The city of San Francisco has 121 square kilometers (about 47 square miles). The Dallas-Ft. Worth Airport's area is about 70 square kilometers, which means that DFW is nearly 60% of SF in its entirety! This has nothing to do with mortgages, but "fun with numbers" does remind us that the CFPB's HMDA data (yes, it is in charge of that now) should be out within a week or two. (HMDA data has always come out around this time. Those reporting their HMDA data to the CFPB must have it submitted by March.  After the submission of the data, the CFPB spends the next several months reviewing the submissions for accuracy and completeness prior to wrapping up their final reviews and ultimate release for public consumption.) Coming to a theater near you!

The Fed is contemplating capital requirements that will be even tougher than Basel. At the margin, this would mean less mortgage lending by the big banks like Wells and JP Morgan. The regulator for the FHLB system has filed a proposal that would require institutions to maintain at least 10% of their assets in home loans or mortgage backed securities in order to borrow. Institutions with $1B or less in assets would have to maintain at least 1% of their assets in similar fashion. The Wall Street Journal also ran a story on the subject. Excluding the changes in the works at the Fed, the Basel capital accords could require banks to have a capital ratio of as much as 12.5% of risk-weighted assets by 2019. "Excluding the changes in the works at the Fed, the Basel capital accords could require banks to have a capital ratio of as much as 12.5% of risk-weighted assets by 2019."

USDA madness! I have received several notes about the impending USDA price changes. Effective October 1, (USDA conditional commitments issued on or after that date) the fee is increasing from 0.4% to 0.5% monthly.  If you currently have a USDA loan in process then please be aware that if you do not have a Conditional Approval from the appropriate RD office by 09/30/2014, you will be required to re-disclose with the higher annual fee. Additionally, the State of Florida has already announced that due to their backlog - they are requiring re-disclosure on all pending USDA loans. And the backlog in other states is bad. Oregon, for example, takes over 30 business days to underwrite these - and the clock starts over unless lenders meet the deadline under the 4 basis point structure. USDA will be updating the eligible area maps to remove cities/MSAs with populations greater than 35,000. The eligible area changes will take place on October 1st.

Genworth U.S. Mortgage Insurance, a unit of Genworth Financial, Inc. submitted its response to the Federal Housing Finance Agency (FHFA) regarding the draft Private Mortgage Insurance Eligibility Requirements (PMIERs), which Fannie Mae and Freddie Mac would use to approve private mortgage insurers that provide mortgage insurance on loans owned or guaranteed by them. In addition, Genworth filed a response and shared recommendations for the FHFA's request for public input regarding the current state of Guarantee Fees.  

"Genworth appreciates this thorough effort to increase the financial strength of the private mortgage insurance industry and reinforce the vital role of private mortgage insurance in the U.S. housing finance system," said Rohit Gupta, Genworth MI's president and CEO.  "We remain committed to working with the FHFA and the Enterprises to implement progressive and transparent reform for strengthening the MI industry. We aim to strike a balance between implementing reform that enhances credit risk protection while ensuring affordable access to mortgage credit for first-time homebuyers, low-to-moderate income borrowers and members of underserved communities."

For example, Genworth recommends inclusion of 210% of prior year's premiums in the asset calculation for loans insured after 2008. This is the same methodology the Enterprises applied to the 2008 and prior year vintages. Genworth is recommending changes to the capital factors applied to 2005-2008 vintages and non-performing insured loans, and adding more granularity for LTVs below 85%. See the Genworth PMIERS Comment Letter for full details.

The MI company also weighed in on guarantee fees. Genworth's response to the request included formally withdrawing the G-fee increases proposed by former Acting Director DeMarco, discontinuing the existing adverse market fees without implementing offsetting increases elsewhere, having existing loan level fees based on FICO scores and LTV percentages that should give full and transparent recognition for the credit loss mitigation from private MI and so should be eliminated or materially decreased, and require GSEs to provide sufficient transparency into their pricing models. Check out the Genworth G-fees Comment Letter for more information.

A common game analysts and traders like to play between opening and closing bells is "what if..." If something happens to A, something will happen to B, and we want to do what? Most scenarios center on natural disasters and the unpredictable events which can't be modeled in pricing engines and valuation tools. These are events which even scare me. What if there's a cat food shortage and our pride of cats roaming our home turns on me? These are the things which keep me up at night. The things which keep Barclays analysts up at night are more relevant, they write, "Northern California was hit by a 6.0 magnitude earthquake in the early morning hours on Sunday. While the earthquake was centered in Napa County and RMBS has a lot of exposure to the broader area, the overall effect on RMBS is likely to be fairly muted. Most deals have minor exposure to mortgages in earthquake-affected areas. The effect of the earthquake has been limited to cities in Napa County and nearby Solano and Contra Costa Counties, and no damage has been recorded in the San Francisco/Bay Area, which is just 40-50 miles away. As such, exposure of RMBS deals to mortgages in strongly/partially affected areas is limited, and even in the few deals with the largest exposures, only 4-5% of the mortgages lie in strongly/partially affected areas. Although the overall impact on mortgage securitizations may be low, insurance companies on the other hand may feel a slight pinch...or will they? What DOES insurance cover these days?

