I had a chance to meet some very good folks here at the MBA conference in Washington DC - there are some genuinely good people in this industry. There is plenty of interest in improving efficiency, interest in how vendors and investors are dealing with QM, and plenty of rumors about Nationstar and other lenders which the industry hopes aren't true. As I stagger to the airport this morning, thinking that perhaps the highlight being spending some time in Jeb Hensarling's office yesterday - more tomorrow, and head to Austin, Texas, I am playing catch-up on e-mails. Sorry for any delay.
Yup, Mel Watt looks like he'll be occupying mortgage news for a while. The Administration is setting him up to replace Ed DeMarco at the helm of the FHFA, which, of course, calls the shots for Fannie Mae and Freddie Mac. Why doesn't he just breeze through since civil and human rights groups are calling for his swift confirmation? Well, Republicans have questioned Mr. Watt's qualifications and say they don't want a political official overseeing Fannie and Freddie. Mr. Watt, elected to Congress in 1992, serves on the House Financial Services Committee.
In some ways this conference in Washington DC generated a lot of news, in other ways very little. But... we all found out where Elizabeth Warren stands on Fannie & Freddie, and whether or not the government should guarantee some part of the biz.
The Texas Mortgage Bankers Association is having a warehouse conclave on November 12th from 2 to 5 during the TMBA Annual Educational Seminar & Marketplace held November 12th & 13th at the Westin Galleria Dallas. The format this year will be a panel discussion on topics relevant to today's market from a warehouse point of view. The panelists include Jack Nunnery - Texas Capital Bank as Moderator, Corky Watts - C. Watts Mortgage Consultative Services, Doug Thorpe - SolomonEdwards, Phil Razori - MCT, Keith May, Richey, May & Co., LLP, Ron Hughes - PitchPoint Solutions, Dean DeMeritte - Phoenix Capital, and yours truly to add style and grace. Registration is available at the TMBA website: www.texasmba.org.
Let's take the opportunity to play some catch up with agency, investor, vendor, and bank news. As always, it is best to read the full bulletin, but these will give you a flavor for the trends out there. And there are some definite trends!
The SSI Mobile App, SAFECLOSE-TM, passed a successful beta test period and has now gone live at ITunes and Google App Store...it is a FREE download that works with all Apple Products and any smartphone or droid technology. Settlement agents (attorneys, notaries, escrow and title closers) who wish to use the application as a quality control/best practices tool need merely download the app and then contact SSI for a unique access code and a simple tutorial. Lenders who wish to have access to this technology to track closings, to obtain real time data about the closing including verification that closing instructions were followed and best practices performed, may want to check it out: www.securesettlements.com.
The government shutdown is over, but while it was happening, Franklin American was temporarily waiving its IRS tax transcripts requirements for loans closed on or after October 1st for all products apart from Conventional Non-Conforming Jumbo Fixed. The industry may be dusting all these off in January & February.
FAMC has revised its Conventional guidelines to state that rental income is not allowed on ohanas and that Inter Vivos Revocable Trusts are allowed on 1-4 unit investment properties, both effective immediately.
Effective for all FHA loans with case numbers assigned on or after October 15th, FAMC will require a capacity analysis of collections and/or disputed accounts exceeding $2000. The disputed accounts threshold has been increased from $500 per account to $1000 based on a cumulative outstanding balance on all derogatory disputed accounts, and judgments will require three months of payment prior to credit approval if not paid in full.
PHH has revised its underwriting guidelines for Texas 50(A)(6) Refinance transactions to require legal review and remove the previous 720 FICO minimum. All borrowers must be on the new loan and sign the note and deed of trust, and unmarried co-tenants living on the property as their primary residence are allowed only if they are on the title, are borrowers, sign the note and deed of trust, and provide a T-42.1 title endorsement. Non-occupant co-borrowers are still not permitted, and the lender cannot require the borrower to apply the proceeds to pay off debt to qualify when the debt is owed to the lender or an affiliate, apart from cases where the debt is secured by the subject property.
Freedom's wholesale division now only requires the lock expiration date to be valid through the date when the closed loan package is received rather than through the purchase date. Loans that are not satisfied within seven days of locking will automatically receive extensions at the cost of 3bps per day until they are purchased; these no longer have to be requested.
Mountain West Financial has updated the Minimum Borrower Contribution for Conventional high balance first mortgages that are paired with a Community Second program to 5%, regardless of the first mortgage loan amount.
Hopefully the government won't be shutdown again, but when it was, Fannie Mae allowed lenders to obtain Verbal VOEs for borrowers who are employed by the government after loan closing up to the time of delivery. Borrowers employed by the military were eligible to use a Leave and Earnings Statement dated within one calendar month before the note date in place of a Verbal VOE, while the loans of furloughed borrowers remain eligible for purchase so long as all required information is obtained by the lender prior to loan delivery. Fannie's policy on government verification of IRS transcripts and SSNs has also been temporarily revised; IRS transcripts may be obtained and validated after closing provided that the lender can do so before the loan is delivered. The same applies to SSN validation.
