Here’s a tidbit for Happy Hour tonight. Currently, about 21 percent of filers take the mortgage deduction, but under the new framework only about 4 percent would, according to recent estimates from the Tax Policy Center. Here's a good summary of how the current proposals, which we'll be hearing about for months and months, impact home owners. More below, but no one (Senate, House of Representatives, White House) have put a firm plan/proposal in front of the public - and heading into the Thanksgiving and Christmas breaks, no single plan has emerged.

HUD, VA, and FHA News From the Government, Investors, and Lenders

The U.S. Department of Housing and Urban Development (HUD) announced it is charging the owner and landlord of several rental properties in Wichita, Kansas, and his wife, who co-owned one of the properties, with housing discrimination after the landlord allegedly sexually harassed two female tenants at his properties and that he also made discriminatory statements based on one of the women's race.

Wells Fargo Funding will no longer offer FHA and VA 7/1 and 10/1 ARM products as of December 11, 2017. 

Provident Funding has added the following states to its FHA offerings: AZ, FL, GA, MA, MI AND NC.

There is an industry awareness that the Dept. of VA may soon dissolve its Condo approval process and turn it back over to lender approvals. Until there is a formal announcement, M&T Bank will still require verification within the loan file that the Condo Project appears on the list of VA approved Condo Projects.

FHA has issued a waiver covering all municipalities in Puerto Rico impacted by Hurricane Maria, allowing damage inspections to be conducted beginning November 9. This waiver is in addition to the waiver issued by FHA on October 24 of its policy on the time frame for completing the inspection of properties prior to closing, or submitting the mortgage for FHA insurance endorsement in the Presidentially-Declared Major Disaster Areas (PDMDAs) in municipalities in Puerto Rico impacted by Maria.

Ginnie Mae posted its News and Notes regarding first payment date reporting responsibilities.

FHA has issued an additional waiver regarding the timing of the property inspection for properties located in Lake, Napa, Mendocino, and Sonoma Counties in California.  Effective immediately, PennyMac is aligning with FHA's waiver and will accept property inspections dated on or after November 2, 2017 for all loans secured by properties located these counties. Click here to read all the information contained in its update.

Effective immediately for all Delegated Fannie Mae, Freddie Mac, FHA, and VA programs, PennyMac is no longer requiring tax transcripts for borrowers qualifying solely with W2 wage earner income and/or fixed income reported on a 1099. Tax transcripts will continue to be required for all borrowers where tax returns are required to document qualifying income and all qualifying income sources for Non-Delegated, USDA and Jumbo loans.  This includes but is not limited to self-employed borrowers, commission greater than 25% of income, borrowers working for family, etc.

Pacific Union Financial announced improvements to its Overlay Matrix effective Monday, November 6. All loan products submitted to DU or LPA that do not receive a credit approval may now be submitted to the other automated underwriting system. FHA Loans with an AUS Approved Decision - Minimum credit score will now be determined by DU Approve Eligible or LPA Eligible Accept. Credit Scores < 560 with an AUS approval will be subject to an LLPA. Loans Manual Underwritten (Refer, Refer Eligible or Manual Downgrade) - Minimum credit scores apply; refer to Overlay Matrix. VA Loans with an AUS Approved Decision - Minimum credit score will now be determined by DU Approve Eligible or LPA Eligible Accept.

Credit Scores < 560 with an AUS approval will be subject to an LLPA. Loans Manually Underwritten (Refer, Refer Eligible or Manual Downgrade) - Minimum credit scores apply; refer to Overlay Matrix.

Of more interest to the "higher ups" and industry analysts was the release this week of the annual report by the FHA on the Financial Status of the Mutual Mortgage Insurance Fund.) It dimmed prospects for a MIP cut, when the report indicated deterioration in the capital ratio of the MMIF (Mutual Mortgage Insurance Fund) from 2.35% to 2.09%, still above the 2.00% minimum. The statement went on to say had the previous reduction (which was suspended less than an hour after President Trump was sworn in) gone into effect, the capital ratio would have fell below the minimum hitting 1.76%. The FHA's volatile reverse mortgage program (HECM) was a large contributor to decline with the statement indicating that the FHA would "closely monitor" the recently implemented changes to the program.

FHA reports that at the end FY 2017, the MMI Fund had a total economic net worth of $25.6 billion and the Capital Ratio that remains above the statutory minimum for a third straight year. Dave Stevens with the MBA sent out, "The full report can be found here, but we wanted to call your attention to some quick highlights.

"The current MMIF capital ratio is 2.09%, a decrease from 2.35% a year ago. Fiscal Year 2017 also marks the first decline in the MMIF capital ratio since Fiscal Year 2012. Had the pending decision to reduce premiums not been reversed in January 2017, the MMIF capital ratio would have been only 1.76%.

"The economic net worth of the MMIF is $25.6 billion, a decrease of $1.9 billion from a year ago. Total MMIF capital resources increased $4.4 billion in Fiscal Year 2017, though this gain was more than offset by a deterioration in the net present value (NPV) of future cash flows. This decrease in the NPV of future cash flows is largely attributable to the Home Equity Conversion Mortgage (HECM) portfolio...Much of the weakness in the MMIF is attributable to the HECM program. The capital ratio of the HECM program is negative 19.8% (a decrease from negative 11.8% a year ago), with an economic net worth of negative $14.5 billion.