The news we had this morning echoed what I'd been hearing from various companies. The MBA said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 7.2 percent in the week ended Sept. 5. The MBA's seasonally adjusted index of refinancing applications dropped 10.7 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, fell 2.6 percent. Refis were this low in November 2008, and purchase applications are now 12 percent below where they were one year ago. Overall applications have not been this low since 2000. Fall is usually the season where first-time home buyers are most active, but this cohort has had the most trouble participating in the housing recovery, due to tighter credit and weak job and wage growth. Even government-insured loans, which offer lower down payments, are seeing far lower application volumes, down 18 percent from a year ago.

Looking at the bond market, it seems investors are a little spooked by what the Fed may do next. There is a lot of noise about the markets misinterpreting the Fed's intent - and in a market with no news that takes priority. Once again, no news, but we do have a $21 billion 10-yr auction later. For numbers we had a 2.50% close on the 10-yr yield Tuesday and this morning we're at 2.53% with agency MBS prices worse about .125.

Jobs and Announcements

As branch managers and originators search for the right fit, I received this note: "Companies spend so much on recruiting producers yet spend so little on retaining them. If people really are the measure of a company's most important asset, then why wouldn't they invest more in them? Fortunately, there are some out there that get it right... I suggest aligning yourself with a company that values, supports and invests in its people as well as one that helps you set yourself apart from your competition. The bar has definitely been raised out there and if you partner with the right company, you can really take your business to the next level. For example, at Hometown Lenders, they actually have a recruiter who does nothing but recruit high-quality Loan Originators for their branches (at their expense), and they can help you implement any one of their proven 'marketing maps' that have been very successful in their other branches. Judging by what Frank and Brian are saying about them here as well as the raving reviews they're getting on Facebook, I'd say you definitely need to check them out. Shoot Rory Broome a quick email and let him tell you how they have helped their producers make more money year after year."

AmeriHome Mortgage Correspondent is pleased to announce 3 new Sales Executives joining their team. In the East is Bridget Williams (most recently head of National MI's field sales and a long time Bank of America/Countrywide Correspondent sales & sales management professional, specializing in the builder business), the Midwest has Terese Joyce CMB (ex-Nationstar and is a 25 years industry veteran, with over 15 years focused on the Midwest correspondent market, and Mary Rigby - also in the East (ex-Homeward Correspondent, is a seasoned correspondent sales professional with strong relationships across the Mid Atlantic & Northeast markets.  AmeriHome Mortgage, Correspondent is a well-capitalized, nationwide investor with a broad portfolio of products, offering a fully delegated, fast, accurate and easy loan purchase experience. For more information on their products, value proposition and how to become an approved seller, please reach out to any member of the AmeriHome sales team.

Congrats to Michelle Van who has been promoted to president of Fifth Third Mortgage Company. Ms. Van was named among the "25 Most Powerful Women in Banking" by American Banker magazine in 2007, 2012 and 2013. She replaces Bob Lewis, who will retire Sept. 19.

In the new product arena, most of us would have to agree that researching agency rules and investor overlays is a time consuming and complex task.  Recently there was a second generation product introduced to help lenders: The Rule Tool by Take Three Technologies. As the complexity of the industry has grown, pricing engines have increased in popularity. (Having ol' Edna on the lock desk track base prices, servicing values, and loan level price adjustments for a company with many investors is problematic). But pricing engines are typically limited to the basic pricing parameters (loan amount, LTV, FICO, state, property type, and debt- to-income ratio).  Agency rules and investor overlays then add an additional level of complexity. Researching these in a pricing engine is very difficult (if it can be done at all) and researching them one agency or investor website at a time is very time consuming process. The Rule Tool provides an intelligent solution for loan originators, processors, and underwriters to simplify the process of researching and confirming agency guidelines and investor overlays as it provides a single, comprehensive source for the multitude of rules and overlays that can affect the eligibility of the loan. "The Rule Tool provides you a simple, easy to navigate user interface that allows you to instantly match a borrower's unique scenario to various agency/lender rules and guidelines."

Ruhl Mortgage and Quad City Bank & Trust, a wholly-owned subsidiary of QCR Holdings, Inc. (NASDAQ:QCRH), announced that they have formed a new joint venture to provide mortgage services and products to their clients. The new venture is pending certain regulatory approvals and is anticipated to commence operation in the fourth quarter of 2014. The combined entity will operate as Ruhl Mortgage. Ruhl Mortgage is tied in with Ruhl&Ruhl Realtors. Because of the new partnership with Quad City Bank & Trust, Ruhl Mortgage will now be able to offer portfolio, bridge and new construction loans. The company will serve the same regional market as Ruhl&Ruhl Realtors, encompassing 13 MLS's (Multiple Listing Services) throughout eastern Iowa, northwestern Illinois, and southwestern Wisconsin.

And we have a new kid on the block: Michigan's Home Point Capital, a de novo mortgage banking business founded by Willie Newman and Stone Point Capital LLC that will develop multi-channel residential mortgage origination, servicing and asset management capabilities. This week Home Point entered into a definitive agreement to acquire Maverick Funding Corp., a multi-state mortgage banking company. New Jersey's Maverick is licensed in 32 states, has 26 retail branches across 11 states and a national third-party lending operation, Maverick has originated nearly $3 billion of residential mortgages since 2012. Maverick's founders, Ralph Vitiello and Mike Petruccelli, will remain with the company and serve as senior executives focused on the continued growth of Maverick's origination network.  Home Point's acquisition of Maverick is subject to customary closing conditions, including the receipt of regulatory approvals.