Apr. 6, 2013: More on the CFPB, exams, and loan transfers; vendor & investor updates; so you wanna be an appraiser?
Rob Chrisman


Friday the commentary mentioned a rumored exam of 360 Mortgage by the CFPB, and I received this note from management:  “The CFPB has not contacted 360 Mortgage, and any rumor that the agency has is flatly incorrect. In the last 15 months, 360 Mortgage has undergone all of the standard mortgage industry reviews – including two with HUD, and one each with FNMA and GNMA, as well as 22 State audits – all with no significant findings. As part of today’s mortgage industry environment, we, like all mortgage lenders, will be audited by the CFPB.  360 is fully compliant with all industry regulations, and we are confident we will pass a CFPB audit as well as any other state or agency audit. Should you have any questions, please contact Mark Greco at mgreco@360mtg.com.”


Thank you for clearing that up – the thoughts tying up resources for a CFPB exam (here is the 924 page exam manual: http://files.consumerfinance.gov/f/201210_cfpb_supervision-and-examination-manual-v2.pdf - the one for student loans appears to be 27 pages) seem to hang over the industry. And anecdotal chatter suggests that although most lenders believe that they would pass an exam, the resources required going through one and being tied up in the process, or the possible penalties if they don’t sail through it, are making some owners ask, “Is it really worth it?” And does that help the borrowers?


Speaking of the CFPB, and the current lack of actual mortgage banker fines, another reader wrote, “I have heard that the CFPB is accumulating a data base of the mortgage lender exams in an attempt to aggregating the findings and determine what infractions are commonplace and which ones are not. Of particular concern to the examiners, for example, is the lack of coherent branch manager agreements in non-depository lenders. Lenders with branch networks, where some branch managers own their own branch, or are owners in the company, or some combination of those two or an entirely different agreement, and raising eyebrows at the CFPB, especially if it impacts the motivation of the branch manager to incent LOs differently. And it seems that when the CFPB has a critical database of information it will commence levying fines and penalties with the severity based on whether or not something is the industry norm or not.” Thanks for that note!


And since I seem to be asked about this link periodically, here is a reminder. A warning was issued by the CFPB in their February 2013 bulletin, to banks and non-bank servicers. The warning pertains to the servicers’ legal obligations to protect consumers during loan transfers. The bureau advises, when handing over the processing of loans, mortgage servicers should not lose paperwork, lose track of a homeowner's loss mitigation plans, or hinder a consumer's chances of saving their home from unnecessary foreclosure. Special thanks to Bankers Advisory for including a detailed “to-do” list for servicers in its Compliance Manual: http://bankersadvisory.blogspot.com/2013/01/cfpb-finalizes-mortgage-servicing-rules.html?utm_source=CFPB+Monitors+Mortgage+Servicing+Transfer+Activity&utm_campaign=Agency+Rep+%26+Warranty&utm_medium=email


I also received, somewhat tongue-in-cheek, “Can a mortgage banker create a line item on the HUD 1 for a ‘compliance fee’ charged directly to homeowners? I am surprised no one has calculated out the cost per transaction to comply with all these government regulations. Measuring your cost per transaction on compliance not only seems like a practical idea, but also provides the public with awareness to the regulatory challenges the mortgage industry faces.” Indeed, the CFPB has embarked on a program to measure this; whether or not it becomes a line item is not all that farfetched – like auto’s “gas guzzler” tax.


Switching topics to appraisers, I recently received this note. “My son is going to college in September, and he is one of those many who don’t know what they want to do for a living (like his dad). He is majoring in business, and I have mentioned to him before about becoming an appraiser. As you have pointed-out there seems to be a shortage of bodies, and it could be an opportunity for him. I was wondering if you knew what the average appraiser makes per year. Also, do appraisers ever offer any types of internships?”


