Occasionally I remind folks that rates are low. They know that, but to remind them even further, I tell them that if Mr. & Mrs. Smith spend their working lives and save up $1 million for retirement, and then, to be safe, want to invest it in a "risk free" 10-yr Treasury note, they'll earn about 1.8%, or only $1,500 per month for the next ten years! To me, a million dollars is a pretty good nest egg, but when put into this context... and as it turns out, even this $1 million isn't likely. According to the latest survey, about 49% of Americans say they aren't contributing to any retirement plan. "People ages 18 to 34 are the least likely to be saving, with 56% reporting that they are not currently contributing to a retirement plan like an IRA or a 401(k)." I hope that everyone isn't relying on Social Security.

And while we're not talking about mortgages, and under the, "Oops, my bad" category, JPMorgan Chase told everyone that its corporate/private equity business expected to take an $800 million after-tax loss for the second quarter due to a "paper loss" of some $2 billion resulting from a hedge done by its London office of the company's entire credit position. The hedge was "flawed, complex, poorly reviewed, poorly executed and poorly monitored," CEO Jamie Dimon said on a conference call. Why the heck should the whole stock market be down because Chase messed up a trade? Jamie Dimon told the press that the losses could rise by an additional $1 billion, but he hoped the problem would be resolved by the end of the year. Fortunately for mortgage bankers, it doesn't seem to involve MBS's, but its synthetic credit portfolio." Dimon said the portfolio "has proven to be riskier, more volatile and less effective as an economic hedge than the firm previously believed."

As we all learned while watching the non-agency MBS market crumble, much of it due to the rating agencies mis-rating securities, synthetic credit products are derivatives that generate gains and losses tied to credit performance without the owner buying or selling actual debt. And while the losses "only" exist on paper now, they will be realized when the trades are closed with profits and losses allocated. But, he said, when the company makes a mistake, "We admit it. We learn from it. We fix it. And we move on." I think if my kid ever told me that after crashing the car, or receiving an "F" in math, I'd be a little miffed.

Someone who knows a lot about Chase is the new CEO of Freddie Mac, since he spent 30 years there. Donald Layton got the nod, becoming the third CEO in four years. He was also appointed to the board of AIG, UG's parent, and was the CEO of E*Trade, the company with the talking baby commercial while at the same time helping folks remember where the * key is on their keyboard.

Up in Delaware, the New Castle County law department issued a letter regarding transfer taxes on transactions involving Fannie Mae & Freddie Mac. Historically, purchases from these entities have been treated as exempt from transfer tax as a conveyance from a governmental agency. But the County announced that, in its opinion, Fannie Mae and Freddie Mac are not governmental agencies - they are federally chartered private corporations.  New Castle County has decided to enforce that distinction starting on June 14, and lenders' compliance departments prepared to adjust their GFE's to disclose the full transfer tax on any loan they have pending where either of these entities is the Seller.  Based on the language of the letter, some believe that any deed recorded on or after June 14th will be subject to full transfer tax (unless a first time home buyer or some other exemption applies). Technically, this letter only applies to the New Castle County transfer tax, not the State of Delaware, but one can expect that other counties, and other states, may follow the interpretation offered by New Castle County.

It seems that everyone is talking about the Wall Street Journal article on refinances, along with some numbers released by Freddie Mac showing that on average, borrowers that refinanced during the first quarter of 2012 reduced their first-year interest payments by $2,900. And according to Moody's, refinancing over the past three years has unlocked savings worth $46 billion in their first year. That certainly has to help our GDP, right?

But it isn't easy to refinance. We all know that fewer banks control a larger share of the mortgage market than they did before the financial crisis. And on the retail side it now takes the nation's biggest mortgage lenders an average of more than 70 days to complete a refinance, according to Accenture Credit Services, up from 45 days a year ago. Documentation and appraisal requirements have increased. And the spread between the primary market and the secondary market has widened out for a variety of reasons (to slow volume, to cover increased overhead, and to increase buyback reserves quickly come to mind - Fannie asked banks to buy back $24 billion last year) as many lenders have boosted their rates to borrowers. In general, what this has tended to do, per the WSJ, is to help smaller, more nimble mortgage lenders with faster turn times. On the retail side, with Wells and Citi at about a 90 day processing time, and Chase at 45-60 days, it is making smaller lenders and brokers look pretty darned good.

