“Made up my mind to make a new start…Going to California with an aching in my heart. Someone told me there's a girl out there, with love in her eyes and flowers in her hair.” But once there, can a renter afford it, and try to save money for a future down payment? Research by Trulia finds the most expensive metro areas in the country (based on monthly mortgage payment as a percentage of income) are: San Francisco, CA (52%); San Jose, CA (43%); Los Angeles, CA (42%); Orange County, CA (38%); Honolulu, HI (37%); Oakland, CA (36%); San Diego, CA (35%); Ventura County, CA (31%); New York, NY (30%); and Miami, FL (27%).

As the years have rolled by, residential lending has found itself more and more entwined with legal matters. As reported in this commentary, on Friday the CFPB appealed the PHH decision. 

BuckleySandler LLP reports that the Supreme Court heard oral arguments in Lightfoot v Cendant Mortgage Corp., the latest in a line of cases assessing the boundaries of the jurisdiction of the federal courts over Federal agencies and instrumentalities. "In Lightfoot, the questions before the Court are whether (i) the phrase 'to sue and be sued, and to complain and to defend, in any court of competent jurisdiction, State or Federal' in Fannie Mae's charter confers original jurisdiction on the federal courts over every case brought by or against Fannie Mae, pursuant to 12 U.S.C. § 1723a(a); and (ii) the majority's decision in Am. Nat'l Red Cross v. S.G., 505 U.S. 247 (1992) (5-4 decision), should be reversed."

Recall last month a long-awaited decision came down against Aurora Bank, FSB ("Aurora") and Aurora Loan Services ("ALS") in favor of Security National Mortgage Company ("Security National"). Security National won a several million-dollar judgment in Utah against Aurora and ALS on December 24, 2014. After a motion for summary judgment in this Utah case, which involved a 2007 Indemnification Agreement between Security National and Aurora, the court held that Lehman Bank could only assign rights for losses it had suffered. Lehman Bank had no losses because of the way they structured their transactions with LBHI, and it had been fully compensated by LBHI.

American Mortgage Law Group reports that it has been working with Bank of America ("BOA") "to achieve full and final resolutions on many of our clients' legacy BOA and Countrywide Home Loan ('CHL') portfolios. While BOA has not been known to be as litigious as many other investors regarding repurchase demands in the past, which we believe there is a good reason for, we have seen a resurgence lately in correspondence from BOA regarding legacy matters and in offering to come to business resolutions to put such matters to rest. Because of the large subset of lenders represented by AMLG who have been involved in these negotiations, we have been able to provide valuable services necessary to resolve these matters at a reduced cost. AMLG has extensively researched and analyzed the potential risks of litigation associated with BOA's claims, including relevant statute of limitations arguments regarding both agency and private label securities, worked with our clients to review and negotiate the terms and conditions of the settlement agreements, and advised our clients on available options and forward moving recommendations." (Questions should be directed to Managing Member James Brody.)

While we're talking about legal matters and the CFPB, last week the GAO released is annual review of the CFPB's financial statements. The GAO report (GAO-17-138R) found: (i) that the CFPB's financial statements were presented fairly and in accordance with generally accepted accounting principles; (ii) although internal controls could be improved, the CFPB maintained effective internal controls over financial reporting as of September 30, 2016; and (iii) no reportable noncompliance for fiscal year 2016 with provisions of applicable laws, regulations, contracts, and grant agreements the GAO tested. The GAO did identify a continuing significant deficiency in internal controls over accounting for property, equipment, and software, but also noted that the CFPB has made progress in correcting the deficiency, which was first identified in the previous year's report. Read more here by law firm BuckleySandler.

As reported in this commentary but definitely worth a reminder, the CFPB recently issued Compliance Bulletin 2016-02, which updates the Bureau's guidance on vendor management and oversight. The Bulletin clarifies that the depth and formality of the risk management program put in place to monitor service providers may vary depending on the type of service(s) being performed and the performance of the service provider in complying with federal consumer financial laws and regulations. Specifically, the Bureau noted that the size, scope, complexity, importance, and potential for consumer harm were factors to take into consideration when assessing the scope of a vendor risk management and oversight program. Consistent with previous guidance, the Bulletin noted that to limit the potential for statutory or regulatory violations and related consumer harm, supervised banks and nonbanks should take steps to ensure that their business arrangements with service providers do not present unwarranted risks to consumers and outlined several recommended actions. Interestingly, the Bureau continued to emphasize the potential for UDAAP (Unfair, Deceptive and Abusive Acts or Practices) violations inherent in third party service provider relationships, an area we have seen the Bureau enforce heavily via enforcement actions in the past few years.

Earlier this month the DOJ and HUD issued a Joint Statement updating guidance on the application of the FHA to state and local land use and zoning laws. The guidance-which is provided in the form of frequently asked questions and answers thereto-is designed to help state and local governments better understand how to comply with the FHA when making zoning and land use decisions as well as to help members of the public understand their rights under the FHA. The first section of the Joint Statement, questions 1-6, describes generally the FHA's requirements as they pertain to land use and zoning. The second and third sections, questions 7-25, discuss more specifically how the FHA applies to land use and zoning laws affecting housing for persons with disabilities, including guidance on regulating group homes and the requirement to provide reasonable accommodations. The fourth section, questions 26-27, addresses HUD's and DOJ's enforcement of the FHA in the land use and zoning context.

