Fifth Third admitted it improperly certified more than 1,400 mortgage loans it knew were defective as eligible for FHA, costing taxpayers millions. It'll cost 53 $85 million big 'uns. And Caliber is not only the subject of rumors ("Is it buying Stonegate?") but instead received a phone call you never want to have: you're under investigation by the New York Attorney General's office.
Ballard Spahr spread the word that the CFPB announced that it is considering proposing rules that would prohibit consumer financial services companies from using class action waivers in consumer arbitration clauses. "The CFPB has published an outline of its proposals in preparation for convening a Small Business Review Panel to gather feedback from small industry stakeholders. This is the first step in the process of a potential rulemaking on this issue. We have issued an E-alert on this important development which contains a link to the CFPB's outline of its proposals."
"In theory there is no difference between theory and practice. In practice there is." Well, the CFPB weighed in on marketing service agreements, and theory and practice seem a little closer. The bulletin highlights risks of agreements violating the federal prohibition on mortgage kickbacks. "...the CFPB has found that marketing services agreements carry legal and regulatory risk for lenders...." That doesn't mean they're "against the law", right? I am no attorney, but maybe as long as you adhere to this: "The bulletin explains that while marketing services agreements are usually framed as payments for advertising or promotional services, in some cases the payments are actually disguised compensation for referrals. Any agreement that entails exchanging a thing of value for referrals of settlement service business likely violates federal law, regardless of whether a marketing services agreement is part of the transaction."
Remember that many in the industry use "MSA" as a catch-all term. But compliance folks are quick to point out that there are MSAs, there are joint ventures, and there are desk rentals. All of those have been a staple of some lenders, Realtors, and builders for years. For others they represent an unfair playing field. HUD, when it was in charge of RESPA, issued a June 2010 Interpretive Rule on the subject that had been the guide until the CFPB handed down its Consent Order for Lighthouse Title about a year ago. The Consent Order did not outlaw MSAs but sent the industry into a tailspin and provided fodder for plenty of attorneys to interpret their client's business practices. Several large lenders exited the market and that further heightened the controversy involving these agreements that rely upon Section 8(c)(2) for RESPA compliance. In June the CFPB Director handed down his decision in the PHH matter and asserted that Section 8(c)(2) is not an exception to the Section 8 anti-kickback provisions in the Act. Again, the CFPB was careful not to claim that MSAs are per se illegal. Now the industry has more clarity - we hope.
RESPRO writes, "What's a settlement service provider to do? On Thursday, October 22 at 2PM the Real Estate Services Providers Council, Inc. (RESPRO) will sponsor a one hour webinar to address your questions and concerns about MSAs. The webinar will be presented by noted RESPA authority Phil Schulman, partner in the Washington, D.C. office of K&L Gates. Marx Sterbcow founder of Sterbcow Law Group will moderate our webinar. This informative session will review the state of MSAs prior to and after the Lighthouse and PHH Decision, as well as offer a list of MSA do's and don'ts for your consideration."
Government interference? Elizabeth Warren is mad that the government is selling distressed mortgages to hedge funds and private equity firms and wants them sold to non-profit firms. She is of the opinion that hedge funds and private equity firms pursue foreclosure too quickly and said "The heart of it is these loan sales need to come with strings attached with basic outcomes for homeowners." Some in the industry think, sarcastically, that given her druthers she'd like to outlaw the collection of any debt. But Ms. Warren is certainly smart enough to know that these loan sales come with "strings attached": servicers usually cannot foreclose for at least a year and must hold the loans for a period of several years. Just look how long it takes to foreclose in many states!
On the other hand there are those that agree with Ms. Warren, as evidenced by this post stating, "I agree with Senator Warren! HUD and the FHFA are nuts to allow FHA, Fannie, and Freddie to auction their distressed loans at big discounts to private equity firms and hedge funds.
Brendan Bordelon and John Berlau raise concerns about Sen. Elizabeth Warren's efforts to condemn the financial services industry. Robert Litan resigned from his position at the Brookings Institution amid criticism from Warren. Warren should face similar criticisms, Bordelon and Berlau write. Berlau notes Warren's support of the Department of Labor's fiduciary proposal. "Warren and the DOL bureaucrats, by contrast, argue that disclosure has reached its limits due to what they regard as Americans' inherent intellectual limitations," he writes. National Review
While we're on government poking of financial services, the House of Representatives passed the Homebuyers Assistance Act (HR 3192), with its 4 month TRID grace period, by a vote 303 to 121. Industry groups were quick to praise the event. For example, ALTA released, "Tonight's overwhelming bipartisan and veto-proof vote shows that the House of Representatives recognizes the need for consumers to continue to receive a positive and compliant real estate transaction...We urge the Senate to pass this bill immediately so that our ALTA members and the broader real estate members can focus on delivering quality service to consumers when buying a home or refinancing a mortgage. Without certainty, service providers are likely to close fewer transactions to ensure compliance with TRID, which will delay homeownership for consumers around the country,"
The FDIC issued a list of banks recently evaluated for compliance with the Community Reinvestment Act (CRA), which is intended to ensure banks meet local credit needs, especially among low to moderate income households. The list includes ratings that the FDIC assigned to institutions in July of this year. The rankings from the evaluation for each bank can be found here.
