Wells Loosens Jumbo Standards; Appendix Q Clarification for Rent; LOs and Minimum Wage
HUD recently took took action against
a California lender for "denying or delaying mortgage loans to women
because they were on maternity leave." The complaint, made by a married
couple, to HUD claimed that the lender denied their refinancing application because the wife was on maternity leave.
HUD's ultimate investigation revealed the lender also allegedly denied
four other applicants who were on maternity leave, or delayed their
applications until after the women returned to work. The agreement
requires the company to pay $20,000 to the couple that filed the
complaint, and $7,000 to each of the other four applicants identified by
you reducing your compliance costs? No worries - neither is anyone
else, and they are mostly being passed on to borrowers anyway. On the
positive side, the MBA released its Credit Monitor
showing that things may be loosening up somewhat. (Heck, there is
nowhere else to go, right? But back to the mounting cost of compliance...
there are plenty of resourceful folks out there in banks and in the
industry, and where there is a will, there's a way to outsource compliance.
those lines, the economy is doing well in Texas, property values, which
didn't skyrocket ten years ago, didn't drop off a cliff five years ago.
So it is interesting to note that the state supposedly has the highest loan fees.
Does it mean that it is more expensive to do a high quality loan? That
it costs more to do business in Texas? Does it mean that it will put a
crimp in lending, therefore driving prices down? Does it mean lenders in
Texas make more money than other states, since the loans are sold into
the same secondary markets as loans from other states?
I received this note about the latest "tiff" between New York and Ocwen:
"Is the servicing deal between Wells and Ocwen dead in the water?"
Pretty much, but coincidentally Compass Point Research and Trading wrote
its opinion on the "Increased risk to Wells Fargo deal. Since the Wells deal was officially
put on hold in February, Benjamin Lawsky has written a series of
letters and other public statements questioning the capacity of OCN to
handle the acquisition of another large servicing portfolio and the
dealings between the different OCN-related companies. While we do not
believe OCN is intentionally harming borrowers or being fraudulent in
the way it conducts business, there is a risk the deal does not happen.
If the deal were to be cancelled or shopped to another servicer, it
could be a negative catalyst for OCN. Even if the deal did happen, we
believe the initial costs of integrating the portfolio onto the current
platform combined with the additional interest expense to fund the
transaction will mute the potential accretion in the first year of
closing the deal."
companies continue to scramble to cut overhead and still strive for the
perfect loan. I received this note from the STRATMOR Group. "Paying
the right amount to the right employee at the right time is fundamental
to ensuring that your organization hires and retains the best talent
while simultaneously controlling costs and justifying compensation to
your stakeholders. Did you miss participating in STRATMOR's Compensation Connection Survey
earlier this year? By popular request, STRATMOR is reopening all of the
original modules (Retail Sales, Retail Fulfillment, TPO Sales, TPO
Fulfillment, Consumer Direct Sales, Consumer Direct Fulfillment, and
Executive Management) for a second round of evaluation. Be armed with
compensation data from 40+ participant companies as you head into budget
season. The results will be cumulative from both rounds. For full
details, visit the 2014 STRATMOR Compensation Connection Survey website or email Angie Middlebrook for more details.
Here's a question that is opening up a can of worms: "Do LOs have to be paid minimum wage?"
Interestingly enough, there is no clear answer in the industry, as some
lenders do and some don't, and of course the ones that do pay their LOs
point fingers and whisper about the ones that don't. Even companies
served by the same law firm may interpret it differently! My dog Sweetie
had no interest in doing the research, so I did a little digging - and
invite any attorney or compliance expert to weigh in.
one state, "California employers must comply with both the California
Labor Code and the federal Fair Labor Standards Act. When state and
federal law covers the same subject (e.g., minimum wage), employers must comply with the law that provides greater benefits or protections to employees.
In most cases, California law provides greater wage and hour
protections than the federal Fair Labor Standards Act. Most in-house
mortgage employees and commissioned stockbrokers would likely be found
overtime exempt under state law. However, the federal inside sales and
administrative exemptions appear not to apply to many inside mortgage
company employees and securities brokers who receive no base
compensation. Because both of these groups of employees are often very
highly compensated, the amount of back overtime liability can be quite
staggering. A number of large nationwide brokerage firms recently
settled FLSA overtime cases where the back overtime topped $25 Million
In Washington DC "it would appear that financial services institutions may classify their mortgage loan officers as exempt employees, if they meet the administrative exemption requirements."
Things may hinge on what are the duties of an outside sales person. Prospect Mortgage found out after incurring a good chunk of legal bills.
A month ago the commentary created a bit of a tempest in a teapot by discussing "What is required to prove rental income in order for a loan to be a Qualified Mortgage?" The CFPB is in charge of underwriting criteria now for QM loans, of course, and Appendix Q is under its jurisdiction. A highly placed source has alerted me that the CFPB definitely wants the leases AND the schedule E.
If you only have a few leases, you can use the income from those
leases. If you don't have the leases you cannot use the income. And if
you don't need the schedule E income you don't need to provide any
leases. At some point in the near future the CFPB may change this, but
for now a loan is non-QM if you don't have the leases. Feel free to drop
them a line if you support any changes: CFPB.
