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Apr. 7, 2011: A few new residential programs; government's shutdown impact on FHA; QRM site for comments
Rob Chrisman
Did the
Texas owner of the company “America's Best Mortgage and Creative
Solutions” in St. Martinville, LA get a little too “creative”?
She is accused of submitting false loan applications on behalf
of clients to mortgage lenders and falsifying documents to make
it appear borrowers were purchasing homes for significantly
higher amounts than the actual purchase price: http://www.chron.com/disp/story.mpl/ap/tx/7507474.html.
Originators in the business continue to deal with the public’s
perception of headline-grabbing stories like this.
I received a somewhat
related note. “It irks me when we blame Obama and Congress for
these regulations, when we have no one to blame but
ourselves and our inability to manage our own industry.
I’ve been in this business almost 40 years. I’ve seen lending
policies that pre-dated ECOA and redlining policies that
pre-dated CRA: I assure you that we’d now be appalled at those
policies. TIL and RESPA are because we weren’t treating
consumers honestly and fairly, not honoring our commitments. Why
is it that we have such a short memory, that we now forget that
we paid commissions that encouraged originators to choose the
product that paid them the most money rather than what was best
for the consumer? Let’s stop blaming the politicians and commit
to always treating our consumers with honesty and
integrity. That’s how we keep the regulations at bay.”
As if the mortgage
biz doesn’t have enough other things to worry about, how about a US government shut down? There are dozens of
HUD programs that may be impacted, but focusing on FHA loans,
there are two important steps in the origination process where
FHA lenders have a dependency on FHA: obtaining a case number
for a new FHA loan and after it closes being endorsed by FHA so
that a mortgage insurance certificate can be issued. The case
number for an FHA loan is obtained via FHA Connection. It is
possible that FHA Connection may continue to operate even if
there is a government shutdown. If that is the case, obtaining
case numbers would not be a problem. (During the November 1995
shutdown, case numbers could not be obtained.) The last I
checked most believe that it is very likely that loans will not
be endorsed and “mortgage insurance certificates will not be
issued in the event of a shutdown. Lenders could continue to
originate FHA eligible loans but they will need to wait to
obtain an endorsement and an MI certificate. It should be noted
that lenders with DE authority can potentially obtain MI
certificates if FHA Connection continues to operate.” The
shutdown in 1995 mainly caused a delay rather than drop in FHA
loan origination, but if lenders decide to stop accepting FHA
applications, it could be a problem. I have heard nothing about
Fannie or Freddie’s operations.
With the comp issue
settled, but in no way forgotten, our business turns its
attention to the release recently of the set of Proposed Risk
Retention Rules, with a comment period ending on June 10, 2011.
These rules encompass more than residential
mortgages – they also impact ABS & CMBS (asset-backed,
like credit card debt, and commercial mortgage) instruments.
Industry followers believe that the portions that seem to be
generating the most discussions will include the exemption of
Fannie Mae and Freddie Mac from risk retention; the narrow
definitions of qualified residential mortgage (QRM), commercial
real estate (CRE) loan, commercial loan, and auto loan; the
creation of a premium capture cash reserve account; and the
limited exemption for re-securitizations. If you'd like to
comment on the risk retention proposals, go to http://www.federalreserve.gov/newsevents/press/bcreg/20110329a.htm.
In spite of this being very much an agency-centric residential
lending environment, there are some “off the beaten path” loan
products that continue to evolve. CMG Mortgage,
in California, continues to offer its HOA program with success.
A few other recent entries include:
Avant Capital
Partners launched its “Bank
Lending Program for Small Business & Owner Occupied Real
Estate” program. “Loans range from $500,000 to $10,000,000 with
leverage up to 90% LTV. The program offers conventional and SBA
guaranteed financing solutions for owner-occupied real estate.
Acceptable property types include: office, retail and industrial
(including condominium), mixed use, and many more like funeral
homes, grocery stores, convenience stores and markets. Interest
rates range from 4.15% to 6.45%.” For more information, contact
Adam Luysterborghs at adam@avant-capital.com.
Avant is hosting a webinar April 12th: https://www3.gotomeeting.com/register/540476102https:/www3.gotomeeting.com/register/540476102
And Mortgage
Harmony Corp. initiated "rate resetting" mortgage, which
upon the first consumer initiated change compensates originators
with monthly recurring commission. The marketing material
suggests that the program, HarmonyLoan, is catching on with
credit unions for both conforming and jumbo loans, “mitigates
investor churn, increases MSR values, offers consumer protection
(improves credit risk), and provides originator income
stability.” Programs include conforming and jumbo 5/1, 7/1, 10/1
ARMS and 15 year fixed, and if you want a demo go to www.harmonyloan.info
or read the recent press release: http://www.marketwire.com/press-release/Montgomery-County-Employees-Federal-Credit-Union-Offers-Consumer-Focused-HarmonyLoan-1422817.htm.