Mike Ousley, CEO of Direct Valuations responded, “I have a couple of stories about being an appraiser. Generally, many can make a good living being fairly independent.  Once an appraiser has their license, they can set about creating their own business, so the more “business” oriented they are, the more successful.  Here are a couple of examples on two different ‘success’ stories. Appraiser A became an independent appraiser and found the work to his liking.  He had a lot of flexibility as to his schedule and found that the work was there to grow his business.  After getting his training, he set about growing his business to the point of adding additional appraisers (trainees) and grew his business to a point where he chose to build first a regional, then national presence with quality appraisals and appraisal reviews.  Eventually, after 15 years or so, the business was acquired by a Fortune 500 company. Appraiser B (one of the appraisers Appraiser A trained) became an independent appraiser.  He chose to stay a small business, employing only one additional appraiser. He constructed a home office and has determined he wishes to stay a small appraisal company where the vast majority of his income comes from his own production. The income potential for these two appraisers was very different, but both are viable depending on the appraiser and the choices they make. Generally, an independent appraiser (Appraiser B) should be able to average about 1.5 – 2 appraisal (talking single family or condo appraisals) per day, 5 days a week. With 4 weeks of vacation per year, that would equate to between 360 & 480 appraisals per year.  The tricky part is trying to figure out what the appraiser gets paid for each appraisal. The lender utilization of AMCs (Appraisal Management Companies) exploded after the adoption of HVCC (Home Valuation Code of Conduct) and continues with the adoption of AIR (Appraiser independence Requirements) by the GSE/HUD.  The downside of the AMC model is that the AMC takes a portion, sometimes as high as 50%, of the appraisal fee that normally would have gone to the appraiser.”


Mike went on. “From our research, it would appear that a ‘normal’ fee for a standard single family appraisal nationwide would be around $350 - $375.  Under the AMC model, that number is more like $250 - $325. Many options are available for an appraiser to accept work from AMCs as well as full-fee work, so if we use estimated average revenue per assignment at $300, the above production numbers would equate to gross revenue of between $108,000 - $144,000 annually. A ton of other factors go into overall income (like whether the appraiser works as a fee appraiser for another appraiser, where they would likely get a “split” of the total appraisal fee), but these are decent rules of thumb for earning potential. As to the trainee/internship opportunities, there certainly may be some opportunity to work as a trainee, gathering information, conducting inspections and writing up appraisal reports for a mentor.  Some difficulty exists in that many lenders won’t accept work from a trainee (and the mentor, or supervising appraiser, must sign and inspect the property as well).  Once upon a time, banks were a decent training ground for appraisers, but most banks no longer maintain staff appraisers, preferring to deal with fluctuations in lending activity by outsourcing the appraisal function. Finally, an appraiser MUST gather not only approved education to get state licensed, but eventually must get valuable work experience (at least 2,000 hours in most states) and pass the state exam, so the training process will take a minimum of one year.  One final thought – there are generally two types of appraisers, Residential and Commercial. Commercial appraisal seems to have a few less ‘rules’ around it where acceptance of trainee/interns is concerned, so that may be an option. I’d suggest maybe your son interview folks in both disciplines to see which appeals to him and what opportunities may exist in each. There are a number of residential appraisal companies in urban areas and Cushman & Wakefield or CBRE have in-house appraisal groups on the commercial side.” Thank you Mike – if you’d like to contact him, he can be reached at mike.ousley@directvaluationsolutions.com.


Let’s move on to the never-ending stream of vendor and investor news – some of it is actually good!


For example, LoanSifter just announced they completed their 27th quarter of consecutive growth, with now roughly 1,000 clients and over 35,000 users ranging from large mortgage bankers with TPO channels to community banks and even individual brokers. LoanSifter also just celebrated the release of its “Automated Change Management” system that includes historical pricing support which “allows a lender (originator and secondary) to price and submit an extension, scenario change, etc. with a click of a button, without ever looking at a rate sheet. LoanSifter also recently expanded its MI Best Execution platform to include 4 mortgage insurance companies.  You can always read about what LoanSifter is doing at www.LoanSifter.com and no, this is not a paid announcement.


The FHA has announced that its Philadelphia and Denver Homeownership Centers have implemented new procedures for processing certain case numbers.  Case cancellations, transfers, and re-instatements and mortgage insurance certificate corrections will now be processed through the FHA Resource Center (answers@hud.gov) according to the instructions at http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/talk/phoc_case_processing.  Procedures at the Atlanta and Santa Ana Homeownership Centers remain unchanged.

As a reminder, the first FHA MIP changes are now effective for all new case numbers assigned on or after April 1st.


