Lenders everywhere are facing a basic dilemma: Diminished volumes and leaving profit margins alone, or reducing profit margins and trying to maintain volume. Or, gulp, both. Everyone talks about efficiency and technology, but many lenders are very concerned about the next 4 months, especially if anything new takes 6 months to roll out. 

Government Actions Affecting Lenders

We start with another good news, bad news scenario. The Federal Reserve Board and the State of Colorado Division of Banking have granted approval for Peoples, Inc. and National Bank Holdings Corporation (NBHC) to complete their merger.

But in language that every mortgage company should read since it impacts every rate sheet in the United States, Peoples Bank has entered into a UDAAP Consent Order with the Federal Reserve, which provides complete and final resolution to a long-standing consumer finance issue involving Peoples Bank's national mortgage business. (NBHC is not a party to this consent order.)

Reading the consent order, focused on the handling of discount points, one notices that Peoples did not have a specific written policy regarding discount points (page 2). The Federal Reserve also states that "Many borrowers who paid discount points did not actually receive a reduced interest rate that was not reduced commensurate with the price paid for the discount points. Therefore, many borrowers did not receive a benefit, or the full benefit, associated with paying discounts points."

The takeaway for every lender? Banks and mortgage companies should have policies and procedures related to discount points. The Consent Order did not mention "par." Each and every mortgage file with discount points should include documentation clearly showing from where the rate is being bought down. In other words, the onus is on the Bank or lender to prove where the starting interest rate is so that there is no question whether the discount points paid are reducing the rate commensurate with the price paid. If the starting rate isn't documented, there is no way to prove that the rate is being reduced commensurate with the discount points paid.

One industry vet from the Atlantic Coast noted, "Charging discount points and not lowering rates sounds like overage. These guys were running net branches/P&L's. This will not stop the practice. Those that were responsible just leave and go to a new bank."

In other news, the U.S. Department of Housing and Urban Development (HUD) announced the agency has filed a fraud complaint in Illinois against two former officials (James Wilson and Martha Franklin) of the Alexander County Housing Authority (ACHA) for using public housing funds for personal travel and gifts and submitting false documentation to the Federal government. HUD is seeking 125 civil penalties against Wilson and Franklin totaling $720,000 and another $188,000 in assessments based upon false claims the two made with respect to funds provided by HUD. Read HUD's complaint. HUD's complaint alleges they "knowingly overstated their travel expenses," sometimes double-charging ACHA for unreasonable and unsubstantiated travel expenses, including hotel stays in Las Vegas, personal meals and alcohol, and gifts to housing authority staff.  The complaint also accuses James Wilson of filing false statements regarding the ACHA's compliance with civil rights laws and lead-based paint regulations.

The Senate tax bill contains a couple thorny issues for lenders & servicers to consider including the House's $10k limit on property tax deductions as well as the treatment of MSRs for both accounting and tax purposes, which if included, would see an exodus of smaller players from this market. These provisions may accelerate other GAAP income into taxable income that is deferred under current tax law if these provisions are included in any final legislation.

The OCC has sent a letter warning that it is weighing a formal enforcement action against Wells Fargo following the bank's actions in the auto-insurance and mortgage businesses.

Fannie and Freddie

Excited for loan limit increases? Well, next year we're at $453,100 (vs $424,100 in 2017) for Fannie & Freddie. The high cost area ceiling: $679,650.

Wells Fargo Funding is enhancing its systems so when the 2018 conforming loan limits are announced, Sellers will no longer have to wait to Lock Best Effort Loans that will utilize a higher loan amount than is permitted under the current limits. Ask about its Best Effort process applicable to Loans already in pipeline.

Effective immediately, Plaza will begin accepting conventional loans using the 2018 conventional conforming loan limits through the announcements from FHFAFannie Mae, and Freddie Mac. A list of the 2018 conforming loan limits for all counties can be found here. DU will be updated on December 9th and LPA will be updated on December 3rd.

Capital Markets

In the bond markets yesterday, despite a very weak 7-yr Treasury note auction and Fed Chairman nominee Jay Powell answering questions from the Senate Banking Committee, rates and prices didn't do much. As expected, the Senate Budget Committee voted to advance the tax bill to a full Senate vote. (The vote is expected to take place on Thursday.) We also had another North Korea missile test, and saw a jump in the Conference Board's Consumer Confidence Index. The 10-year ended the day yielding 2.34% - about the same as Monday.

This morning we've had the MBA's apps numbers for last week (-3.1%). In something that can move rates, we've had the second look at Q3 GDP (3.3%, up from the original estimate of 3%, tame inflation component); coming up is the October Pending Home Sales Index (expected to increase), and this afternoon is the November Fed Beige Book. Rates are higher (that was a solid GDP number) with the 10-year at 2.37% and agency MBS prices worse .250.

Upcoming Events and Training

Register for Plaza's December 4th webinar on Mortgage Fraud. With this course, acquire an increased awareness of the sources of fraud, learn ways to prevent fraudulent mortgage loans and discover how to effectively identify "Red Flags".

Join Mark Reeve, VP, Reverse Mortgage Division on Thursday, December 7 at 11:00 a.m. Pacific for a presentation on a Plaza Reverse Mortgage. Learn key sales techniques for the senior clientele market and answers to the questions that borrowers and their families frequently ask.

Register for Plaza's webinar on Wednesday, December 13 at 12PM PT. This course teaches participants how to validate DU loans based on the information contained within the DU Finding and Analysis reports. The course will give the participant the opportunity to review and analyze a sample finding report and complete exercises to instill key learning objectives.