Franklin American reminded clients
that, starting on the 18th, “Appraisals may no longer
be used to increase the insurable mortgage balance above the sum
of the outstanding principal balance and the new UFMIP. In other
words, closing costs, discount points or prepaid items may not
be included in the new loan balance. The insurable balance may
only increase above the sum of the outstanding principal balance
and the new UFMIP by using a credit qualifying (streamline or
rate/term) refinance with an appraisal. FHA requirements for
three and four unit purchase transactions regarding
self-sufficiency test, net rental income calculations, reserves
and monthly payment calculations also apply to all refinance
transactions of three and four unit properties.” In addition,
“Maximum financing is allowed for a refinance of a former
investment property at the same level as an owner-occupant if
the borrower re-occupied the property 12 months or more prior to
the loan application. For those who re-occupied less than 12
months prior to application, the maximum LTV is limited to 85%.”
Provident Funding told brokers of its
“Section 7 of the new Loan Origination Agreement that broker
compensation must be the subject of a written agreement between
the mortgage broker and the borrower. A copy of the agreement
must accompany each completed loan package delivered to
Provident Funding by the mortgage broker. The written agreement
must indicate that (1) broker compensation may or may not be
negotiable, and (2) in setting the amount of compensation the
mortgage broker has not discriminated on the basis of race,
color, religion, national origin, sex, marital status, handicap,
familial status, or any other legally prohibited basis.” The
agreement must be executed and returned to the Broker Approval
department by next Wednesday.
Parkside Lending, a West Coast wholesaler,
provided its brokers with a "RESPA and TILA Disclosure" form
which the agents fills to guarantee that the borrower received a
valid and timely GFE, and has not been steered in any matter in
their loan choice given the anti-steering provisions.
Wednesday was another
not-so-good day for rates, with MBS sales volumes picking up a
little bit but current-coupon prices losing about .125. Ten year
Treasury notes were worse by about .5, closing with a yield of
3.54% given the inflation fears picking up again (oil is nearing
$110 per barrel) along with some weakness in the US dollar ahead
of an expected interest rate hike from the ECB (which did indeed
happen). “REITs, banks and money managers” were better buyers at
these rates.
Weekly Jobless Claims
dropped from a revised 392k down to 382k, another little bit of
good news for our job market (as opposed to going the other
way), but more importantly the ECB (European Community Bank)
raised their rates. The Jobless Claims number was about as
expected, but the ECB move tends to put a little pressure on our
own Fed. Regardless, the 10-yr is up to 3.57% and MBS prices are
worse by .125-.250.
An Irish farmer named Seamus had a car accident. In court, the
lorry company’s hot-shot solicitor was questioning Seamus.
“Didn’t you say to
the police at the scene of the accident, ‘I’m fine?’” asked the
solicitor.
Seamus responded, “Well, I’ll tell you what happened. I had just
loaded my favorite cow, Bessie, into the...”
“I didn’t ask for any
details,” the solicitor interrupted. “Just answer the question.
Did you not say, at the scene of the accident, ‘I’m fine!’?”
Seamus said, “Well, I had just got Bessie into the trailer and I
was driving down the road...”
The solicitor
interrupted again and said, “Your Honor, I am trying to
establish the fact that, at the scene of the accident, this man
told the police on the scene that he was fine. Now several weeks
after the accident, he is trying to sue my client. I believe he
is a fraud. Please tell him to simply answer the question.”
By this time, the judge was fairly interested in Seamus’s answer
and said to the solicitor, “I’d like to hear what he has to say
about his cow Bessie.”
Seamus thanked the judge and proceeded. “Well as I was saying, I
had just loaded Bessie, my favorite cow, into the trailer and
was driving her down the road when this huge lorry and trailer
came through a stop sign and hit my trailer right in the side. I
was thrown into one ditch and Bessie was thrown into the other.
I was hurt, very bad like, and didn't want to move. However, I
could hear old Bessie moaning and groaning. I knew she was in
terrible pain just by her groans.
“Shortly after the
accident, a policeman on a motorbike turned up. He could hear
Bessie moaning and groaning so he went over to her. After he
looked at her, and saw her condition, he took out his gun and
shot her between the eyes.
“Then the policeman
came across the road, gun still in hand, looked at me, and said,
‘How are you feeling?’
“Now what the heck would you have said?”
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