Nov. 10, 2012: Dodd Frank comp & steering question; quick thoughts on rate predictions; some disaster investor updates
Rob Chrisman

With mortgage rates hitting record lows this year, it was inevitable that people would start to ask when they would start to rise again. The MBA expects that they’ll gradually increase over coming 12 months, with rates for 30-year fixed loans averaging 3.8% in Q4 of 2012, 3.9% in Q1 of 2013, and eventually climbing to 4.4% by this time next year. It is a safe bet that rates, at some point, will move higher, but the MBA has been incorrect (not that mine or anyone else’s is any better!) for the last several years. For example, the MBA forecast that the average rate for 2012 would be 4.4%, and the annual average is estimated to be closer to 3.8%. Projections aside, I tell groups to watch private sector job growth, housing prices, & European economic trends, and that the duration of QE3 will likely have the greatest impact on rates. I have been told by many a manager that successful LO’s don’t predict rates, they seem to keep their noses to the grindstone and help their clients regardless of rates. And while it is interesting to pretend that some guy on the radio or TV knows where rates are going, anyone who can do that should be sitting on a beach in Belize instead of telling the world to follow them.

Returning to the broker/banker question, Joe S. asks, "One of your readers brings up a valid point and as a wholesaler, one that I see daily. I’d be curious what your Broker readers had to say as you seem to cater to a savvier slice of the mortgage population.  For all intents and purposes, this seems to not be specifically defined in Dodd/Frank.  One can imply and assume, of course, and it may well serve to be conservative, but the broker will usually be more aggressive than the banker; that doesn’t mean it’s illegal. Obviously what your reader is seeing is an at large activity and one I would have to confirm in my own dealings. It amazes me how those coming from the broker side are shocked when I tell them they will be paid the same on a Government loan and a conventional loan. They are still telling me that they are paid differently as brokers depending on which investor they send the loan to. Isn't this steering?


Joe continues, “Dodd/Frank speaks specifically to the mortgage product, but not necessarily to the provider in a TPO setting.  It appears to me that Dodd/Frank was written to the middle of the 3 entities, the mortgage banker. They aren’t a broker and they aren’t a depository and on either side of the ‘middle,’ there are gray areas such as originally not needing an NMLS affiliation (‘If you can’t pass the test, go work for a depository!’) to this discussion of having different comp plans with different lenders.  Will the CFPB catch up to it as your reader suggests? Time will tell but is that truly steering? I understand your readers point, but playing devil’s advocate, here’s what Dodd/Frank says is prohibited: ‘Steering any consumer to a residential mortgage loan for which the consumer lacks a reasonable ability to pay; Has predatory characteristics or effects; Steering a credit-qualified consumer from a qualified mortgage to a non-qualified mortgage; Engaging in abusive or unfair practices that promote disparities among equally credit-worthy consumers based on race, gender, ethnicity or age (doesn’t say based on investor); Mischaracterizing or suborning the mischaracterization of the applicant’s credit history, the loans available to the consumer, or the appraised value of the subject property; Discouraging a qualified consumer from looking  elsewhere for a cheaper loan if the originator is not able to offer that product.’ And here’s what defines ‘Safe Harbor’: originator must obtain loan options from ‘significant number’ of creditors with which it regularly does business for each loan type in which consumer expresses interest.

So here’s the question I ask:  If a broker has 1 point higher comp plans set with all their government lenders than their conventional lenders, and the consumer expresses interest in a government loan for a low down payment, are offered 3 different pricing options, has the ability to repay, the loan itself doesn’t have ‘predatory’ characteristics, isn’t gender or race based, isn’t determined by credit score, and isn’t discouraged from shopping down the street, is this truly steering? I see the intent Rob, but I’m not convinced…and the fact that this practice, as a sample, is constant in more than half the brokers I deal with (having different comp levels by lender), there’s another shoe to drop!” Thanks Joe, and anyone with the answer, feel free to send it in.


On to some other somewhat recent agency and investor updates, along with the usual disclaimer that it is best to read the bulletin for full details, but this will give you a flavor for current trends.

First off, regarding a note yesterday on court assigned liabilities being included in DTI calculation under Fannie's DU 9.0. As was pointed out by many, it is incorrect. Without naming the Top 10 investor that has/had it in their guides, but as the DU release notes don't have it, and no one else has apparently heard of it or is doing it, and Fannie issued a note to one company saying there has been no change made to their previous court assigned debt guidelines, well, that's that!


It was announced that HUD would be speeding federal disaster assistance to homeowners and low-income renters forced out of their homes by Hurricane Sandy in Connecticut, New York, and New Jersey.  For the latest on federally designated disaster areas and relief programs, the FHA is referring homeowners to the official Disaster Assistance site (  Information on HUD and FHA relief programs is available via the HUD resource site at

With regards to Hurricane Sandy, Fannie Mae reminds servicers that they’re permitted to temporarily suspend or reduce mortgage payments for up to 90 days for Fannie borrowers in federally declared disaster areas whose income has been impacted by the storm.  Servicers may grant relief to affected borrowers while taking the steps necessary to establish Quality Right Party Contact and determine the best course of action.  For disaster-related relief that exceeds the 90-day limit, servicers are required to consult with Fannie.

