Scotsman Guide - February 2011 Residential Edition

From the Editor
BY IVANNA C. SUKKAR, EDITOR
Inthe Past Month

NEWS FROM THE INDUSTRY AND ABROAD

IN TWO MONTHS, THE WAY THAT RESIDENTIAL MORTGAGE ORIGINATORS ARE PAID
IS SET TO CHANGE. ALTHOUGH THIS WILL AFFECT ALL MORTGAGE ORIGINATORS, THE
BROKER CHANNEL IN PARTICULAR APPEARS TO BE FACING THE BIGGEST CHANGE.

Some interpretations would have you believe it’s the end of the broker channel, while others say wholesale lenders will adapt their broker-compensation structures and that brokers will move on, as they have with past challenges.

With all the different expectations and interpretations, however, it seems to be common belief that we may not know exactly how this will affect brokers’ and originators’ compensation structures until the Federal Reserve Board rule that implements the change takes effect on april 1.

and complicating matters further, the Dodd-Frank financial-reform act includes additional provisions regarding loan-originator compensation.

For 2010, mortgage rate
at 55-year low

WaSHINGTON, D.C. — average interest rates for 30-year contracts averaged 4. 7 percent in 2010, the lowest average since 1955, Freddie Mac said.

By itself, the low rate is not unprecedented, but it’s not exactly an apples-to-apples comparison. In 1955, the average U.S. home cost $22,000, Freddie Mac Vice President and Chief Economist Frank Nothaft said — about $150,000 less than the average price in 2010.

This month’s Scotsman Guide lays out some of the varying interpretations for you. In his column, The FinePrint (Page 16), Churchill Mortgage’s Richard Smith discusses the view that many brokers, as well as NaMB — The association of Mortgage Professionals, share: that the Fed rule and Dodd-Frank provisions are detrimental to brokers’ and originators’ businesses, as well as to consumers, and should be delayed.

In fact, NaMB is circulating a petition among its members to stop or delay the rule’s implementation. The Mortgage Bankers association (MBa) also is taking action — this past December, it sent a letter to the Fed requesting further clarification and written guidance about its compensation rule. you can see the MBa’s letter at sctsm.in/MBa_Fed.

Vince Parlove of Michigan Mutual Inc. discusses the varying provisions in both the Fed rule and the Dodd-Frank act, potential impacts, and further areas still needing clarification on Page 34.

New-, existing-home sales
increase in November

WaSHINGTON, D.C. — Sales of new and existing homes turned higher in November after a month of declines, according to reports from the U.S. Department of Commerce and the National association of Realtors.

Sales of existing single-family homes, including co-ops, condominiums and townhouses, increased by 5. 6 percent after falling 2.2 percent in October, the Realtors group said.

Meanwhile, sales of new single-family homes increased 5. 5 percent in November compared with October, the Commerce Department said.

The Commerce Department said the median sales price for a new home sold in November was $213,000. The national median price for existing homes in November was $170,600, according to the Realtors group.

Meanwhile, 360 Mortgage Group LLC’s andrew Weiss-Malik takes the view that brokers’ compensation structures aren’t changing all that much, that yield-spread premiums are not disallowed and that brokers shouldn’t buy into what he sees as scare tactics. Read that take on Page 24.

Next;release:

Existing-home sales: Feb. 23

New-home sales: Feb. 24

Regardless of which interpretation of loan-originator-compensation changes you agree with, one thing is clear: Brokers and other mortgage originators must stay apprised of how their businesses will be affected, even if the effects stay unknown until the actual implementation date, delayed or not.

you can do this by keeping up with your associations — NaMB, MBa and others — and by networking with your peers and with lenders. In fact, a LinkedIn group ( sctsm.in/DiscussPay)

dedicated to the topic was recently created, and discussions among its members provide varying insights into the rule and changing compensation structures.

Pending home sales
continue to increase

WaSHINGTON, D.C. — Pending home sales increased 3. 5 percent in November, following a 10.4-percent jump the previous month, the National association of Realtors said.

The Pending Home Sales Index, which predicts home closings one and two months down the road, increased to 92.2 from a revised 89.1 for October, the Realtors group said.

The index was 5 percent below November 2009.

Next;release:

Pending home sales: Feb. 28

ivannas@scotsmanguide.com

NEXT MONTH
TIP OF THE MONTH

… in March’s Scotsman Guide

•How to employ helpful
technology
• What to do when credit
problems are your own
• Where Massachusetts’ housing
market is headed
• What to consider before
jumping ship

Follow the leads

… and much more.

Many of your former competitors are gone, and many of those who remain likely continue to focus on closing out their pipelines or refinancing loans. Now is the time to hit the streets — or rather the real estate offices and open houses in your area — and develop valuable relationships with good agents while your competitors aren’t looking. as business shifts to purchase loans in 2011, real estate agents remain a prime source for those leads.

Home prices decline
in October

NEW yORK — U.S. home prices showed declining rates of growth in October in 18 of 20 monitored cities, according to the S&P/Case-Shiller U.S. National Home Price Index.

The index dropped 0.8 percent in the month, compared to October 2009. In a 10-city index, prices increased 0.2 percent, although year-over-year gains were only noted in four of the 10 cities, the report said.

Only Washington, D.C., and three cities in California — Los angeles, San Diego and San Francisco — showed year-over-year gains.

From this past September, prices declined in each of the 20 cities monitored, and in six cities — atlanta; Charlotte, N.C.; Miami; Portland, Ore.; Seattle; and Tampa, Fla. — prices dropped to their lowest level since prices began to decline before the recession.