MBA's Action Alliance Adding Members; NAR's Well Done Letter to Mel Watt; PennyMac in Forbes; Non-QM Loans Not Illegal!
couple was Christmas shopping at the mall. The wife turns around to
find that her husband had disappeared. Upset, she calls him on his
cellphone and asks where the heck he is. He asks, "Remember that jewelry
store I bought that diamond necklace for you 30 years ago when we fell
in love?" She becomes teary eyed and starts to cry. "Yes! I do! OMG!" He
says, "Well I'm at the pub next door." Communication is important, and
here is an early present for many in the biz. Per a source close to
Congressman Mel Watt who wrote to me, he is suspending all three
changes: the LLPA increase, the base gfee increase, and elimination of
the adverse market charge. "He views them as a package."
Of course, anyone who locked in a long-term lock during the last week or so has a right to be miffed.
Some correspondent reps are sending out notes saying things like, "Some
of the changes that you noticed last week in the rate sheet for best
efforts that were related to G Fee increases are being unwound. You
should see this within the next few days." Of course clients and LOs
always wonder why the reaction time seems to be different based on the
event, and whether it is a positive or a negative. But those who set
prices are there to protect companies from loss, and although
encouraging production is important, breaking even on a small volume is
better than taking a loss on any volume, right?
One can't help but see the similarities between the NFL and the Mel Watt comments & the FHFA announcement raising gfees,
LLPAs, and removing the adverse market charge. "The ruling on the
previous play is unsportsmanlike conduct. Mel Watt has challenged the
ruling of the FHFA. The play is under further review." Rep. Watt will be
sworn in early next month, after which we'll all hear, "After further
review, the ruling on the field is confirmed." Or maybe we'll hear,
"After further review, the ruling is overturned, since the current book
of business of the Agencies does not justify penalizing future
borrowers, and current gfees and LLPAs will encourage private capital to
enter residential lending. Therefore..." And while things are under
review, there are many who remind us that the QM criteria are not set in
Our National Association of Realtors knows a thing or two about lobbying, as was recently evidenced by the loan fee news.
And it is worth repeating a portion of its President Steve Brown's
letter to Mel Watt. "On behalf of the over one million members of the
NAR I am writing to share our concerns about the most recent increase in
fees at both Fannie Mae and Freddie Mac (the government sponsored
enterprises, or Enterprises) that either includes a specific rate of
return for the Enterprises or is based on a policy decision that seems
to lack performance measures. What is clear is that the higher fee structure imposes new costs on home-buying taxpayers and home owners seeking fair and affordable mortgage loans.
We are also concerned that the new fees will reduce access to an ever
increasing amount of borrowers. We believe that the Enterprises must
continue to play a vital role in the success of our nation's housing
market by serving as a reliable source of liquidity for housing finance.
Unfortunately, we believe home-buying taxpayers are being charged
excessive fees due to questionable agency policy goals."
letter goes on to give an excellent summation of the LLPAs, gfees, and
the current state of the industry ("Our concern is that we will look
back a few years from now after Fannie Mae and Freddie Mac will have
generated billions dollars of profits and will come to the conclusion
that the cost estimate and profit that FHFA has directed the Enterprises
to take was substantially higher than the actual risk borrowers
presented.") I highly recommend reading the NAR letter here.
to the groups involved in the change, and speaking of which the MBA is
reminding us of its free (f-r-e-e) Mortgage Action Alliance. It is just for mortgage and real estate people: It's free, takes seconds to join, and allows up to let you know when
something big is happening in housing that needs your help. The MBA is
looking for 1,000 more sign ups before year end. Please do it today!
It's nonpartisan, non-profit, and, oh yeah, costs nothing.
"Hi Rob, what happens to the money from all of these Fannie & Freddie settlements,
the latest being Freddie Mac with more hundreds of millions in
settlements from banks? Is this set aside for the losses (like FHA) or
is this counted toward their profit? I was just curious on how this
will impact their revenue...if at all." These details will be released at
the next quarterly earnings announcement, scheduled for the first week
in February. But verbiage from Freddie's earnings statement last month
will give you an indication of how these monies are counted: "Freddie
Mac's pre-tax income was $6.5 billion for the third quarter of 2013, up
$1.6 billion from the second quarter of 2013. The increase primarily
reflects higher other non-interest income, driven by gains on securities
in the company's mortgage-related investments portfolio, gains on
multifamily mortgage loans and settlement proceeds related to private
label securities litigation. These favorable impacts were partially
offset by a shift from derivative gains in the second quarter to
derivative losses in the third quarter."
Believe it or not, the Consumer Finance Protection Bureau targets other industries besides mortgage lending. Here's a $80 million hit in the auto lending sector.
