Chris Whalen notes, “The failure of Bear Stearns & Co a decade ago illustrates the key lesson of financial markets, namely that non-banks are dependent upon 1) banks and 2) clients for liquidity. And no amount of capital will save a non-bank that has a deficit in terms of confidence. In times of market stress, credibility and character are far more important than capital.” On the flip side, Angelo Mozilo famously observed that a liquidity crisis will take a company down faster than anything. Any questions? IndyMac’s Mike Perry had a statement on his blog yesterday titled, “Not Too Big To Fail: Mike Perry talks about IndyMac Bank and the financial crisis ten years on.”


FHA/VA/Ginnie News

First off, anyone hoping for a mortgage insurance premium cut this year will probably be disappointed. Per Brian Montgomery, the health of the Mutual Mortgage Insurance Fund just isn’t where it needs to be.

Joan Timm with Summit Mortgage and several others have asked me about government guidelines regarding DACA borrowers. Looking briefly and Freddie and Fannie, Joan wrote, “From my correspondence with FNMA and FHLMC, they too are classifying DACA Borrowers as ‘Non-U.S. Citizen, not lawfully in the U.S.’; therefore, not eligible for financing.”

This commentary discussed DACA borrowers in the autumn of 2016 and it probably still aligns with HUD’s current position on DACA borrowers. “There are millions of these people here in the US and many of them are trying to apply for loans. Many of these loans are closing even though most lenders agree they should not. Our company had a private call with some individuals at HUD who understood the issue and confirmed that borrowers with deferred action status are not eligible for FHA financing because they are not on a pathway to residency and do not meet the guidelines printed in the manual. Additionally, these loans are clearly not eligible for USDA financing as GUS requires you to enter information that identifies their status in the US. When you do so, GUS will tell you that the borrower is ineligible. If you are a lender who currently accepts borrowers with a deferred action status, you may want to consult your attorney for legal advice.”

And the esteemed Potomac Partners had a call saying that DACA borrowers are not eligible for FHA financing.

Perhaps most DACA borrowers have probably closed undetected under FHA financing because HUD has nothing published regarding the ‘Category’ a Borrower’s EAD card is issued under (few were monitoring the “Category” of the Borrower’s EAD card on FHA loans and only recently became aware of Category C-33 being an identification of a DACA Borrower). Although they are a small percentage of originations, many feel HUD has left FHA Lenders very exposed by not publishing that EAD cards issued under Category C-33 need to be underwritten under paragraph (c) of Section (9) for Residency Requirement.

Ms. Timm wrote, “I have not discussed DACA Borrowers with the VA, but a DACA applicant under VA financing would be rare and would also need to be underwritten directly by the VA (e.g. Veteran purchasing with a non-Veteran they are not married to). And really, all the government agencies should define eligibility of DACA Borrowers the same.”

Since HUD published Handbook 4000.1, lenders have been told to “follow what is published in the 4000.1”. Some believe that a DACA borrower holding a valid EAD card should be eligible for FHA financing until HUD publishes that EAD cards issued under Category C-33 are not eligible for FHA financing. Because without that detail most DACA Borrowers will meet all of HUD’s published requirements under HUD Handbook 4000.1 Section II.A.1.b.ii. (A).(9).(b) for a ‘Non-Permanent Resident Aliens’.

Getting a little more into the weeds, a Borrower meeting all of HUD's published requirements under HUD Handbook 4000.1 Section II.A.1.b.ii.(A).(9).(b) for a ‘Non-Permanent Resident Aliens’ is no longer eligible for FHA financing because HUD is stating a Borrower holding a valid EAD (Employment Authorization Document) card under a Category C-33 (Which is the EAD code for an alien who has been granted Deferred Action for Childhood Arrivals - DACA) pushes them out of Section II.A.1.b.ii.(A).(9).(b) and into Section II.A.1.b.ii.(A).(9).(c) for ‘Non-U.S. Citizens without Lawful Residency’; which have never been eligible for FHA financing. Give HUD a shout with questions.

The industry continues to incorporate Ginnie’s seasoning requirements.

Pacific Union has posted a clarification on the VA Cash-Out and IRRRL. Previously announced updates to the seasoning requirements for all VA refinances have been updated to align with the more restrictive guidelines from Ginnie Mae’s APM 18-04 and VA Circular 26-18-13 regardless of the loan amount.

FHA published in the Federal Register, a final rule (Docket No. FR-5457-F-02) that streamlines the inspection requirements for FHA single family mortgage insurance by eliminating the regulations for the FHA Inspector Roster. FHA acknowledged there is no longer a need to maintain and administer its own standardization process for inspectors. This final rule becomes effective August 2.

PRMG has updated product profiles for its VA Products and CalHFA ECTP and MyHome Assistance.

Mortgage Solutions Financial offers a 65% DTI VA program, call for details 719-283-9558.

M&T Bank requires Correspondent Lenders to evidence compliance in issuing accurate initial and closing versions of the VA IRRL Comparison Statement disclosure as explicitly outlined in both VA Circular and FAQ Circular 26-18-1, Change 1. Reminders include: the initial IRRL Comparison Statement must be issued to the Veteran within 3 days of the application date. The Lender certification language where the underwriter certifies to borrower qualifications (required when the PITI increases more than 20%) is only required on the losing version of the disclosure. Both documents must be present for M&T review at the time of whole loan purchase.

Site Condominium properties in Michigan do not require a VA Condominium Project ID number indicating review and approval by the VA. This is a regional variance that only applies to the state of Michigan. Ditech will be updating its Client Guidelines accordingly.

Mortgage Solutions Financial posted a revised clarification regarding 6 Month Seasoning Requirement on VA Cash Out and IRRR. This announcement is effective with loan funded on and after February 16, 2018.