Vendors, of course, are tuned in to legal issues for clients, which of course include reps and warrants. Credit Plus offers an expansive array of Reps and Warranties coverage for its entire line of verification services available now through its technology platform. The coverage allows lenders to better defend their companies against the negative financial consequences of a possible loan default and the resulting repurchase requests. "Our coverage is not limited to just a few products. Rather, it extends across our comprehensive line of verification offerings. And, our customers can obtain it today. No special technology integrations are needed to attain this protection," said Greg Holmes, National Director of Sales and Marketing at Credit Plus. (And nope, this is not a paid ad.)

Shifting to the bond markets, are rates going to go much higher? Many are saying "no," yet we find the yield on the risk-free 10-year T-note above 2.30%. Blame it on more sellers than buyers, the US Dollar index near a 14-year high, prospects of a December rate hike, a higher deficit under a Trump administration, this week's auctions of $88 billion in 2-, 5- and 7-year notes, or decreasing liquidity during the Thanksgiving holiday week. At week's end the 10-year was yielding 2.34% - it's highest yield in over a year.

Agency mortgage-backed securities have done their best to hold on, but Fannie 3% securities are below par (100) for the first time this year - and those are the securities that many 3.75%-4.125% 30-year fixed rate Fannie loans go into. The demand for them isn't as strong as it once was, as the NY Fed is in buying roughly $1 billion a day. Just wait until early next year when early pay-off monies really dwindle for the Fed to buy agency MBS.

This week we have a whole lot of news crammed into four days, with most of it coming Wednesday. Today was only the Chicago Fed National Activity Index (up to -.08), and tomorrow is only Existing Home Sales. Wednesday the 23rd, however, things start rolling with the MBA's read on last week's residential applications, Durable Goods, Initial Jobless Claims, the FHFA's (conservatory of Freddie & Fannie) read on house prices, New Home Sales, the University of Michigan's set of indices, and the release of the Federal Open Market Committee's minutes from the meeting a few weeks ago.

But wait - there's more on Friday! Why go shopping or take a long bike ride when you could pay attention to some trade balance numbers and more 2nd tier numbers that will be lost in the shuffle of most people not being at work. We start with the week with rates slightly better: the 10-year's yield is hovering around 2.32% with agency MBS prices better by .250 versus Friday evening.


Jobs and Announcements

Speaking of California, "looking to make a move for the New Year? A well-capitalized, leading mortgage lender in Orange County, CA with over 17 years in the industry is seeking an SVP of Credit Policy/Risk to join their executive management team, as well as Retail Loan Officers for remote and call center positions nationwide. This lender is a Fannie Mae/Freddie Mac seller/servicer and offers all Ginnie Mae and reverse mortgage products. The SVP of Credit Policy/Risk will be responsible for managing all aspects of underwriting including credit quality and underwriting culture for the company. Positions offer aggressive and competitive compensation plans." Interested parties can send confidential resumes to me.

In wholesale and correspondent news, Sierra Pacific Mortgage is on a nationwide search for talented Wholesale Account Executives. "Mortgage brokers have always been an important part of Sierra Pacific Mortgage for over 30 years. We are looking for professionals to solicit, build and cultivate long-term relationships in the broker community." says Chuck Iverson, EVP. To keep up with its rapid expansion, SPM's management is looking for highly talented people to fill operations positions throughout their National Regional Operations Centers. "If you are an ultimate underwriter, passionate processor, dazzling doc drawer or fabulous funder who's looking to make a move to a company known for its strength, stability, and dedication to both their clients and employees, Sierra Pacific Mortgage may just be the company for you! Take the next step in your career and email careers@spmc.com with your resume!"

In personnel news, The Mortgage Collaborative, an independent mortgage lending cooperative, announced the appointment of David G. Kittle, CMB as its President said John M. Robbins, CMB, the corporation's Chairman. "David is uniquely qualified to take the Collaborative to the next level and beyond as TMC expands its Lender Member services into the Secondary Market and Technology Innovation."

Often in this spot in the commentary I mention personnel moves. But work is only part of life, and in a week where being thankful is important, how about a move to... obtain a new leg? Ryan Nelson, the Southwest Regional Manager for Utah's Academy Mortgage Corporation, is in Australia halfway through recuperation and physical training for having a "brand-new, bionic leg" attached directly to his thigh bone. "It is going to be awesome to not have any more socket or sleeves," after the surgery by Dr. Munjed Al Muderis in Australia. Feel free to say "congrats" to Ryan who is looking forward to next year's Academy's President's Club trip to South Africa.

In company news, real estate investor Window Rock Capital Partners is acquiring some key WinWater Home Mortgage assets and hiring two high-profile non-agency players as it expands from distressed debt into new lending opportunities, including non-QM loans. "The acquisition of certain contractual rights from WinWater owner Premium Point Investments coincides with the hiring of Ketan Parekh (a former executive vice president at WinWater) as a managing director and partner, and Joseph Kohout (WinWater's former head of residential credit) as the senior vice president of mortgage credit and operations. Window Rock's purchases include a list of more than 100 correspondent lenders for Window Rock's new conduit, Ventana Loan Services. "What's different for Window Rock is a focus on non-QM loans, which have drawn increasing interest from mortgage investors for their higher rates and potential volumes."