For some folks, including an ex-wife of a billionaire, $1 million a week is simply not enough. A $100 million house?

Something else that isn't enough is mortgage applications in the U.S., which fell to their lowest level since November 2008. The weekly MBA figures showed that apps decreased 13% in the week ended Jan. 21, with refi's down 15% to the lowest in a year while purchase applications fell almost 9% to the lowest level since October. Obviously some of this may be due to the MLK holiday. On the "good news" side of this, less supply and decent investor demand should lead to good MBS prices on a relative basis. FULL STORY

Of course, what tends to happen, with "normal" business and revenue dropping, companies will often take another look at "off the run" products. Management and secondary staffs will tend to listen to producers asking about products like 203(k), or Home Path, etc., especially if it means a potential increase in revenue. But they will often run up against a government agency offering a program but investors not doing so due to 'risk versus return' issues, and as you know, volumes have to justify the effort. A trout will only expend energy if the food drifting by will gain more calories than it uses up. So most companies don't feel the need to gear up and jump through hurdles for programs where volume is limited.

NAMB, which is either the National Association of Mortgage Brokers or National Association of Mortgage Professionals, spread the word that it learned that "the Federal Reserve Board is working on a compliance guide for small entities on the LO compensation rule, pursuant to Section 212 of the Small Business Regulatory Enforcement Fairness Act (SBREFA), and it will be published in the immediate future. NAMB will ask for a significant delay on the April 1st deadline in order for Office of Advocacy Small Business Administration to interpret and implement any guidelines coming from the Federal Reserve board at such a late date." READ MORE

In the meantime, Optimal Blue, mostly known for its decision making technology, announced it has "released the first phase of its Loan Officer Compensation functionality...which includes configuring mark ups, fees, and compensation for the loan officer to ensure lenders are compliant with the forthcoming Federal Reserve Bank regulations." "Being ahead of the curve and releasing this functionality gives our customers the confidence they will be in full compliance when the regulation takes effect," said Larry Huff, co-CEO of Optimal Blue.

Yesterday I passed along Part 1 of a Q&A dialog between the MBA and Federal regulators (although SunTrust distributed it to its broker clients). Here is Part 2 in a series of several:

Q4: Assuming a creditor establishes a fixed percentage of loan amount compensation for a particular type of loan, how frequently may the creditor adjust the compensation to the originator?
A. Fed Response - Over any reasonable period of time that would support a finding that compensation requires adjustment, provided such adjustment does not lead to loan-by-loan adjustment; not more frequently than every two weeks.

Q5. Compensation variations for purchase and refinance loans. Can the compensation to a loan originator vary based on whether a loan is a purchase or a refinance?
A. Fed Response - No, not if purchase and refinance loans are priced differently. In such cases, purchases or refinances become proxies for different rates and originators cannot be compensated differently for them There is danger if there is differential compensation that consumers will be steered to whichever transaction results in greater compensation to the
loan originator. If purchase and refinance transactions are priced the same, these dangers are not present.

Q6. Can the compensation to a loan originator vary based on whether a loan is a FHA, VA or Conventional loan?
A. Fed Response - No. If FHA, VA and Conventional loans are priced differently, the loans become proxies for different rates and originators cannot be compensated differently for them. If there is differential compensation that some consumers will be steered to whichever transaction results in greater compensation to the loan originator.

Q7. Can the compensation to a loan originator vary based on whether a loan is to be held in
portfolio or a loan that will be sold?
A. Fed Response - No, if portfolio and non-portfolio loans are priced differently, they become proxies for different rates and originators cannot be compensated differently for them. There is danger if there is differential compensation that some consumers will be steered to whichever transaction results in greater compensation to the loan originator.

Q8. A creditor has an incentive compensation plan for originators that is based on the originator's loan volume over a particular period. It is not tied to loan terms. It is based on a fixed percentage of the aggregate principal balance of loans originated by the loan originator during the period.

Q8a. Can payment of the incentive compensation to the originator be conditioned on the company, region or branch achieving a certain level of profit during the period?
A. Fed Response - No. Permitting lenders to base compensation decisions on profits may lead to basing compensation on terms or conditions. The rule does not permit this at this time.

Q8b. What if the profit is calculated in whole or part based on the aggregate value of loans originated during a particular period?
A. Fed Response - Yes. It would be permissible. Calculating compensation based in whole or part on the aggregate value of loans would not result in a loan originator being compensated impermissibly based on the terms of any loan.

(Part 3 will be tomorrow, when I will be coming to you from Dallas!)

Fraud...in Illinois? No way! Six people were indicted recently on federal charges alleging they participated in a $15 million mortgage fraud scheme that involved more than 40 residential properties in Chicago and the south suburbs. Their actions allegedly caused several financial institutions to lose approximately $4.5 million on mortgage loans that were not repaid by the borrowers or fully recovered through foreclosure sales, a release from the U.S. Attorney's office said.  FULL STORY

Yesterday both the S&P and the FHFA released their home price indexes for November with both reporting year-over-year declines. Standard & Poor's S&P Case-Shiller HPI dropped 1.6% year over year in November, and its 4th straight month of dropping, for the 20-City Composite with eight MSAs - Atlanta, Charlotte, Detroit, Las Vegas, Miami, Portland (OR), Seattle and Tampa recording new price lows. The 10-City Composite was down 0.4% YOY. (Please note the difference between the 20-cit and 10-city numbers, which is leading some to point out how large cities are outperforming smaller ones. Best performers:  Coastal California, parts of the Northeast.  Worst performers:  the Southeast, the Midwest, the Pacific Northwest, Florida, Arizona and Nevada.)  FULL STORY

For the FHFA index, it was unchanged in November, but down 4.3% for the year. For the month five regions recorded declines - Mountain (-1.9%), West North Central (-0.1%), East North Central (-0.5%), Middle Atlantic (-0.2%) and South Atlantic (-0.7%), while the Pacific (+1.2%), West South Central (+1.3%), East South Central (+0.8%) and New England states (+0.3%) recorded gains. From an investor's point of view, weak home prices will keep voluntary prepayments low as many borrowers are unable to refinance their mortgages due to high LTVs. But it also keeps foreclosure risk elevated and suggests involuntary prepayments will continue to make up a larger portion of early pay-offs in the higher coupons.

At least rates are relatively quiet and  "range-bound." MBS volumes picked up a little bit on Monday, which was good to see during a nice rally (improvement). On the Treasury side, the 10-yr improved by about .75 in price. (It closed at 3.32%, and has been between 3.28-3.53% for almost two months.) Consumer Confidence came in stronger-than expected, which might cause a nudge toward higher rates. But this was balanced against chatter about a potential spending & budget freeze mentioned in the State of the Union Address, along with solid results from the 2-yr auction.

Tradeweb recorded above-normal MBS volume for the first day since January 5, and traders reported buying interest from hedge fund and money managers. MBS prices, which began the day worse by about .250, ended the day better by .250, resulting in numerous investor price improvements.

I never thought about this until an elderly acquaintance exclaimed, "I'm rich! Gold in the Teeth. Silver in the Hair. Crystals in the Kidneys. Sugar in the Blood. Lead in the "rump". Iron in the Arteries, and...An inexhaustible supply of Natural Gas. I never thought I'd accumulate such wealth."