In the 1995 movie Casino, Robert De Niro's character Ace Rothstein says, "In
Vegas, everybody's gotta watch everybody else. Since the players are
looking to beat the casino, the dealers are watching the players. The
box men are watching the dealers. The floor men are watching the box
men. The pit bosses are watching the floor men. The shift bosses are
watching the pit bosses. The casino manager is watching the shift
bosses. I'm watching the casino manager. And the eye-in-the-sky is
watching us all." The CFPB could certainly be the eye-in-the-sky for
decades to come, and as we've seen over recent months their extension
in the many facets of the lending industry is extensive. But who watches
the eye-in-the-sky? Mandated in Dodd-Frank is the provision that the CFPB be independently audited every year;
recently the bureau released KPMG's findings. The items evaluated in
the 2013 audit and results include the CFPB's intra-agency and
inter-agency coordination process for its student loan initiatives, the
CFPB's budget process relative to its policies and procedures on budget
formulation, execution, and monitoring, along with the review of
corrective actions taken by the CFPB to address the findings in its 2012
independent audit. The full 2013 audit report can be found here.
Federal Reserve Board, FDIC, NCUA, and the OCC recently issued a
statement to clarify safety-and-soundness expectations and CRA
considerations related to Qualified Mortgage loans and non-Qualified
Mortgage loans offered by regulated institutions. The release is
intended to guide institutions as they assess the implementation of the
CFPB's Ability-to-Repay and QM Standards Rule, which takes effect
January 10, 2014. All four agencies emphasize that an institution may originate both QM and non-QM loans.
According to this most recent press release, the agencies will not
subject a residential mortgage loan to safety-and-soundness criticism
solely because of the loan's status as a QM or non-QM. The agencies
continue to expect institutions to underwrite residential mortgage loans
in a "prudent fashion and address key risk areas in residential
mortgage lending, including loan terms, borrower qualification
standards, loan-to-value limits, documentation requirements, and
portfolio- and risk-management practices, regardless of whether a
residential mortgage loan is a Qualified Mortgage or non-Qualified
Mortgage." From a consumer protection perspective, the agencies
responsible for conducting CRA evaluations do not anticipate that
institutions' decision to originate only Qualified Mortgages, absent
other factors, would adversely affect their CRA evaluations.
Let's check on some relatively recent lender & investor news.
Sometimes being featured in a Forbes article is a good thing, sometimes not. In PennyMac's case, it is the latter, but the reporter hits on many topics common in our industry with every lender.
Guaranty Trust Company
announced its new Jumbo Loan Program. The program is available for
purchases, rate/term refinances and cash out refinances for both primary
and second-home transactions. The program offers 15 and 30-year
fixed-rate terms with LTV's up to 80% and a maximum loan amount of $2.25
million dollars. The minimum credit score requirement is 720. For more
information about the program, contact Retta Gardner at email@example.com; the company also launched a new website.
now underwriting and guaranteeing VA loans, expanding opportunities for
lenders without VA Automatic Authority, LAPP approval, and an on-staff
Staff Appraisal Reviewer. To
get approved for the program, complete the VA Underwriting and Guaranty
Agreement and the VA Sponsorship Approval Request to Toni Donovan at firstname.lastname@example.org.
Impac has made several changes to its HARP product guidelines. For
DU Refi Plus, the eligibility date has been updated to use the note
date of the original loan, and the minimum FICO has been reduced to 620
for Conforming loan amounts for all LTVs and high balance transactions
with LTVs of 105 and under (680 for high balance loans with LTVs over
addition to this, the guidelines have been updated to reflect Fannie's
changes to the program, including retiring EA-I, -II, and -III risk
levels (all of which are now "Approve" loans) and the estimated value
findings in DU. The
same eligibility date applies to Open Access, which also allows FICOs
down to 620 for all LTVs on Conforming loan amounts and for Super
Conforming loan amounts with LTVs of 105 or under.
Carrington Mortgage has added Solutionstar Settlement Services to
its AMC roster, now available for full appraisals, limited one-family
appraisals, drive-bys, review appraisals, re-inspections and
re-certifications, damage reports, evaluations, FHA appraisals, and REO
First Community Mortgage has
updated its Conventional guidelines to lower the FICO requirement for
1-Unit Cash Out transactions at 85% LTV from 700 to 660 and to allow
leasehold estates and investment property and second home condominiums
as eligible property types and primary residence condominiums as
eligible properties on high balance products. For VA loans, the IRRRL minimum credit score has been lowered from 660 to 640. Power of Attorney and pre-approvals have been clarified for all product types.
there is economic news showing a continued pickup in activity, but does
anyone care what rates are doing right now? Yesterday we learned that
Consumer Spending rose 0.5% in November, the most in five months.
Personal income rose just 0.2% in November after falling 0.1% in
October, and the savings rate dropped to 4.2%, the lowest since
February, from 4.5%. The Thomson Reuters/University of Michigan final
index of consumer sentiment climbed to 82.5 from 75.1 in November. The preliminary reading for December was 82.5. By
the end of Monday the 10-yr closed at a yield of 2.93%, and in the
early going today is up to 2.95% and agency MBS prices are worse about