Servicing Goes to India

U.S. banks are outsourcing the labor involved in servicing mortgages and processing foreclosures to Indian companies such as Tata Consultancy Services, Wipro, and others, in cities such as New Delhi and Mumbai. Indian firms will bring in double the revenue from mortgage work this year as in 2009, around $316 million. The outsourced work is comprised of financial verification, such as reviewing borrower's salary and credit history to determine their suitability for a loan, and foreclosure verification, such as reviewing that collection notices were sent on time, that the lender attempted to reduce the monthly payment, and that the borrower was far enough behind to demand foreclosure. The Indian firms do not judge the cases, but prepare all the facts to be decided on by Western decision-makers.

From "Mortgage Jobs Sent to India by U.S. Banks"
Wall Street Journal (05/27/13) Schectman, Joel

St Casimirs Thanks All Veterans For Their Service

Friday Rate Update

Mortgage Rates Keep Rising


The average rate for a 30-year fixed-rate mortgage was 3.59 percent, Freddie Mac reported yesterday. The rate is up slightly from 3.51 percent last week, rising for the third straight week. This time last year, the rate averaged 3.78 percent.

ICBA Urges Legislative Fix for QM Concerns


ICBA continued its campaign for needed reforms to the Consumer Financial Protection Bureau’s “qualified mortgage” rules in a statement for the record for yesterday’s House Financial Services Subcommittee on Financial Institutions and Consumer Credit hearing.

While ICBA is encouraging the CFPB to modify the rule to better protect community bank balloon mortgages, a clean solution is needed, the association wrote in its statement. ICBA wrote that its Plan for Prosperity solution is simple and would preserve the community bank lending model.

The Plan for Prosperity—ICBA’s regulatory relief agenda for the 113th Congress—would provide safe harbor “qualified mortgage” status for community bank loans held in portfolio, including balloon loans in rural and non-rural areas. Community banks that hold loans in portfolio hold 100 percent of the credit risk and have every incentive to work with borrowers to structure the loans properly, ICBA noted in its statement.

ICBA thanked Rep. Blaine Luetkemeyer (R-Mo.) for including in the CLEAR Relief Act (H.R. 1750) a provision that would accord qualified mortgage status to mortgages originated and held in portfolio for at least three years by a lender with less than $10 billion in assets. The association noted that it strongly supports the bill because it contains this provision and other needed regulatory relief measures from the Plan for Prosperity.

The Plan for Prosperity is ICBA’s targeted legislative platform designed to ease excessive, redundant and costly regulations on community banks. Many of the Plan for Prosperity relief measures have been teed up in Congress. Therefore, ICBA is encouraging community bankers nationwide to urge their members of Congress to support the plan and help enact these important measures ---- ICBA

CFPB Cracks Down on Real Estate Kickbacks

The Consumer Financial Protection Bureau is cracking down on real estate kickbacks, ordering Texas homebuilder Paul Taylor to surrender $118,194.20 in funds earned through unlawful referral fees. Through alliances with Benchmark Bank and Willow Bend Mortgage, Taylor founded and jointly owned Stratford Mortgage Service, which advertised itself as a mortgage originator. The CFPB says these entities were in fact "shams designed to allow Taylor to receive the kickbacks." CFPB Director Richard Cordray promises that the bureau "will continue to take action against schemes designed to let service providers profit through unscrupulous and illegal business practices."

From "CFPB Cracks Down on Real Estate Kickbacks"
Reverse Mortgage Daily (05/19/13) Oliva, Jason

Fed Governor: QM May Reduce Credit for Some Homebuyers

Aspects of the ability-to-repay rule and "qualified mortgage" standards may make credit access difficult for homebuyers with low credit scores, including many low-income and first-time homebuyers, Federal Reserve Board Governor Elizabeth Duke said yesterday.

For example, she said, lenders usually compensate for risk by charging higher rates, points and fees. But, she added, "if lenders originate a first-lien QM with an annual percentage rate that is 150 basis points or more above the rate available to the highest-quality borrowers, lenders receive less protection against lawsuits claiming violation of the ability-to-repay and QM rules."

"The extent to which these rules regarding rates, points and fees will damp lender willingness to originate mortgages to borrowers with lower credit scores is still unclear," Duke concluded. "Although I expect housing demand to expand along with the economic recovery, if credit is hard to get, much of that demand may be channeled into rental, rather than owner-occupied, housing."


*******************


Mortgage Rates Edge Up

Mortgage rates edged upward, Freddie Mac said yesterday. The 30-year fixed mortgage rate rose to 3.42 percent from 3.35 percent last week but was still down from 3.83 percent a year ago

Mortgage Lenders Ease Standards for Safest Borrowers

Americans are finding it slightly easier to get a mortgage, yet banks remain wary of lending to would-be home buyers with weaker credit histories. Nearly 10 percent of banks said they eased their lending standards for low-risk mortgages in the first quarter, according to the Federal Reserve's latest survey of senior bank-lending officers released Monday. The report showed more banks easing these standards compared with the less than 5 percent of banks easing prime-mortgage standards in a previous survey in February. Still, banks are focusing most of their lending on borrowers with strong credit histories. Most banks said they weren't any more willing to approve loans to borrowers with credit scores of 680 or 720—middle of the range—than a year ago. Meanwhile, a "modest net fraction" of banks were more likely to approve an application with a higher score of 720 and a 20 percent down payment.

From "Mortgage Lenders Ease Standards for Safest Borrowers"
Wall Street Journal (05/06/13) Shah, Neil


And conflicting news. . .


Fannie, Freddie Limited to QM Loans: FHFA

The Federal Housing Finance Agency announced Monday that Fannie Mae and Freddie Mac must restrict future mortgage purchases to "qualified mortgage" loans. The Consumer Financial Protection Bureau outlined the criteria for such loans in a rule issued in January, which included limitations on fees and points charged and verification of a borrower's income. When the rule goes into effect on Jan. 10 of next year, the FHFA said Fannie and Freddie will only purchase QM loans, effectively barring them from buying interest-only loans or those beyond a 30-year maturity.

From "Fannie, Freddie Limited to QM Loans: FHFA"
American Banker (05/07/13) Blackwell, Rob

Mortgage Rates Edge Lower as 15-Year Sets New Record

The average rate for a 30-year fixed-rate mortgage was 3.35 percent, Freddie Mac reported yesterday. The rate is down slightly from 3.4 percent last week. This time last year, the rate averaged 3.84 percent.

The average rate 15-year fixed-rate mortgage was a record low of 2.56 percent, edging last week’s the previous record 2.63 percent.

BofA Asks Judge to Throw Out Mortgage Suit


Bank of America has asked a federal judge to dismiss a civil lawsuit by federal prosecutors over the quality of home loans sold by its Countrywide Financial unit to Fannie Mae and Freddie Mac in the buildup to the U.S. financial crisis. Federal prosecutors in Manhattan have alleged that Countrywide, facing revenue shortfalls as the subprime mortgage market imploded in early 2007, eliminated checks on loan quality in a streamlining effort known as the "Hustle," while assuring Fannie and Freddie that the loans were quality investments. The U.S. is seeking at least $1 billion in damages. Lawyers for Bank of America, which acquired Countrywide in 2008, argued that the U.S. hadn't sufficiently established that a fraud had occurred and was instead trying to turn a contract dispute into a fraud case.

From "BofA Asks Judge to Throw Out Mortgage Suit"
Wall Street Journal (04/29/13) Bray, Chad