State & Investor Updates; Nationstar 'Growing Pains'; Are Gift Cards a RESPA Violation?
Phew! It turns out that the acronym for the Mortgage Bankers Association (of America) remains "MBA." MBa is just its logo. Here is an interesting note I received from the CFO of an MBA member. "Rob, my Capital Markets guy tells me that we shouldn't use Treasury securities to hedge our mortgage pipeline because of the basis risk. What are others in the industry doing?" Someone, somewhere, can make an argument that they can be used. But let's take a look at the market on July 5 and the market late last week. The yield on the 10-yr T-note was 2.74% then, and 2.74% last week. Fannie 3.5% 30-yr securities, however, were 99.00 then and 100.75 last week. Fannie 4% securities (usually containing 4.25-4.625 mortgages) were 102.125 then and 104.00 late last week. I am not a proponent of using T-notes to hedge a pipeline, but certainly one would have come out ahead here - but remember that whole loan mortgage prices from investors saw pretty much the same price change.
With all the bank layoffs, some mortgage loan originators are moving to mortgage banks to ply their trade. (And some LOs, those lacking common sense and intelligence, are contemplating writing a daily commentary on the mortgage biz.) Seriously, the ranks of LOs are thinning. For those of you who'd like to do a little research and see how much, visit page 8 here, or go here.
(Read More: Licenses Decline for both State and Federally Regulated Mortgage Companies)
The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury releases a monthly report of the Obama Administration's Housing Scorecard - a comprehensive report on the nation's housing market. The latest data shows some progress across many key indicators-as home prices, purchases of new homes, and sales of existing homes continue to show annual gains-although officials "caution that the overall recovery remains fragile." The full Housing Scorecard is available online.
The Mortgage Bankers Association of the Carolinas sent this question out to its members: "Is it a RESPA violation for loan officers to give realtors gift cards as a thank you at the end of the year?" Bah humbug! MBAC states, "This may be construed as giving a thing of value to realtors that are in a position to refer settlement services to the loan officers. If the loan officers received any business from the realtors, it could be determined to be a RESPA violation because the loan officers would be giving a thing of value in connection with the referral of loan origination business, a settlement service. A 'thing of value' can take many forms on a transactional basis or cumulatively, including, 'monies, things, discounts, salaries, commissions, fees, duplicate payments of a charge, stock, dividends, distributions of partnership profits, franchise royalties, credits representing monies that may be paid at a future date, the opportunity to participate in a money-making program, retained or increased earnings, increased equity in a parent or subsidiary entity, special bank deposits or accounts, special or unusual banking terms, services of all types at special or free rates, sales or rentals at special prices or rates, lease or rental payments based in whole or in part on the amount of business referred, trips and payment of another person's expenses, or reduction in credit against an existing obligation.' -12 CFR 1024.12(b). Even a small amount on a gift card would still be considered a thing of value."
The above note is applicable regardless of state. But let's take a look at some somewhat recent state-level lending news - always good to see the trends out there as I head to Kansas.
Over in Texas, the Texas State Affordable Housing Corporation, a nonprofit corporation organized under the laws of the State of Texas is implementing a qualified mortgage credit certificate program within the program area to assist eligible purchasers. Black, Mann & Graham write, "The MCC Program allows first-time homebuyers an annual federal income tax credit equal to the lesser of $2,000, or the credit rate for the MCC multiplied by the amount of interest paid by the holder on a home mortgage loan during each year that they occupy the home as their principal residence." Eligible purchasers of a residence located within the programs area may apply to the TSAHC for an MCC through a participating lender at the time of purchasing an owner occupied residence and obtaining a mortgage from a participating lender.
The Missouri Department of Finance (MO-DOF) has notified NMLS of a change to its continuing education requirements. Effective January 1, 2014, individuals seeking licensure with MO-DOF will be required to complete one (1) hour of MO-DOF specific education. The new CE education requirements are as follows: 3 hours of Federal Law; 2 hours of Ethics (must include fraud, consumer protection, and fair lending issues); 2 hours lending standards for Non-Traditional mortgage products; 1 hour of MO-DOF Elective; Total = 8 hours.
North Carolina amended its anti-predatory lending laws to make them no more restrictive than federal lending regulations, having been concerned anti-predatory lending laws in North Carolina had become burdensome to instate lenders. The General Assembly revised its consideration of the points and fees, mortgage finance charges, assessed to a borrower as a condition precedent to consummating a home loan.
