All is not bleak in residential lending. Note that yesterday the MBA reported applications rose 4.7% last week versus +11.9% the previous week. Yes, versus a year ago applications are down 56%, but there is some good news. For the third week in a row, refi applications rose, up 9.9% last week vs. 11.2% prior week (but are still down 66% versus a year ago). Refis as a percentage of loan applications rose to 64.1% vs. 62.3% last week while purchase applications fell 3.6% versus a jump of 11.5% the prior week.

(Read More: Mortgage Applications Continue Higher as Rates Retreat to 2014 Lows)

Speaking of refis, if someone can refinance a home loan, can they refinance their student loan? Elizabeth Warren thinks that should be doable.

Salvador Dali commented, "What is important is to spread confusion, not eliminate it." As we all know the QM rule became effective January 2014. Some say that if the first victim of the rule is clarity, the second is the consumer, with the industry a close third. Already there are as many ways to calculate the three percent points and fees cap as there are lenders who are concerned about safe harbor. One question that has been raised by several originators is how does the requirement to include lender paid compensation paid to a non-self-funding originator play into the disclosed APR? It seems that the answer to this question is not shared by all lenders.

According to Bill Kidwell with IMMAAG, "attorneys at the CFPB, before and during a November roundtable discussion with the Director and several of his staff, responded that the answer was straightforward - lender paid compensation only counts toward the calculation of the 3% Points and Fees cap for determining if the loan is a Qualified Mortgage. It DOES NOT get 'double counted' in the APR. Remember that the interest derived from the base rate is already in the APR and that is the source of the same lender paid compensation." Bill continued, "So, if you have a lender mandating that you include, or if their TIL disclosure increases the APR because they include the lender paid compensation as an addition to calculate APR, please push back and have them contact the CFPB for clarification." (IMMAAG, an industry information and compliance company is gathering information about QM problems so they can be collected and submitted to the Bureau in a solutions oriented way. If you have issues or questions about the implementation of QM and you want to discuss them with someone who is concerned and wants to help solve them you are invited to send an email to, subject "QM Questions.")

Interestingly enough, home loan programs tied to state programs have escaped the QM confinements, per Bloomberg. "Every state has one of these little-known agencies, which legislatures set up in the 1960s and 1970s to promote affordable housing. Now, as regulators tighten mortgage rules and big banks resist lending to riskier middle-income Americans, HFAs across the U.S. are rapidly expanding to restore the fading dream of homeownership. The state agencies got a boost from the Consumer Financial Protection Bureau, which exempted them from stricter mortgage regulations that it rolled out this month." Remember that the CFPB has gone on record as saying non-QM loans are not bad loans! Here is the article about state-assisted loans. But there is an entire industry that knows that these aren't "higher risk borrowers" - someone should have put a little more thought into that headline.

I'm sure in the Top 10 list of movie quotes for business people, Glengarry Glenn Ross' "ABC....always be closing" is somewhere right behind "Greed, for the lack of a better good," and, "You feeling lucky, Punk, well do ya?" OK, so that last quote isn't officially in a business movie yet, but I HAVE incorporated it into my own screenplay about a non-QM underwriter coming to terms with a QM world. You know who else is interested in closings? That's right, the CFPB. The agency is seeking information about the mortgage closing process from industry, consumers and other members of the public; specifically, information on key consumer "pain points" associated with mortgage closing and how those pain points might be addressed by market innovations and technology. The CFPB wants "to encourage the development of a more streamlined, efficient, and educational closing process as the mortgage industry increases its usage of technology, electronic signatures, and paperless processes." This can all be considered a part of the CFPB's incremental steps towards their "Know before You Owe" initiative.

(Read More: CFPB Wants Your Thoughts on Mortgage Closing Process)

What are vendors, investors, and agencies up to lately?

On January 9 the USDA sent out a "Status Update on Proposed Changes to Eligibility Areas Based on 2010 Census Data". "As January 15, 2014 approaches, many are wondering whether Rural Development will be implementing the Future Eligibility maps based on the 2010 Census data.   At present, the eligible areas remain unchanged and we continue in a 'holding pattern' until either an appropriations bill or a continuing resolution is passed.  Notification will be sent pertaining to changes to this status."

HUD has delayed the implementation of Financial Assessment and Reserve Requirements for HECM loans that were originally scheduled to go into effect on January 13th.  Updated guidance will be published shortly and will apply to all HECM case numbers assigned 90 days from the release date.