It's not always easy to spot fraud, but becoming familiar with red flags that commonly appear in fraud cases will better protect you from its costly damages. Join MGIC for its December 4th webinar: Preventing Mortgage Fraud - Take a Closer Look.

MGIC's December webinar offerings cover evaluating assets, calculating income, appraisal reviews and much more. Click here to view the MGIC calendar of available webinars.

Take a deep dive into regulatory and supervision trends that will impact you in 2018 with the annual Regulatory Outlook webinar from October Research. Topics include Richard Cordray's exit from the CFPB, co-marketing and affiliated arrangements, cybersecurity, TRID 2.0 and HMDA implementation. Join Ballard Spahr team from 2 - 3:30 p.m. on Thursday, December 7th.

The California MBA Legal Issues and Regulatory Compliance Conference is coming up on December 4th and 5th at the Irvine Marriott in Costa Mesa. Registration is underway.

Visit the HomeReady page to register for the Dec. 14 live webinar where Fannie will discuss HomeReady features.

If you're working on your calendar for April, don't forget that Missouri has joined with Arkansas, Mississippi and Tennessee to create the Great River MBA Conference. It will be held in Memphis, TN, on April 9-11, 2018: https://www.greatrivermba.com/

Employment, Promotions, and Lender Purchase

NewFi Lending is looking for a SR VP Head of Capital Markets to build a new department for a rapidly expanding and innovative mortgage company. Primary responsibilities include working with the CEO in daily pricing of loans, loan sales, monitoring markets and warehouse lines and managing hedge position. Additional responsibilities will include building relationships with counterparties, hedge advisor, researching and developing new and existing loan programs. It also includes maintaining product and pricing guidelines in NewFi's loan origination system. The position is in the SF/Bay Area. Please email steve@newfi.com for inquiries.

QuickInsured has developed Quick Quote, the first seamlessly integrated Homeowner's Insurance service within Ellie Mae's Encompass platform. Now, with a simple click of a button, mortgage professionals can connect their borrowers with multiple homeowner's insurance quotes from the nation's top-rated carriers. The Quick Quote service eliminates the time consuming "shopping" process for borrowers and efficiently provides Encompass users with all the homeowner's insurance information required to process the loan application. They have tailored their service to assist mortgage professionals with effortlessly obtaining the required homeowner's insurance documentation, all while ensuring that each borrower is getting the best coverages, discounts and price to fit their unique needs. To learn more about the Quick Quote and how QuickInsured can help with expediting the homeowner's insurance process contact Derek Batt.

AmeriHome Mortgage becomes the only "endorsed" Correspondent Lender of the American Bankers Association..."To ensure community banks get the top-tier pricing and service necessary to stay competitive in their local markets, the American Bankers Association has endorsed AmeriHome Mortgage Company's secondary market services. After a thorough vetting process, ABA endorsed AmeriHome's services because they offer consistent competitive pricing, as well as integrated and client-focused service, and the type of value banks are looking for in a long-term, mutually-beneficial, relationship with an investor." See the ABA's press release here, and visit amerihome.com or email CLsales@amerihome.com regarding a partnership."

"Fast & High Quality don't always go hand in hand, but at DVS-AMC, the full-service appraisal management division of Direct Valuation Solutions, they do! Utilizing our highly efficient software to get assignments to the most proximate and highest quality appraiser within seconds, matched with weekly appraiser payments and coupled with certified staff review appraisers, DVS-AMC has perfected quick turn times with unparalleled quality. DVS-AMC continues to maintain average turn times of 4-6 business days, 97%+ on-time consistency AND with few underwriter conditions, generally less than 5 out of 100 (5%) submitted appraisals require a modification due to underwriting conditions. This means fast and high-quality appraisals for quick and efficient closings. Want to make 2018 exceptional and successful? Contact us, we can help - info@directvaluationsolutions.com or call 888.931.0040."

NRZ announced plans to acquire Shellpoint Partners, a mortgage originator and servicer, for $190 million. The acquisition includes Shellpoint's $50 billion servicing portfolio, and origination capacity of around $6.6 billion per year. The acquisition has been approved by the boards of both companies. The transaction is modest in size but should be positive for NRZ.

Congrats to Brian Montgomery. The Senate Banking Committee voted to approve his nomination to be Assistant Secretary for Housing-Federal Housing Commissioner, U.S. Department of Housing and Urban Development. This will now go to a full Senate vote.

And to Grace Huebscher who was voted in to Freddie Mac's board of directors. Her resume includes president of Capital One Multifamily Finance, LLC, a subsidiary of Capital One Financial Corporation, CEO of Beech Street Capital, LLC, and, gasp, a variety of positions at Fannie Mae.

First Guaranty Mortgage Corp. is laying off 82 workers at its offices in Frederick, Maryland.

Retail lender Guaranteed Rate announced the promotion and broadened scope of responsibilities for SVPs and Divisional Managers James Elliott and Chris Knapp who, in addition to their current roles, will lead the company's nationwide sales and recruiting program.  Knapp, the new EVP of National Retail Production - East, takes the eastern half of the country while Elliott, as EVP of National Retail Production - West, will focus on the western half.

Yesterday the commentary mentioned an article in the Seattle Times about HomeStreet Bank. It turns out there was a response from HomeStreet worth a gander - here is a second Seattle Times article on the topic, including the bank's response to the investor's claims.