It is good having a roof over your head. But sometimes even well-known TV
actresses find themselves without one. What would The Fonz do?
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.
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 here
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
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.
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
How about some MA, 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
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 Rushmore will 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, MT 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?