I thought about taking today off from the commentary to celebrate, since yesterday I won all 4 quarters of my office’s Super Bowl pool! And then I remembered that I was the only one in the pool, don’t really have an office, and that the net effect of my $50 a square winnings was about the same as the US Government buying back their own securities. Oh well.
Those dues that you pay to the Mortgage Bankers Association – where does the money go? Education, lobbying, etc., but some probably went into buying the MBAA its $90 million headquarters in downtown Washington which it sold last week for $41 million after 3 years. Ouch! CoStar Group, who is moving its headquarters from Maryland to DC, also received a $6 million property tax break – hats off to them. Not only did the MBAA’s interest rate expense increase, but it had trouble finding tenants for its additional office space. To make matters worse, and this should be of no surprise, according to the MBAA their membership has been noticeably falling off, resulting in less revenue.
Secondary marketing employees, especially those that sell loans, are notorious for splitting off the CRA loans (Community Reinvestment Act, designed to meet local credit needs) and selling them to investors for a point or two more than the broker or agent was paid for them without a rate sheet adjustment. That entirely aside, as it turns out, the FDIC monitors institutions and their compliance with CRA regulations. The FDIC announced that it has come out with a new drug to treat small banker heart palpitations. Okay, I was just kidding to see if anyone reads this stuff. Late last week, however, the FDIC did issue its list of state nonmember banks recently evaluated for compliance with the Community Reinvestment Act (CRA).
I ain’t no tax expert, so when a broker from Idaho wrote to me and asked, “How long do I have to keep statements from banks that don’t exist anymore?” I was flummoxed.
“Only” one bank was shut down by the FDIC on Friday. It was in Minnesota (1st American State Bank of Minnesota), and Community Development Bank, also in Minnesota, agreed to assume the assets and deposits of the failed bank. The loss of $11.7 million will be shared, with the taxpayer, picking up about $3 million of the expense.
Fannie Mae and Freddie MAC both updated their Home Affordable Modification Program (HAMP) program, addressing issues that primarily concern servicers of the product. Previously Fannie & Freddie had set forth eligibility, underwriting and servicing requirements for the Home Affordable Modification Program (HAMP), and last week amended key features of the program. For example, starting June 1 (how do you like that for advance notice?) F&F changed the verified income documentation “for all HAMP trial period plans.” F&F’s amendments, which can be viewed on their respective websites, concern the process of modifying a loan, the initial package, income & asset documentation, timelines, making a modification permanent, eliminating the stated income trial plans, etc.
Investors in mortgage securities usually are betting on how long they will hold a particular pool of loans. Some want them to be paid off quickly; others would prefer that the loans stay on their books for a long time. When either group sees unexpected prepayments, for whatever reason, that is cause for concern. Last week prepayment information was released showing that fixed rate prepayments declined 15% in the latest survey, due to a lower day count and weaker housing “seasonals”. Higher coupons saw some buyouts, although the new SFAS 166/167 implementation (where the delinquent loans that are bought out by the GSEs no longer have to be marked at their market values, and possibly requiring the agencies to issue short-term debt in order to accomplish the buyouts) did not appear to be a driving force. Of interest to originators, however, is the expectation that with rates steady, and the percent of refi’s expected to drop, prepayment speeds are also expected to drop.