Pen Fed Members to Lower Rates With no Refi; Wells Creates Portfolio Retention SWAT Team in Response to QM
morning we learned from the MBA's poll of 75% of retail lenders that residential mortgage applications in the U.S. rose last week
as refinancing activity climbed by the most in two months. The overall
index was +2.6%, the first advance in a month, although the MBA also
released data for the week ended Dec. 27, which showed the index
decreased 4.2 percent to the lowest level since December 2000. The gauge
of purchase applications fell 0.5 percent after rising 2.4 percent the
week before. The measure of refinancing climbed 4.6 percent after
decreasing 8.9 percent in the previous period. (Refi biz is still
running at about 63% of total apps.)
(Read More: Mortgage Applications Rise Just Slightly from 12 Year Lows)
Three days until QM
- and hopefully it will be a non-event for lenders since we've had so
much advance notice. Senator Elizabeth Warren, in fact, believes that
the new rules will help buyers. But lenders remain unconvinced, and time will tell.
MBA is certainly keeping an eye on it, as is the National Association
of Realtors. It is hoped that we'll see "homebuyers access safer
mortgages that meet strong underwriting standards." Or so spoke Consumer
Financial Protection Bureau Director Richard Cordray at an event
held by NAR. "The Ability-to-Repay rule is
straightforward. It puts behind us once and for all the kind of
irresponsible lending that disrupted the housing market and so badly
damaged our economy, and it provides strong new consumer protections
while preserving needed access to mortgage credit," he said of the rule
and its Qualified Mortgage standard. To echo that, NAR President-elect
Chris Polychron observed, "These regulations will go a long way to
protecting consumers from receiving loans that may be inappropriate for
them and gives them additional legal protections. NAR supports these
changes and has provided input throughout the rulemaking process."
so fast, however. Cordray acknowledged concerns that the new rules
could further constrain credit in an already tight lending environment.
"Importantly, our rule also takes careful account of these
access-to-credit issues," he said. "Those lenders that have long upheld
strong underwriting standards have little to fear from the
Ability-to-Repay rule. Qualified mortgages cover the vast majority of
loans made in today's market, but they are by no means all of the
mortgage market." Cordray explained the basic criteria for Qualified
Mortgages, which cannot be made to a borrower with a debt-to-income
ratio greater than 43 percent. "They also cannot have certain risky
features, such as paying interest only or even negatively amortizing so
that each month the consumer owes more than they did before and loans
must have relatively reasonable points and fees," he said. (Remember
that F&F have not, at this time, modified DU & LP regarding
rule includes a 3 percent cap on points and fees, which NAR believes
unfairly discriminates against affiliated lenders who have to count many
more items toward fees and points than large retail financial
institution, such as title insurance charges and escrow for homeowner's
insurance. "The problem is that under this rule, affiliated and
non-affiliated firms are treated differently," said Polychron. "It's
NAR's view that this would be a disadvantage to many real estate
affiliated lenders and reduce the choices available to consumers of
where they can get a mortgage, and because the unaffiliated lender must
still use a title company, the consumer pays the same amount either
the event, Lawrence Yun, NAR's chief economist, explained the future of
homeownership depends on greater access to credit. "Over the past eight
years, homeownership in the U.S. has decreased while many in the
growing population have turned to renting instead of buying a home. We
need to ensure that good, creditworthy renters can someday have the
appropriate access to credit so they can build equity through
homeownership." But Barry Zigas, the director of housing policy for the
Consumer Federation of America, applauded the CFPB for listening to
stakeholders across the country to create a meaningful rule to protect
consumers. "Consumers are finally going to be in an environment where
their ability to repay a loan will be the fundamental determining factor
about whether they'll get a loan or not. This is a terrific week for
Americans," he said.
Let's see what those clever lenders, investors, and vendors are up to - nothing ever remains the same, right?
California's Mountain West Financial alerted clients to its Compliance Resource Portal.
announced the US Patent and Trade Office granted it a patent that
describes various features of a lender compliance testing and measuring
system. "On the heels of the Consumer Financial Protection Bureau's 2014
Ability-to-Repay (ATR) and Qualified Mortgage (QM) Rule requirements,
Mortgage Grader will soon offer its lender compliance testing and
measuring system. Mortgage Grader will offer independent, fact-based
loan file reconstruction, proving that lenders accurately qualified
borrowers, accurately priced loan terms to borrowers and accurately
matched and offered the lender's best available credit terms with ATR
and QM in mind. Borrower data is analyzed to calculate income and debts.
Nothing is assumed. Pricing data and the lender's
eligibility/underwriting guidelines from the same date and time are used
to determine approvals or denials as well as the actual pricing for
those approved loans. Just
like a math proof, there may be no better way to demonstrate whether
lenders are accurately qualifying borrowers except when the
reconstructed loan file figures match exactly with the original terms
that the lender provided." For more information go to mortgagegrader.com or contact Jeff Lazerson at email@example.com.
