Freedom Continues to Grow; $500k Fine for RESPA Violation; Information on Individual Liability in CFPB Cases
going to retire and live off of my savings. The second day, I have no
idea what I'll do." Quips aside, many Americans have no clue about how
much money they'll need to fund a financially secure retirement. For
example, who has a crystal ball to estimate health care costs?
(Fidelity's most recent Retiree Health Care Cost Estimate found that the
average couple could expect to spend more than $220K in health care
expenses over the course of their retirement.) But many bank and non-bank mortgage companies are offering financial planning,
and when one walks into their lobby one sees advertisements for those
services. They figure, "You're telling us all about your current
financial situation, we might be able to help you plan for retirement." A
good number of community banks offer retirement products such as
targeted savings accounts. So as demographics change, banks see this as a
way to get a foot in the door with customers in their 40s and 50s who
could really benefit from this type of guidance.
For some industry news, congrats to industry vet Don Emerson. San Francisco-based Bay Equity Home Loans has hired Don as Divisional Vice President to further develop and grow the California region. Don
will oversee 13 company branches in California in addition to
overseeing expansion in the state. Bay Equity Chief Production Officer
Casey McGovern said, "Hiring Don Emerson reflects our commitment to hire
only the best. Don has trained, mentored and worked beside more than
2,500 loan officers, account managers and mortgage brokers in retail and
wholesale lending in California, Arizona, Texas, Oregon and Washington.
Don is a perfect fit to help us implement best practices and invest in
our people." Family owned and purchase focused Bay Equity
has a great culture, full agency approval (Fannie, Freddie, Ginnie) and
is looking for top mortgage professionals to join its team. For more
information contact Casey McGovern, casey@bayeq. com.
Diversity is important in the lending biz, and MBA member received this note yesterday. "The Mortgage Lending Industry Strategic Markets and Diversity Conference
held six annual conferences between 2006 and 2011. I am pleased to
announce that, as part of its expanded diversity initiative, the
Mortgage Bankers Association (MBA) has agreed to take future
responsibility for this important event...This annual gathering provided a
unique opportunity for industry professionals like you to candidly
discuss the interplay of strategic lending, diversity, compliance and
the bottom line. I am thrilled to tell you that this event is back (next
month), and expect it will be better than ever with your support. MBA's Strategic Markets and Diversity Summit will deliver the tools you need to grow your business in a thriving, forward-looking market."
We'll also be having a free National VA Financing Webinar in June.
I have previously discussed in this forum that one area in which the
government has stepped up over the years is in addressing the financing
needs of our Veterans, and the men and women actively serving.
Nevertheless, VA financing is often either misunderstood or discouraged
by many mortgage and real estate professionals. Even Vets often do not
embrace it due to previous experiences or a misunderstanding of the
program. We need to change that perception. I will be providing the
opening comments at an informational National VA Financing Webinar on Tuesday, June 24th at 10:00 AM Pacific Time. The purpose of the free
call will be to enlighten and encourage real estate and financial
industry professionals to better embrace the VA financing option. The
call is sponsored by iServe Residential Lending and will feature comments by Keith Pedigo, the former Director
of Loan Guaranty Services and Deputy Undersecretary for Policy at the
Department of Veterans Affairs. Presenting for iServe will be long-time
industry Veteran, and Director of Government Lending, John McDade.
In Alabama, or any state for that matter, $500,000 goes a long way. The CFPB has fined RealtySouth
that amount for "inadequate disclosures that could leave consumers
unaware of their rights to choose service providers during the
home-buying process." The forms either explicitly directed or suggested
that title and closing services be conducted by Title South, LLC, an
affiliated company owned by the same holding company that owns
RealtySouth. The CFPB said the forms could leave consumers unaware of
their rights to choose service providers during the home-buying process
and charged that the company violated the Real Estate Settlement and
Practices Act (RESPA), which protects consumers by prohibiting kickbacks for referrals of real estate settlement services.
is quite a shot across any company's bow that is working with the
consumer and may "refer" that consumer to a lender. Not a week goes by
that I don't receive an e-mail, usually with proof, of Realtors and
builders directing clients to a particular lender. Some of these are
obvious, some are slyly worded. For example, a Realtor or builder may
state that they don't require their customer use their preferred lender,
but will require a pre-approval from the preferred lender. And of course, what borrower wants to go through a pre-approval and then change lenders for the actual approval?
firm K&L Gates reports that, "To date, the CFPB has brought 12
cases-out of more than three dozen total CFPB enforcement cases-in which
it named individuals as defendants or respondents liable for violations
of consumer protection statutes. Below, we consider the standards for individual liability in CFPB cases, the actual cases that have been brought, and 10 lessons that can be drawn from these cases."
is, or should be, a huge concern in the industry. It goes without
saying, the mortgage industry has many PR concerns, and with many banks
moving their brands away from solely a "price leader" to a more
"customer friendly" look, those concerns rise proportionally. Late last
month, Jeb Hensarling (R-TX), a member of the House Financial Services Committee sent letters to the Federal Reserve, the OCC, the OCC, the FDIC, and the NCUA asking the regulators to explain their use of "reputational risk."