No matter how hard they try, the government can't keep its nose out of the mortgage markets. Whether it was encouraging lending down the credit curve 10 years ago to borrowers who arguably should not have received home loans, or HARP, it just won't leave the private markets alone. For today, we'll have "The Responsible Homeowner Refinancing Act of 2012" in the news, sponsored by U.S. Senators Robert Menendez (D-NJ) and Barbara Boxer (D-CA).  "This bill is a win-win-win -- a win for responsible homeowners who will be able to refinance at record-low rates, a win for mortgage lenders who will enjoy an influx of new business, and a win for communities and our economy, which will benefit from additional refinances that will be made possible by this bill," Boxer said.  Moody's Analytics Chief Economist Mark Zandi has projected that the bill will result in three million additional refinances. "Unnecessary" red tape and high fees will be pushed aside, and removes the barriers preventing these Fannie Mae and Freddie Mac borrowers from refinancing their loans. The bill would: extend streamlined refinancing for all Fannie and Freddie borrowers regardless of how much they owe compared to the value of their home, eliminate up-front fees completely on refinances, eliminate appraisal costs for all borrowers, remove additional barriers to competition, require second lien holders and mortgage insurers who unreasonably block a refinance to pay a fine, and pay for itself since reducing homeowners' mortgage payments also reduces default rates and foreclosures, reducing Fannie and Freddie's reliance on taxpayer bailouts. The bill has been endorsed by a wide array of groups including Americans for Financial Reform, Amherst Securities (mortgage investor), Center for Responsible Lending, National Council of La Raza, NAHB, NAMB, NAR, National Consumer Law Center (on behalf of its low income clients), and Quicken Loans.

The CFPB's compensation plan for loan officers spells trouble - and my guess is that the borrower will once again pay the price through unintended consequences. "I'll do a $100,000 loan. It'll just be with the same $5000 origination fee I'd charge on a $500,000 loan! As best I can tell, all thing being equal, an LO is inclined to charge less (fewer points) for a $400k loan than for a $100k loan. The dollar amount comes out to be the same. But if they tell everyone they can only charge 1 point, and an LO has two loans on their desk, one for $4k income and the other for $1k, which borrower is going to receive the attention?"

Another LO wrote, "Yes, larger loans will receive more attention. I guess I almost always charge about the same % and it means that on larger deals I make more and on smaller deals I make less.  On the smaller deals, it is hard to charge more than 1% due to industry rules on total fees & expenses. Of course, I am talking about loans around $100K or less, that unfortunately are becoming more and more prevalent!  My gut feeling is that all of this is a non-issue because eventually Wells and the other big players are going to take their ball and go home and stop doing any form of wholesale or broker business and be retail only. Either that or regulation, low loan amounts and declining real estate sales, will drive everyone but the absolute biggest hitters out of the market."

And, "Rob, how ironic that CFPB wants to cap LO compensation to a 'fixed' amount when everyone else in the industry (FED, HUD, etc.) continue to hang their fees and regulatory guidelines on a percentage basis. And in low cost areas, try to price a $50k loan in today's market and see how beat up you get on fees, etc. I do these loans for goodwill and hopefully a referral down the line - it sure doesn't pay at the time of the loan."

And law firm Ballard Spahr did a nice, thorough write-up on the current situation.

With all of this going on, no one seems to care about rates anymore. Besides, they are pretty stable on a relative basis, although yesterday higher coupon mortgages and MBS's worsened slightly. But originators are focused on rate sheet prices for their borrowers. MBS prices were nearly unchanged on 30-year 3.5's, and 10-year T-notes fell about .125 in price to a yield of 1.89%.

The news out this morning consisted of the Producer Price Index, which was -.2% (less than expected), ex-food & energy +.2% (as expected), and in a bit we'll have the preliminary May Consumer Sentiment reading, projected slightly lower but it is not a market-moving number. In the early going, the 10-yr has improved to 1.85% and MBS prices are slightly better.

(This isn't a joke in the pure sense of the word, although the last couple sentences suffice. It came from a weary loan officer, and given the CFPB's word on LO comp, figured it was fitting.)

"We have lender paid agreements that specify how much we charge are every loan.  Our percent is 1.5.  That means I charge 1.5% on every single loan - period.  I am only allowed to do lender paid loans.  My broker can originate and do a borrower paid, then the origination fee can change, but the borrower must pay the origination fee. With the jumbo lenders, we have the lender paid agreement set at 1.0%, and borrowers must sign a form stating which type of origination they want.  I just spent over 40 hours processing an investment loan. The buyer is incredibly complicated. There are over 12 pounds of paper in his file - no joke. The tax returns would choke a horse but it is a small loan, $103k.  All we can collect is 1.5% on the lender paid.  I am working for minimum wage, with no benefits. Then the borrower decides to buy another property, next door.  He asked that I lower my fee, because I had already done one for him.  I told him to take the loan somewhere else. Two days later he called and asked that I please take the loan.  The other lenders he called wanted 2.5% in origination.  Like a fool, I accepted the request. What is the difference between a street walker and a mortgage originator?  The mortgage originator has an office."