Wells Fargo Funding's clients received a note yesterday that is of use to the entire industry involving a scam impacting the mortgage settlement process. "On January 22 the Federal Bureau of Investigation issued a Public Service Announcement - Alert Number I-012215-PSA titled "Business Email Compromise" (BEC). The purpose of the PSA was to alert potential victims of sophisticated scams targeting businesses working with businesses that regularly perform wire transfer payments. The Secret Service has confirmed that this scheme is now hitting the mortgage settlement process. A request for a wire transfer from the compromised account is made to a second employee within the company who is normally responsible for processing these requests. In some instances, a request for a wire transfer from the compromised account is sent directly to the financial institution with instructions to urgently send funds to bank 'X' for reason 'Y.'" Talk to your Wells rep for a copy of the bulletin including recommendations on not being a victim.

There continues to be analysis of Stonegate Mortgage since it is viewed as one of the few publicly-traded pure lender/servicers. Kevin Barker with Compass Point Research & Trading weighed in with, "The resignation of Mr. Cutillo should not come as a surprise given the company has struggled to report positive earnings and the stock has fallen close to $6 per share after raising equity in a private offering at $18 and issuing stock to the public in an IPO at $16 in 2013. The stock recently fell to ~60% of TBV after the company reported a $0.04/share operating loss in the second quarter in what is typically one of the stronger quarters for mortgage originators...The company has faced challenges to earn a decent return due to elevated MSR amortization expense on the FHA servicing portfolio from high prepay speeds and elevated operating expenses due to the build-out of the retail mortgage channel...Mr. Cutillo has already announced a $3mm cost-cutting plan, but this is likely to be increased.

The Compass Point report continued. "Over the past few months we have seen several acquisitions of mortgage originators from Blackstone (BX), including the recently announced acquisition of Stearns Holdings, a privately held mortgage originator with 1,700 employees. Stearns is the 11th largest originator and largest wholesale mortgage originator in the U.S., according to Inside Mortgage Finance. According to various media reports, Blackstone has also purchased Pinnacle Capital, Gateway Funding Services and certain assets of PMAC Lending Services. Considering Mr. Kraemer has not served in an operational role of a company since the 90s (although was very active with Saxon), we doubt he has plans to serve in this role for an extended period of time. Considering the stock is now trading at a 35% discount to TBV and there are active acquirers in the space for mortgage originators, we would not be surprised if SGM would entertain an offer near or above TBV ($10.66 per share).

"Considering the stock is now trading at ~65% of TBV, management is likely to make significant changes to increase profitability, and there has been increased M&A activity in the space, we believe SGM is one of the most attractive investment opportunities in the mortgage banking industry." Editor's note: if the company is taken over it wouldn't be the first, and wouldn't be the last.

Changing gears, Jackie Mallett with Bricker & Eckler LLP writes, "I received some rare written guidance from a CFPB official regarding the new Home Loan Toolkit. The toolkit can be customized to add any company's logo to the front cover. But it is a RESPA violation if a title company puts a real estate professional's logo on the front and provides the toolkit to the realtor free of charge. On the other hand, it is not a RESPA violation for the title company to put its own logo on the front of the toolkit and provide free copies to a realtor (as long as the title company does not control the distribution of the toolkit and is not providing the toolkit in exchange for referrals). The written guidance is in the CFPB's PowerPoint (slides 40 and 41) and here."

This leads us right to...TRID? How about this note to start things off: "Under TRID we are struggling on how to deal with Real Estate Taxes required to be paid in advance and it is a zero tolerance item. WOW. Talk about an unintended consequence." Yes, there are plenty of unanswered questions with only 22 business days left.

The new TRID rules will go into effect changing the way closings are performed. NAR Research surveyed members about their awareness and preparation for the changes. More than 80% of respondents had taken some form of training on TRID. In preparation, more than half of respondents will alter their purchase agreements to include a longer time horizon. Over the 12‐month period ending in August, 9.1% of closings were delayed due to an issue in the lending process, while only 1.2% were canceled. And 71.2% of REALTOR® members rated their level of preparedness as average or better.

Here is a short video and three helpful action items that lenders can take as part of their TRID implementation with AMCs.  It's narrated by Jeff Dickstein, Chief Compliance Officer for Pro Teck Valuation Services.

The Colorado Inter-Industry TRID Task Force announced the release of its Colorado TRID Recommended Best Practices document. The document is intended to help guide participants in the Residential Real Estate Industry in Colorado through the complex changes brought about by the implementation of the CFPB's TRID rule which takes effect October 3.

Join BuckleySandler partner Ben Olson and associate Brandy Hood for a discussion focusing on what purchasers of mortgage loans need to know about TRID in order to manage risk, particularly the provisions that carry assignee liability and present the most difficult diligence issues. Mr. Olson is the former Deputy Assistant Director of the CFPB's Office of Regulations and led the TRID rulemaking during his time at the CFPB. This free webinar will be of particular interest to in-house legal, compliance, and risk management personnel at banks and other institutions that purchase mortgage loans - Tuesday, September 15 from 2:30 to 3:30 pm EDT. Please, no outside law firms, government agency personnel, consulting firms, or media. After registering and being approved, you will receive a confirmation email containing instructions for joining the webinar.  

