Occasionally the question comes up, "How can I find information on if it is allowable to take back LO commissions if loans pay off early, or deduct or suspend commissions for an LO who does not follow company or investor policies?" David Medlin with Medlin & Hargrave writes, The abbreviated answer to this question is that there may be ways to get to a result of 'recouping' commissions in the event of EPO’s, EPD’s, etc.  One challenge is to do so in a manner which is not only compliant with the Truth in Lending Act’s (“TILA”) Loan Originator Compensation Rule (“Rule”), but also applicable labor and employment laws.  Additionally, the Rule is a transactional one, making it difficult to “recoup” commissions on an individual transactional basis – although, once again, there are ways to effectively accomplish this.”

The attorney continues, “Generally speaking though, the more aggressive the approach, the more complicated it is to properly implement and follow in order to “stay within the lines.”  Finally, an additional challenge is that at this point there is no decisional authority with respect to the Rule.  Rather, we are limited to the Rule itself, as contained in TILA and the applicable provisions of Regulation Z, the Official Staff Commentary and a few policy letters issued by the CFPB.  Accordingly, at least to some extent, implementing such a policy requires a bit of a balancing between economic concerns and risk tolerance.  Therefore, we have found that the methods which our clients have used to address issues like this has varied, depending upon the needs of the individual client, their willingness to engage programs which can be a bit complex, and, of course, their individual risk tolerance. (If you'd like to reach Dave for legitimate legal consulting on LO comp, write to him at dmedlin@mhlawcorp.com.)

I have heard nightmarish stories about CFPB audits, and a cottage industry has sprung (sprang?) up in preparing companies for them. For example, Garrett, McAuley & Co. has partnered with law firm Medlin & Hargrave to help lenders prepare for CFPB exams, and we heard that they’re fully booked for May, so if you want to have them come in, you’ll have to wait to June. For more information, contact Joe Garrett at jgarrett@garrettmcauley.com.

Yesterday the commentary discussed industry rumblings about HARP 3.0. A reader from Montana wrote, "Rob, this is three weeks old, but it can give your readers a flavor of some of the chit-chat that is taking place: http://banking.senate.gov/public/index.cfm?FuseActionNewsroom.PressReleases&ContentRecord_idxba0fd6-c4b3-b079-bd9e-ab1c1aa4712c

Here's something that we haven't had to worry about for quite some time: flood insurance, and once again the industry is waiting for Congress to do something about it. FEMA’s Administrator, W. Craig Fugate, is engaging Congress to strongly recommend reauthorization of the National Flood Insurance Program (NFIP) which will expire on May 31, 2012. Most know that floods are the number one natural disaster in the United States in terms of lives lost and property damaged. And recently it seems that a series of short-term reauthorizations and temporary suspensions of the NFIP have eroded confidence in the program among stakeholders, including state governments, tribal governments, local communities, individual policyholders, mortgage lenders, and the private insurance industry. In addition to disrupting the program's day-to-day operations, short-term reauthorizations and temporary suspensions create significant uncertainty regarding the federal government's long-term commitment to underwriting and indemnifying flood losses.

How about some somewhat recent lender/investor/agency/MI updates? As always, it is best to read the actual bulletin, but this will give one a flavor for what is happening out there.

Saturday's lender & agency update edition noted the agencies "no longer allow expanded debt ratios for properties constructed using energy efficient designs, materials and equipment, which means that FNMA 1004A Energy Addendum and FHLMC 70A Energy Addendum forms will no longer be issued." As a clarification, Freddie Mac does continue to permit expanded Debt Ratios for energy efficient properties. The retirement of the 70A form did not end its policy of taking a home's energy efficiency into account when calculating debt ratios.  The form was retired (some years ago) because the required information about energy efficiency is captured in the appraisal or a Home Energy Rating System (HERS) report.

Also, it was mentioned that United Guaranty will be pulling a “soft” credit report when the full file loan submission for Mortgage Insurance is received for the purpose of analyzing and gauging the likelihood of the borrower’s being able to make their monthly payments.  This will be rolled out for the non-delegated program, rather than the delegated program, as was written Saturday.  The practice is slated to be extended to the delegated program in the future.