Lenders intending to sell Fannie loans on properties affected by Hurricane Sandy are reminded that they are responsible for determining whether or not re-inspections or new appraisals are necessary and if properties are still eligible based on the extent of the damage and the property insurance in effect.  This doesn’t apply to properties securing DU Refi Plus and Refi Plus loans, which will be eligible so long as they meet the standard property insurance requirements.  Refi Plus loans require a new appraisal that covers both the interior and exterior and relieves the lender of any representations and warranties concerning the property’s marketability.

The Asset Management Network/HomeSaver Solutions Network November 2012 Release Notes have been published and are available to all servicers via

Freddie Mac has implemented several new loss mitigation requirements, including timelines for providing documents for MI claims, streamlined imminent default documentation guidelines for HAMP and standard modifications, and new charge-off recommendation parameters.  Servicers are now required to obtain approval before referring borrowers to foreclosure if they believe that foreclosure may pose a risk of property ownership to Freddie.  Freddie has also made delegation agreements with several MI companies, which will allow servicers to approve short sales and deeds-in-lieu without obtaining prior approval so long as they comply with the Seller/Servicer Guide as of November 1st.

Effective for new trial period plan evaluations conducted on or after December 1st, Freddie will be adjusting the Standard Modification interest rate from 4.25%to 4%.  Servicers are, however, encouraged to start using the new rate as soon as possible.  As a reminder, when calculating monthly housing expense-to-income ratios for Standard Modifications, Workout Prospector no longer includes monthly borrower-paid MI payments.  This change affects all new borrower evaluations that were conducted on or after November 1st.

LP is scheduled for a November 18th update that will integrate changes to the Relief Refinance program and various other recent changes.

Freddie borrowers whose homes were damaged or destroyed by the hurricane in declared major disaster areas are eligible for relief services, it was announced on Tuesday.  Borrowers in areas where federal Individual Assistance programs have been made available will be have the option to have foreclosure and eviction proceedings delayed for up to twelve months, penalties and late fees waived, and delinquencies or forbearance not reported to credit bureaus.

As per the LTV changes announced by Fannie for its high balance loans, Wells Fargo has raised the primary residence, rate-term refinance, and fixed-rate LTV to 90% for conforming loan amounts over $625,000 and aligning it for lesser loan amounts.  In cases where the LTV, TLTV, or CLTV require different loan scores, the most restrictive must be applied, and for loans in Arizona, California, Florida, and Nevada with LTVs over 80%, a 720 minimum score is required.  Attached PUDs in Nevada are subject to a maximum LTV of 85%.  The changes apply to all DU 9.0 submissions dated October 20th and after but do not affect loan limits or Super Conforming loans that use LP.

(Oldie but goodie, and in spite of rates having moved down after the election…)

While walking down the street one day a corrupt Senator (that may be redundant) was tragically hit by a car and died.
His soul arrives in heaven and is met by St. Peter at the entrance.
"Welcome to heaven," says St. Peter. "Before you settle in, it seems there is a problem. We seldom see a high official around these parts, you see, so we're not sure what to do with you."
"No problem, just let me in," says the Senator.
"Well, I'd like to, but I have orders from the higher ups. What we'll do is have you spend one day in hell and one in heaven. Then you can choose where to spend eternity."
"Really? I've made up my mind. I want to be in heaven," says the Senator.
"I'm sorry, but we have our rules."
And with that, St. Peter escorts him to the elevator and he goes down, down, down to hell.
The doors open and he finds himself in the middle of a green golf course.  In the distance is a clubhouse and standing in front of it are all his friends and other politicians who had worked with him.  Everyone is very happy and in evening dress. They run to greet him, shake his hand, and reminisce about the good times they had while getting rich at the expense of the people.  They played a friendly game of golf and then dine on lobster, caviar and the finest champagne.  Also present is the devil, who really is a very friendly guy who is having a good time dancing and telling jokes.  They are all having such a good time that before the Senator realizes it, it is time to go.  Everyone gives him a hearty farewell and waves while the elevator rises.
The elevator goes up, up, up and the door reopens in heaven where St. Peter is waiting for him, "Now it's time to visit heaven...”
So, 24 hours passed with the Senator joining a group of contented souls moving from cloud to cloud, playing the harp and singing. They have a good time and before he realizes it, the 24 hours have gone by and St. Peter returns.
"Well, then, you've spent a day in hell and another in heaven. Now choose your eternity."
The Senator reflects for a minute, then he answers: "Well, I would never have said it before, I mean heaven has been delightful, but I think I would be better off in hell."
So St. Peter escorts him to the elevator and he goes down, down, down to hell...  Now the doors of the elevator open and he's in the middle of a barren land covered with waste and garbage. He sees all his friends, dressed in rags, picking up the trash and putting it in black bags as more trash falls to the ground.
The devil comes over to him and puts his arm around his shoulders.  "I don't understand," stammers the Senator. "Yesterday I was here and there was a golf course and clubhouse, and we ate lobster and caviar, drank champagne, and danced and had a great time. Now there's just a wasteland full of garbage and my friends look miserable. What happened?"
The devil smiles at him and says, "Yesterday we were campaigning, today, you voted...”

If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at The current blog discusses some of the considerations facing the FHFA regarding Fannie and Freddie. If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what's going on out there from the other readers.




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Copyright - Rob Chrisman