Loan Mods vs. Reps & Warranties; More on RESPA; Higher Priced Mortgages; Indiana & Appraisers
Here is an interesting question for anyone who sells a loan to an investor/servicer: If the loan is modified, are you, as the seller, still "on the hook" for the reps and warranties you gave when you sold the original loan?
Servicers use the Home Affordable Modification Program (HAMP) and other non-HAMP modification efforts to avoid foreclosure whenever possible and keep borrowers in their homes. Some servicers, such as Wells Fargo, may have a policy that states "we consider loan modification activities intended to keep borrowers in their homes, and pursuit of remedies for a breach of Representations and Warranties under the Loan Purchase agreement, to be distinct and independent events." So if a loan undergoes loss mitigation (like a modification of unpaid principal balance, interest rate, etc.), the servicer treats that process as a separate issue then when a defect is identified in a loan which results in a contract remedy. So check with your servicer - you may not be "off the hook" for your obligations.
One of the best statements that I have heard regarding the RESPA changes in 9 days came from a top mortgage banker, who simply said, "We don't know how much we don't know." Broadly speaking, on 1/1 companies should know about a new Good Faith Estimate, new HUD-1/HUD-1A Settlement Statement, tolerance limits, and changes to the disclosure of Yield Spread Premium. Franklin American Mortgage Company told clients that they will adhere to the new requirements and will purchase loans that are in compliance with the requirements of the RESPA Act, and will enforce the requirements of the new RESPA regulations effective with January 1st applications.
Who says deals aren't done during the week leading up to Christmas? Mason Dixon Funding, out of Maryland, was purchased by Embrace Home Loans. Embrace Home Loans is a pretty typical mortgage banker who sells to Freddie & Fannie, is FHA & VA approved, and issues Ginnie Mae securities. Mason Dixon has nine retail branches located in Maryland, Virginia, the District of Columbia and Delaware, and more than 150 employees, while Embrace Home Loans employs more than 550 mortgage professionals, originated more than $3 billion in loans this year and operates 16 retail branches.
Wells Wholesale channel came out with an adjustment to their policy on Higher-Priced Mortgage (HPM) loans starting January 1st. "As part of the Home Ownership and Equity Protection Act (HOEPA), new compliance and HMDA reporting requirements for Higher-Priced Mortgages (HPM) took effect with new owner-occupied registrations taken on or after Oct. 1, 2009...Additionally, HOEPA will require compliance on all HPM loans with a close/fund date of Jan. 1, 2010, or after, regardless of registration date." Wells also noted that 2-Unit second homes are no longer allowed with Freddie Mac Relief Refinance Mortgage after... yesterday.
Many compliance employees only have to deal with one state. They are fortunate, in that many states have their own nuances. For example, the state of Indiana established regulations regarding undue appraiser influence that apply to the sale of real estate property including the "making, refinancing or consolidation of a mortgage loan effective for Indiana loan applications taken on or after Jan. 1, 2010. In order to promote the reporting of undue appraiser influence violations, the Homeowner Protection Unit has issued a "Notice to Borrower" for creditors to provide within three business days of receiving a real deal application. The Notice to Borrower also provides language that states the borrower has the right to review the HUD-1 document 24 hours before closing if requested. Closers should be aware of this requirement and ensure all fees are verified and present on the HUD-1 and provide a copy to the borrower if requested." Brokers are responsible for providing the notice to the borrower.
What the heck happened to rates yesterday? Rates are back to October levels, the yield on the 10-yr Treasury went up above 3.62% (a technical support level), and the yield curve continued to steepen since overnight and short-term rates are still near 0%. (And many feel a steep curve indicates future growth.) Some traders blamed a rallying stock market, thin holiday trading done by "the B-team", few buyers ahead of year-end, or the chance that next week's auctions will be poorly received. Mortgage servicers were in doing some selling, and the Fed was in doing some buying.
Today we've already had some news out. The final revision to the 3rd Quarter GDP numbers came out which showed that the U.S. economy grew at a much slower pace than initially thought. The final estimate showed GDP grew at a 2.2% annual rate instead of the 2.8% pace it reported last month. It was still the fastest pace since the third quarter of 2007 and ended four straight quarters of decline in output. Is that helping bonds? Nope. The yield on the 10-yr is now above 3.70% and mortgage prices are worse by another .250-.375. At 10AM EST we'll have Existing Home Sales. Let's not get carried away on the upside here...
There was a man who worked for the Post Office whose job was to process all the mail that had illegible addresses. One day, a letter came addressed in a shaky handwriting to God with no actual address. He thought he should open it to see what it was about.
The letter read:
Dear God, I am an 83 year old widow, living on a very small pension. Yesterday someone stole my purse. It had $100 in it, which was all the money I had until my next pension payment. Next Sunday is Christmas, and I had invited two of my friends over for dinner. Without that money, I have nothing to buy food with, have no family to turn to, and you are my only hope. Can you please help me? Sincerely, Edna.
The postal worker was touched. He showed the letter to all the other workers. Each one dug into his or her wallet and came up with a few dollars. By the time he made the rounds, he had collected $96, which they put into an envelope and sent to the woman.
The rest of the day, all the workers felt a warm glow thinking of Edna and the dinner she would be able to share with her friends.
Christmas came and went.
A few days later, another letter came from the same old lady to God. All the workers gathered around while the letter was opened.
How can I ever thank you enough for what you did for me? Because of your gift of love, I was able to fix a glorious dinner for my friends. We had a very nice day and I told my friends of your wonderful gift. By the way, there was $4 missing. I think it might have been those *&^%'s at the post office. Sincerely, Edna.