Below is a collection of articles, news, and announcements associated with our industry.
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On August 31st, FHFA announced another increase in the guarantee fee (G-fee) charged by Fannie Mae and Freddie Mac on the loans they insure. The amount of the increase is set to average 10 basis points, but the amount of the increase may vary by product and seller. The increase is to be effective on loans sold directly to Fannie or Freddie beginning in November and for any loans to be pooled in a mortgage-backed security (MBS) with a December 1st or later issue date. Longer term locks already reflect this increase. Short term locks may as well, depending who is buying the loan and whether the loan will be pooled in a MBS. If they don’t now, they will very soon. G-fees are paid by the borrower from the interest paid on the loan or are collected upfront as a cost to the borrower. The cost is approximately five times the increase in G-fee. The effect of this increase in G-fee on the borrower has been masked somewhat by recent price increases in the MBS market. Loans locked at prices before the G-fee increase was added will incur heavy extension fees, if required, so timely delivery of well documented, high quality loans is extremely beneficial.
Economic troubles in Europe have helped mortgage rates move lower in recent months. One reason is that slower global economic growth reduces the risk of inflation, and inflation is negative for mortgage rates. The second reason is that investors have been concerned that the debt problems in Europe could spread to other countries and hurt the global banking system. As a result of the uncertainty, investors have shifted some funds to relatively safer assets, including US mortgage-backed securities (MBS).
Greece has experienced the worst of the European debt troubles. After weeks of negotiations, on Monday European officials finally agreed to provide a $172 billion bailout package to Greece. This aid will allow Greece to avoid defaulting on debt maturing on March 20, removing some uncertainty from the market. As it became clearer last week that a deal was close, investors began to reverse the flight to safety trade, selling MBS, and mortgage rates moved a little higher.
Investors will continue to watch the situation in Europe. It is not at all certain that Greece will fully implement the severe austerity measures required in the deal, and other countries such as Portugal are teetering on the same economic edge as Greece. With the Greek bailout package done, events in Europe, at least for the short-term, may have less influence on daily US market movements. Investors likely will focus more on incoming US economic data which has generally been surprising to the upside so far this year. A stronger economy, although great for employment and the stock market, is potentially inflationary and may not be good for mortgage rates.
European officials are scheduled to meet this weekend and again next week, and they hope to release a plan for a comprehensive aid package by Wednesday. Officials are divided on what steps to take to help ease debt problems in troubled nations. Given the conflicting goals of the parties involved, the optimal solution is not clear. Whatever the outcome, it will likely have a significant impact on mortgage rates next week. Until the results of the summit are known, MBS prices may be subject to a high level of volatility, as news and speculation comes out. A decisive plan to prevent the spread of debt problems could cause investors to reverse the flight to safety trade, leading to higher mortgage rates. On the other hand, a plan which disappoints investors could produce an increased flight to safer assets, causing mortgage rates to move lower. In any case, be prepared for higher than normal volatility over the next several days.
If you need additional information about this blog post, please visit our website MBSQuoteline.com or call 800-627-1077.
Mortgage rates have moved higher (mortgage security prices have moved lower) and strangely enough QE2 deserves much of the blame. The Fed intended for the opposite to happen. As they purchase their $600 billion in long-term Treasury securities, the Fed expected the added demand would drive prices higher and rates lower, not only for Treasury securities, but for mortgage backed securities as well. Things have not happened as planned. The Fed began their Treasury purchases on Friday and MBS prices fell 27/32nds. The Fed continued their Treasury purchases today and MBS prices are down another 16/32nds. So what has gone wrong?
Some of the issue is that MBS prices rose considerably in the weeks preceding the Fed’s announcement that they were going to buy $600 billion of Treasury securities. The much anticipated announcement had already accomplished much of the expected end result before it even started. After the announcement, sentiment toward the benefits from the plan shifted. Investors worldwide began to doubt the Fed’s ability to control rising inflation when it begins. Foreign investors recalculated their required returns after seeing the value of the dollar fall to recent lows. Political power in the US shifted from the Democrats to the conservative Republicans and Tea Party members. And several economic measures announced right around the time of the Fed’s announcement were stronger than expected. All of this combined to suggest to investors that inflation may heat up and any further quantitative easing plans were unlikely, forcing a sell off in Treasury and mortgage backed securities, resulting in higher long-term interest rates.
Click PLAY to listen to the podcast of this week’s BlogTalkRadio/Lykken on Lending with Dave Lykken and MBSQuoteline’s Joe Farr:
MBSQuoteline supplies the essential market information necessary for effective decision making by Originators when assisting borrowers during the loan origination process, and for secondary marketing departments while managing pipelines. For additional information or to sign up for a free 2-week trial subscription, visit www.MBSQuoteline.com or call (800) 627-1107.
