As noted in the commentary very early yesterday, a shade ahead of the actual details, the big news was the HUD/DOJ/False Claims Act announcement. Cutting “to the chase,” it prompted one CEO of a small non-bank lender to write me saying, “Well, with the big banks expected back into the FHA pool, there go the profit margins!” PennyMac, pretty much the top FHA lender in the country via its correspondent and portfolio retention channels, certainly took note given the expected increased participation by banks (in the FHA market) will make things more competitive in their various retail channels. Certainly won’t make things less competitive, right? According the HUD, in 2018 under 15% of FHA originations were done through banks, compared to 45% in 2010. Lots to think about, especially IF a new administration takes over since the current one remains focused on reducing the FHA footprint. More below.
Lender Products and Services
Optimal Blue shared that its Loan Trading Solution, Resitrader, has grown over 600% in the last year with monthly offered volumes approaching $10 billion. “We’re seeing nearly universal adoption of the platform among our hedge advisory clients,” said Jim Glennon, Director of Optimal Blue Secondary Services. “And with deep integrations to both Fannie and Freddie for cash window plus servicing bids, automated pooling and commitments, that have been in place for over a year, our clients find they have the entire market at their disposal for all execution types – for a True BESTX™.” Jim further commented that Bulk Mandatory represents about 70% of servicing released executions, with best efforts continuing to win the price wars 7-15% of the time and co-issue making up the rest.
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“Chenoa Fund, following up for success. Many homebuyers obtaining a mortgage find that aside from a monthly bill, communications with their lender pretty much stop after they sign on the dotted line. At the Chenoa Fund, we take a different approach. Through regular outreach, we stay in touch with our borrowers to provide support, reminders and, if needed, advice. Customers appreciate it. ‘The post-purchase calls, emails/texts are encouraging and serve as a regular reminder that we were able to accomplish this feat,’ says Gabrielle B. ‘It feels great knowing they are on your side and want you to be a successful homeowner,’ adds Danielle M. We love hearing these reviews, because they validate our philosophy: when our borrowers succeed, we all succeed. We want our homebuyers to know that we value them and believe in them. Staying in touch is a small gesture that can mean a lot.”
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Home Point Financial’s Customer For Life program is expanding, and post-Fuse coverage is building as well. But they’re also making moves on the product front. To save time for brokers and borrowers, they’ve simplified and clarified our bank statement program (50% Expense Factor) to allow for a more efficient review for business accounts. In fact, they will no longer request a borrower-prepared profit and loss statement. Looks like Home Point is handing out an early Halloween treat. Don’t wait to partner with Home Point Financial: click here.
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Tech and Vendor News Including Survey Results
Vendors are tumbling over themselves with news and partnerships during the annual conference.
Just in time for the MBA annual: STRATMOR Group’s October Insights Report includes the article, “Six Key Takeaways from the 2019 Technology Insight Study.” STRATMOR Senior Partner Nicole Yung, head of the company’s Analytics Team, shares the “aha” moments from this year’s study, including data on the consolidation of the LOS market, the continued evolution of CRM/Lead Management systems, and the barriers that lenders are still facing in implementing digital capabilities. Also in the October report, “A Tale of Three Borrowers,” the borrower experience stories of three STRATMOR experts as they navigated the home buying market in 2019. Check out the October Insights Report.
Ellie Mae, rumored to be in the market for a hedge advisor, announced Monday that it has signed a definitive agreement to acquire Capsilon, the leading provider of AI-powered mortgage automation software for mortgage lenders, investors and servicers. “With the acquisition of Capsilon, Ellie Mae is accelerating the vision of offering a fully digital mortgage by combining Ellie Mae’s Encompass™ Digital Lending Platform with Capsilon’s AI-powered solutions to create the most comprehensive end-to-end Software as a Service (SaaS) solution for companies in the mortgage industry.”
FHA Program Updates
Sure, GNMA (“Ginnie Mae”) is out there beating the drum about its modern GNMA Total Access pilot, that VA orphan loans can be issued waivers to be sold, and high LTV VA loans (over 90% LTV) had to be delivered in October settlements. But the real news from the MBA’s conference focused on FHA loans. The ones the big banks shied away from some years ago because of potential huge fines that would spring forth from vague violations.
As a result of the announced agreement HUD expects violations to be primarily addressed through HUD administrative proceedings. Violations would only be referred to the DOJ in cases where there are significant violations. The degree to which these moves negatively impact private mortgage insurance companies like Genworth, Essent, Radian, Arch, MGIC, and National MI remains to be seen, but it won’t help them if volume does indeed shift to FHA from the conventional conforming channel.
