Sudden shake-up for independent US mortgage bankers

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Hurried and sleepy summer weekend rule-making by US mortgage lender Ginny Mae is indicative of the decline of the federal apparatus.

Most politicians watch videos of bitter inter-party feuds within the Democratic Party and the shouts of the Governor of the South. The real DC works in the second home office, tracking waves and clouds in the mountains, setting ambiguous rules and sending emails to his colleagues. This is where you can make a lot of money.

Important discussions take place between subcommittees that weigh each other’s strengths, and they all use “independent” consulting firms to pose questions. Let’s take the creation of a new Genie May rule as an example. On July 9, the agency sent a “request for opinion” from “stakeholders”.

Genie May is the leading mortgage guarantor for high-risk homeowners in the United States. Through programs like those made possible by the Federal Housing Finance Agency and the Department of Veterans Affairs, Genie May is committed to serving home buyers looking for simple working-class income and modest savings. is an.

It accepts mortgages and approves banks or independent mortgage bankers who “service” the documents for the respective year. These mortgages are then consolidated, securitized, and sold to investors who want slightly more interest than government bonds, but are partially offset by bank and staff fees.

Jeannie wants to contribute to changing the affiliate mortgage banker program eligibility requirements. Jeannie is not required to go through the usual rule-making process, which is time-consuming and subject to appeal in the High Court. And Genie doesn’t need to change anything in response to “input.”

The rather rude name “RFI” makes the general public feel coma, but there have been many independent mortgage bankers who took it to the galley as a life sentence. There are many at stake.

The “upfront” fee is quite high, but the 0.5% annual service fee for sending a statement, requesting payment, or foreclosure warning is very expensive. For example, in the first quarter of this year, PennyMac earned $ 224 million in Ginny’s services revenue, and Freedom Mortgage Corp’s $ 234 million. Of course, this can be costly if you don’t have the scale and the best technical skills, or if the market is under pressure and out of foreclosure.

Commercial banks cut Genie May’s stake following the financial crisis. Too much to do and too expensive. Thus, over 900 IMBs generate nearly 70% of new Genie mortgages. The business has been great, especially in a low interest rate environment with homeowners taking on refinancing and buying fees.

Jeannie’s RFI smelly bomb, which is expected to go into effect on Aug.9, imposes significantly higher capital charges on independent banks. This amounts to up to 250 percent of the booked value of service income.

Ginny’s request was vaguely justified by talk of equalizing the capital requirements of commercial banks and IMB, but the latter has a more moderate balance sheet risk. Also, RFI is not like a banking lobby tool as most people don’t want to re-enter a Genie transaction. So who was your idea?

The agency has not had an official CEO since 2019, nor has it had a chief operating officer. A “deputy director” is appointed. But “acting”
Officials not approved by the Senate should, in principle, not start
Major policy changes similar to that of caretakers
Parliamentary government. In addition, there are not many employees here, as more than 77% of Genie’s expenses are paid for “contractors” such as Deloitte and ISPs.

However, I noticed that IMB spoke in more than one loud voice to RFI. My hypothesis is that if all 900 competitors fail, or if you leave Genie May banking to them, you won’t care about some of the larger, more complex, and more funded IMBs. This will. After that, the survivors can speak to Ginny as an oligarchy and not as a trader in the market. DC Darwinism.

Can Genie May fully model RFI risk? Well, according to his auditor, his “current organizational structure … a lack of control that prevents the model from being effectively countered … management properly prevents, detects and corrects misstatements.” You may not be allowed to do this. “

Reformers need to understand that governments need highly paid, accountable civil servants to create transparent rules. I am not an “acting” leader who would later end up in a great consulting position.

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