Tune in every Monday at 1:00pm(et) for up-to-the-minute information on interest rates, loan programs and “hot” industry news related to the mortgage industry. Dial: (646) 716-4972 or log in at: www.blogtalkradio.com/lykken-on-lending
The new rules which beginning April 1, 2011 will govern how loan originators (LO or LOs) are to be paid have been the topic of much discussion lately. There seems to be as many opinions as there are people and there are as many unanswered questions as there are answers. To try to help bring clarity to the situation and to try to address what is known, Tony Musgrave, mortgage industry veteran and practicing lawyer, joined the show today. Tony’s general advice on this issue is to accept that change is coming and to begin to prepare for it. He said that when considering the new rules, first consider where they came from. The new rules are a result of political and public perception that the old compensation rules incented LOs to take advantage of borrowers and to put them in loan products and at loan rates which were advantageous for the originator, but not necessarily for the borrower. Tony’s advice is to interpret the new rules with this perception as the basis for your new policies.
What is known is that a loan originator cannot be paid an amount that differs based on the terms of the loans he originates. He can be paid a percentage of the loan amount, and the percentage can vary by LO and can even be changed periodically on a prospective basis for each LO. There should be no incentive for a LO to encourage a borrower to accept loan terms that are not the most favorable loan terms available to that borrower. This will preclude things like priced in overage and profit splits for producing branch managers.
One of the many things not known is whether LOs can participate in market movement which occurs subsequent to quoting the best possible rate and points to a borrower off his rate sheet. The Fed rule specifically exempts secondary marketing gains for the effects of this rule. It is my opinion that unfavorable market movement subsequent to quoting the best possible rate and points to a borrower would not be absorbed by the borrower. It should be absorbed by the LO for not getting the loan locked timely. It is also my opinion that the opposite should be true. If there is favorable market movement subsequent to quoting the best possible rate and points off the rate sheet, the borrower is not due the improved pricing and the LO would not be precluded by this rule from participating in that improvement.
Click PLAY to listen to the podcast of this week’s BlogTalkRadio/Lykken on Lending with Dave Lykken and MBSQuoteline’s Joe Farr:
MBSQuoteline supplies the essential market information necessary for effective decision making by Originators when assisting borrowers during the loan origination process, and for secondary marketing departments while managing pipelines. For additional information or to sign up for a free 2-week trial subscription, visit www.MBSQuoteline.com or call (800) 627-1107.
Tune in every Monday at 1:00pm(et) for up-to-the-minute information on interest rates, loan programs and “hot” industry news related to the mortgage industry. Dial: (646) 716-4972 or log in at: www.blogtalkradio.com/lykken-on-lending
Lykken-on-Lending (LoL) has partnered with HousingMatrix, an online resource of information for the housing industry. HousingMatrix now hosts the LoL library of the most recent recorded program as well as all prior programs. HousingMatrix is a site you should explore if you have not been there before. If the information you seek has to do with housing, you will find it at HousingMatrix.
Mortgage rates have continued their move lower this week, reaching a new low this morning. Last Tuesday’s Fed announcement helped push mortgage rates lower and then the announcement on Friday that July’s inflation remains very low helped as well. The Fed announced that they were keeping the Fed Funds rate between .25% and 0% and that they expect to keep it at this very low level for an extended period of time. This was as expected. What was a bit of a surprise was that they expressed a concern that the pace of the economic recovery was slowing and they announced a new policy to add a little stimulus to the economy. The new policy deals with what they will do with the cash the Fed receives from payments on their portfolio of Treasury and mortgage-backed securities. Until now the Fed has been taking the payoff proceeds out of circulation. Now they will use the money to buy new long-term Treasury securities.
MBSQuoteline supplies the essential market information necessary for effective decision making by Originators when assisting borrowers during the loan origination process, and for secondary marketing departments while managing pipelines. For additional information or to sign up for a free 2-week trial subscription, visit www.MBSQuoteline.com or call (800) 627-1107.
Tune in every Monday at 1:00pm(et) for up-to-the-minute information on interest rates, loan programs and “hot” industry news related to the mortgage industry. Dial: (646) 716-4972 or log in at: www.blogtalkradio.com/lykken-on-lending.
Glen Corso, Executive Director of The Community Mortgage Banking Project, joined the BlogTalkRadio/Lykken on Lending show again today and was kind enough to answer a series of questions from the hosts about the content of the Dodd-Frank Act (DFA). Glen has lobbied on behalf of the industry as this bill progressed through the legislative process. The DFA is expected to pass the Senate soon and will then be signed by the President. It has several provisions which, when implemented, will have a significant impact on the mortgage industry. Its implementation is many months down the road, but its content needs to be understood to the extent possible. Many of the provisions in the DFA will not be fully understood until regulators have finalized the Bill’s implementation rules.
