"I went for my routine check-up today and everything seemed to be going fine until he asked me to drop my shorts!  Do you think I should change dentists?" Sometimes things aren't what people are expecting. I received this note. "I was wondering if you are receiving many comments from LO's regarding the new comp rules. As the dust settles, here is the effect: For the first 3 months under my commission plan, which was a fair number if in a high volume market, I wound up earning $3,500 less than I would have in the old plan, making my company obviously more income.  In the meantime I agreed to a time sheet that says I only perform my duties for 37.5 hours a week and am paid for these hours by money deducted from commissions. Are my clients really better off? By the way, I have only been in the business 35 years, so maybe I am missing something."

I am indeed hearing continued complaints about the LO compensation structure, the internal pricing mechanisms that must be put in place, and the questionable benefit on borrowers. But on the other hand, I have also heard from some loan agents that they are making more money under the new plan. Either way, I have heard nothing about any serious moves afoot to change or repeal the existing structure.  Please share your thoughts in the comments section below.

And are companies really making more income? If you're curious about how your company is performing during 2011 YTD (July) relative to your peers, STRATMOR Group conducted a recent survey of 40 mid-size independent and bank-owned mortgage originators to get a handle on this question. The findings pretty much confirmed what just about everybody suspected: across all survey participants: origination volume was down 28% but net income margins were down 34% from 2010 levels.  However, mortgage banks suffered the largest decline in volume, but bank-owned lenders experienced the biggest drop in profitability. Per STRATMOR total revenues actually improved over 2010, but unfortunately expenses increased faster than revenues rose.  Other observations include: purchase business has increased to 62% of total production, the number of LO's employed dropped by 10% (due to the impact of the Fed comp rule, licensing requirements, etc.), LO turnover was down significantly, and LO productivity fell by another 15% after peaking in 2009.  If you would like to discuss this survey's findings, contact Jim Cameron at the STRATMOR Group jim.cameron@stratmorgroup.com.

Word from mortgage origination trenches continues. "I would like to comment on the FOMC's and the Administration's perception of why the economy is so weak.  All the talk is centered around Easing, Monetary policy, Interest Rates, Stimulus etc. and while low interest rates are great it is not interest rates that are keeping the economy down at this point.  Lack of jobs and lack of confidence are the problem.  Nothing is going to get better until we achieve real job growth, and recent Jobless Claims numbers are indicating that nothing is changing.  Job growth will stimulate a housing recovery and both will boost the economy.  Now the wiz bang geniuses in DC think that they can tinker with rates and numbers and fix it enough to get re-elected but I submit they are wrong.  Businesses and entrepreneurs (read new businesses and job creation) need to have confidence that a fairly predictable business and regulatory environment exists in which to operate.  That does not exist today hence businesses, large and small, are not willing to risk and are sitting on whatever cash they have.  The answer, I think, to repairing the economy and promoting growth is not interest rates, a new Stimulus, the Fed buying bonds, or whatever else they tried that hasn't worked.  The answer is rolling back the tsunami of new regulations the politicians have placed in motion.  Businesses literally do not know if what they are doing today is going to become illegal next month or next year.  We are experiencing "death by regulation" in almost every industry.  Hundreds of new regs are still to be written and implemented.  Our Industry is only one, among many, that are being pummeled with new rules and regs.  Bottom line is: get the Government out of our way and American businesses will get moving." So opined mortgage marketing executive Derek Becker at derek@pugdogmarketing.com.

Citi, as do all major investors, performs post-purchase due diligence on a sample of loans purchased from Correspondents. Citi reminded clients that, "Among other check-points, this process identifies defects or instances of non-compliance with investor policies, procedures, and quality expectations and regulatory requirements. Our post-purchase defect rate goal for each Correspondent is 5% or less. Through in-depth trend analysis, we identified the top post-purchase defects for conventional and government loans. Errors in documenting large deposits and the source of gift funds continue to be cited as top post-purchase defects."

