News From NAMB: June 9, 2016

June 9, 2016

You may have noticed that News From NAMB is not just links to other media stories but also goes to primary sources. News From NAMB is different because we find important information that may not be reported elsewhere and we comment on why it is relevant to you, often in a fun way. Best of all, it is free to NAMB members. News From NAMB is sponsored exclusively by United Wholesale Mortgage

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Are Bank Jumbos a Way to Discriminate?
Rumbles are growing that may result in huge lawsuits against the big banks who are providing jumbo money at below-market rates. An article in the Wall Street Journal gives inklings that this may be a discrimination issue. Many protected classes do not qualify for jumbo mortgages. The rationale is that this is an intentional or unintentional way of avoiding giving loans to minorities and protected classes.  The evidence is very damning since loans by the big banks to minorities have plummeted over the past few years.  Many brokers and non-banks will be happy to see the banks have to adjust their policies since most do not share their jumbos with TPOs.


Zillow-NAR War Ends
Zillow was accused of stealing secrets from NAR and its Realtor.com web site. Things had deteriorated to the point where NAR was banning Zillow from its trade shows. Now, the suit has been settled with Zillow paying Realtor.com $130 million dollars. NAR will get 10% of that. They want Move Inc., the operator of Realtor.com to invest the bulk of the money improving the Web site. Legal fees in this case could have topped that amount had this case gone to trial.


House Lays Out Major Changes to Dodd/Frank, CFPB
House Financial Services Chair, Jeb Hensarling, laid out an interesting plan to solve some of Republican problems with Dodd/Frank. Hensarling wants to dump the “Too-big-to-fail” language and create a special bankruptcy for the behemoth banks. Much of his plan revolves around making the CFPB more accountable to Congress. He wants Congressional funding control. To make the CFPB less of a one-man show, Hensarling is proposing a bipartisan commission to run the agency rather than a single director. Hensarling doesn’t get down in the weeds on specific rules and actions of the CFPB. Although there is little likelihood this could pass this year, Republicans see it as the agenda for the coming year.


Costs to Originate a Loan Still Going Up
According to the MBA’s latest Performance Report, costs to originate a mortgage jumped again in the first quarter of 2016.   When costs jumped to $7,747 in the fourth quarter of 2015, it was thought they would level off; they didn’t.  In the first quarter of 2016 per loan cost rose again to $7,845.  Personnel costs are the biggest factor at $5,141 per loan.  Despite higher costs, companies made $825 on each loan in the first quarter of 2016, up from $493 in Q4 2015.  If costs are up and profits did not drop, that has to mean consumers are paying more.


NAR Writes to Cordray on TRID
Tom Salomone, Realtor president, penned a letter to CFPB Director Richard Cordray this week with more complaints about TRID.  Salomone points out that TRID is still a major source of frustration and extra costs for consumers. His big 3 wish list is: 1) Clarify that lenders can share the Closing Disclosure (CD) with third parties if the lender receives a consent form from the consumer, 2) provide additional guidance to lenders about revising the CD to reflect changes in circumstances, and 3) extend post-consummation timelines to correct minor Know Before You Owe errors.


MGIC CEO Claims There Are Too Many PMI Companies
There are seven major PMI companies plus FHA and other federal guaranty programs. MGIC CEO Patrick Sinks says there just aren’t enough loans for 7 PMI companies right now. That could change based on several companies going through revisions. Radian’s CEO is retiring which could make it a takeover target. AIG may decide to sell off UGIC as it reorganizes.


Manual Underwrites Brought Discrimination Action
First Citizens Bank, a South Carolina bank, was slapped with a discrimination complaint for discriminating against African-American and Hispanic mortgage applicants. HUD claimed the bank disproportionately denied loan applicants in these two classes. The charge revolves around loans that were denied by the automated underwriting system. Of those loans, far more white people were eventually approved than blacks and Hispanics. First Citizens agreed to open more branches in certain areas, make special loans to the affected classes, and create a race-neutral review of AUS loans that were denied.


MBA Says Mortgage Credit Is Tightening… Really?
According to the MBA’s Mortgage Credit Availability Index (MCAI), lenders slightly tightened standards in May. The MCAI analyzes data from Ellie Mae's AllRegs Market Clarity business information tool. The index has shown tightening for the past 3 months. According to the Index, the main culprits were tightening of government lending standards and jumbos. The strange thing is I see the exact opposite from a broker perspective. Every day I get an email where some company is liberalizing government guidelines or giving higher LTVs at lower scores on jumbos.