It seems that there were several important milestone achievements in FHA’s efforts to provide greater clarity and consistency for lenders doing business with FHA. These milestones include the execution of a Memorandum of Understanding (MOU) with the Department of Justice (DOJ), the approved FHA annual lender certification, proposed loan-level certification, and the final Defect Taxonomy.
Under the terms of the MOU, infractions would only be referred to DOJ if they are deemed material (which would be defined as cases in which there are at least 15 loans with a balance of at least $2 million and under aggravating factors such as evidence that the violation is systemic or widespread).
Interested in annual lender certifications? On Friday FHA published the final Paperwork Reduction Act (PRA) notice (Docket No. FR-7111-N-38A) for its approved annual lender certification in the Federal Register. The new annual lender certification, which can be viewed on the Annual Recertification web page, will be effective for the Certification Period ending December 31, 2019.
What about loan-level certifications? The FHA published a 60-day Federal Register PRA notice (Docket No. FR-7014-N-26), which proposes significant revisions to FHA’s loan-level certification. These include incorporating materiality into the certification as defined in the Defect Taxonomy. If you want to speak out, here’s your chance: the public may provide comments on FHA’s loan-level certifications PRA notice until Tuesday, December 24, 2019. After considering any comments received, FHA will publish a subsequent 30-day notice on the proposed changes.
If you have questions about defect taxonomy and the loan review system, the FHA posted its updated Single Family Housing Loan Quality Assessment Methodology (aka Defect Taxonomy) on its Loan Review System (LRS) web page. The revised Defect Taxonomy “provides more clarity and transparency into FHA’s loan-level quality assurance processes, and includes clarification of Severity Tier definitions, potential Remedies that align with Severity Tiers, revised Sources and Causes in certain Defect Areas, and incorporation of HUD policy references.
Wait, there’s more! FHA is making system enhancements in LRS to allow lenders to submit responses to Tier 3 and 4 findings. Until the enhancements are implemented, lenders may continue to submit appeals to deficient findings by contacting the FHA Resource Center at email@example.com or by calling 1-800-CALL-FHA (1-800-225-5342).
Many organizations chimed in supporting the news. “The changes demonstrate the Administration’s commitment to enhance and update key elements of FHA’s core risk management policies and practices, a welcome and important step forward in FHA’s revitalization efforts… With this announcement, FHA has updated critical certification documents used in lender oversight and loan-level review processes and established an explicit nexus to FHA’s quality control standards and remedies for deficiencies.
U.S. Treasuries pulled back in curve steepening fashion to open the week, including, the 10-year yield closing +5 bps to its highest level since the second week of September at 1.85 percent, moved by reports from China confirming that progress is being made toward a "Phase One" trade deal with the U.S. As Treasuries slumped, U.S. stocks climbed to a record as President Trump confirmed the signing of the trade deal was ahead of schedule; and markets received solid earnings reports despite having priced in the near certainty that the Federal Reserve will cut rates tomorrow.
Since we’ve talked about trade, I guess it is time to talk about Brexit. The EU reportedly agreed to extend the Brexit deadline to January 31, with an opening for the UK to leave earlier if lawmakers there approve the withdrawal plan in the interim.
Looking at today, economic releases include the S&P Case-Shiller Home Price Index for August, Consumer Confidence for October, and Pending Home Sales for September. The week is still full of more earnings results and central bank decisions. Some key events coming up outside of the FOMC decision include U.S. Q3 GDP data due Wednesday, the Bank of Japan setting policy on Thursday and the monthly U.S. non-farm payrolls report to close the week. We begin the day with Agency MBS prices a smidge better and the 10-year yielding 1.83%.
Mountain West Financial, Inc. welcomes Regional VP of Production Tiffaney Mason to its growing Wholesale family. Based in Salt Lake City, Utah, Tiffaney brings 30 years of mortgage leadership to MWF’s California based team. Joining her is a team of top-notch support staff and account executives. Tiffaney will manage the Mountain Region expansion for MWF offering wholesale lending in OR, WA, CO, UT, NV, NM, TX. MWF has been a top lender in California for the last 29 years and is excited to continue the expansion into these additional states. Connect with Tiffaney to find out why Mountain West Financial would be a good fit for you; currently recruiting in all Mountain region states.
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