Citi noted that the, "Top Post Purchase Defects are Assets: Paper Trail for Large Deposit Missing (source documentation for large deposits not included in the file, cumulative smaller deposits not being documented as large deposit), and Source of Gift Funds from Donor (missing withdrawal document or bank statement from donor, missing documentation that verifies funds were from an acceptable source). The findings should be shared with your staff, and clients can find the information at www.agentsite.com/solutions under the 'Quality Tools' header."

This week Flagstar spread the word to its clients that, "Effective September 15, 2011, Brokers and Correspondents, including VA Automatic Correspondents are no longer required to provide appraisals for IRRRL transactions that refinance an existing Flagstar-serviced loan. Flagstar to Flagstar IRRRLs submitted and denied for no appraisal prior to September 15, 2011 may be resubmitted." In addition, "Effective for all FHA, VA and USDA Rural Housing loans locked on or after September 22, all borrowers must have a minimum FICO score of 620. Loans for borrowers having FICO scores between 600 and 619 must be registered on or before September 21, and must close on or before October 21. The requirements above apply to all Brokers and Correspondents, including DE Delegated and VA Automatic Correspondents." Flagstar is also undergoing adjustments to its jumbo ARM and fixed-rate products. Please see its full memo for details.

In somewhat non-mortgage related market news yesterday, the European Central Bank announced additional US dollar liquidity-providing operations over year-end. More specifically, the ECB "has decided, in coordination with the Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank, to conduct three US dollar liquidity-providing operations with a maturity of approximately three months covering the end of the year. These operations will be conducted in addition to the ongoing weekly seven-day operations...these will all take the form of repurchase operations against eligible collateral and will be carried out as fixed rate tender procedures with full allotment." In English, Central banks are trying to settle fears that European banks could be threatened by a shortage of dollars, as they were at the height of the 2008 financial crisis, and opened new lines of credit to institutions in the first such show of force in more than a year.

This news caused stock markets to rally - banks can borrow dollars for up to three months, instead of just for one week as before. And it seemed to go beyond just providing reassurance that European banks would not be cut off by American lenders wary of their financial state. The central banks seemed determined to demonstrate that they would not hesitate to deploy their combined weight to keep the European sovereign debt crisis from becoming a bigger threat to the global economy.

We had a "slew" of economic news yesterday. The CPI was +.4% (higher than expected), but Jobless Claims were +11k to 428k (higher than expected), and the Empire State Manufacturing Survey General Business Conditions index inched down one point. Nationwide, Industrial Production increased 0.2% in August, and Capacity Utilization edged up to 77.4%, and the Philadelphia Fed Index of General Business activity within the factory sector rose to -17.5 this month from -30.7 in August and 3.2 in July.

The impact of all this on rates was not particularly good, since the ECB coordination with our Fed will dampen the bid for safe assets (i.e., Treasury securities) and the CPI rose faster than expected in August. The 10-year UST note yield increased as much as 13 basis points to 2.12%, after having dropped to a record low of 1.8770% three days ago and closed at 2.09%. Volume in MBS was light today at just 64% of the 30-day average, according to Tradeweb's experience, and prices were worse by about .250.

There is very little news today (only a preliminary September read on Consumer Sentiment - expected higher to 56.5 from 55.7). In the early going rates are nearly unchanged with the 10-yr at 2.08% and MBS prices unmoved from Thursday's close.

Subject: WHY MEN DIE FIRST (Part 2; Part 1 was yesterday)
This is a question that has gone unanswered for centuries...... but, now we know.
If you ask her to do something she doesn't enjoy....... that's domination.
If SHE asks you.........it's a favor.
If you appreciate the female form and frilly underwear...... you're a pervert.
If you don't..............you're gay.
If you like a woman to shave her legs and keep in shape..............you're sexist.
If you try to keep yourself in shape................you're vain.
If you don't................you're a slob.
If you buy her flowers.............you're after something.
If you don't....................you're not thoughtful.
If you're proud of your achievements........ you're full of yourself.
If you don't....................you're not ambitious.
If she has a headache............she's tired.
If you have a headache.............you don't love her anymore.
If you want it too often.........you're oversexed.
If you don't..........there must be someone else.
Men die first because they want to.


If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog takes a look at the recent news concerning REIT's, and the possible tax implications. If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what's going on out there from the other readers.