September 19, 2021

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Sudden shake-up looms for US independent mortgage bankers

The hectic and sleepy rulings by US mortgage lender Ginny May over the summer weekend show the demise of the federal machinery.

Most political amateurs watch videos of violent party feuds within the Democratic Party and the shouts of the Southern Governor. The real DC works in a second home office, monitors waves and clouds over the mountains, refines ambiguous regulations and electronically tweets to colleagues. You can earn a lot of money there.

Important discussions take place between sub-committees that weigh each other’s strengths, which all “independent” consultancies use to raise issues. Let’s take creating a new Genie May rule as an example. On July 9, the agency published a “request for comment” from “interested parties”.

Genie May is the leading higher risk homeowner mortgage guarantor in the United States. Through programs such as those facilitated by the Federal Housing Finance Agency and the Department of Veterans Affairs, Genie May aims to help home buyers seeking bare labor income and modest savings. is.

It accepts mortgages and approves banks or independent mortgage lenders to “handle” the paperwork for the accompanying year. These mortgages are then consolidated, securitized, and sold to investors looking for a little more interest than government bonds but are partially offset by bank and service fees.

Ginny wants input on changing the eligibility requirements for affiliate mortgage lenders. Ginny is not required to go through the standard rulemaking process, which is time-consuming and open to appeal in the High Court. And Genie doesn’t have to change anything in response to the “input”.

The rather crude title “RFI” slips the general public into a coma, but there have been plenty of independent mortgage bankers who dragged it onto the galley like life imprisonment. Many are at stake.

The “original” fee is high enough, but the 0.5% annual service fee for sending a statement, requesting payment, or issuing a foreclosure reminder costs a lot. For example, in the first quarter of this year PennyMac made $ 224 million in Ginnie’s service revenue and Freedom Mortgage Corp generated $ 234 million. Of course, it can get expensive if you don’t have the size and the best technical skills, or if the market is stressed and foreclosed.

Commercial banks have reduced Genie May’s stake since the financial crisis. There are too many procedures and too high costs. Hence, over 900 IMBs generate nearly 70% of the new Genie mortgages. Business was excellent, especially in a low interest rate environment where homeowners incur fees from refinancing and buying.

Ginny’s RFI stink bomb, which is expected to go into effect on August 9, will require significantly higher capital requirements from independent banks. This corresponds to up to 250 percent of the book value of the service revenue.

Ginny’s request was vaguely motivated by talk of aligning commercial bank and IMB capital requirements, but the latter has a more modest balance sheet risk. Also, the RFI doesn’t appear to be a bank lobbying tool as most people don’t want to re-enter Genie’s transaction. So who was your idea?

The agency lacks an official CEO and COO since 2019. A “deputy director” is assigned. But “acting”
Officials not confirmed by the Senate should generally not run
Major policy changes similar to caretaker practices
Parliamentary government. Plus, there aren’t many employees, as more than 77% of Genie’s costs come from paying “contractors” like Deloitte and internet cloud service providers.

However, I noticed that the IMF did not speak in a loud voice at the RFI. My hypothesis is that if all of the 900 competitors fail or you leave Genie May’s banking business to them, you won’t care about some of the bigger, more sophisticated, and financially strong IMBs. It will be. The survivors can then speak to genius as oligarchy rather than prostitutes in the market. DC Darwinism.

Could Genie May fully model the risk of “RFI”? Well, according to its auditor, its “current organizational structure … a flaw in the control design that prevents an effective challenge to the model … management prevents, detects and corrects false information.” You may not be allowed to. “

Reformers need to understand that governments need highly paid, accountable officials to create transparent rules. I am not an “acting” executive who could later end up in a sophisticated consulting assignment.

A sudden shock threatens the independent US mortgage bankers Source link A sudden shock threatens the independent US mortgage bankers