In the letter the Congressman asked each regulator to add clarity to a
few issues, such as: whether it consider reputation risk in its
supervision of depositories, and, if so, to explain the legal basis for
such consideration and why it is appropriate; what data is being used to
analyze reputational risk and why such data is not already accounted
for under the Uniform Financial Institutions Rate System (aka CAMELS);
and) whether a poor reputation risk rating could be sufficient to
warrant recommending a change in a depository's business practices
notwithstanding strong ratings under CAMELS.
Ellie Mae released its insightful Insight Report.
One link is worth a thousand words, right? According to the report,
which obviously doesn't include loans that don't pass through Ellie Mae,
the FICO average of purchase conventional loans that closed was 755 and
LTV average was 80% which was just slightly eased from an average of
759/80 for 2013 and 763/79 in 2012; 64% of closed loans were for
So how are recent housing numbers looking? Taken from various reports, existing home sales YTD are down about 6.5% according
to data from the National Association of Realtors. Housing analysts
estimate repeat buyers are down 1.6%, first-time buyers are down 12.3%,
investor purchases are down 10.2%, and non-investors are down 5.6%.
However, cash buyers are up 4.7%, non-cash buyers are down 11.3%, and
distressed purchases are down 39%. Home prices appearing to remain strong, up 1.4% YTD and up 12.2% year-over-year through early spring. New home sales are down 1.8% First-time homebuyers still remain weak.
Going back to 2008, first time homebuyers accounted for roughly 30% of
home sales and reached 45-50% during the first time home buyer tax
credit, but have steadily drifted to slightly below 30%.
The Fed is still worried about housing,
as the sector continues to grow as expected. Unfortunately, the Fed
doesn't have a lot of levers to deal with the underlying issues of low
household formation, tight credit, and lenders frightened of their own
shadows. Again, all real estate is local, and the problems are mainly in
the Northeast, which is still dealing with a large shadow inventory of
foreclosures. In areas where this has been dealt with already
(California), there is a tremendous amount of building.
And regarding servicing, from reporter Jody Shenn comes this story about Freedom Mortgage. Freedom's at $50 billion in servicing - nothing to sneeze at!
For a couple recent state-level updates...
Maryland, with passage of Senate Bill 583,
has revised statutes on interest escrow accounts and savings accounts
which have been created for a specific purpose. The state legislature
has made revisions to commercial and financial statutes relating to
escrow accounts created in connection with loans secured by a first
mortgage or deed of trust on residential property. Section 12-109 now
contains a new minimum interest rate payable to borrowers with such
escrow accounts. It states, "a lending institution doing business in
Maryland must now pay interest on the funds in the escrow account at an
annual rate of no less than the weekly average yield on United States
Treasury securities adjusted to a constant maturity of one year."
And Indiana has made revisions to pre-licensing education requirements for originators. The
department has eliminated a prior requirement of two hours of education
on the topic of state law and rules concerning residential mortgage
lending, The state of Indiana's pre-licensing education requirements for
mortgage loan originators currently mandate a minimum of twenty hours
of relevant education. The regulations state that pre-licensing
education must include, at a minimum: two hours of training related to
lending standards for the nontraditional mortgage products marketplace,
three hours of education on ethics, including instruction on fraud,
consumer protection, and fair lending issues, and three hours of
education on federal law and regulations.
GDP numbers for the United States were released
yesterday, and they were poor. First quarter GDP was revised downward
to -1% versus expectations of -.5% - how long can we blame the weather?
Initial Jobless Claims fell to 300k, and Pending Home Sales increased
.4% month-over-month, but fell 9.4% in the year-over-year number.
are driven by supply and demand. Overall, the recent bond rally (bond
prices going up, rates going down) has caused a pick-up in lock
activity, and thus a pick-up in selling agency MBS to hedge the
production. Traders also saw some selling from hedge funds. The pick-up
in MBS sales is not only quite a bit over the recent daily averages but
well over the Fed's daily purchases of about $1.8 billion. In terms of
numbers, Thursday saw the 10-yr down a smidge and close at a yield of
2.45% and agency MBS prices worsen about .125.
on the last business day of the month the economic news calendar has a
fair amount of news: April's Personal Income and Consumption (expected
+0.3 and +0.2, respectively), Core PCE Prices (expected +0.2), the May
Chicago Purchasing Manager's Index, and the final May Consumer Sentiment
number. In the early going the 10-yr. is at 2.46% and agency MBS prices are roughly unchanged.