Updates on 2nds; Pricing/Fee Changes; United Shore Settles with DOJ on FHA violations

News

Overheard: “I have a feeling that my ‘check liver’ light may come on this weekend.” I guess drinking helps some people forget, and it’s been a rough week for celebrity deaths with George Michael, Carrie Fisher, Debbie Reynolds, and now…Pan Pan. The world’s oldest male panda has died in China aged 31. His more than 130 descendants account for a quarter of the world’s captive-bred panda population. While we’re on foreign news, UK mortgage approvals posted a 9% year-on-year fall in November, the British
Bankers Association
 said. The decline puts Britain on track to have fewer total
mortgage approvals for all of 2016 than in 2015.

United
Shore
Financial Services will pay $48 million to settle allegations brought by
the Department of Justice, which accused United Shore of
violating the False Claims Act by “knowingly originating and
underwriting” mortgages that did not meet Federal Housing Administration
standards, the
DOJ announced
.
The settlement makes United Shore just the latest in a long line of mortgage
lenders that settled with the DOJ over alleged FHA lending violations.

As
a refresher, the False Claims Act is a popular
catch-all law that is used to persecute dozens of mortgage companies. If you
want to look it up it is 31
U.S.C. §§ 3729-3733
,
and is also called the “Lincoln Law”. It imposes a liability on
persons and companies (typically federal contractors) who defraud governmental
programs. It is the federal Government’s primary litigation tool in combating
fraud against the Government.

It
is called the Lincoln Law since it was enacted during his presidency in 1863 by
a Congress concerned that suppliers of goods to the Union Army during the Civil
War were defrauding the Army. The FCA provided that any person who knowingly
submitted false claims to the government was liable for double the government’s
damages plus a penalty of $2,000 for each false claim. It’s been amended, and
in 1986, there were significant changes to the FCA including increasing damages
from double damages to treble damages and raising the penalties from $2,000 to
a range of $5,000 to $10,000.

If
you’d like a very lengthy primer, here
is one
 provided by the Department
of Justice.

Less
than a month ago, a jury found Allied Home Mortgage and its CEO Jim Hodge liable
for Civil Mortgage Fraud and there were $92 million in damages. It turns out
there was more than a decade of misconduct, and they will also face the
trebling of damages and additional mandatory penalties for fraudulent conduct.

In
October, Primary Residential Mortgage Inc. (PRMI) and SecurityNational Mortgage
Company have agreed to pay the United States $5 million and $4.25 million,
respectively, to resolve separate allegations that they violated the False
Claims Act by “knowingly originating and underwriting mortgage loans insured by
the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing
Administration (FHA) that did not meet applicable requirements.”

I
could go on and on, and I am sure that there is a list somewhere, but suffice
it to say that a) it has earned the government a lot of money, and b) there
will be plenty more fines
. The industry is watching Quicken Loans’ legal
maneuvers with the Department of Justice. The DOJ alleges that from September
2007 through December 2011, Quicken “knowingly submitted, or caused the
submission of, claims for hundreds of improperly underwritten FHA-insured
loans.” And that Quicken instituted and encouraged an underwriting process that
led to employees disregarding FHA rules and falsely certifying compliance with
underwriting requirements in order to reap the profits from FHA-insured
mortgages.

Where
does the mortgage settlement money go?
 
Since the 2008 housing crisis, federal regulators have touted billion-dollar
settlements, which, by giving certainty to investors, are often accompanied by
a jump in the bank’s stock price.

With
millions of borrowers having 30-year loans in the 3% range, they’re pretty
happy. So, what
about 2nd mortgages? 
Certainly the field is dominated by
lenders and investors such as US Bank, TCF Bank, Mountain West, Ditch, and
Acopia. (You can always enter the state and then the 2nd program at www.mortgageelements.com to see who is doing what
in what state.)

PRMG Product updates and
announcements are only a click
away
 and it is now offering
Closed End Second Liens.

In addition to 10, 15 and 20
year terms, Ditech’s Piggyback Home Equity Closed Product
is now available in 25 and 30 year terms.

We all know that the bond
market, and therefore interest rates, changes every day. But there are structural pricing and fee changes that lenders
investors are making that
impact smaller lenders and their borrowers.

To more accurately reflect the
market, risks, and associated transaction costs, effective January 1, 2017, Wells Fargo’s mandatory high-balance adjusters for
all loan types will be differentiated by product and coupon and change weekly.
All standard and negotiated high-balance adjusters will be replaced by the
weekly high-balance grid.