Wells Fargo has reduced its Non-Conforming ARM purchase special pricing adjustment from .625 to .375, effective immediately.

Franklin American has clarified that it will include the entire amount of borrower-paid single premium MI in the applicable QM Points and Fees, regardless of seller or lender credits, while lender-paid MI and annual and monthly premiums will remain excluded.

PennyMac is now purchasing non-Jumbo Massachusetts loans from lenders that are granted specific approval.  This change has already been incorporated into the SRP grid for the relevant programs.

Effective for loans in CT, FL, NY, and NJ, M&T Bank is no longer applying the -.25 FHFA Adverse Market Adjustment as an LLPA.

Plaza has suspended its 3/1 ARM products indefinitely while it evaluates the impact of ATR and QM.  Affected products include FHA, VA, and Conforming 3/1 ARMs.

As part of its wider compliance efforts, Cole Taylor Mortgage is now requiring all loan files to include an Affiliate Business Relationship Certification.  The certification for allows lenders to select one of three options: they have no affiliates, they have one or more affiliates that are not being used on the loan-level transaction, or they have one or more affiliates that are being used in connection with the transaction.  Lenders must disclose the names of all their affiliate services, whether they are being used or not, and in cases where they are, the fees being retained by them.

Flagstar, which laid off 600 last week, announced its earnings. Mortgage banking income fell to $44.8 million from $75.1 million in 3Q. Total mortgage originations came in at $6.5 billion, down 16.9% from $7.8 billion in 3Q. Rate lock commitments fell 22% to $6.5 billion from $8.3 billion. The gain-on-sale (GOS) margin (based on closings) fell to 0.66% from 0.90%.

In response to QM, Bank of the Internet has made several guideline changes, including eliminating prepayment penalties on all loans registered after January 10th.  Loans registered and cancelled before January 10th will be subject to a .375 adjustment rate (equal to the prepayment penalty buyout) if they are re-registered within 120 days of the cancellation.  BofI will be continuing to offer Interest Only Portfolio products and will require that all HPML borrowers receive a copy of their appraisal.

WesLend is now allowing delayed financing for Conforming Fixed DU and DU High Balance programs in cases where the LTV is 80% or less.  Delayed financing will remain available for the WesLend Direct and WesLend AJ programs with LTVs over 80%.

As part of its efforts to complement its mini-correspondent and wholesale broker channels, Castle Mortgage and American Mortgage Network have announced that they will be implementing a delegated underwriting program to their correspondent platform, currently operating in 24 states.  Interested correspondents may apply here.

Long Beach, NY-based Lenders Compliance Group has announced the launch of Servicers Compliance Group, a full-service risk management firm that will specialize in outsourced mortgage servicing compliance.  The group caters specifically to servicers and sub-servicers and provides expertise from compliance attorneys, consultants, and other subject matter experts.  Learn more here.

Software provider Accurate has enhanced and rebranded its cloud-based data platform as Archer.  The new platform manages 25,000 third party vendors and streamlines workflow to deliver data more efficiently.  In the wake of Accurate's acquisition of ValueNet in August 2013, Archer is also fully integrated with the full ValueNet suite of products.  Users can automate supply chain management; have their systems integrated with commercial LOS providers; access valuation, title, closing, and other service providers; and customize the entire process.  More info here.

Secondary folks are out there hedging locks! Despite no economic data, distractions from an ABS conference in Las Vegas, and snow on the East Coast, MBS volume was above normal (above $1 billion) with Tradeweb reporting at 118% of the 30-day moving average, and Treasury prices worsened. The rumor is that Treasury prices worsened due to hedging of upcoming corporate debt pricings - but all on one day? Does anyone really know for sure? The 10-year note closed out at a yield of 2.860%.

The news picks up a little today: Initial Jobless Claims, expected unchanged at 326k, is at 8:30 AM EST, the FHFA's House Price Index for November at 9AM, December Existing Home Sales (expected +1%), and December's Leading Indicators (+0.2 versus +0.8 last). For those wild and crazy fixed-income folks, today we'll have the Treasury's announcement of next week's coupon auctions which include its first ever 2-year floating rate note (probably $10 billion), along with the usual 2-, 5- and 7-year notes (e: $96 billion). In the early going the 10-yr.'s yield is down a shade to 2.84% and agency MBS prices are better by a few ticks.