Nov. 10, 2012: Dodd Frank comp & steering question; quick thoughts on rate predictions; some disaster investor updates
rates hitting record lows this year, it was inevitable that
people would start to ask when they would start to rise
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
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?”
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.
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
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!
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 (http://www.disasterassistance.gov/).
on HUD and FHA relief programs is available via the HUD
resource site at http://www.hud.gov/info/disasterresources_dev.cfm.
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
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
The Asset Management Network/HomeSaver Solutions Network
November 2012 Release Notes have been published and are
available to all servicers via www.efanniemae.com.
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…)
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
"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
"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
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
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 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...”
you're interested, visit my twice-a-month blog at the STRATMOR
Group web site located at www.stratmorgroup.com.
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.