Death and Taxes

Our industry is focused on anything impacting housing, of course. Did you know that only 32 percent of taxpayers itemize in the first place, and of those 79 percent claim the MID? Homeowners who simply take the standard deduction on their taxes get no benefit from the MID. And neither do households who rent. Capping the mortgage interest deduction on loan principal eligible for the deduction to $500,000 from the current $1,000,000, as the proposal includes, would impact just 5% of home owners.

Sure, the House voted to approve its tax plan. But its tax plan will go nowhere in the Senate, which isn't supposed to vote on its own plan until after Thanksgiving. The House of Representatives passed H.R. 1, the "Tax Cuts and Jobs Act," a bill National Association of Realtors President Elizabeth Mendenhall has called an all- out assault on homeownership.

What does NAR have to say about it? "It's disappointing to see this legislation move forward, but the real work to shape this debate is just getting started. Realtors will now look to the Senate as we make our case that the tax reform proposals pending before Congress overwhelmingly remove the tax incentive to purchase and own a home in America...Make no mistake: Middle-class homeowners will see their home values fall if this proposal moves forward, while large corporations walk away with the bulk of the tax cuts."

Capital Markets

Communication is a good thing, and previous Fed officials who held the chairman role ran the gamut in terms of keeping the markets informed. The heads of the four biggest central banks said they will keep investors fully informed of their intentions to smooth the adjustments that will have to be made as they begin scaling back stimulus measures. The leaders of the Federal Reserve, European Central Bank and Bank of England largely supported advice from Bank of Japan Governor Haruhiko Kuroda to keep the message straightforward.

Most prices, and in turn interest rates, are a result of supply and demand. In demand news, China's U.S. Treasuries Holdings Dip, Remain Near Year-High. China's holdings of U.S. bonds, notes and bills declined for the first time in eight months, dropping by $19.7B to $1.18T, according to Treasury Department data released Wednesday in Washington. China remains the biggest foreign holder of U.S. Treasuries, ahead of Japan, which owned $1.1T, down by $5.7B from August. 

In terms of daily price fluctuations, up some, down some, and yesterday U.S. Treasuries and agency MBS prices were broadly lower. Yield curve watchers saw the 2s10s spread expand to 66 bps from 65 bps at the end of Wednesday's session. We certainly had a slew of news: the weekly jobless claims numbers were released (the 141st straight week initial claims have been below 300,000), import prices increased slightly while export prices were unchanged, the Philly Fed Index slipped, industrial production increased 0.9% in October, capacity utilization increased, and the NAHB Housing Market Index hit its highest reading since March. "Dem" builders are happy!

This morning we've had Housing Starts and Building Permits (+13.7% and 5.9% - huge!). After closing Thursday with a yield of 2.36%, this morning we find the 10-year wallowing around 2.37% with agency MBS prices unchanged versus last night's close.

Odds and Ends

How are borrowers using online reviews? According to recent research conducted by the STRATMOR group, 64 percent of borrowers are reading online reviews, but fewer say online reviews are the main factor in selecting their lender. In this month's MortgageSAT Tip, STRATMOR's Mike Seminari shares more of the results of this research, including information on which sites borrowers prefer and how influential these online reviews are in the borrower's selection of a lender. Find out more about the value of testimonials and reviews in driving organic growth, and get suggestions about where your social media focus should be in this new article.

Congrats to Nashville's Built which reached a pivotal point in the company's three-year history with a $21 million Series A investment led by global venture capital firm Index Ventures, with participation from New York-based Nyca Partners, a FinTech-focused VC firm.  The new Series A brings the total capital raised to date by the company to $25 million.


MSA, an Executive Search Firm focused solely on the Financial Services industry, is actively seeking candidates on behalf of one of its clients, a small Midwestern community bank, to assist in identifying a new Chief Lending Officer, a position which is anticipated to accelerate into the Presidency and/or CEO role within the first year. The ideal candidate will have firsthand experience in running a small or mid-sized bank, including having working relationships and experience with state banking regulators and other financial institutions. Experience in broker direct / Correspondent lending a plus. Candidates should have experience in providing or participating in digital technology strategies in consumer banking and an entrepreneurial mindset, while participating in a rapidly growing asset base from a leadership perspective. Qualified candidates should send a resume in confidence to Tami Coffey.

National MI is looking for a Sales Account Representative to work with its current Account Manager in the Greater Houston market. Their responsibility would be to promote the sale of National MI products and services to clients through a consultative selling approach. This individual will also assist in sourcing new business from originators, and potentially manage the relationships with specific clients. Experience in client relationship management is imperative. 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.

This retirement stuff is getting out of hand. The Community Mortgage Lenders of America (CMLA), announced that Executive Director Glen Corso will retire effective December 31, 2017.

Being dismissed is another matter, which is what Wells Fargo did to Franklin Codel who was a senior executive VP and head of its Consumer Lending organization. "The company said the dismissal was the result of Codel's acting in a manner that was contrary to the company's policies and expectations of its senior leaders during a communication he had with a former team member regarding that team member's earlier termination. The company said the reasons for the dismissal did not involve the business or operations of Consumer Lending, the servicing of its customers, or its performance or financial results. The dismissal also did not pertain to sales practices at the company." A new head of Consumer Lending should be announced by the end of the year, and in the interim Michael DeVito (interim head of Wells Fargo Home Lending and head of Mortgage Production) will report directly to CEO Tim Sloan.