The Fed Senior Loan Officer Survey is out, and it discusses non-QM lending.
The majority of banks reported that the rule had no effect on prime
conforming mortgages (unsurprising since if it is conforming, it is QM
compliant), but about half the respondents indicated QM reduced approval
rates on applications for prime jumbo loans and non-traditional
mortgages. Of course, the last thing that the CFPB wants to be accused
of is restricting credit to borrowers.
a quick aside, in case you've been sleeping for a few weeks, as many
already know or will soon find out, the CFPB is tasked with enforcement
of HMDA and Reg C violations, and has been directed, by way of
Dodd-Frank, to "expand the collection of mortgage origination data."
Currently this includes items such as length of the loan, points and fee
information, applicant information, etc. However, Dodd-Frank also gave
the Bureau discretionary authority to substantially expand the number of new data points required to be reported. In the CFPB's newest proposal,
the Bureau would start requiring lenders to report items such as,
dwelling-secured loans, which would include some loans not currently
covered by Regulation C, including reverse mortgages, and all home
equity lines of credit irrespective of their purpose. The proposal
follows a review initiated by the CFPB earlier this year to assess the potential impacts of a HMDA rulemaking on small businesses.
press doesn't know the difference between retail and correspondent, so
make sure you remember the business channel that is impacted by any
story titled, "Wells Fargo Loosens Standards for Jumbo Loans."
to the markets, everyone wants "private money' to come back to the MBS
market. Of course, no one wants it if it is going to push mortgage rates
to 6%! But the MBA submitted a letter to Treasury identifying existing barriers to activity in the private-label RMBS market.
The outreach by the Treasury department is part of a larger effort to
engage stakeholders and spur private capital to assume more mortgage
did have a smattering of news yesterday, of little or no consequence in
terms of moving rates. The ISM Non-Manufacturing Index increased nicely
in July, and is at its highest point since inception (with the caveat
the index started in Jan 2008). And Factory Orders increased 1.1% as
well, but the IBD / TIPP economic optimism index declined.
Russia invade Ukraine? Will the cease fire hold in Israel? Will the
Ebola virus move the market, or confusion in Libya? I am not a student
of the history of the bond market, but these skirmishes (see usual humor
section below) remind us of how quickly traders can move the markets. Imagine
what volatility would be like during World War II - the current
securities market in the U.S. certainly doesn't give one much time for
thoughtful action, investing, or charting a course, rather than reacting
while trying to hedge a pipeline given all the hype in the media
a little intra-day volatility, by the time the dust settled Tuesday we
were basically back to where we were Monday, and on Friday - or a shade
lower. At the close the 10-yr was at 2.48% and agency MBS prices were
about flat. For today's thrills we've had mortgage applications (+1.6%)
and will see some June trade balance numbers & auction numbers for
next week. Early on the 10-year is at 2.45% and agency MBS prices are better by .125.
Jobs and Opportunities
Citadel Servicing Corporation continues to expand seeking to hire a National Funding Manager. Founded in 2003 and located in Irvine California, "Citadel
is the leader in the origination and servicing of Non-Prime and
Specialty Finance mortgage loans. This position is responsible for all
facets of the funding process. A minimum 5 years' experience is required
and must include management time. Confidential inquires, resumes, and
references can be sent to HR@CitadelServicing.com.
National Mortgage and Consumer Lending ("MCL") group, which is part of
the Risk Consulting Advisory Practice, is looking for experienced and
motivated individuals with backgrounds in mortgage servicing rights
("MSR") valuation and analytics, mortgage credit risk modeling, and MBS
The MCL group is comprised of over 300 KPMG professionals in the United
States who focus specifically on the mortgage and consumer lending
industry that provide a broad array of advisory services to a variety of
financial institutions, government agencies, and specialty finance
companies that originate, service, and securitize consumer finance
products. MCL uses valuation techniques, credit analytics, financial
analysis, monitor capital markets and regulatory changes for their
projected impact on MSRs, valuations, and operations. More information
about career opportunities can be found at KPMG Credit Risk Opening, and confidential questions can be directed to Jacqui Ambrosino, KPMG Recruiter.
And the product selection continues to expand. For example, PMAC Lending Services correspondent division fully supports the USDA Rural Housing mission to provide housing to low- and moderate-income families in rural America. PMAC's
correspondent USDA program has no overlays, no minimum score
requirements, recently reduced LLPAs, and improved pricing on both 700+
scores and $200+ loan amounts
- and the team has more than 25 years of combined USDA
experience. Contact PMAC at the link above to learn about the new
guidelines effective September 1st, "subject to" commitments in the new fiscal year, and future eligible areas.
Congratulations are in order. StoneHill Group
(quality control, due diligence, and mortgage fulfillment solutions)
has appointed Wade Hamby as the company's national director of sales and
marketing. And FirstKey Holdings
(specialty residential and commercial real estate financing products
and loan servicing solutions) announced that Jeffrey Mayer has joined
the company as Executive Chairman of the Board of Directors. Mr. Mayer,
and ex-Bear Stearns exec, joins FirstKey from Deutsche Bank, where he
was most recently Head of Corporate Banking & Securities for North