Joyce Wilkins Pollison with Lenders Compliance Group was asked, "We have a Down Payment Assistance Loan Program for low to moderate income borrowers in the form of a purchase money second mortgage. This second mortgage loan can be in an amount up to 20% of the purchase price. Are loans under this Program exempt from TRID compliance requirements? Also, does the down payment assistance loan need to be included on the Loan Estimate and Closing Disclosure for the first mortgage transaction?" "Provided the down payment assistance program meets certain requirements, the creditor does not have to provide a Loan Estimate, Closing Disclosure or Special Information Booklet with respect to that loan. [12 CFR 1026.3(h)]". Her answer goes on from there, and is worth a read.

Matchbox LLC came out with its "TRID Grid" sales pitch of its program to help its clients.

There continues to be unanswered questions. In mid-August the Community Home Lenders Association called on the CFPB to address a potential "black hole" for lenders that could arise when TRID takes effect. Going back to a HousingWire story, "According to the CHLA, the supposed 'black hole' could occur because of a potential conflict in the timing requirements for the TRID-stipulated Loan Estimate and Closing Disclosure that could leave lenders exposed to an unavoidable and costly situation." What happens when a borrower requests a change in the loan or an extension of the closing? CHLA reminded the CFPB that when a borrower makes a request to delay the closing after the Closing Disclosure has been made, but more than seven business days before the new closing date, that there is no apparent legal way for the lender to disclose an increase in costs, for example in conjunction with a loan lock extension fee."

The CHLA told the CFPB that after the Closing Disclosure has been delivered the Loan Estimate cannot be revised. Therefore, the changes must be reflected in a revised Closing Disclosure. "However, if the change in circumstances occurs more than seven business days before consummation, there are concerns that a lender cannot effectively comply with both the

Canfield & Associates Daily Financial, Tax, Trade and Health Clips August 20, 2015 Page 31 requirement to provide the revised Closing Disclosure (in lieu of a revised Loan Estimate) within 3 business days of the change AND provide it within 4 business days of consummation," the CHLA said. In such a situation, it appears that the lender's only option may be to absorb the increased cost, since the permitted tolerance would be exceeded and the lender cannot comply with requirements relating to a revised Loan Estimate. The CHLA said that this is true even if the change or extension is requested or precipitated by the borrower.

"We do not believe that TRID rules are intended to put lenders and borrowers in such a situation, where loan changes or closing extensions are rendered problematic and lenders may have to absorb increased costs incurred as a result of a borrower's actions or requests," the CHLA said in its letter.

Turning to the markets, anyone who still thinks that there is a direct correlation between the stock and bond markets is receiving a lesson in "no, there isn't." If there was, the yield on the risk-free 10-yr T-Note would be well below 2%. Yes, the same news impacts both markets, but the flow of funds from equities into longer-dated fixed-income securities is not always predictable. Yes, U.S. Treasury securities rallied Monday on global risk aversion and declining oil prices but the rally faded as the session progressed with rumors of Chinese selling in off-the-run Treasuries.

We did have some news from here in the US. The Institute of Supply Management reported that the U.S. manufacturing sector grew at its slowest rate in two years during August. The Employment Index fell to 51.2 in August from 52.7 in July. But Construction Spending increased 0.7% in July after increasing an upwardly revised 0.7% (from 0.1%) in June. Private construction spending increased 1.3% in July after increasing 0.1% in June and private residential construction increased 1.1% in July. Private nonresidential construction spending rebounded in July. Spending rose 1.5% after declining 0.7% in June. But public construction spending turned negative in July.

Today we'll have lots more to chew on including the MBA's application index from last week (+11% with refis +17% and purchases +4%) and the August ADP Employment Change (+190k, less than the +210 expected), and Q2 Productivity and Unit Labor Costs - Rev. (+3.3%). Ahead of are July Factory Orders and the September Fed Beige Book (8AM HDT). Tuesday we closed out the 10-year at 2.17% and this morning we're sitting right there with agency MBS prices also unchanged from Tuesday's close.

Jobs and Announcements

In wholesale news 1st Alliance Lending LLC is entering the California and Arizona markets and has openings for account executives in Sacramento, Orange County, San Diego and Phoenix. It also continues to hire account executives for its centralized Wholesale Sales team in East Hartford CT. 1^st Alliance, a national leader in FHA lending to the underserved borrower and an approved GNMA issuer/servicer, also announced it will roll out a non-delegated correspondent program for FHA loan products in the fourth quarter. Qualified mortgage sales professionals with a minimum of two years proven track record of success can forward their confidential resumes to Teresa Waldie, HR Director.

On the retail side Renew Lending is looking to add a Regional Director to recruit, add & expand its partner branch network in the Western United States from its California offices in either El Dorado Hills or La Jolla. "Our company is rapidly growing and offers an excellent compensation package including stock options for originators. Renew Lending has introduced a residential NON-Qualified Mortgage program up to $5 million in CA, NV, AZ, CO and NM at very competitive interest rates for borrowers who need alternative underwriting to traditional FNMA guidelines. We offer unlimited cash out, underwriting using bank statements and asset depletion; investment properties & foreign nationals are okay and unseasoned bankruptcy or short sales are considered. Full program details available upon request. Confidential inquiries and resumes should be sent to CEO Joe Cunningham (916.939.2726).

And on the product side, "LoanCraft's transcript and tax return tool is not just for large lenders. LoanCraft's Self-Employed Express income tool received two new endorsements, from the Community Bankers Association of Ohio and from the Community Bankers of Michigan. The transcript and tax return analysis tool provides quick and early documentation of income, speeding origination for processors and underwriters.  The consistent documentation is especially appealing to community lenders. See its website for more information."