Stearns Lending has revised its LLPAs for all Fixed-Rate Conforming products such that loan amounts under $75,000 are subject to an adjustment of +0.625 and $75,000-$99,999 to an adjustment of +.0375. Adjustors for refinance loans with amounts between $350,000 and $417,000 have improved by an eighth, while adjustors for corresponding purchases have improved by a quarter.


Although Fannie Mae ARM Notes allow for a loan assumption, PennyMac does not permit loan assumptions on any of its Jumbo products.  All Jumbo ARM loans must be originated using the Non-Assumability ARM Rider and Non-Assuming Note Addendum, the use of which extinguishes any potential for an assumption.  Both of these can be found in the Forms section of the Seller Guide.


PennyMac is no longer requiring a 10% LTV reduction for borrowers with three to four financed properties; however, the previous requirement of 18 months’ reserves remains in place.  For purchase transactions, the square footage of the subject property must be higher than that of the borrower’s previous residence; if not, a motivation letter should be included in the loan file.

Previously, PennyMac borrowers were required to have at least three open trade lines with at least 24 months’ history and activity within the last six months.  Borrowers with at least one open trade line will now be accepted if they can provide a minimum of 12 months’ reporting history, have an established credit history of at least ten years, and have no fewer than 10 trade lines reporting (one being a mortgage).


Mountain West Financial has clarified that it will permit the MLDS RE883 by either the broker or broker loan officer as the broker representative so long as the signing party has a fully completed signature section, including NMLS and License ID numbers.


MSI has clarified a couple of guidelines, stating that that lender-paid mortgage insurance is available for all priced Conforming products with terms of 30, 25, 20, 15, and 10 years and that gifts of equity are subject to the same LTV rules as gifts (i.e. that if the LTV of the loan is 80% or less, the borrower is not required to have 5% of their own funds in the transaction).


MSI reminds sellers that all loans are subject to certain FEMA guidelines on flood insurance, which requires a policy on any structure located in a flood zone with a permanent foundation and at least two walls.  The insurance agent must determine the minimum replacement cost value (which may be different from the appraised value), and each structure valued at over $1,000 must carry a separate policy, as the Flood Dwelling policy covers only the main residence and a detached garage.


Zoila Price has joined First PacTrust Bancorp, holding company for Pacific Trust Bank and Beach Business Bank, as President of Warehouse Lending.  Ninh-Thu Do, Elsa Boyd, and Diana Galindo will round out the residential warehouse lending team.  The new warehouse division is slated to launch in the next few months alongside a correspondent platform, which will be led by Ted Ray, President of Residential Lending, and Rick Cossano, Chief Production Officer of Residential Lending.


Bryn Mawr Bank Corporation, parent company of The Bryn Mawr Trust Company, has announced that it will be acquiring Wilmington, DE-based Midcoast Community Bancorp and its subsidiary Midcoast Community Bank.  The acquisition will expand Bryn Mawr’s Delaware presence by adding four branches, $235 million in loans, and $250 million in deposits.  The merger, valued at $33.3 million, is expected to close late in Q3.  Keefe, Bruyette & Woods acted as the exclusive financial advisor for the transaction.


The First Bancorp has announced that it will be issuing 661,540 shares of common stock to the public at a price of $16.25 per share, with the gross proceeds expected to total $10.75 million.  The company has also granted underwriters the option to issue up to 99,231 additional shares pursuant to over-allotment, and net proceeds are projected to be approximately $10 million for the whole deal.



Distracted Driving Incident:

Yesterday morning on the interstate, I looked over to my left and there was a woman in a brand new Cadillac doing 65 mph with her face up next to her rear view mirror putting on her eyeliner. I looked away for a couple seconds to continue shaving, and when I looked back she was halfway over in my lane, still working on that makeup. As a man, I don't scare easily. But she scared me so much I had to put on my seat belt and I dropped my electric shaver, which knocked the donut out of my other hand. In all the confusion of trying to straighten out the car using my knees against the steering wheel, it knocked my cell phone away from my ear which fell into the coffee between my legs!  It splashed, and burned “Big Jim and the Twins,” ruined the damn phone, soaked my trousers, and disconnected an important call.

Darned women drivers!



If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog is, “How Changes in FHA Loan Pricing Will Lead to Changes in Investor Demand." 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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