Jan. 26, 2013: CFPB not going anywhere despite court ruling; investor updates including PennyMac's move into LP & USB's DAP stance
Rob Chrisman


Sometimes we just shake our head at the legal system. I am not intelligent enough to be an attorney, but for those that are, there is some interest in the decision by the Washington D.C. Court of Appeals. It just released its decision in Noel Canning v. NLRB, holding that the NLRB (National Labor Relations Board) lacked a quorum to take action against the company. But in addition, the Court of Appeals held, in a unanimous decision, that President Obama’s recess appointments to the NLRB were invalid because there was no “recess.”  You can read the opinion here: http://www.cadc.uscourts.gov/internet/opinions.nsf/D13E4C2A7B33B57A85257AFE00556B29/$file/12-1115-1417096.pdf.


“Why should I care about that?” you wonder, if President Obama’s “recess” appointments to the National Labor Relations Board were invalid. Since Richard Cordray was appointed as Director of the Consumer Financial Protection Bureau during the same “recess,” Cordray’s appointment also was invalid per the court.


It isn’t as if the CFPB is going away â€" it isn’t. Richard Cordray was re-nominated by President Obama to serve as CFPB Director for a five-year term.  The President’s recess appointment of him only allows him to serve as CFPB Director until the end of this year. Instead of waiting until later this year to re-nominate Mr. Cordray, the President may have decided to act now because of concerns about the potential outcome of the case. But it isn’t like this will change the average life of the average mortgage company or LO, or compliance person preparing for a CFPB exam.


I continue to receive input on the recent CFPB rules and changes. “I've read that lenders may soon have to offer ‘no point’ loan options to all borrowers.  While we have plenty of room in our pricing to counter pricing adjustments for property type, occupancy, credit score, etc., I have worked at places where the internal pricing was capped well below the level it would take to price certain loans with no points.  If there is a 3% agency pricing adjustment on a loan, and a lender only has 2% room to price it into rate, how are they supposed to offer a no point option?”


And, “It’s easier to avoid QM risk all together by following GSE/FHA/VA guidelines. The government says, ‘jump’ and the industry asks, ‘how high?’ Sounds a lot like the current state of the secondary mortgage market (except now QM makes it easier for borrowers to file a lawsuit if you step outside the box) â€" this is not what the FHFA wants to hear, and it is obviously not exciting news for portfolio shops. So mortgage products just become more vanilla and competition consolidates and continues to contract. Mortgage mergers here we come?”


And, “Under the new Ability-to-Repay rule, lenders will have to determine the consumer’s ability to pay back both the principal and the interest over the long term âˆ' not just during an introductory period when the rate may be lower. Does this mean you can’t make a QM loan to a senior that likely exceeds his/her retirement age? I guess you would have to analyze the borrower's likely retirement income. This might be a boon to financial planners. This also might run head on into Fair Lending (or ECOA) rules on age discrimination.”


Let’s move on to some recent lender and investor news. I’ll give the usual warning that it is best to read the actual bulletin for all the nitty-gritty details. But these will give you a sense of the trends.


Norcom Mortgage has promoted Ryan Kelly to the position of Marketing Manager. I think that Norcom president Phil Defronzo summed the thinking, and the thinking of many good companies, up by saying, “It’s simple: talented people produce great results. And by developing our talent, we’re able to grow our business and be successful. Ryan has proven to be a great asset for the company. He’s creative, responsive, and customer-focused.” Norcom has also promoted Josh Gillooly to the position of Corporate Recruitment Officer.


The FHA has revised the TOTAL Mortgage Scorecard User Guide to provide clarification to the exception policy for non-owner occupied borrower cash-out refinances.  To access the most recent guide, see http://portal.hud.gov/hudportal/documents/huddoc?id=total_userguide.pdf.


As was mentioned last week, Fannie Mae has approved National Mortgage Insurance Corporation (NMI) as its newest insurer of conventional first mortgage loans.  Though NMI isn’t yet licensed to provide insurance in all states, it plans to expand on a state-by-state basis.  Loans insured by NMI can be delivered to Fannie on or after June 1, 2013, provided that the note is dated January 16, 2013 or after.


Version 2.2 of Fannie’s EarlyCheck is scheduled to be implemented over the weekend of March 23rd.  The updates will affect DU Compare, import validation changes, files delivered in XML format, and the Summary Results page.  See the full release notes for more details (http://cl.exct.net/?qs=9b845b9eaa52d364d1fdfa23e6dcbea060b34fbb8eec6c33edda67e426649737). 


In other technological news, Version 18.7 of the Asset Management Network/HomeSaver Solutions Network was implemented last weekend, the full notes on which are available here (http://cl.exct.net/?qs=ce0f74986c080ae2a376c5985eb97ef70efb1c6fa6de0da376f24702e4040bea).


In instances of foreclosure where a servicer files a claim for reimbursement of sheriff’s costs, Fannie is requiring supporting documentation in the form of a cost sheet with the sheriff’s office letterhead.  If this isn’t available, a letter, fax, or email with the sales costs; a receipt of sales costs; or a copy of the website showing the cost schedule from the sheriff or its authorized agent is acceptable.  A copy of the notice of sale with notation of sale costs; statute, ordinance, or other regulation; court confirmation entry/order; clerk return showing sheriff’s costs; attorney’s check; or refund check for unused deposit funds will also suffice if provided along with another form of documentation.


