Are we heading for a "Pearl Harbor" type event in the internet? Possibly, and cyber security is certainly becoming critical. And it just isn't always simple. (Yes - use the electrical outlet - don't let more devices have access to your lap top by charging them there!) The Federal Financial Institutions Examination Council (FFIEC) developed the Cybersecurity Assessment Tool to help institutions identify their risks and determine their cybersecurity preparedness. The Assessment provides a repeatable and measurable process for financial institutions to measure their cybersecurity preparedness over time. It's free, gives you an idea about the risks to your computer - every bank and lender should have its IT department go through it.
The FHA news continues unabated. The Community Home Lenders Association (CHLA) sent a letter to acting FHA Director Ed Golding calling on FHA to lower premiums when the FHA Fund hits a 2% Net Worth Requirement. The letter also urges HUD to eliminate its Life of Loan premium policy. "As you know, the FHA Actuarial Report is expected out in November, and many are predicting it will near or possibly surpass FHA's 2% net worth requirement. So in advance of that the CHLA is asking FHA to look at cutting annual premiums back to pre-crisis levels of .55% for most loans when the 2% is reached - either in the Actuarial Report, or whenever the FHA can document it hits that point after that. The statute requires FHA to balance the Fund's financial performance and meeting borrower needs - and a rate cut at that point would be consistent with those requirements.
The FHA dropped its proposal for a claims filing deadline - which was causing consternation among lenders.
Coming out of the MBA's Annual Conference were analyst's thoughts on a potential FHA premium changes. There has been some chatter among market participants suggesting that FHA might reduce its mortgage insurance premium (MIP) if its minimum capital improved meaningfully this year. At a panel discussion Ed Golding was asked about this possibility and he answered that FHA was not considering making any change. So it seems that decreasing the MIP further was not even being discussed within the FHA at the moment.
Some who attended saw a less positive tone from the FHA especially with regards to FHA rep and warranty trends. The specific concern is the DOJ's use of the False Claims Act to bring actions against originators to force them to settle. Bill Emerson, the incoming chairman of the Mortgage Bankers Association is the CEO of Quicken Mortgage. Both he and Dan Gilbert, founder and Chairman of Quicken, highlighted the lawsuit the company brought against FHA earlier this year challenging the claims that FHA has made about the company's origination practices. MBA CEO Dave Stevens also specifically highlighted the negative impact that FHA's behavior is having on credit availability. HUD Secretary Julian Castro did not specifically address the issue in his speech.
The MBA's Chart of the Week a few weeks ago focused on the FHA's share of purchase mortgage originations. The share of purchase mortgage originations for FHA has declined between 2010 and 2014, while annualized mortgage insurance premium increased. In 2015, this trend reversed following a 50 basis point drop in the yearly share of the MIP in January. In the fourth quarter of 2014, FHA's share of purchase mortgage originations jumped from slightly under 15 percent to more than 19 percent in the second quarter of 2015.
Pacific Union issued a reminder for correspondents who are populating the FHA/VA/MI field in the MERS OnLine system to verify the information is completed accurately. The LOAN screen must be completed with accurate information prior to transferring loans to Pacific Union. Do not populate the FHA/VA/MI field with type (VA, FHA, etc.). The field should be populated with the appropriate insured/secured number excluding blank spaces and dashes.
The Department of Veterans Affairs (VA)'s has posted new closing disclosure statement requirements, and the new mandatory stacking order for files selected for VA full file loan review of all loan applications taken on, or after, October 3, 2015.
And don't forget that the vast majority of FHA & VA loans go into filling Ginnie Mae securities, and Ginnie Mae posted its October 2nd Notes and News. View the information for important information regarding implementation of SecureID Token for GinnieNET Users.
Remember earlier this year the Department of Veterans Affairs has clarified requirements regarding the HUD-1 documentation and itemization requirements. Franklin American Mortgage, for example, incorporated these changes, effective with loans closed on or after May, 1 2015. Log into the FAMC website to view details if you didn't do so six months ago.
Legal settlements, and legal settlement headlines, continue. The latest big one was Bank of America Corporation agreeing to settle charges for defrauding shareholders and relying on MERS (electronic mortgage registry) by paying $335 million. Investors accused the bank of concealing its exposure to risky mortgage securities.
And how 'bout that $85 million Fifth Third settlement last month involving an appraiser that ratted out, uh, blew the whistle on, his former employer? (It isn't a stretch to forecast that tattle-tales, uh, whistleblowers, are a likely threat to those who remain in MSAs.) Snide comments aside, many believe that this type of activity levels the playing field for companies above reproach. Dave Gallegos sent along this story from Isaac Peck. "In what many see as a win for appraisers, as well as those lenders and appraisal management companies (AMCs) that do follow the law, Fifth Third Bank has agreed to pay nearly $85 million as part of a settlement with the U.S. Department of Justice (DOJ). The case deals primarily with fraudulent appraisal practices. The lead whistleblower in the case is George Mann, Fifth Third's former chief appraiser.
"The settlement is the latest in a string of appraiser whistleblower lawsuits that highlight unethical and fraudulent practices that violate appraiser independence and perpetuate appraisal fraud. Mann follows in the footsteps of Kyle Lagow, of Countrywide, who received $14 million in a whistleblower case that led to a $1 billion settlement between Bank of America (BoA) and the DOJ, and Robert Madsen, who received $56 million for his part in a $16.65 billion settlement, also with BoA.
"Mann, and his co-claimant John Ferguson, will receive seven and one-half percent (7.5%) for their part in the Fifth Third suit as whistleblowers, which calculates to a tidy $6,368,326 before lawyers' fees and taxes. The lawsuit was filed under the qui tam or whistleblower provisions of the False Claims Act, which allows private parties to sue on behalf of the United States when they believe a company has submitted false claims for government funds.