Click on the attachment to read through an extensive Q & A on these topics.
Click PLAY to listen to the podcast of this week’s BlogTalkRadio/Lykken on Lending with Dave Lykken and MBSQuoteline’s Joe Farr:
MBSQuoteline supplies the essential market information necessary for effective decision making by Originators when assisting borrowers during the loan origination process, and for secondary marketing departments while managing pipelines. For additional information or to sign up for a free 2-week trial subscription, visit www.MBSQuoteline.com or call (800) 627-1107.
Tune in every Monday at 1:00pm(et) for up-to-the-minute information on interest rates, loan programs and “hot” industry news related to the mortgage industry. Dial: (646) 716-4972 or log in at: www.blogtalkradio.com/lykken-on-lending
Dave Lykken, host of the BlogTalkRadio show Lykken-on-Lending, and President of Mortgage Banking Solutions, has published an article in National Mortgage Professional Magazine titled A View From the C-Suite: Branch development … Four “C” tips from the “C” Suite. In it he discusses four things to consider when adding branches to your production organization or when seeking a new production organization for your branch. These four tips were the topic of discussion on the radio show today. Here is a summary the four tips, but I recommend you read the full article for yourself.
Both the producing group looking to join a new organization and the funding group looking to add more production need to carefully consider any potential marriage. Both sides should follow the 4 “C”s: seek counsel, consider the culture, consider capital constraints, and consider character.
1. Counsel here doesn’t necessarily reference legal counsel, but legal counsel may help minimize confusion should things ever unwind. The counsel you should seek is industry counsel. Talk to those in the industry who know you and the other party. Ask if they think the two of you will be a good match. Some personalities just don’t mix.
2. Find out if the culture of your organization matches that of the other. Are you a jumbo specialist considering joining with an FHA specialist? Is the funding group experienced at adding production groups? Are they good at effectively communicating policies and procedures? Are they skilled at accommodating regional differences?
3. Investigate whether the funding company’s capital is sufficient to support additional production. Does it have warehouse capacity for more production? Are you the only production group being consider to join the funding group? Does the funding group have the financial capital and the human capital to manage expansion?
4. And the last and maybe the most important thing to consider is the character of the individuals involved. It takes a long time to establish a good reputation, but only a few bad experiences to lose it.
Click PLAY to listen to the podcast of this week’s BlogTalkRadio/Lykken on Lending with Dave Lykken and MBSQuoteline’s Joe Farr :
MBSQuoteline supplies the essential market information necessary for effective decision making by Originators when assisting borrowers during the loan origination process, and for secondary marketing departments while managing pipelines. For additional information or to sign up for a free 2-week trial subscription, visit www.MBSQuoteline.com or call (800) 627-1107.
Tune in every Monday at 1:00pm(et) for up-to-the-minute information on interest rates, loan programs and “hot” industry news related to the mortgage industry. Dial: (646) 716-4972 or log in at: www.blogtalkradio.com/lykken-on-lending
Mortgage rates made a nice move lower last week. In fact, they have moved lower each of the last four weeks, to the lowest level of the year. Many of us thought mortgage rates would head higher after the Fed stopped buying mortgage-backed securities (MBS) at the end of March. Mortgage rates did move higher just prior to and just after March 31st, but new circumstances entered the market in April. Uncertainty has pushed investors out of riskier assets like stocks (the Dow is well off its recent highs) and into less risky assets like government insured MBS. Several things are contributing to this uncertainty. The European debt crisis and a tightening monetary policy in China have made investors very uncertain about future economic growth in the US. In addition, the passage by the Senate of a financial reform bill has many investors questioning how freely banks will make capital available to US businesses to finance their expansion. This uncertainty combined with very low inflation rates have made MBS an attractive alternative.
Dave Lykken hosted today’s show from the exhibit floor of the MBAs National Secondary Market and Expo. He reported that the conference was well attended and the mood was generally upbeat. Senate Bill 3217 was the topic of conversation at the conference. Attendees were pleased by the amendment to the risk retention provisions of the original bill. There was almost unanimous belief that the provisions of the bill restricting how loan officers are compensated will become law without significant revision.
Click PLAY to listen to the podcast of this week’s BlogTalkRadio/Lykken on Lending with Dave Lykken and MBSQuoteline’s Joe Farr :
MBSQuoteline supplies the essential market information necessary for effective decision making by Originators when assisting borrowers during the loan origination process, and for secondary marketing departments while managing pipelines. For additional information or to sign up for a free 2-week trial subscription, visit www.MBSQuoteline.com or call (800) 627-1107.
Tune in every Monday at 1:00pm(et) for up-to-the-minute information on interest rates, loan programs and “hot” industry news related to the mortgage industry. Dial: (646) 716-4972 or log in at: www.blogtalkradio.com/lykken-on-lending
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