Mortgage Volume Jumps Way Up This Week
According to the MBA, mortgage originations were very strong this week, up 9.3%. The refinance index was up 7% while the purchase side skyrocketed by 12%. Rates are so low, borrowers can’t resist. These figures are a little misleading though since MBA played with the numbers which were compressed by the Memorial Day weekend.


USDA Rural Housing Keeps Losing Volume
How can a program that give 100% financing to people with scores down to 620 and below not be red hot? USDA has found a way and continues to drop in volume. First, USDA eliminates a large number of borrowers because they make too much money. A family of 4 has the same income limits as one person. That knocks out many families with 2 wage earners. Then, USDA redrew its maps of eligible areas, excluding millions of homes. You can be on one side of the street and get a USDA loan but directly across the street you can’t.  The loan must go through an extra step to be guaranteed that can take a week of more. USDA’s underwriters are much stricter in how they view income and assets than normal FHA underwriters. The upfront Guaranty Fee is nearly a percent higher than FHA. At least that will be lowered to 1% in October. NAMB is currently involved in a study to improve these problems.


Employment Bright Spot… Non-Bank Mortgage Originators
While the rest of the economy was not creating new jobs, non-bank mortgage companies were according to the Bureau of Labor Statistics. Non-bank and brokers gained 14,000 since last May. More good news for MLOs is that the average MLO makes $75,170. 25% of MLOs make over $90,000 and 10% make over $130,000 a year.


NYAMB Speaks Out On TRID
Leaders of the New York Association of Mortgage Brokers gave their views on TRID from the originator perspective at their recent conference. Nearly everyone thinks there are some benefits of TRID. But, more and more we see the rule makes it more difficult for brokers to deliver small loans because of the 3% cap on compensation. Everyone also agrees that there still is no agreement on compliance with the TRID rules. Perhaps that is why the CFPB has chosen to reopen the rule this summer.


Washington Post Creates Firestorm on Fannie/Freddie Takeover
Washington Post editors ignited hundreds of comments by taking the stand that we should do away with Fannie and Freddie. The Post does lean left so praising the government takeover of Fannie and Freddie is not surprising. What was surprising is the Post’s editorial board insisted the takeover was necessary. Forensic accounting disagreed. The administration chose to take over Fannie and Freddie and simply give “draws” to FHA. It is unusual to see the Post editorialize in such an uninformed way and readers took them to task over it.


CDFIs Don’t Need to Fool With QM
Most of us who have read the QM rules saw the part about Community Development Financial Institutions (CDFIs) being exempt but now we are beginning to see how that may play. All of the gobble de gook associated with Ability to Repay gets thrown out the window. Some CDFIs are greatly relaxing how strictly they prove income as a result. Banks and credit unions are encouraged to become CDFIs so more may appear. Non-banks may also qualify and get grants.



Rate Outlook
The Bureau of Labor Statistics monthly jobs report that came out Friday was a true shocker. Job creation hit the skids, dropping to just 38,000 new jobs created in May, the worst number in 5 years. The unemployment rate, which is nothing more than a survey that reporters like because it is simple, fell to 4.7%, showing how poor a measure that survey is. With jobs creation in the tank, it is unlikely the Fed will raise rates in June. Most feel they will wait until July to see if these job numbers were an aberration.

Yellen’s most recent speech seemed to bear out the Fed is going to watch things for a little while before making a move. But, she believes this may be just a temporary situation and believes rates will eventually be raised.

This week did not contain a lot of economic news. The largest news was weekly jobless claims coming in at 264K pretty much as analysts had expected

Treasury auctions were good this week, indicating a strong demand for U.S. debt. 

Next week will be pretty busy with Retail Sales, Producer Price Index, Consumer Price Index and the Fed telling us whether they are raising rates or keeping them the same on Wednesday.





 

John Councilman, CMC, CRMS of AMC Mortgage Corporation in Ft. Myers, Fla. is immediate past president of NAMB—The Association of Mortgage Professionals. He may be reached by phone at (239) 267-2400 or e-mail jlc@amcmortgage.com.