Maybe Erin should apply to the CFPB for a job, perhaps in the
"public comment" section. (Okay, that was a stretch.) But
LO's are keenly interested in the comments on compensation
- and who wouldn't be interested in thousands of people
determining how they will be paid? Industry comments regarding
the Consumer Financial Protection Bureau's proposed rules
governing loan originator compensation must be submitted by
October 16. The proposal contains clarifying amendments to
definitions set forth in the current TILA compensation
restrictions. For example, the proposal aims to clarify that
clerical employees of creditors and loan originators who do
not "arrange, negotiate, or otherwise obtain an extension of
credit for consumers" are not covered by the rule, while
producing managers who meet the definition of a loan
originator are subject to the compensation restrictions. Here
is the place to comment on this and other proposals: http://www.consumerfinance.gov/notice-and-comment/.
Given the agency sales caps, here's one industry
observation: "To heck with Basel III, and its consequences of
bringing more assets to the largest of banks. That will take
years. The mortgage industry should be more focused on the
unintended consequences playing out a little closer to home: Fannie
(and Freddie?) delivery caps will result in an increase or
at least maintenance of risk concentration as opposed to
a disaggregation of it. Whether or not it is policy for all
sellers and servicers, or just a few (we got our addendum
letter this week, so anyone who thinks it is a myth is wrong),
the trend under the heading 'counterparty risk' is an issue
among others in our peer lending group. The chatter is, 'Any
agency would much rather deal with 20 counterparties than
2,000' and it is reminiscent of a derivation of Warren
Buffett's investment advice: "Put all your eggs into a few
baskets and watch those baskets very carefully."
How
well do you know your own real estate or mortgage company's
ethics? There are two days left to participate in Innoveta
Strategies’ survey – which will result in a white paper on
restoring trust in the financial services industry. Go to http://survey.constantcontact.com/survey/a07e695kp2jh5sfclwa/start
to participate. They thank you for your time and comments.
Regarding underwriting trends and appraisals, Michael
Cleveland with Stratis Financial writes, "I really
don’t feel that the guidelines via Fannie and Freddie are such
a big issue. The folks that qualify and are willing to provide
the needed documentation can take advantage of the
artificially low interest rates. The main issue we see is
the use of AMC’s and the non-accountability of the
appraisers themselves. To open refinances up to those
who do not qualify is no answer – it is back to the state of
mind that ‘homeownership is a right.’ Well, it’s not, it’s a
privilege! A privilege to those who operate their lives and
finances correctly. Sure, if guidelines were scaled back I
could double my income. It would also bring the industry back
to the days were we had elementary school students producing
mortgages and selling homes. To be successful in the current
market place, you need to be smart, work hard and provide a
value to your customers."
And
another comment: "Given the current underwriting (auditing)
environment, we’re not seeing an increase of people getting
declined. But we’re seeing more and more 'ticked off'
customers when I have to ask them what was that $200 deposit
you made into your bank account a week ago? Especially when
we’re doing a rate and term refinance and they’re NOT coming
in with any money at closing. It’s frustrating when I take a
file to --------- Funding and the wife, who’s NOT even on the
loan, has to make sure her $500 W-2 matches the tax returns
even when her husband makes $150k on a W-2. It’s frustrating
to customers when I have to ask to see what the terms of your
401k withdrawal procedures are. The typical answers I hear in
Arizona are, 'Trust me, if I lose my job and I am $50k+
underwater I will NOT be pulling money from my 401k loan to
keep this house afloat.' Or when I need to ask for a CPA to
write a letter of explanation that the client, who’s pulling
money from his business account to pay down his mortgage, will
not lose his business by doing that. How does the CPA know
better than Joe, who owns Joe’s Crab Shack? It’s just more and
more ridiculous BS that we’re asking for. It’s not that people
aren’t getting approved, it is all the work and hurdles
getting them to the closing table."
In a little non-mortgage financial news, the Postal
Service is about to miss another multi-billion dollar
payment. Unfortunately it must rely on Congress to help
fix it - and they're all out scrambling for their jobs. It
can’t even cut Saturday deliveries without a vote: http://www.businessweek.com/ap/2012-09-28/us-postal-service-to-default-on-second-5b-payment.
Here's something else that Congress probably won't act on: the
clock is ticking on the Mortgage Forgiveness Debt Relief Act
– it expires on December 31. The San Francisco Chronicle
reports that “Before the housing downturn hit, ‘forgiven debt’
on home mortgages could be taxed as income. For instance, if
your lender lopped $50,000 off what you owed (a type of loan
modification called principal reduction), if you short-sold
the property for $50,000 less than your mortgage or if your
lender foreclosed on a property worth $50,000 less than you
owed, the $50,000 would be treated as income, adding up to a
potential big bill for state and federal taxes. But with
millions of struggling homeowners in such situations, both the
Congress and the California Legislature passed bills to exempt
forgiven home debt from taxes.” Remember that it only applies
to the mortgage you originally got to acquire the home or to a
refi used to improve the home – no cash out. I guess that
anyone thinking of short-selling their homes have a pretty
good reason to act on that thought process sooner rather than
later.
How about some M&A, investor and lender updates?
These are from recent weeks, and will give you a flavor for
what is going on out there.
US
Bank
has announced a new 7-day lock period for all new locks or
float to locks taken on or after September 4, 2012 on closed
loan files ready for purchase or delivery. Loans that haven’t
yet expired may be granted an 8-day extension using the
original rate sheet 15-day price and expiration date. Loans
that have already expired may be granted a 15-day relock where
the pricing is the worse of the original rate sheet 15-day
lock price or the 15-day price on the date of relock.