Illinois recently amended the Residential Mortgage License Act of 1987. These changes allow for the sponsorship of individual loan originators, however, the exempt person must still fulfill any NMLS reporting requirements, provide a blanket surety bond, supervise the activities of all sponsored mortgage loan originators, comply with all rules and orders to ensure SAFE Act compliance, and pay an annual registration fee. The amendments will become effective immediately upon becoming law.
Maryland recently amended provisions regarding continuing education requirements for renewal of a mortgage lending license. The purpose of the amendments were to clarify the regulation by making the definition of persons required to complete continuing education consistent with the licensure requirements found in the state's Financial Institutions Article. The amendments define "Covered Employees" that must meet the continuing education requirements. A covered employee is now defined as: "the person with the required experience under Financial Institutions Article, §11-506(b)(2), (3), and (4), Annotated Code of Maryland, and the manager of each branch office licensed, or required to be licensed, by the Commissioner."
California recently modified several provisions of the Financial Code relating to mortgage lenders in Assembly Bill No. 1091. The bill amends the Financial Code to (a) exempt business and industrial development corporations when making five or fewer commercial loans in a 12-month period (from one loan per 12 month period), (b) expands the definition of a Financial Code "crime" under the existing law, and (c) provides the Deputy Commissioner of Business Oversight with the authority to order any person engaged in the business as a broker or finance lender, or a mortgage loan originator, without a license, or any licensee violating any provision of the Financial Code, to desist and refrain from engaging in the business or further violate the Financial Code. As with many things in the state, the legislation becomes effective on January 1, 2014.
And turning to a bit of investor news...
Following the FHFA's announcement that it will be extending HARP to December 31, 2015, PHH is requiring all closed HARP loans to be delivered by May 31, 2016 and purchased on or before June 30, 2016 (for those who like to plan in advance).
PHH has clarified that, when LTV is referenced in its guidelines on recovery periods after derogatory credit events, the policy applies to CLTV and HCLTV as well, and the maximum LTV/CLTV/HCLTV allowed is the lesser of the LTV/CLTV/HCLTV listed within the product description. Guidance has also been added specifying the time periods for recovery after significant derogatory events, which should be followed if the borrower has experienced a pre-foreclosure, short sale, or multiple bankruptcy filings, which will not be detected by DU or LP. In cases where the credit report indicates a trade line as being included in a bankruptcy and the public records show a bankruptcy as being filed and discharged, DU will base its response from the discharge date in the public records. In such cases where the public records do not report a bankruptcy dated within seven years of the credit report date, the underwriter will need to confirm the actual filed and discharged dates.
PHH has revised its Power of Attorney guidelines for its VA product underwriting requirements, clarifying what Limited (Specific) Power of Attorney, General Power of Attorney, and all Powers of Attorney need to authorize. Guidance has also been added on the requirements for the Alive and Well certification.
There is a lot of chatter about Nationstar and its ability, or lack of, in funding loans. I have even received e-mails asking about the possibility of a repeat of Taylor Bean. It appears that this is overblown, although I don't mean to suggest I have any insider information. The latest on its financial position (the 8-K filed with the SEC) can be found on Nationstar's website which shows an additional $1 billion warehouse line with Barclays and record earnings. Sources within the company basically say, "Yes, we admit that we have had some delayed fundings based on growing pains as the company moved from $1 billion a quarter to $7 billion a quarter. But there is nothing wrong, and we are working on our internal systems to accommodate this."
Cole Taylor Mortgage has set up its disaster policy in Adams, Boulder, Larimer, and Weld Counties in Colorado per FEMA's declaration of disaster area status. All appraisals on properties in these counties that were completed before September 11, 2013 will need to be redone before a Final Approval can be issued or closing can occur. As a reminder, the appraisal must state that the property has not sustained flooding and/or windstorm damage, disclose the condition of the neighborhood conditions, and include a photo of the subject property, and the cost of the re-inspection may not be included on the updated GFE. Rate locks on loans in these four counties will be extended free of charge as needed.
The markets? There just isn't much on the schedule. There is zip today; tomorrow is Consumer Confidence, some Case-Shiller numbers, and the FHFA Housing Price Index. Wednesday is Durable Goods and New Home Sales. On Thursday, September 26th, GDP will provide an estimate update on the total production of the country, but we'll also have Jobless Claims and Pending Home Sales. We wrap up on Friday with Personal Income and Consumption/Outlays, PCE Prices, and a Michigan Sentiment number. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday. Friday we closed the 10-yr T-note at 2.73%, this morning we find it at 2.74% with agency MBS prices almost unchanged.