As they say, "Good judgment comes from experience, and experience comes from...bad judgment." IT folks and the industry are certainly interested in the experience and judgment in the situation (and lawsuit - Superior Court of California, County of Orange, filed back in September), between W.J. Bradley and RPM Mortgage over client data base information. And now Bradley clients are being notified that "A former loan officer took clients' credit reports, Social Security numbers, bank account information, tax information and other personal data." Here is information on the breach.

Prospect mortgage, who you might remember recently raised $150 million via a bond issuance, is looking to put some of that money to work acquiring small or medium sized lenders, and in hiring retail originators. Prospect is licensed in 47 states, and its servicing portfolio totals $16 billion. To its credit, Prospect's current volume is over 80% purchase business, and has maintained a higher percentage of purchase volume throughout the refi boom. The company (http://myprospectmortgage.com/) is the #2 renovation lender in the U.S. and offers FHA products down to a credit score of 580, and "significant product offerings for investors including HomePath investor, delayed purchase loans, and HomeStyle Renovation. If QM and ATR are getting you down give Prospect a call." Contact John Manglardi at John.Manglardi@ProspectMtg.com for confidential inquiries or resumes.

Is respect, integrity, passion and a relentless focus on service what sets you apart?  If so, then Acopia Capital's growth "is your opportunity for success!  Acopia Capital (www.myacopia.com) closes over one billion dollars in volume annually, is licensed in 25 states, and is a direct seller-servicer for Fannie Mae and Ginnie Mae."  Acopia Capital has recently expanded into several new states and is currently searching for wholesale account executives in AL, TX, IA, LA, FL, MD, MN, and WI.  If joining an established growth company dedicated to the best interest of its clients and employees is exciting to you, then please contact Matt Puffer at mpuffer@myacopia.com.

And while we're on company-related news, Affiliated Mortgage Company is expanding to the West. Affiliated announced the addition of Tim Frohock as Vice President, Regional Manager of the Western Division. Tim Frohock is a Mortgage Lending Professional, based in Phoenix, Arizona, with an excellent reputation of providing top tier customer service.  Beginning his career as an Account Executive 20 years ago, he has spent the past 17 years managing customer service-centric Wholesale and Mini-Correspondent Regional offices, covering multiple states. Tim joins Affiliated Mortgage Company, a wholly owned subsidiary of Benchmark Bank of Plano, Texas, with the task of opening a new full service Regional office in Phoenix to support Wholesale and Mini-correspondent production growth in the Western United States. For more information visit www.affiliatedtpo.com.

A lot of companies (that decided to add servicing during 2012 and 2013) now want/need the cash in order to fund current operations and the costs of compliance. Or, put more bluntly, no one expects a huge surge in lock volume in the upcoming months, and money is needed. And given that servicing has value, the industry can expect to see continued bulk and flow deals through companies like Mountain View and IMA. The latest to cross my e-mail desk came from Steve Fleming at Phoenix Capital (sfleming@phnxcap.com), and is typical. "Phoenix Capital, Inc. (PCI) is pleased to present the following $1 billion bulk Fannie Mae A/A and minimum $50 million/month Fannie Mae A/A flow mortgage servicing rights offering for your consideration. Written bids are due Wednesday, January 15, 2014 by 5pm EST." The offering goes on to describe the bulk sale ($1 billion, 100% Fannie A/A, fixed rate, 0% delinquencies, 90% California, weighted average FICO of 749, 85% wholesale...) and the flow deal ($50 million per month, 100% Fannie A/A, and so on, pretty much mirroring the bulk sale).

Where are we on Dodd-Frank? We're halfway.

We have 5 business days until QM. How are "non-top" lenders handling QM? Here's a great example: www.citadelservicing.com and click on "Click here to see our expanded first TD rate matrix." And there is Athas Capital: http://www.athascapital.com/. (The point of this is to show that there are lenders that are not traditional A-paper lenders, not to make a list of every one that is lending money. At a certain price, and a certain rate, money will be lent - borrowers should not expect rates where they were 8 months ago.)

What about lenders nearer the top of the food chain? A good example is Burlingame, California's Provident Funding, long a mainstay in the wholesale channel. (In a coincidence, I will be visiting Burlingame today, but spending time with a different company.) Yes, the wholesale channel has diminished in size, but knowing policies is important. Provident has told its broker clients that they can no longer negotiate the amount of their fee with borrowers. "Borrower-paid compensation will no longer be negotiated and the 'lender-paid level' will become a uniform broker compensation level," Provident Funding Associates says in updating its loan officer compensation policy.

Borrowers can still pay the broker directly, but the amount of the compensation must be the same as lender-paid compensation. "Provident Funding is committed to the principle that all borrowers should be charged fair and reasonable amounts for the services provided to them during the loan origination process. This applies not only to the fees charged by Provident Funding, but also by mortgage brokers. Provident Funding requires that broker compensation must be subject to a written agreement between the mortgage broker and the borrower. In addition, the Broker Fee Agreement must indicate the following: broker compensation is non-negotiable, and in setting the amount of compensation the mortgage broker has not discriminated on the basis of race, color, religion, national origin, sex, marital status, handicap, familial status, or any other legally prohibited basis."

Put another way, "To comply with the new LO Compensation requirements issued by the CFPB, effective for loans with a GFE Audit completion date on or after January 1, all transactions will require that broker compensation be set uniformly. Specifically: Borrower-paid compensation will no longer be negotiable and the 'lender-paid level' will become a uniform broker compensation level which will apply to all transactions for a broker, no matter if broker compensation is lender-paid or borrower-paid. No other broker fees (e.g. application, processing, etc.) may be charged. Brokers will no longer be able to reduce their compensation to cover any borrower closing costs (which was previously allowed in borrower-paid transactions). Cures for RESPA tolerance violations will be covered by Provident Funding regardless of whether broker compensation is lender-paid or borrower-paid. The uniform broker compensation level may still be set at the broker's discretion and updated periodically (subject to the existing limits and criteria).

