A 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 stone...
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."
The 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.
Congrats 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.
The 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 firstname.lastname@example.org; the company also launched a new website.
Affiliated is 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 email@example.com.
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 105). In 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 appraisals.
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.
Yes, 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 .125.