 | | | | By Paul Muolo pmuolo@imfpubs.com Wellington Management Co., a global money management firm, has reduced its stake in Ocwen Financial to just 0.12 percent of outstanding shares compared to 5.23 percent back in February, according to a new filing with the Securities and Exchange Commission. According to trading records, at one time it was one of the largest institutional shareholders in the lender/servicer. Earlier in the year, Ocwen’s stock was trading in the $50 a share range compared to $28 this week. On paper, Wellington’s investment has cratered, but the SEC records do not indicate at what price the investment firm bought into Ocwen and at what price it sold. A telephone call to Wellington from IMFnews had not been returned at press time. A spokeswoman for Ocwen said the company “does not comment on the action of its shareholders.” Since earlier in the year, the nation’s largest nonbank servicer has been under intense regulatory scrutiny from the New York Department of Financial Services for its servicing practices and its ties to companies it has spun off. To date, the NYDFS has yet to bring any formal charges against the company and analysts continue to back management. Other areas of interest: Originations, Servicing, Regulatory, Nonconforming | | By Thomas Ressler tressler@imfpubs.com Sen. Elizabeth Warren, D-MA, a potential contender for a White House run in 2016, pointedly criticized federal regulators this week for their lack of referrals to the Justice Department for criminal prosecution of top mortgage banking company executives in the wake of the financial crisis. Warren referenced a handful of recent large settlements that major banks made with the federal government stemming from their sales of subprime MBS that eventually turned toxic. Among other things, the Massachusetts Democrat – considered the founder of the Consumer Financial Protection Bureau – noted that no executives went to jail because of such transactions. In contrast, “After the savings and loans crisis, the government brought over 1,000 criminal prosecutions and got over 800 convictions,” partly because of referrals from federal regulators, the senator noted. Civil money penalties that are paid by big corporations and their shareholders don’t provide deterrence, she added. “In fact, if you’re Jamie Dimon, the CEO of JPMorgan Chase, you might even get an $8.5 million raise for negotiating such a great settlement when your company breaks the law,” Warren said. “So without criminal prosecutions, the message to every Wall Street banker is loud and clear: If you break the law, you are not going to jail, but you might end up with a bigger paycheck.” Sen. Richard Shelby, R-AL, agreed with Warren’s criticism of the government’s failure to prosecute individual bankers, but he faulted the Department of Justice, not the Federal Reserve, the Federal Deposit Insurance Corp. or the Comptroller of the Currency. “Something’s wrong with the Justice Department,” said Shelby. “People shouldn't be able … to buy their way out of culpability.” One government source told IMFnews that the DOJ does not need a specific referral in order to initiate a criminal prosecution. Other areas of interest: Secondary/MBS, Personnel, Regulatory, Nonconforming | | By Paul Muolo pmuolo@imfpubs.com The Treasury Department’s point man on housing policy said the agency – for now – is staying neutral on the topic of allowing nonbanks to become members of the Federal Home Loan Bank system by using a captive insurance affiliate. In a speech this week before the North Carolina Bankers Association, Treasury Department Counselor Michael Stegman told lenders in attendance that although his agency is not taking a stand on the matter, originators should communicate their views directly to the Federal Housing Finance Agency. Stegman noted that REITs – through their captive insurance affiliates – pose “potential incremental” risks to the FHLB system, but also pointed out they provide liquidity to the mortgage market. The Treasury official even highlighted a jumbo lending joint venture that one REIT, Redwood Trust, has with the FHLB of Chicago. “If successful, this partnership may create a new source of liquidity and access to the secondary market” for the system’s 1,500 member institutions, he said. One observer familiar with Stegman’s remarks said, “I think it’s clear that he likes what Redwood is doing in the system.” A publicly traded mortgage REIT and jumbo MBS issuer, Redwood became a member of the FHLB system through a captive insurance affiliate. For more on the captive story, see the upcoming edition of Inside Mortgage Finance, available online Thursday afternoon. Other areas of interest: Secondary/MBS, Regulatory, Nonconforming | | By John Bancroft jbancroft@imfpubs.com Commercial banks held $1.386 trillion of residential mortgage-backed securities at the end of June, marking their second consecutive quarterly gain in MBS investments, according to a new Inside MBS & ABS analysis. The 0.7 percent increase in bank MBS holdings was enough to offset a 3.5 percent drop in thrift investment in the sector. On a combined basis, banks and thrifts saw a 0.3 percent increase in residential MBS during the second quarter, though the industry