1st Alliance Self-Reported Violation; Loans that Become Non-QM; LO Signing Bonuses
Connecticut's 1st Alliance Lending, LLC
has been fined $83,000 by the CFPB for violating Real Estate Settlement
Procedures Act (RESPA) rules. 1st Alliance apparently realized it had
illegally split real estate settlement fees and notified CFPB on its own
of the infraction. 1st Alliance buys distressed mortgage
loans from servicers, and then attempts to refinance those loans into
new ones with lower principal balances through federally related
mortgage programs (similar to Ocwen). Initially it obtained its funding
from a hedge fund and split revenues and fees with the hedge fund's
affiliates but ended that in 2011 although continued to split
origination and loss-mitigation fees with the affiliates, a
violation of RESPA which bans a person from paying or receiving a
portion or split of a fee that has not been earned in connection with a
real estate settlement. Read all about it, because it's no longer good enough to turn in your competitor...
& Associates invites readers to join management for an informative
conference call to discuss their outlook on the housing market and
mortgage environment on Monday, March 3rd
at 2PM EST. "Ivy Zelman and her team deliver unique and data-intensive
research across housing and have been consistently recognized for their
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mortgage market's shift to purchase dominance, Zelman's focus on
homebuilding and related sectors provides a valuable perspective for
lenders. The conference call can be accessed by dialing 1-877-234-0285 with the passcode 139842.
Please note that a link to the call's presentation will be provided on
Monday 3/3 before the call through this newsletter so stay tuned.
What happens if a QM loan is found to be a non-QM loan, say through some points and fees miscalculation, by the investor? As best I can tell, these loans currently cannot be cured. But there is certainly a move in the inner ranks of the industry to allow specific violations to be cured, somehow, depending on
the reason the loan violated QM. Many in the biz say that, from a high
level, QM seems very reasonable and is in everyone's best interest. But
the fact of the matter is that if a "QM" loan doesn't fit inside the box
(points and fees exceed QM cap, DTI over 43%, cannot obtain a GSE patch
on 43% DTI, negative loan feature like IO or prepayment penalty, did
not determine the borrower's ability to repay), it is moved from a "credit decision" to a "risk decision" by the investor.
Lenders know that loans can be profitably originated and sold within
the boundaries of QM. The problem is that it's not as easy as it looks,
and the devil's in the details: a processor clicks the wrong box and the
technology does not calculate the points and fees correctly, a
borrower's employment is terminated a day before the loan funds but
after everyone verifies income, an underwriter missed a lender
announcement on how to document assets and now the AUS cert is
invalidated. I think the industry is protesting because people make
mistakes, and some of the old timers don't want to transition to the 21st century. I would like to see a better originator system of checks and balances for auditing loan quality.
the other hand, although some people did not take QM seriously many did
their homework, and read all of their investor's guidance on QM
documentation, and personally audit each one of the files for QM
compliance before loans are sold. There will be a learning curve and
some expensive mistakes by the industry. And thus we find capital
markets staff dusting off the business cards for scratched & dented
loan buyers, and girding their loins for 70 cents on the dollar, or
asking an under-utilized LO to refinance the customer into a QM
compliant loan if that is an option.
Regarding the agencies auditing files, Frank Fiore, president of Matchbox LLC,
writes, "Your comment in today's commentary is what scares me about
certain lenders out there. Anyone that looks to agency approval for the
fact that Fannie does not review their files as hard as Chase does truly
does not understand the implications or being agency approved. Selling direct to the agencies requires a stronger set of QC and QA guidelines pre and post-closing.
They have to be able to ensure that the loan has been run through a
more stringent set of tests so that when that loan come back as a
possible repurchase in 3 years from now, it can be defended. I advise
all of my clients that before they sell a file to an agency they should
be able to mark it complete and be able to support the closing of that
file 3 years from now assuming no one that was involved with the file is
still with the company to "defend" the decision to close. Any lender
that is looking to the agencies as an easier outlet than aggregators
does not truly understand the possible repercussions that will be coming
in 6-18 months from now, if not sooner."
seems that I can't swing a dead cat (sorry Myrtle, it's just a saying)
around a group of LOs without hitting someone who has either been solicited, has heard of some extreme signing bonus, or heard of someone solicited with an extreme signing bonus.