Through it all announced bank mergers and acquisitions continue, and will continue until the cows come home. In California Pacific Premier Bank ($2.6B) will acquire Security Bank of California ($658mm) for about $118.9mm in stock. In The Land of Lincoln Town And Country Bank ($515mm, IL) will acquire Premier Bank of Jacksonville ($196mm, IL). Ameris Bank ($5.2B, GA) snuck across the border and will acquire The Jacksonville Bank ($502mm, FL) for $96.6mm in cash (25%) and stock (75%) or about 1.44x tangible book. Park Sterling Bank ($2.4B, NC) will acquire First Capital Bank ($616mm, VA) for about $82.5mm. CenterState Banks, Inc. (Davenport, Florida) has agreed to acquire Community Bank of South Florida, Inc. (Homestead, Florida). And West Plains Investors, Inc. (Jacksonville, IL) has agreed to merge with Town and Country Financial Corporation (Springfield, IL).
On the flip side only eight banks have been shut down this year - but two last week. In Washington the deposits of Hometown National Bank, Longview, Washington were moved to Twin City Bank, Longview, Washington. And the Bank of Georgia, Peachtree City, Georgia, and became part of Fidelity Bank, Atlanta, Georgia.
In capital markets news, the Financial Industry Regulatory Authority has released its liquidity risk management directive for broker-dealer firms, which includes reviews and stress tests, writes Richard Satran. "FINRA is coming to town with liquidity stress tests no matter what size your firm is," said Julian Fisher, head of Crest Rider. "It's not just the province of the big boys in New York anymore. But smaller firms have fewer resources to invest in technology and expertise to do what's required, and it can be incredibly costly."
Looking briefly at the bond markets, things were quiet Thursday, through Jobless Claims, through Kevin McCarthy dropping out of the race for Speaker of the House, through a solid 30-year bond auction, until the release of the minutes from the September 16-17 FOMC meeting. They showed that many members saw the economy on track to warrant a rate hike later this year, and that the pause at the September meeting was "to wait for additional information confirming that the economic outlook had not deteriorated.'' And then bonds sold off.
Today the only news of minor substance was the September Export Prices (-.7%) and Import Prices (-.1%). We closed the 10-year at 2.11% Thursday and this morning we're at 2.12% with agency MBS prices worse a shade. Don't forget the bond markets are closed Monday!
Jobs and Announcements
In wholesale job news JMAC Lending, a national wholesale lender offering conventional, government, and cutting-edge jumbo/non-QM products, is seeking Account Executives that have a proven track record of success in wholesale and correspondent lending. "Applicants can expect industry leading pricing, top of the line systems and an Operations staff fully equipped to take production to the next level - our AEs fund an average of over $6 million per month. The market is ripe and territories are open. Make the best career move you can make. Interested candidates for Southern California, Arizona, and Nevada can contact Sales Manager Colin Field. For all other territories, please contact Lilly Lefeber. Don't let this incredible opportunity pass you by."
On the retail side up over in Washington VITEK Mortgage Group is looking for purchase-focused retail MLOs to "join our expanding Bellevue Branch Office. We love our MLOs and we take great care of them! We've been in business for more than 28 years, built to be nimble, and have a sophisticated delivery system and support structure. Local leadership and operations, as well as accessible decision-makers truly set us apart from the competition! We are delegated with Fannie, Freddie, and Ginnie, and have all the products you need in order to shine with your clients. If you are serious about business, but still want to feel like part of a family, we might be just the place for you! Contact George Charles for confidential consideration and check us out at VITEK."
And if you're interested in sales management in Hawai'i, HomeStreet Bank, a top 20 lender with nearly 90 years of single family lending expertise, is recruiting a Branch Operations Manager for its fulfillment center in Honolulu. HomeStreet has been rapidly gaining market share in Hawaii and this role is considered critical to support next steps. While local candidates are encouraged, the hiring managers are open to assisting relocation of an outstanding leader from the mainland with a proven track record. The successful applicant will possess strong competencies in pipeline management, processing oversight and a passionate production affinity. The company is headquartered in Seattle with regional branches throughout the western United States. HomeStreet Bank is an Equal Opportunity/Affirmative Action Employer; minorities, females, protected veterans and individuals with disabilities are encouraged to apply. Please send your resume and a cover letter for confidential consideration to Senior Recruiter Holly Wirth.
Although it seems that the average age in this industry is 76, not everyone stays in forever. Utah's Security National Financial Corporation announced the year-end retirements of Mr. Lynn Beckstead, Jr., President, and Mr. Kenneth Parr, Chief Financial Officer. The Company further announced, in conjunction with these retirements, the appointments of Mr. Stephen Johnson as President and Mr. Jacob Banks as Chief Financial Officer of SecurityNational Mortgage, effective January 1. Congrats to all involved!
Move over Stonegate, Nationstar, Ocwen, Walter...We will soon have another lender to follow in the stock market as LoanDepot has filed an IPO.
ZestFinance has received $150 million from investment-management group Fortress Investment Group. The Hollywood financial tech firm, an online lender targeting sub-prime borrowers, has developed a machine-learning software program that assesses the risk of lending to sub-prime borrowers. Previously, it had sold that software to financial institutions, but now it aims to use its program to manage the risk around originating loans to near-prime borrowers, the top slice of the sub-prime category. ZestFinance's software uses 70,000 nontraditional, often nonfinancial factors to judge credit worthiness. "One of the things we look at is the way you fill out an application," said ZestFinance Chief Executive Douglas Merrill. "If you are typing your name in on an application in all upper cases you are slightly higher risk than someone who types in all lower case or upper and lower case." The company launched its sub-prime loan Basix product this summer across 15 states.
And how about Radian's sister company Clayton Holdings going out and buying ValuAmerica?
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