Ginnie Mae has posted a new bulletin: "Updated MBS Pool Consolidated and Loan-Level Data Dictionaries.”

Capital Markets

Hey, if your company does a lot of purchase business, you’ll be okay, right? Rates are certainly cooperating and are nearly stuck in the mud. But they fell yesterday slightly as heightened geopolitical tensions from U.S. - Sino trade relations grinding to a halt caused the 10-year to close at 2.84%, narrowing the 2s10s spread. Few think that a trade war will benefit us much, and in fact can have a negative impact on our gross domestic product, but here we are. There are now few signs of the “Trade War” abating, after the office of U.S. Trade Rep Robert Lighthizer was ordered to prepare to impose a 10.0% tariff on $200 billion worth of imports from China. With no immediate plans to restart formal trade discussions, and China viewing the tariffs as “totally unacceptable,” about seven weeks remain before the $200 billion of tariffs take effect after August 30.

As far as economic releases went, the Producer Price Index and Wholesale Inventories didn’t move the market much. Looking to today, we have June CPI and Core CPI (+.1% and +.2%, respectively, near or at Fed target), weekly Initial Claims (lower than forecast at 214k), and a $14 billion 30-year Treasury auction. Additionally, we have some Fed speak, with both Minneapolis Fed President Neel Kashkari and Philadelphia Fed President Patrick Harker on the docket. The day starts with the 10-year yielding 2.86% and agency MBS prices worse about .125.

Lender Products

Spruce, the leading digital title & escrow company, has announced the launch of its end-to-end title & closing API. Lenders can use the API to fully integrate Spruce's services into their own LOS or POS, and realize significant efficiency and productivity gains. "We already have a number of first mortgage and HELOC lenders using the platform with great success," said Patrick Burns, CEO of Spruce. "It's flexible enough that a lender can craft the right solution for their use case, but always backed by Spruce's team of title and closing experts". To find out more or schedule a demo, click here.

Calculating and underwriting income is time consuming, especially for a self-employed borrower. It often requires significant work before the complexity of a file is understood. LoanCraft’s Virtual Panel SM provides a solution. Part of every Income Report, it provides three income estimates tailored by varying assumptions. The biggest benefit is that the Virtual Panel gives you an immediate view of how complex a file is. When all the estimates are close or the same, the file is not complicated, even if it has several businesses. But when the estimates differ, it’s likely that a little additional analysis is warranted. If three different underwriters, with different points of view, gave you the same answer, how much more research would you need to do? Visit for a White Paper on the Virtual Panel or contact Lindsey Fougeorusse (248-897-0604).

Career Opportunities

National MI is expanding its sales team and adding an additional Sales Account Representative who will reside in greater Chicago area. Responsibilities include to promote the sale of National MI products, services, and programs to clients through a consultative selling approach via personal sales calls and email/phone contact. This individual will also assist in sourcing new business from originators and will manage the relationships of specific clients by serving as a customer advocate, educator, and loan issue problem-solver. Experience in client relationship management and training is imperative, and strong research, process improvement, and presentation skills are required. Headquartered in the San Francisco Bay Area, National MI is a U.S.-based, private mortgage insurer enabling low down payment borrowers to realize homeownership. National MI has a GREAT culture, compensation and benefits. For the complete job posting, see National MI's careers page.

A mid-size independent mortgage banker with all GSE approvals in place and $4 billion in annual production conducting business in the Southwest is seeking a dynamic, enthusiastic, experienced National Sales Leader to recruit and retain a national sales force that delivers extraordinary results. This position is responsible for planning, organizing and directing company-wide strategic initiatives, sales development, leadership and management of loan production throughout the organization with a proven production platform. Send confidential resumes to me for forwarding.

First Savings Mortgage Corporation is a mortgage lender based out of the DC metro area licensed in DC, MD, VA, FL, DE, NC and SC. “First Savings has been consistently recognized as a top lender by Scotsman Guide and the Washington Business Journal. The average tenure for a First Savings mortgage loan officer is more than 13 years, largely due to the ‘LO-centric’ culture. Collectively, a First Savings mortgage loan officer averages over $40 million in annual production volume, due to the unique, purchase-market driven solutions like bridge financing and the constant emphasis on providing superior service to both clients and referral partners. Year to date, 51% of our loans have closed in less than 30 days! As a consistent, top lender, First Savings Mortgage Corporation continues to grow our market share in those markets mentioned above. Contact Managing Director Mark Deitz (240-223-1556; First Savings Mortgage) today to learn more about our team and our story!”

In wholesale expansion news, Village Mortgage has hired industry veteran Bob Germano as Director of Wholesale and AJ Capece as Wholesale Operations Manager. Bob has successfully launched two wholesale channels over the past 10 years and “Is a seasoned and trusted leader who has brought a tremendous team of talented associates to Village Mortgage’s already experienced wholesale lending department,” said Laurel Caliendo, President of Village Mortgage. As Ops Manager, AJ Capece will focus on running a customer-centric and service obsessed operation. Bob notes, “Ultimately, regardless of how good our technology and price offerings are, people do business with people. We are here to serve our customers and have assembled an all-star team to exceed their expectations. We are looking forward to the opportunities ahead of us.” Village Mortgage is adding Account Executives in the Northeast and in Florida, and resumes should be sent to Bob.

In retail news, AmeriFirst Home Mortgage continues to build its Southeast Region with the announcement that Christopher Arbogast has joined the Southeast Regional team as Area Manager of the Wilmington, N.C. area. For over a decade he has successfully managed high producing teams and will work to continue to expand AmeriFirst’s footprint in this region. AmeriFirst’s recent growth in the Southeast Region includes the 2017 opening of new branches in Winter Park and Tampa, Florida, for a total of six full-service branches in the state. Contact Chris for a confidential discussion.