If it weren't for real, it would be comical. Volumes drop, margins
drop, LOs begin to think maybe their company has grown a little stale
and have more time on their hands to go to lunch with competitor's
recruiting folks. The grass is always greener, right? Newer lenders,
perhaps with a recent infusion of venture capital cash, who are trying
to gain a foothold in a certain market, seem very willing to give
bonuses or guaranteed salaries for a certain period of time to "get
through" this time of year. But don't think that the VCs who provided
the cash infusion will settle for a single digit return: any management
"bet" in the form of an up-front signing bonus or guaranty will be
followed by an ROI demand from the VC investor, and that means two
things - profit and volume.
it turns out the grass is not so green, and I am hearing some pretty
grim tales out there. LOs, and AEs, lured by signing bonuses and great
minimum compensation levels for a certain period of time, are finding
that closing loans isn't any easier, and some are trying to go back to
their old company. Companies who gave the bonuses are finding that
perhaps the LOs compensation is not worth the scant production. Passing
this cost along to the borrowers doesn't work in a competitive
marketplace, and so they cut them loose (thus not all the LO and AE
movement is voluntary). Still other companies refuse to give bonuses
at all, wondering about the ethics of paying the new gal a big bonus
while other LOs with tenure and loyalty receive no such bump in pay.
We've all seen it before. For a while underwriters were the shining
stars, then it became compliance folks, and then servicing personnel,
now any LO with both decent volume and some purchase concentration
business north of 50% is in the spotlight. Maybe commentary writers will
be the next stars...
announced the reorganization of its business into two operating
segments: Data & Analytics (D&A) and Technology and Processing
Solutions (TPS). The company also announced that it plans the
divestiture of its default management business (Asset Management and
Processing [AMPS]). The main change to the D&A segment is the
addition of EQECAT, a global catastrophe modeling firm. (Wouldn't that be cool to say you worked for a global catastrophe modeling firm?)
The TPS segment is the old Mortgage Origination Services Segment. In
addition, the company's document processing retrieval and loan file
review operations will be reported as part of this segment instead of
the D&A segment.
recent servicing conference in Orlando had many relevant topics and was
heavily attended similar to recent MBA conferences. This year's best
attended sessions, unlike in previous years, did not focus on lawsuits,
settlements, or foreclosure moratoriums. Ben Madick writes, "We saw the
most attendees interested in CFPB examinations, operations of servicing
and the realization of higher costs to service (or sub-service), and a
packed house for vendor management oversight. Servicers,
sub-servicers, and vendors were unanimously in agreement that the cost
of hosting and performing due diligence is a reality that has set in.
Every lender must perform diligence on their service providers and
work WITH them to provide a seamless, safe transaction for each borrower." Ben is with Subsequent QC, a
vendor that focuses on servicing QC and works together with
sub-servicers and lenders to bridge the gap to meet their oversight
objectives. To learn more about Servicing Oversight or selecting a sub-servicer, contact Ben Madick at email@example.com.
the commentary stated, "The St. Louis Post-Dispatch announced that
Nationstar Mortgage is laying off 115 employees and closing a St. Louis
County office that had been open for about a year." Per Nationstar,
its St. Louis office is not closing and will keep between 25 and 35
employees, in addition to being the location of the Correspondent
Lending Capital Markets group. The St. Louis Post-Dispatch ran a corrected story.
the real estate sales division of Freddie Mac, announced a special 2014
Winter Sales Promotion that will pay cash incentives to real estate
agents who list or sell HomeSteps homes in 23 select states between
February 18, and April 15, 2014.
The 2014 HomeSteps Winter Sales Promotion also offers homebuyers a
choice of incentives, including funds to cover condominium association
fees. Selling agents will receive a $1,000 incentive, and listing agents
a separate $500 incentive, when they sell HomeSteps homes located in
one of the 23 target states. And homebuyers have a choice of $500
incentives they can use towards condominium association dues, flood
insurance premiums or the home warranty of their choice.
(Read More: More REO Incentives, This Time $1500 for Realtors)
HomeSteps Winter Sales Promotion details. (My guess is that Freddie's lawyers approved all of that.)
of Freddie Mac, the Feb. 22 column mentioned a CFPB Guide to lenders
for sharing appraisal information with borrowers. In June of 2013
Freddie Mac added HVE valuation information to UCDP, and therefore the
SSR. But, on Jan 12, 2014 Freddie suspended providing HVE values in UCDP
in response to customer concerns involving ECOA rule changes.)
to the markets, rates didn't do much Monday. Our pal the 10-yr. sat
around 2.74% or 2.75% (where it closed) all day. Sure, Fannies moved a
little different than Freddies, which moved a little different than
Ginnies, and 30-yr moved a little different than 15-yr securities, but
overall it was quiet - so I won't waste your time.
head to Kansas today, and judging by Asia & Europe not much
happened overnight. We will have S&P /Case Shiller Index for
December (yes, a two month lag) and the FHFA home price indexes (+0.1
last). At 10AM we'll see February's Consumer Confidence, and the
Treasury's sale of $32 billion 2-yr notes. In the very early going the agency MBS prices are roughly unchanged, as is the 10-yr yield at 2.74%.