As part of its recent rebranding, GNMA has redone its website and is requiring subscribers to re-subscribe to its subscription notification service in order to continue receiving Disclosure Bulletins and MPMs.


Wells Fargo has issued a correction to its January 14th announcement on debt ratio calculations for conforming and jumbo loans.  The original announcement stated with regards to “other debt” that “at minimum an interest only payment must be included in the debt ratio,” that “post-closing liquidity may not be used to offset payments,” and that Wells would not purchase conforming loans with interest-only payments.  This was meant to say that Wells does not currently purchase non-conforming loans with interest only payments.


As part of its alignment with the GSEs’ policies, Citibank is now basing the delivery date for DU Refi Plus and LP Open Access loans on the application date, which must be before December 31, 2013.  For LP Open Access loans, the borrowers obligated on the note of the mortgage being financed must be the same as those on the new mortgage being refinanced.  Borrowers may be omitted from the note for any reason; this is no longer restricted to death or divorce. 

Citi has revised the non-traditional credit parameters for MyCommunityMortgage and Home Possible loans, which are now the same as those for all other agency transactions.  As a reminder, all loans qualified by non-traditional credit must be underwritten by Citi and are ineligible for delegated underwriting, while non-traditional credit-qualifying loans that require mortgage insurance need to be underwritten by the MI provider.


Citi has updated its Ineligible Originator list, the full version of which is available in the elfno/Forms section of the Correspondent website (http://app.communications.citimortgage.com/e/er?s=1253&lid=139&elq=9c6b7bfcc2574c52893dc4f2392c7a37).


Fifth Third has updated its Ineligible Condo list and 2013 and Super Conforming loan limits and has clarified that, for all HASP Open Access and DU Refi Plus loans, the AUS findings must reflect that the borrower meets the minimum reserve requirements.


As a reminder, Fifth Third will only report mortgage interest that has been paid by the borrower to Fifth Third via the regular monthly principal and interest payments for IRS 1098 year end reporting.  Interest paid to the correspondent sellers before monthly mortgage payments to Fifth Third, including daily interest on the HUD-1, should be reported to the IRS by the correspondent seller.


Franklin American is requiring a current payment history on all loans where one or more payments have come due when the loan is purchased and/or if disbursements have been made from the escrow account before purchase.  The pay history should disclose the dates of payment, the payment amounts, any escrow disbursements, the current escrow balance, and the current principal balance.


All FAMC purchase transactions are now required to contain a copy of the insurance policy and a paid receipt for one year.  A paid receipt from the insurance agent, itemization as paid on the HUD-1, and a zero balance on the declarations page will all suffice.  For refinance transactions, FAMC is requiring evidence of 12 months’ policy renewal if the existing policy is scheduled to expire 30 days from the date of purchase.  Necessary documentation includes the declarations page for the renewal page, including dates of coverage, and evidence that the renewal premium has been paid.


In order to ensure compliance with recent FHFA initiatives, FAMC is encouraging lenders to use some sort of undisclosed debt acknowledgement disclosure to reflect any new debt or customer obligations that weren’t otherwise reported on the loan application, as both DU and LP rely on debts and repayment histories as they’re reported by the credit bureaus.  FAMC has provided a sample template here (https://mail.google.com/mail/u/0/?ui=2&ik=48a1bdd876&view=att&th=13c724972d52b48a&attid=0.1&disp=safe&zw) or suggests using an alternative debt monitoring solution.

Correspondent lenders are reminded that, if the property tax date falls within 30 days of purchase by FAMC, they are held responsible for payment.  If disbursing the tax payments from an escrow account, the lender must provide a current payment history and an updated Tax Information Sheet.


Following HUD’s recent issuance of its Interpretive Rule (“Prohibited Sources of Minimum Cash Investment Under the National Housing Act”), US Bank has reiterated that it is still not accepting Downpayment Assistance Programs on any of its products.


Formerly DU-only lender PennyMac has announced that, effective with commitments issued on or after February 4th, Freddie Mac LP loans will be eligible for purchase. The committing process will be the same as for DU loans apart from selecting LP as the AUS type.  For full details of the new Freddie offerings, correspondents should have received the full grids.


PennyMac has revised its Jumbo program criteria to allow DTIs up to 43% for purchase and rate/term refinance transactions for borrowers whose reserves exceed the minimum requirement by nine months or where the LTV is 5% or more below the program maximum.  This replaces the previous maximum DTI of 45%.




The Montana Department of Employment, Division of Labor Standards claimed a small rancher was not paying proper wages to his help and sent an agent out to investigate him.

AGENT: I need a list of your employees and how much you pay them.

RANCHER: Well, there's my hired hand who's been with me for 3 years. I pay him $200 a week plus free room and board. Then there's the mentally challenged guy. He works about 18 hours every day and does about 90% of all the work around here. He makes about $10 per week, pays his own room and board, and I buy him a bottle of bourbon every Saturday night so he can cope with life. He also sleeps with my wife occasionally.

AGENT: That's the guy I want to talk to - the mentally challenged one.

RANCHER: That would be me.


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 role of the IRS and REMIC's in the current credit crisis. 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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