PennyMac announced
expansion of the Best Effort grids to include specialized base pricing for loan
amounts less than 200K.  Commencing
with locks on or after Dec 12, 2016, PennyMac expanded the Best Efforts pricing
grids for certain programs into seven loan amount buckets.

Wells
Fargo Funding is making two important
changes
to its new Mandatory suspense fee policy. Wells is eliminating Loan
roll fees (aka cut and roll fees) – Mandatory Loans that do not fund by the
Last Day for Approval within the pool settlement month will incur a suspense
fee. Also, it is adjusting our effective date – Our suspense fee policy will
apply to Loans in Mandatory Commitments with a pool settlement month of
February 2017 or later (i.e., Loans funded after January 30, 2017, which is the
Last Day for Approval for January pools). 

AmeriHome
Mortgage announced its Secondary
Market will be offering a new AOT option beginning January 3rd,
2017. Sellers currently approved for direct trade commitments will be
automatically approved for the AOT commitment option.

Fannie
Mae is starting the new year
by eliminating the $75 Property Inspection Waiver (PIW) fee, effective
January 1, 2017. Enhanced PIWs offer freedom from representations and
warranties on property value, condition, and marketability on certain refinance
transactions at no cost. Discontinuance of the fee applies to all loans
delivered with SFC 801 on or after January 1, regardless of when the PIW offer
was issued.

Wells
Fargo Funding will accept Best Effort Locks and Mandatory Commitments for VA
Loans originated under the 2017 effective loan limits, including high balance,
as follows: originated under the 2017 effective loan limits, including high
balance, as follows: Best Effort Locks, relocks, and renegotiations on and
after December 29, 2016 and Mandatory Commitments on and after December 29,
2016. VA Loans originated under the 2017 effective loan limits must meet all VA
and Wells Fargo Funding requirements.

Fannie
Mae’s AAA Matrices have been
updated to reflect the changes to the maximum allowable foreclosure fees for
Fannie Mae mortgage loans secured by properties in various states. The updated
versions will be available on the Fannie
Mae business website
 on December 22nd.

While we’re talking money, higher mortgage rates will probably
force buyers to purchase lower-priced homes, according
to a survey of realtors by Redfin
.
Almost half think that homebuyers will be forced to lower their price range,
while another 15% think it will cause buyers to walk away. The rest either see
no effect or think that sellers will decide to sit tight. Homebuilders will
probably shift their production to lower price points, and builders like D.R.
Horton and Pulte could be situated best. And as mentioned in the commentary
earlier this week, demographers are also seeing a migration of younger families
from the coasts to the heartland, where real estate and the cost of living is
much lower. 

Yes, rates have gotten a
little better as of late, including mortgage-backed securities. In fact, the
10-year yield now the lowest since before the FOMC hiked rates on December 14.
Risk aversion briefly pushed the 10-year note yield to an overnight low of
2.47%. By the end of Thursday, the 10-year had rallied .250 in price, and the
5-year note and agency MBS prices improved by .250 also – somewhat unusual.

The only news today will be
the Chicago Purchasing Manager’s Index for December at 9:45am, projected lower
to 57 from 57.6. The bond market closes early today, and one can figure that
lock desks will as well…or back pricing off accordingly. The 10-year is at 2.48% and agency MBS prices are
unchanged versus last night.

Jobs and Announcements

In DTC job news, “Come grow with Military Direct Mortgage!  Based outside of Hartford CT, Military Direct Mortgage is excited to announce that it is opening a second call center in Dallas, TX. If you are an experienced Direct to Consumer Loan Originator and want to work for a dynamic, growing company with excellent salary, benefits and unlimited commission potential. Please send your resume to Alex Halisky, or for applicants on the East Coast send your resume to Patti White.”

And in product news American Advisors Group (AAG) announced the expansion of the new AAG Advantage Jumbo Reverse Mortgage Loan to wholesale partners in Colorado for properties valued up to $6 Million. “Colorado will be the seventh state to welcome this unique financial product which is also available on some non-FHA approved properties and features no upfront or ongoing mortgage insurance with full-draw at closing. Your opportunity just got bigger, the AAG Advantage Jumbo Reverse Mortgage Loan is also available in the following states: CA, CT, HI, FL, VA, TX. New to reverse? Transitioning is easy, TRID doesn’t apply to reverse mortgages and there is typically no additional licensing necessary. Join the AAG family and get started in just 30 days! For industry professionals only. American Advisors Group, NMLS #9392.” License information available on www.aag.com/disclosure.

In “not-so-great” news, it is rumored* that Annie Mac laid off nearly 200 employees recently. It won’t be the first, it won’t be the last… (* “Rumored” as in I received notes from several impacted employees.)

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