United Guaranty is updating its Performance Premium risk-based pricing for mortgage applications and rate quote requests received on or after May 14th. Compared to the GQX market rating list effective from February 20, 2012, UG’s GQX ratings that are scheduled to be updated on May 14th show an improvement in about 58 markets, while 7 appear to have worsened.  A complete list and zip code lookup tool is on the United Guaranty website. Also, UG is expanding and clarifying underwriting requirements concerning corporate relocation loans, condos and co-ops, DU and LP Unacceptable recommendations, and credit scores.  The full underwriting guide will be updated on May 14th.

Rate Runner and DPI Upload have both been updated, and an enhanced version of Optimal Blue will be available on April 28th.  The updated Optimal Blue will feature the five-year cost of FHA insurance as part of the payment option comparison, and the rate quotes generated will be further streamlined.

As part of its underwriting process, United Guaranty will now pull a “soft” credit report upon receipt of a full file loan submission for Mortgage Insurance in which the borrower’s additional credit activities are analyzed for any indication that they might not be able to meet the monthly mortgage payments.  This won’t affect borrowers’ credit scores but will appear as an inquiry on the report.  At present, this affects submissions received through the non-delegated program, but the plan is to extend the process to all submissions.

Fannie Mae is venturing into the Twittersphere and the Facebook-sphere, where it will post news, training resources, and other housing information.  You can follow or “like” Fannie to get a constant stream of updates.

Under the Servicing Alignment Initiative, Freddie Mac has revised guidelines on short sales in the Single Family Seller/Servicer Guide.  This includes a new uniform set of minimum response time frames for short sales processed according to Chapter B65, Workout Options, and working with homeowners who are eligible for Home Affordable Foreclosure Alternative (HAFA) Short Sales.  Specifically this covers acknowledging borrower response packages, responding to purchase offers, and offer and receiving counteroffers, and will affect new borrower evaluations conducted on or after June 15, 2012.

No one is complaining about rates, or at this point volatility, and yesterday was no exception in spite of a little news. The Case Shiller/S&P Housing Index, which never seems to go up, didn’t disappoint: it showed home prices dropped in 20 large cities by 3.5%. This is the slowest decrease in more than a year and shows some firming. (Is that like a girl saying “no” when you ask her out less quickly?) Fifteen out of twenty cities decreased, with Atlanta showing the largest drop (17%) while Phoenix put in the biggest gain (3.3%). But wait - the Federal Housing Finance Agency's (FHFA) Home Price Index rose .3% from a revised January -.5%. Remember that the FHFA Index is calculated using purchase prices of houses financed by mortgages sold to or guaranteed by Fannie Mae or Freddie Mac. Combined, it shows that the industry is still somewhat struggling but finding some footing.

Nuances aside, fixed income markets sold off slightly more due to strong earnings releases, and a decent debt auction in Spain and the Netherlands created a better bid for riskier assets, i.e., not Treasuries. Traders reported that volumes picked up a little bit although it was purchased by the usual suspects (Fed, banks, and money managers). By the end of the day MBS prices were worse about .125, and the 10-yr yield’s settled at 1.96%.

For thrills and chills today we’ll have Durable Goods at 8:30AM EST and a $35 billion 5-yr note auction to help pay for our government’s deficit. At 12:30PM EST the FOMC will release its statement, followed at 2PM by its summary of economic projections, and then 15 minutes later by a press-conference with Chairman Bernanke. The markets will be focused on what the Committee says or doesn't say regarding Operation Twist and QE3 and a sell-off on an adverse outlook will of course lead to a pickup in mortgage banker selling and investor profit taking.

In a crowded city at a busy bus stop, a woman who was waiting for a bus was wearing a tight leather skirt. As the bus stopped and it was her turn to get on, she became aware that her skirt was too tight to allow her leg to come up to the height of the first step of the bus.
Slightly embarrassed and with a quick smile to the bus driver, she reached behind her to unzip her skirt a little, thinking that this would give her enough slack to raise her leg.
Again, she tried to make the step only to discover she still couldn't.
So, a little more embarrassed, she once again reached behind her to unzip her skirt a little more.
For the second time, attempted the step, and, once again, much to her chagrin, she could not raise her leg.  With little smile to the driver, she again reached behind to unzip a little more and again was unable to make the step.
About this time, a large Texan who was standing behind her picked her up easily by the waist and placed her gently on the step of the bus.
She went ballistic and turned to the would-be Samaritan and screeched, "How dare you touch my body!  I don't even know who you are!"
The Texan smiled and drawled, "Well, ma'am, normally I would agree with you, but after you unzipped my fly three times, I kinda figured we was friends."