week 7

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Lykken Mortgage Industry Update

Mon, January 14, 2013 12:00 pm CST

Here is my contribution to this week’s program.

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(transcript from http://www.blogtalkradio.com/lykken-on-lending/2013/01/14/lykkenmortgage-industry-update  )

I have 4 big items for you this week.

Two interesting papers were released in the last week.

Mortgage orb.com has a 2013 mortgage industry forecast. Five points are made.
1. Originations should drop this year.
2. Rates on 30 year fixed rate mortgages should rise above 4% in the third quarter of this year.
3. Mortgage industry employment should drop by 100,000 in the next 12 to 18 months.
4. Purchase business will eclipse refinance business, so get set up for this now.
5  The industry is graying or aging, especially in the secondary marketing and senior management areas.

The second paper released in the last comes from Heritage Foundation and discusses the economic effects of eliminating the GSEs.

The paper is a bit long, but worth your time.

The main conclusion is that even if the GSEs are eliminated, 10 years from now it won’t make much of a difference.

My opinion is that the GSEs will be around because the QM rule which defines safe harbor mortgages all but ensures that that safe harbor mortgages will be the lion’s share of what is originated, and that the GSEs will be the main liquidity take out for those mortgages.

The third item is a Robo signing update that I posted this morning, pointing to six articles.

Elijah Cummings is the head of the House Committee on Oversight and Government Reform.  Apparently the OCC and Fed did not bother to consult Congress before announcing the robo settlement. This may allow the banks to sweep past abuses under the rug,  according to Cummings.

I have another article on Robo signing. This one was written about by an attorney who defends third-party originators against big banks on repurchases. 

He says the Robo settlement is utter hypocrisy.
Banks are blaming the correspondents for making bad loans, yet those same banks are the ones who did the Robo signing.

Robo signing caused foreclosures that never should have happened.

How can banks blame correspondents for making bad loans when it is the bank’s robo actions that caused wrongful foreclosures?

Last Friday, I did a post titled QM, a Quick and Dirty Summary. This post received a lot of hits.

I have a new QM post out this morning that has 13 additional links all about QM.
Highlights in this post includes an article that indicates that safe harbor mortgages will really be the only types of mortgages originated.

Already we are seeing exemptions to QM. Reverse mortgages are exempt, and small banks making balloon loans are exempt.

QM also limits the points and fees on loans to three points. This will cause the unintended consequences of limiting loans to low and moderate income borrowers, hurting these borrowers and making it more difficult for banks to fulfill their CRA investment requirements.

So, let’s summarize the four areas we discussed this week.

First, a special paper with a 2013 mortgage industry forecast.
 
Next, the Heritage Foundation paper on the economic effect of eliminating the GSEs.
 
The last two items were special posts I put out today about the latest with the Robo Settlement and Qualified Mortgage proclamations from the CFPB.

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