Sudden shake-up looms for US independent mortgage bankers

Genie May Update

The rushing and sleepy summer weekend rulemaking by US mortgage lender Ginny May shows the decline of federal machinery.

Most political amateurs watch videos of fierce party feuds within the Democratic Party and the yelling of the Southern Governor. The real DC works in a second home office, monitoring waves and clouds across the mountains, fine-tuning ambiguous regulations, and electronically tweeting to colleagues. That’s where you can make a lot of money.

Important discussions take place between subcommittees that weigh each other’s strengths, all of which use “independent” consulting firms to raise issues. As an example, let’s take the creation of a new Genie May rule. On July 9, the agency issued a “request for opinion” from “interested parties”.

Genie May is the leading guarantor of mortgages for higher risk homeowners in the United States. Under programs such as those made possible by the Federal Housing Finance Agency and the Department of Veterans Affairs, Genie May aims to serve homebuyers who are striving for mere working class income and modest savings. is.

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

Ginny wants “input” for changing eligibility requirements for affiliated mortgage bankers. Ginny is not obliged to go through the usual rule-making process, which takes a lot of time and can be appealed to the High Court. And Genie doesn’t need to change anything in response to the “input”.

The rather crude “RFI” title causes a coma for the general public, but there were many independent mortgage bankers who took it to the galley like life imprisonment. Many are at stake.

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

Commercial banks have reduced Genie May’s share since the financial crisis. There are too many proceedings and too much cost. Therefore, over 900 IMBs are generating nearly 70% of new Genie mortgages. The business was great, especially in a low interest rate environment where homeowners incur fees through refinancing and purchasing.

Ginny’s RFI stink bomb, which is expected to come into effect on August 9, imposes significantly higher capital charges on independent banks. This represents up to 250 percent of the accounting value of service revenue.

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

The agency has lacked an official CEO since 2019 and also lacks a COO. A “deputy director” is assigned. But “acting”
Officials not confirmed by the Senate should, in principle, not start
Major policy changes similar to caretaker practices
Parliamentary government. Also, there aren’t many staff, as more than 77% of Genie’s costs come from paying “contractors” such as Deloitte and Internet cloud service providers.

However, I noticed that the IMB was not speaking in one loud voice at the RFI. My hypothesis is that if all of the 900 competitors’ low ends fail, or if you leave Genie May’s banking to them, you don’t care about some of the bigger, more sophisticated, and more funded IMBs. It will be. The survivors can then talk to Genie as an oligarchy rather than a hustler on the market. DC Darwinism.

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

Reformers need to understand that governments need high-paying, accountable civil servants to create transparent rules. I’m not an “acting” executive who could end up in a nifty consulting gig later.

Sudden shake-up looms for US independent mortgage bankers Source link Sudden shake-up looms for US independent mortgage bankers

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