New Century, Carrington, & RFC Legal News; MI Master Policy News; FHA's LEAP Difficulties
reports community banks now spend about 15% of revenue
on compliance to meet regulatory requirements. True, the cost of doing
business for a regulated business does not drive Congress or the CFPB
decision-making, but these costs are passed on to the consumer - who can
have quite a voice.
It seems everyone in lending has a lot of stress these days. On a broader scale, the FDIC recently announced it is seeking comment on a notice of proposed rulemaking amending the FDIC's Annual Stress Test rule.
The FDIC's NPR follows similar action by the Federal Reserve Board and
the Office of Comptroller of the Currency on June 12. This proposed rule
would shift back the timing of the annual stress testing cycle by
approximately 90 days, and clarify that institutions covered by the
Annual Stress Test rule will not have to calculate their regulatory
capital ratios using the Basel III advanced approaches until the stress
testing cycle beginning on January 1, 2016. The public comment period
closes 60 days from publication in the Federal Register. Publication of
the proposal in the Federal Register is expected shortly.
It's been a long time since I'd heard the name New Century mentioned, but now it is back in the news. The SEC is investigating Carrington's mortgage deal with New Century.
And RFC is back in the news. Some good news from the legal trenches comes to us again from James Brody at American Mortgage Law Group (AMLG). "In the large group of cases brought by RFC
against correspondent lenders that are now pending in the United States
District Court of Minnesota, we have received our first indication of
how at least one judge will treat these cases stemming from loan
repurchase demands. In RFC v. Hometown Mortgage Services, Inc., Case
No. 13-cv-03509 (D. Minn.) the three correspondent lenders had filed
motions to dismiss RFC's cases based on 1) the expiry of the statute of
limitations on the breach of contract and indemnification claims, and 2)
that RFC's complaints were deficient because they did not base their
allegations on loan-level data. On June 18, the Honorable Paul A.
Magnuson in large part agreed with the Defendant correspondent
lenders. The Court first ruled in favor of AMLG's client, holding that
the statute of limitations on the breach of contract claims had expired
on those loans sold to RFC before May 14, 2006. These claims were
dismissed with prejudice, meaning that they cannot be simply re-plead
and re-filed with new information. This is a somewhat alloyed ruling for
the Defendants, however, because the Court also ruled that the statute
of limitations on the indemnification claims did not begin to run until
RFC had to payout its downstream investors, meaning that for the large
part, under Minnesota's six-year statute of limitations, the
indemnification claims will be found timely. Second, the Court also
held that the Plaintiff's complaint was deficient because it did not
include any specific loan-level information. While RFC will be able to
re-plead these claims, this also means that RFC will have to engage in
the arduous task of locating and analyzing individual loan data from
older vintage loans in order to pursue these claims. AMLG notes,
however, that since this is the first major decision handed down, this
cannot be yet identified as a trend or outlier. At last count, there
are over 80 RFC cases pending before a number of different judges
in Minnesota alone. AMLG continues to litigate these issues for a
significant bloc of lenders."
On the MI-front, Fannie Mae and Freddie Mac have announced an effective implementation date of October 1, 2014 for new mortgage insurance master policies.
U.S. Mortgage Insurers (USMI) noted that, "New master policies provide
assurances about the consistent handling and payment of claims and bring
greater transparency to contractual protections for lenders and
investors with regard to "representations and warranties." This
important step forward is a component of meaningful reforms that will
help ensure that the industry maintains a strong financial position and
meets its obligations."
Back in March this commentary had a quote from Claudia
J. Merkle, an EVP and Chief of Insurance Operations at NMI Holdings,
Inc. (National MI) in response to comments about standardized MI master
policies, "I'd like to pass along an important distinction about
National MI. A good analogy: BMW and Yugo are the same in that they are
both cars, but there is a lot of variation between the two. I encourage
lenders to be skeptical of any MI firm that openly brags that we are all
the same. I have personally been involved with the GSEs and the FHFA
through the National MI master policy development process, and although
some firms would like to have the market believe that all of the
policies are the same, there are some significant differences that will either save or cost the lender real dollars.
Later this year, the new MI master policies will be similar to the
extent that they all contain the general principles required by FHFA and
GSEs, but they are not mandated to be entirely identical."
received this note from the Northeast: "Our company strives to comply
with the myriad of rules and regulations with which we are faced. We are having difficulty paying our recertification fee on FHA LEAP.
Do you know of any tricks to it? It is like the FHA's version of the
Obamacare website fiasco." I don't know any tricks, but Karen Garner of
the Collingwood Group certainly has the background and current situation nailed down. "For what it is worth, you are in good company. Everyone is having problems. The
good news is that FHA knows it so the worry over being sanctioned
should go away. In my experience the FHA will give guidance about
extending the recert IF its staff doesn't get it up and working soon. As I understand it management hopes to have things fixed by the end of June (next week)
so if it is not fixed then yes I am sure they will. They have already
extended the deadline before because LEAP was not out so I think they
will do it again. But to be safe, my suggestion is to try and log in and
if you get an error message, print the screen. I've
been in compliance over 30 years and we are all about the paper trail.