Stearns Lending spread the word to clients that, " As a
result of the new FHFA mandated G Fee increase, any lock that
may require an extension, may be subject to an additional
50bps cost (for 30yr, 25yr, and 20yr amortizations) and 25bps
cost (for 15yr, and 10yr amortization terms) in addition to
the current relock or extension charges. New locks or Relocks
taken BEFORE October 1st AND extended on or after November 1st
will be subject to Stearns current rate lock policy, extension
policy plus any additional charges incurred."
As
of September 7th, Stearns Lending has retired its DU Refi Plus
High Balance and DU Refi Plus programs, effective for all
amortization types. DU Refi Plus will remain available
through the Agency Retained DU Refi Plus programs, which are
less restrictive than the generic programs. Existing pipeline
loans may be locked under the retired codes until September
21st. If not locked by this date, they must be changed to
the applicable Agency Retained program.
New
Jersey’s Grand Bank announced today it has signed an agreement
with Rushmore Loan Management Services, in which Rushmorewill purchase the business of Grand Bank’s ICON
Residential Lenders. Terms of the transaction were not
disclosed. We all know California’s ICON as a national
wholesale mortgage originator and servicer which sources loans
through a nationwide network of over 1,400 mortgage brokers.
The company is an approved Fannie Mae seller and servicer and
Ginnie Mae issuer of mortgage-backed securities, and has a
strong FHA and VA niche loan business. The closing of the
transaction is subject to regulatory approvals as well as
other customary closing conditions, and is expected to close
in the fourth quarter of 2012 or the first quarter of 2013.
Kinecta has revised the qualifying rate for 5/1 Jumbo
ARM loans. As of September 5th, the rate is either the fully
indexed, fully amortizing rate or the note rate plus 2%,
whichever is larger. The qualifying rates for 3/1, 7/1, and
10/1 Jumbo ARMs are not impacted.
West Coast wholesaler Pinnacle Capital has added
guidance on conforming loans stating that leaseholds on Native
American land are not eligible. Guidance on asset
documentation requirements and the disaster policy for FHA
loans has been updated as well. The 10-year warranty
requirements for USDA loans have been changed to indicate that
they must be purchased by a USDA-approved company, and the
Jumbo loan limit for VA loans has been increased to $1.5
million for borrowers with FICO scores over 700. Superfund
site guidance for conforming, FHA, USDA, and VA loans has been
amended as well.
In the wake of Hurricane Isaac, M&T Bank is
requiring that all properties located in the Louisiana and
Mississippi counties indicated by FEMA be re-inspected,
provided that their appraisals were completed before August
26, 2012. The inspection should include a photo of the
exterior, a certification that the property is free from
damage and in the same or better condition than it was when it
was first appraised, and commentary on any conditions that may
negatively affect its marketability.
Following the USDA’s announcement that it would once again be
issuing conditional commitments for refinance transactions, Plaza
has resumed funding, purchasing, and accepting locks for Rural
Housing refinances. Purchase transactions remain unaffected.
As part of its efforts to combat fraud, MSI has
tightened its policy on verbal verification of employment for
self-employed borrowers. The borrower’s business should be
verified at least five calendar days prior to the note date
through a letter from the CPA or copy of the current business
license in addition separate documentation from
yellowpages.com, supersearch.com, or searchbug.com. Sources
where business owners are permitted to add their own
information will not be accepted.
MSI has updated its LP Relief Refinance policy to state that
sellers who select Option Two for their appraisal must enter
and resubmit the HVE value to LP as an estimated value, which
ensures that the final finding discloses the correct LTV. The
LP feedback certificate containing the HVE value should then
be included in the loan file. Sellers should note that they
no longer have the option of using the HVE value to calculate
the LTV/TLTV if an appraisal has already been obtained;
instead, they are required to use the appraised value, even if
it is less favorable.
Sellers in Alabama, Florida, Louisiana, and Mississippi whose
loans closed or were delivered to MSI after August 26th must
document that the property hasn’t been damaged by Hurricane
Isaac as per MSI’s disaster policy.
ACT Appraisal was added to MSI’s list of acceptable
AMCs and began receiving new order placement along with the
rest of MSI’s AMC roster as of August 24, 2012.
Rate-wise, Treasuries opened in New York Thursday morning
slightly softer, with traders blaming talk of Chinese
stimulus. We saw a little improvement after the weak numbers
in the U.S., but never really went anywhere. (For housing,
Pending Homes Sales declined 2.6% in August, but we’re still
nearly 11% above 2011’s levels. In fact, the index shows 16
consecutive months of year-over-year increases, and that has
translated into a higher number of closed sales.) Lock desks
and hedgers were busy, as volumes picked up way above the
recent daily averages. Still, the Fed is buying more than that
every day. By the end of the day agency MBS prices were worse
nearly .5, snapping a long winning streak and the 10-yr closed
at 1.64%.
This
morning we’ve had Personal Income for August (expected +.2%,
it was +.1%) and Personal Consumption/Spending was +.5% (just
as expected). Later we’ll have the Chicago PMI for September
(expected unchanged) and the University of Michigan survey for
September. Early on, rates are little changed, and the
10-yr is now at 1.62% and MBS prices better by about .125.
An amateur group of Islamic film makers have posted a video on
YouTube which mocks Christianity and Jesus Christ.
It is believed to be so offensive that St Peter's church in
Shrewsbury, England has postponed their tea and cake morning
until next Wednesday, and Dorothy Green from Margate has
written in to the BBC.
When will the madness end?
If
you're interested, visit my twice-a-month blog at the STRATMOR
Group web site located at www.stratmorgroup.com.
The current blog discusses the looming fiscal cliff brought on
by Washington DC. 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.