Fannie has published a notice that, during the implementation period of the Ability to Repay provisions of Dodd-Frank, it will not require the purchase of any loan on the grounds of noncompliance with the final rule on QM-related points and fees. Loans will still be subject to repurchase action if any regulatory or authoritative body determines that it exceeds the maximum allowable QM-related points and fees and/or if Fannie determines that it has an ineligible term or amortization provision. Any loan determined to be a "high-cost mortgage" will also be subject to repurchase.
Chase Correspondent has removed the 700 minimum FICO requirement for Chase Limited Review for established condo projects and the detached PUD overlay for DU/LP underwritten loans, lowered the minimum credit score from 740 to 700 for loans with LTVs of 80% or less, and reduced the FHA short sale seasoning requirement to 36 months. The geographic overlays for both Agency and non-Agency products have also been removed such that Michigan and Nevada are no longer considered distressed states and all LTV/FICO product guidelines are aligned. Florida condos are now eligible as non-Agency property types in Florida as well. With regard to principal curtailment, interested party contributions, and the maximum number of financed properties for primary residents, Chase policy has been aligned with Fannie and Freddie.
US Bank has clarified its re-lock policy to define worse case reference rate sheet pricing as the comparison of the price and lock period from the original rate sheet versus the current published pricing in effect equivalent lock period and the subsequent selection of the option with the worse pricing. In cases where the reference rate sheet is the current live published, USBHM will use the 15-day lock expiration and price for locks that were originally taken for both 7- and 15-day locks. The maximum lock expiration on a worse case re-locked loan is 30 days, provided that the original lock was 30 days or greater, while 7- and 15-day locks are subject to a maximum 15-day re-lock option, and all extension fees are applied in addition to worse case pricing.
In more "in case it happens again", in response to the government shutdown, M&T Bank was authorizing FHA Streamline and VA IRRRL transactions to proceed with closing under normal policies and procedures without a 4506-T Tax Transcript. Correspondents will not have to provide 4506-Ts for all other programs so long as they have received a 2010 1040 Tax Return from the borrower if it has not already been submitted through normal process and underwriting requirements. Correspondent underwriters must review the number of dependents, undisclosed business interests, alimony/separate maintenance obligations, unreimbursed business expenses, and undisclosed rental property ownership and validate and validate that the information is consistent with the information contained in the file. In terms of Verbal VOEs for furloughed workers, M&T will still require verification within 10 days prior to the closing of the loan. For USDA loans, correspondents are still required to submit Form RD 1980-17 (Loan Note Guarantee) as proof of the USDA guarantee.
M&T has re-launched its FNMA Homestyle product, which allows borrowers to either purchase or refinance a property and the cost of its rehabilitation through a single mortgage by placing all of the cash for repairs into escrow. The program, available in all states apart from Alaska and Hawaii, features no minimum rehabilitation cost and a 10% holdback on each disbursement, and does not permit upfront deposits or manual underwriting.
Stearns Wholesale is offering Jumbo loan amounts up to $1.5 million for LTVs up to 80% and credit scores of at least 700, while loans of up to $2 million are available for purchase and rate/term refinances with LTVs up to 70% and FICO scores of 720 and higher and for cash-out refinances with LTVs of 70% and below credit scores of 740 and higher. All transaction types are subject to a maximum DTI of 41% and two full appraisals.
Guild has announced that it will resume funding loans where the 4506-T and SSN Verification has not been processed for W-2 employees for FHA, VA, and Conventional products, all of which will be purchased with a "To Follow" condition stating that the processed documents are still outstanding. This applies to loans delivered to FNMA so long as there are no data integrity issues; the same goes for all loans delivered to Freddie apart from those for borrowers with five to ten financed properties. In terms of new requirements, Guild will be conditioning for copies of the most recent year's tax returns in order to determine whether there are undisclosed 2016 expenses, Schedule C losses, etc., effective for all product types.
Cole Taylor Mortgage has issued a reminder that after the first five calendar days, it will apply an adjustor of -.375 plus worse case pricing to re-lock in cases where the market has declined. If the current price is the same or better than the lock price, CMTG will give a free extension for a maximum of 20 calendar days if the loan has not been previously extended. For all re-locks, the number of subsequent days will be multiplied by the published per day extension cost.
CMTG has updated its waiting period requirements for derogatory events to four years for bankruptcy (both Chapter 7 and 11), mortgage modifications, and deeds-in-lieu and short sales with LTVs between 80-90%; two years for deeds-in-lieu and short sales with LTVs up to 80% and Chapter 13 bankruptcy (based on the discharge date); and seven years for foreclosures.
The markets? In spite of some news, yields on government fixed-income securities have barely budged since Friday, and neither have agency MBS prices or rate sheets. Party on, Wayne.