"...the suit alleges that fraudulent and misleading appraisals were used by Fifth Third to qualify for funding from the Troubled Asset Relief Fund (TARP), the Federal Deposit Insurance Corporation (FDIC), Fannie Mae, Freddie Mac, and other federal funding and securitization programs.
The practices described in the suit reflect the worst of the industry's abuses, echoing the same issues that appraisers continue to encounter and speak out about today: pressure to meet value, unreasonable turn times and low fees. According to the suit: "From 2004 through today, loan officers instructed, coerced, and/or intimidated staff into obtaining appraisals at below-market fees and with unrealistically short delivery times, which resulted in questionable valuations. In addition, lenders used the same methods of intimidation to pressure REVG staff and/or appraisers into raising values so loan conditions could be met."
interest to many who read this settlement closely is the fact that John
Ferguson was named as a co-claimant in the suit and received a portion
of the $6.34 million whistleblower settlement, despite the fact that
Ferguson never worked at Fifth Third Bank. Ferguson is a self-described
'career whistleblower' who initially filed a whistleblower lawsuit
against Bank United in the early 2000s. While his whistleblower lawsuit
was not successful due to Bank United declaring bankruptcy, Ferguson
learned so much about the process that he decided to become a fulltime
whistleblower, helping others build cases against big banks and other
organizations that have defrauded the government.
Ultimately, the government decided to focus on residential lending, discovering that hundreds of FHA loans were too defective to qualify for FHA insurance. The $85 million settlement with Fifth Third compensates the government for over 1,400 loans that were insured through the FHA loan program and were discovered to be defective.
Linda J. Stengle, one of the attorneys representing Mann and Ferguson, encourages appraisers to step forward. "The False Claims Act, and to a lesser extent, the SEC whistleblower program, can really help protect qualified appraisers who are doing their jobs properly. Appraisers who are aware of large scale USPAP and FHA violations, for example, should investigate whether a whistleblower action will work for them."
The article noted that, "Even inside the industry, appraisers are frequently blamed for going along with the widespread fraud that contributed to the real estate bubble and crash of the early 2000s. However, the Fifth Third settlement is a reminder that appraisers have often been on the frontlines in the fight against real estate and mortgage fraud. One expert noted that, 'Appraisers are often bullied and pushed around. The whistleblower statute, which was reinforced under Dodd-Frank, gives appraisers some muscle to stand up to bullies.'"
Rates went up slightly Monday when the fixed-income markets turned their attention away from a weak Institute of Supply Management number and instead to better-than-expected data out of Europe and East Asia, although we had a decent Construction Spending figure. And for some unexplained reason stocks (equities) rallied again: the S&P 500 climbed 1.27% to 2,105.84.
There isn't much news of note today (September Factory Orders at 10AM EDT) - generally not a big market mover & shaker. For numbers the risk-free 10-year T-note settled at 2.19% Monday; this morning it is sitting at 2.18% with agency MBS prices a smidgeon better.
Jobs and Announcements
In wholesale job news New Penn Financial is hiring talented, experienced Wholesale Account Executives immediately in Florida; specifically, Miami, West Palm Beach/Ft. Lauderdale, and Orlando. "New Penn Financial is a dynamic and rapidly growing mortgage lender with over 1,600 employees nationwide. Founded in 2008 and licensed in 48 states, New Penn Financial is a part of the Shellpoint Partners family of companies. Its reputation has grown substantially under the guidance of a management team with years of experience in the mortgage industry. New Penn Financial has been recognized in the top 20 Third Party Originations Lenders and was recently voted as being a great mortgage lender to work for by sales professionals. Please submit confidential resumes to Senior Corporate Recruiter Aubrie Cusumano.
On the retail side the market share battle continues, and Fairway Mortgage Company is finally open in Nevada. The #1 company in the country to work for (as voted by LOs) continues to rapidly expand its footprint across the country. Fairway announced immediate openings in the Reno area and will expand across the rest of state shortly. "Fairway is a Top 10 retail lender, direct to all three agencies, closing approximately $1 billion/month, and has TRID completely dialed in. Fairway's world class customer support averages a response time to originators of less than 3 minutes from Branch Support along with 10 day purchase closings. If you are a customer-service oriented mortgage professional in the Reno are interested in exploring possibilities please contact Kent Montavon (720.495.9594) for a confidential conversation.
Congrats to David Childers who has joined The Duncan Group as President and Managing Partner. He is charged with driving business growth and relationships through innovative strategies. (Many know The Duncan Group because of its 4-day Sales Mastery event.) Todd Duncan, Founder and CEO of The Duncan Group, "is thrilled to have an executive of David's caliber to shape the company's future. Todd said, 'David Childers is a visionary leader with formidable skills and knowledge in sales, marketing, event production, and has a passion around providing world class customer service. I am excited about expanding the High Trust Selling brand, and building a team focused on impacting clients at a high level.'"
In new product news, everyone is busy planning for 2016, and trying to figure out what tools to use. "Effectively forecast your future with PREVUTM Project Portfolio Management Plaform! PREVUTM gives your organization the ability to align strategic business decisions with your project portfolio and resources, making sure you are working on the right things at the right time. Advanced "What-if" modeling and predictive analysis provides you a virtual white board for unlimited project portfolio alternatives to guide your future. Get a true picture of your resource capacity and where you might need to focus on improvement. All from one simple-to-use, cloud-based dashboard. Take control of your business. Put your project portfolio first with PREVUTM! And if you have questions please send us an e-mail."