New York Mortgage Trust announced the pricing of its public offering of common stock.
As mentioned in this commentary earlier this week, members of the $16 billion PenFed will now be able to change their mortgage rate without refinancing through software developed by Mortgage Harmony.
And now Wells Fargo has created a "Swat Team" to keep its loans in-house in response to QM.
In a Bloomberg story by Dakin Campbell and John Gittelsohn, Wells Fargo
has assigned about 400 underwriters to originate mortgages for the bank
to hold, with as many as 40 percent of the loans likely to fall outside
government guidelines taking effect this week. "The bank is training
the group as a way to increase lending without losing control of
quality, according to Brad Blackwell, head of portfolio lending for the
San Francisco-based lender. The group will review loans including those
with terms that prevent them from qualifying for protections provided by
the Consumer Financial Protection Bureau, or CFPB, under new rules, he
said...pushing the initiative to compete for wealthier clients seeking
non-conventional loans such as those with interest-only payments."
article goes on to say, "Wells Fargo wants to give its clients more
loans that can't be sold to the government-backed firms. The bank is
confident the new underwriting group, which will make both qualified and
non-qualified mortgages, will allow it to originate debt that doesn't
meet the CFPB's safe harbor, said Blackwell. Non- qualified mortgages
could be about 5 percent of the bank's total mortgage production, he
said. The approach represents a change for the bank, which long made
loans with the intention of selling them all. 'In the early days of our
history, we were a mortgage bank: our primary responsibility was to
originate and sell,' Blackwell said. 'Today we are originating for our
portfolio. These are loans that we will hold for their lifetime.'" Hey, Wells, or any lender, isn't in business for their health. Here's the link.
updated its Non-Conforming guidelines to cap maximum loan amounts at
$1.5m for 2-unit properties and $1m for 3-4 unit properties for
purchase, rate/term, and cash-out transactions; to require nine months'
reserves for loan amounts of $1m or les, 12 months' for loan amounts
of$1-2m, and 24 months' for loan amounts over $2m; and to no longer
consider co-ops eligible for secondary financing. The
maximum CLTV adjustor for properties in AZ, FL, and NV has been changed
to 5.0 for all loan amounts up to $1.5m, and the cap structures across
all ARM products will remain at 5/2/5 to align with the retail bank. In addition, all CA ARM transactions will be subject to an additional pricing adjustment of -.25.
Green Tree has
updated its guidelines to state that it will not purchase loans to
principal owners or majority shareholders (25% or greater ownership) of
Business Lending clients. Additional
revisions stipulate that investment property borrowers have a two-year
history of rental property management within the last three years, that
the LTV/CLTV/HCLTV be based on the lesser of the sales price or current
appraisal value, that a Lender Full Review be provided for all primary
residence existing Florida condo projects, that seller contributions to
high balance primary residence and second home transactions are subject
to a 3% maximum, that all foreign assets used for down payment and
closing costs be deposited into a US bank account prior to closing, that
all second home and investment property transaction must be arm's
length, that desk reviews will not be permitted in place of appraisals,
that all AUS Approve and Manual Underwrite transactions require two
reported credit scores, that all disaster-related repairs be completed
as required by the appraiser, and that a year-end profit and loss
statement be provided if the borrower has not filed prior year tax
addition, Green Tree has clarified that written VODs and VOEs cannot
serve as standalone documentation and that one month's bank
statement/paystub is required for all loans regardless of AUS decision.
No one seems to be wringing their hands over Europe anymore. In fact, Ireland has re-entered the bond market for the first time post bail-out. But
why should anyone here care about "shadow banking" in China? Well, no
one doubts the size of China's economy - but what about its strength? If
China's economy is weaker than we thought, then the world's economy
could be in the same shape - which would lead to lower rates. But I doubt anyone is hoping for a world economic slowdown.
to the markets, following Monday's improvement Tuesday did not
disappoint anyone waiting to lock in rates. The Fed's buying is "more
than a match", as Thomson Reuters pointed out, for the originator supply
that continues to be less than $1 billion per day. "This led to spreads
holding tight," and helped agency MBS prices to rally about .250.
had the December ADP employment numbers, which have varying degrees of
relevance and predictive ability. They were expected to show an increase
of 200k, and came in at +238K. Later today we'll have a $21 billion
10-yr note auction, and the minutes from the December 18-19 FOMC meeting
and investors will find out more on the discussion to taper and
possibly how it will proceed. For numbers, yesterday the 10-yr closed at 2.94%, and in the early going today we're at 2.98% and MBS prices are worse .250.