That way if anything should happen you would have evidence that you
tried and it was their system that did not work." Thank you Karen, and
here is what has been sent by the FHA:
most lenders are aware, FHA's Lender Electronic Assessment Portal
(LEAP) version 3.0 was deployed on May 27, 2014. While FHA is
enthusiastic about the long-term business transformation benefits of
LEAP 3.0, we are aware that users are currently having difficulty
executing some functions in the system. FHA is working diligently to
resolve these issues, and hopes to have LEAP operating at its full
capacity as quickly as possible. Lenders facing access issues,
particularly with the functionality for providing access to independent
public accountants for purposes of recertification functions, should
visit the "IPA Registration and Assignment Instructions" on the LEAP information page.
For access issues related to certifying officials or other lender
functions in LEAP and/or FHA Connection, lenders should access the LEAP 3.0 User Manual. The FHA Connection User Guide can be found here.
also aware of difficulties lenders are encountering in LEAP when adding
new branches, making changes to existing branches, and changing Cash
Flow Accounts. FHA is highly focused on correcting these issues, and
hopes to have these functions working properly very soon.
Finally, FHA is aware of the complications that some lenders have faced
in submitting their annual re-certifications in LEAP. Many of these
challenges have now been addressed, and lenders should continue working
to meet the June 30 deadline for submitting their recertification
packages. Visit the LEAP Information Page, or the online resource."
Donna Beinfeld with Donnashi
writes, "The LEAP (Lender Electronic Assessment Portal) will be used
not only for new mortgagee applications, but also for the
re-certification process and other HUD lender assessment activities. I
spoke to a member of the HUD Resource Center and he indicated they are
aware of the issues with new applications not being processed because of
an error on their end. For lenders who have pending new mortgagee applications the process is as follows.
Call the HUD Resource Center (800-225-5342), indicate you are a lender
and then press 4, which is for all other questions. They do not have a
specific extension for LEAP related questions and issues. The Resource
Center individual will take your name, company name, etc., and forward
your call to a LEAP specialist. The LEAP specialist can tell you the
status of your application. Since payment of your application fee, and
other fees related to FHA loans once you are approved are handled
through Pay.gov, I highly recommend a company applying to work with HUD registers with Pay.gov before they start this process. The information available to the lending community related to LEAP can be found here, or for a PowerPoint on the program go to ApprovedMortgagees.
Thomson Reuters reported that Auction.com, the largest online real estate dealer in the US, will stop selling residential mortgage loans.
"The company, which made a name selling distressed properties after the
financial crisis, came under fire last year in connection with a
lawsuit over RMBS loans sold on the site. RMBS bondholders sued
Nationstar Mortgage Holdings for selling roughly US$150m in soured
securitized home loans on Auction.com without notifying them. EVP Rick
Sharga said that the decision to exit the residential loan market was
unconnected to the case, which was settled out of court, and based on a
desire for growth instead. IFR reports, "It's not that this doesn't work
online," he said. "It's just a question of where the best return
is...Auctions.com has also been selling bulk pools of soured residential
and commercial loans from servicers in an eBay-type auction. It will
continue selling commercial real estate loan and properties. It said it
sold more than US$7bn in real estate online last year. Auction.com was
valued at US$1.2bn in March after Google Capital made a US$50m
investment in the platform. Others shareholders include Starwood Capital
Group, Starwood Property Trust, Stone Point Capital and funds managed
by affiliates of Fortress Investment Group."
Turning to rates, it almost seems that regardless of the news, rates seem quite comfortable where they are - surprising given the bad news out yesterday. Durable
Goods Orders for May fell -1.0%, the first drop since January. And Q1
GDP, in its final number, was -2.9%, below the expected fall of -1.8%
and down from second revision of -1.0%. This was the biggest loss since
Q1 2009. Analysts were quick to slice and dice the numbers, and when the
dust settled it turned out a portion of these dismal numbers can be
explained away due to weather and Obamacare! Nonetheless, rates improved
slightly with the 10-yr closing at 2.56% and agency MBS prices better
by about .125.
realize that I will receive no sympathy, but I am attending the
Mortgage Bankers Association of Hawai'i annual conference, and it is
darned early here so I am sending this out before the set of economic
numbers. At 2:30AM HST we have Initial Claims (expected -2k to 310k) and
May Personal Income (+0.4 expected) and Consumption (+0.4). Later we'll
have a $29 billion 7-year note auction. Before that, rates are roughly unchanged from Wednesday's closing levels.
Liberty Home Equity Solutions, Inc. is expanding its footprint and is searching for originators! "Liberty is one of the nation's largest and most experienced lenders of reverse mortgages. For
nearly a decade, we've delivered education, home equity solutions, and
personal care to over 35,000 senior homeowners and 1,000 wholesale
partners. Come join our team! Now hiring licensed and experienced Field
Sales Advisors (in a variety of locations throughout the US) and a
Wholesale Account Manager for our SE territory." Contact Dena Linzay or visit its website at Liberty for more information.
A leading full-service direct lender founded in 2003, NLC Loans is seeking a professional, goal-oriented VP of Operations and experienced underwriters to join its team.
"Our VP of Operations would manage and direct all facets of the
mortgage operations department, leveraging business intelligence metrics
to promote efficiency in workflow. Located in Independence, Ohio, our
state of the art headquarters offers employees an innovative workplace
that has been ranked as one of the best in Cleveland by the Cleveland
Plain Dealer. NLC Loans is also seeking purchase driven mortgage professionals
to partner with on a national level to open NLC branch offices in
established purchase markets." Interested parties should contact Eric Roman.