remained 0.2 percent below the level set at the midway point in 2013. All of the increase came in the agency MBS market. Bank and thrift holdings of Fannie Mae, Freddie Mac and Ginnie Mae pass-through MBS increased 0.8 percent from the end of the first quarter, and their agency structured MBS portfolio was up 0.1 percent. Although the Federal Reserve has tapered its agency MBS purchases significantly, the central bank continued to grow its holdings during the second quarter, including reinvesting the cash flows from its portfolio. The outstanding supply of Fannie MBS (including commercial MBS) actually declined during 2Q, although Freddie and Ginnie outstanding securities were up. For further analysis and an exclusive table on MBS holdings by depositories, see Inside MBS & ABS. Other areas of interest: Secondary/MBS, Data/Rankings, Fannie, Freddie, Ginnie Mae/FHA | | By Paul Muolo pmuolo@imfpubs.com The level of warehouse commitments rose 9.6 percent on a sequential basis in the second quarter as originations increased in the primary market, according to figures compiled by Inside Mortgage Finance. Overall, commitments edged up to an estimated $30.0 billion across the industry. But compared to the same period a year ago, commitments fell a bloodcurdling 26.8 percent, reflecting the downdraft in the overall origination market over the past 12 months. According to interviews conducted by Inside Mortgage Finance over the past few weeks, usage rates improved during the second quarter, but nonbanks have not moved to increase their borrowing authority by very much. Also, consolidation has reduced the overall pool of customers. “Regulatory burden has been a problem,” said Bob Garrett, a warehouse lending executive at First Tennessee Bank. Garrett estimates that his bank has lost 12 to 15 accounts over the past year due to consolidation. For more on the story and an exclusive ranking of the nation’s top warehouse providers, see Inside Mortgage Finance. Other areas of interest: Originations, Secondary/MBS, Warehouse, Trends & Profitability | | By Paul Muolo, Charles Wisniowski, Thomas Ressler pmuolo@imfpubs.com. cwisniowski@imfpubs.com, tressler@imfpubs.com A new report from Kroll suggests that nonbank mortgage firms have more tangible capital and lower leverage ratios than the nation’s largest commercial banks. Kroll also points out that banks have “dominated” the government-sponsored enterprise business for the past two decades. Of course, that domination is ending… In case you’re wondering, there’s still no update on Wells Fargo’s sale of $39 billion in non-agency servicing rights to Ocwen Financial. We understand that when stock analysts meet with Ocwen management, executives at the nonbank usually tell them to not even ask about the deal. We should point out that some of the $39 billion in MSRs must have run off by now, even if the portfolio is highly delinquent… Even though we continue to hear anecdotal evidence that origination volumes are holding up (somewhat), new figures compiled by the Mortgage Bankers Association suggest otherwise. The trade group said applications fell 7.2 percent for the week ending Sept. 5. Then again, the results included an adjustment for the Labor Day holiday… GSE UPDATE: A federal appeals court recently shut down two separate – but related – legal efforts to force Fannie Mae and Freddie Mac to pay taxes on the transfer of foreclosed properties. The U.S. Court of Appeals for the 1st Circuit ruled on an appeal by Johnston, RI, and, in a separate case, by Bristol County, MA, rejecting both appeals in a joint ruling. In the two cases, federal district courts in Massachusetts and Rhode Island dismissed the cases brought by Bristol County and Johnston because Fannie, Freddie and the Federal Housing Finance Agency have “statutory exemptions from taxation.” MORTGAGE REGULATORY UPDATE: Consumer Financial Protection Bureau Director Richard Cordray told a Congressional panel this week that the agency’s pending Home Mortgage Disclosure Act rulemaking “presents an opportunity to reduce unwarranted regulatory burdens.” The bureau is looking closely at how to clarify existing requirements and streamline the processes and infrastructure for reporting this data. “We have conducted detailed discussions with a group of small creditors to focus on their particular concerns, and we are now seeking broad public comment from all stakeholders on the proposed rule through the end of October,” he said.
Having provided a long ramp-up, the CFPB likely won’t offer any grace period on new disclosures Experts warn that the new integrated disclosures will shake up the whole originations process and will take many months of preparation. If you don’t have it figured out in time, you may not be able to make any mortgage loans after August 15. And don’t expect that the CFPB will offer a grace period for working out wrinkles. Find out what you should be doing right now to get ready at Inside Mortgage Finance’s September 11, 2014, 2:30 pm webinar: “Planning for New Disclosures: The Time Is Now.” Other areas of interest: Servicing, Secondary/MBS, Personnel, Regulatory, Mergers & Acquisitions, Nonconforming, Fannie, Freddie | | | |
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