Provident went on to inform clients that it is still responsible for monitoring pricing and fees on funded loans in aggregate for any disparities in broker compensation on a legally prohibited basis, and that "should improper pricing disparities be found, Provident Funding may further restrict the maximum compensation level for a broker's account or may terminate the mortgage broker's account. Provident Funding will provide an updated Broker Fee Agreement form that includes the required fair lending language described above, although brokers may also use their own Broker Fee Agreement forms. Broker Fee Agreements without the required language must be accompanied by a separate Fair Lending Notice with the required language described above."

"Since the appraisal fee is paid to an affiliate of Provident Funding (LenderVend Appraisal Zone), the amount that is not passed through to the appraiser but that is retained by the affiliate for work performed will be included in the points and fees calculation. (Note: Affiliates of the broker, such as an affiliated title or escrow company, may not be utilized in transactions with Provident Funding.) The amount of the appraisal fee that is retained varies but is generally $120 for most appraisals. The details of the QM points and fees test that is performed on each loan will be accessible" on Provident's software system, and to help offset the inclusion of the amount of the appraisal fee that is retained in the points and fees calculation, effective for loans with a GFE Audit completion date on or after January 1, 2014, Provident Funding is amending its fees and pass-through charges.

"To comply with the new Ability to Repay requirements, effective for loans with a GFE Audit completion date on or after January 10, 2014, Provident Funding will restrict all loans, including investment property loans, to the Rule's QM-eligibility limit on points and fees (generally 3%). In addition, Program Guidelines will be updated to require a maximum debt-to-income ratio (DTI) of 43% and minimum reserves based on the amount of residual income (see the Quick Reference Guide for further details).

Switching companies, anticipating more regulatory effects on the financial services industry, CliftonLarsonAllen acquired Bankers Advisory, expanding its mortgage compliance offerings; it also acquired two more firms. I am sure other mortgage-related accounting firms have taken note of this.

So here we are at the in the first full week of 2014 - and we have some important things that will definitely impact residential mortgage lending. First, today is the swearing in of Mel Watt as head of the Federal Housing Finance Agency (FHFA). A few weeks ago it became apparent that Mr. Watt is in favor of delaying the implementation of gfee increases, loan level price adjustment changes, and the removal of the adverse market fee until a further review is done. While experts do not expect Mr. Watt (and therefore the FHFA, and therefor Freddie and Fannie) to support radical changes, experts think that some policy changes are likely. Namely these include principal reduction through the Home Affordable Modification Program (HAMP), and an extension of the deadline for the Home Affordable Refinance Program (HARP). The latter is giving some lenders hope of more refis - but we will not see the boom we were having a year ago.

Today Janet Yellen's confirmation vote is expected to take place at 5:30PM EST. That is pretty much considered to be "a done deal."

Lastly is the most important, of course, and that is the new Qualified Mortgage (QM) rule, which goes into effect on January 10^th. That being said, most lenders and investors have already incorporated the QM changes, so it may not have a material impact on the mortgage market in the near term because of the exemption for the GSEs and because of the broader QM rule that has been adopted by the FHA. The final rule generally prohibits loans with negative amortization, Interest Only (IO) loans, balloon payments, loans with terms greater than 30 years, and loans in which the points and fees are greater than 3% of the loan amount. Most importantly, it requires that consumers have a debt-to-income (DTI) ratio of less that 43% - but remember that F&F's DU and LP systems will still allow DTIs greater than 43% and the loan will still be "QM".

Given the Agency exemption, the only non-QM loans currently being produced on any scale are very high quality jumbo IOs, and portfolio products offered by banks through their retail branches (not through wholesale or correspondent channels in any mass, meaningful way). One can expect that these loans will continue to be originated since the credit quality of these borrowers makes default risk fairly remote. The exemption for the GSEs and the broader FHA QM rule will allow most other current production loans to fall within the QM category. Keep in mind, however, that the exemption for the GSEs will be removed once they emerge from conservatorship or after seven years, whichever happens first.

Fortunately, rates are not doing much, at least today - but we do have a very busy week for scheduled news that could move bond and stock prices. Today we have a couple second-tier numbers (ISM Non-Manufacturing, and Factory Orders), and tomorrow is the Trade Balance. But the pace picks up Wednesday with the ADP Employment Change figures and the Fed's release of the meeting minutes from the 12/18 meeting. Thursday is the weekly Initial Jobless Claims, and Challenger job cuts. And then Friday is Nonfarm Payrolls, Hourly Earnings, and the Unemployment Rate. But with the cutbacks in monthly Fed purchases of Treasury and MBS already in the works, the press isn't yammering about the unemployment data quite as much as it has in recent months.

Looking at numbers, and possible rate sheet moves today, the yield on the 10-yr. on Friday was 3.00%. Here today we're at 2.99%, and agency MBS prices are a shade better.

It was the first day of the new school year at a college and the dean was addressing the freshman class.

"We have very strict rules here regarding the dormitories," the dean explained. "The female dorms are not to be visited my any male student and the men dorms are off limits to the female students."

"Anyone caught breaking this rule will be fined $ 50 for the first time."

"Anyone caught breaking this rule a second time will be fined $ 100," he added.

"Breaking the rule three times will cost you $ 200. Any questions?" the dean asked the students.

One male student in the back raised his hand and spoke out, "How much for a season pass?"