Uncle Sam Joins the Family Business






Latest articles from "Mortgage Banking":

Lenders expect weakening purchase demand(October 1, 2014)

Cleveland's Own(October 1, 2014)

Reinvention(October 1, 2014)

FNC reports home prices declined in St. Louis, Cincinnati and Cleveland(October 1, 2014)

A NEW WORLD OF APPRAISALS(October 1, 2014)

THE FUTURE Sales Organization(October 1, 2014)

Q&A with Ginnie Mae's Ted Tozer(October 1, 2014)

Publication: Mortgage Banking
Author: Morse, Neil J
Date published: February 1, 2012

Admitting that her agency "does not have the resources" to pursue all needed actions in certain financial enforcement cases, Mary Schapiro. chairman of the Securities and Exchange Commission (SEC), told an audience at the Securities Industry and Financial Markets Association (SIFMA) Annual Meeting in New York last November, "We have to make judgments about what cases we can bring."

Schapiro argued for more muscle in that regard, stating: "We need a strong cop on the beat when it comes to Wall Street; we need a regulator who has the tools and resources. We have a lot of tools and more with Dodd-Frank [Wall Street Reform and Consumer Protection Act! to come, but we don't have the resources.

Zeroing in on one particular area of her jurisdiction, the SEC chair said, "The general success of money market funds long allowed them to be a sleepy, low-risk part of the financial world. [But] they catapulted into the general consciousness in September 2008, in the midst of the financial crisis when the reserve primary bond 'broke the buck,' triggering a run on prime money market funds."

Schapiro, who was appointed to her position in January 2009, said new SEC money market reforms would serve as "a critical first step, and [though] many have said, 'You've done enough,' I believe additional steps must be taken to address the structural features that make money market funds vulnerable to a run. They are significantly intertwined in the U.S. economy and global marketplace."

As reverse-mortgage lenders continue to wrangle with tax and insurance (T&I) delinquencies among senior customers and a resulting new emphasis on financial assessments is pressed, the Department of Housing and Urban Development (HUD) is working to better define the problem, according to Colin Cushman. director portfolio analysis for HUD. He told attendees at the National Reverse Mort gage Lenders Association's (NRM LA s) Annual Meeting & Expo in Boston last October, "a third of the T&I problem is tax only, a third insurance and a third both. In jumbo loans, it is primarily a tax-only problem," Cushman reported, "especially in New York state."

For perspective, he reported, some 8 percent of the total reverse-mortgage portfolio has T&I default problems and among those, 42 percent defaulting owed less than $2,000. Further statistics from Cushman: "46,000 current borrowers have [some form of] delinquency status, totaling $209 million."

The HUD official said the agency wants "to identify borrowers with a high probability of default" and noted that the government intends to "request the industry get loan-level data to [project] the (potential default] threshold of these borrowers." Among the policy options being considered, Cushman noted, "are two- or three-year property charge set-asides."

At the Five Star MPact mortgage banking conference and expo in Dallas in December last year, Steve Clinton of Freddie Mac and Edward Seiler of Fannie Mae seemed to be at odds when Seiler, Fannie's director of economic business analysis and decisions, said, "We're not going back to the good old days of loss mit," spending hours with (each] client "finding out everything we can about their financial situations. There are 18 million Fannie loans on the books and millions who need loss mit. We don't have time to spend hours on the phone with clients, or the money to put everybody through mass credit counseling." But then Clinton, Freddie's senior vice president of single-family operations, said the Federal Housing Finance Agency's (FH FA 's) new servicer alignment initiative was "a reminder to get back to old-fashioned loss mit, and cleaner processes and common approaches to get more done."

Asked about any contradiction, both government-sponsored enterprise (GSE) representatives suggested there was none, countering that more effective loss-mitigation techniques were essential. Toward that end, the GSEs' aligning effort, begun Oct. 1, 201 1, "is expected to have its biggest lift come [2012]," Clinton said, noting that previously "Freddie was doing short sales one way, Fannie was doing mods and short sales another way, the private-label people a third way and FHFA a fourth way."

He said: "We're screaming that [servicers] have to do more and they're screaming [back] that it's a fragmented industry, that HAMP [the Home Affordable Modification Program] was a good start, but where 's the rest of it?"

Clinton described a new incentive, called the "package fee," that would encourage servicers to try harder to get in touch with [delinquent] borrowers "to verify information as best [they] can. If [servicers] can get [borrowers] to the disposition line, we'll pay you $500," he said, adding: "We're putting our money behind the theory that that will lead to a good outcome; it's not throwing good money away. You get paid more if you do the mod sooner rather than later."

The Freddie executive got a semi-hostile question from an audience member about compensatory fees that are retroactive. "For servicers to be charged when we're receiving many different signals about how to delay the process, to do more loss mit versus foreclosure, it's confusing at best," said the audience member. Responding, Clinton said: "We don't want the money. We want the behavior. We'll do the best we can with each servicer, each situation, each loan," he pledged. "So you say you don't want the money?," the questioner shot back, drawing laughter from others in the audience. "The GSEs will continue to revisit the timelines; they differ by state," Clinton replied, ending the exchange.

During another session at the same conference, Mike Wileman. president and chief executive officer of Orion Financial Group, Southlake, Texas, reported that problems associated with making sure loan ownership documentation is in order were having "a significant impact on the industry." He said, "Records show that rejected documents were costing the industry about half a billion dollars a year, and today it has to be in the billions because of all the work they're trying to do to come up with assignments from three or four owners ago on notes. In some cases," according to Wileman, "the problem is even causing judges to restart the entire foreclosure process."

In a discussion about the future of the GSEs, Roger McKnight. president and chief executive officer of National Capital Funding Ltd., Houston, told the conference audience in no uncertain terms that "it would be political suicide to do a lot with [them)" - that is, change the GSEs in any significant way. "As long as they get their insurance revenue back up to an acceptable level, that will take the pressure off. Without FHFA, I don't know when [the economy] would recover," McKnight declared.

Author affiliation:

Neil J. Morse has worked in the mortgage finance industry for 15 years as a writer and marketing professional, enabling him to know a quotable quote when he (over)hears one. He can be reached at nmorse@morsecommunications.com.

The use of this website is subject to the following Terms of Use