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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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What’s Ahead in 2017?
Everyone is making predictions about what we will see in 2017.  Let me give it a stab.  Congress will pass legislation to change Dodd/Frank but not eliminate everything in it.  Donald Trump and Richard Cordray will have a showdown that will end up in the courts unless the courts continue to hold the opinion that a sole director is unconstitutional.  In that case, Trump will simply replace Cordray.  Rates will go up somewhat but not a huge amount.  They are likely to even go down a little at the beginning of 2017.  More and more files will be processed through automation.  There will be fewer bank statements, W-2s, tax returns, and paystubs in files.  Lenders will be getting those online.  Appraisal qualifications will be relaxed, allowing more residential appraisers to enter the market.  Title will become more automated as property data becomes even more computerized.  As regulations become simplified, originators will leave lenders and banks to become mortgage brokers or work for one.


Caliber Touting 10-Day Closings
Caliber Home Loans is claiming they can close loans in 10 days.  The brainchild of Sanjiv Das, Caliber CEO, is dubbed, “The Ultimate Homebuying Experience,” will be available to wholesale as well as their retail LOs.  The company is using electronic services to verify income and assets or anything else that is available through automation.  Caliber claims their process is different because it perfectly integrates LOs and support staff with technology where others rely mostly on technology.  Das claims there will be no compromise of standards for speed.  There is a disclaimer though, “Some loan applications are not suited for, or cannot be completed with digital delivery of asset, income, employment and other documentation required for loan approval. Applicants whose banks do not offer digital delivery may experience slower processing times.”


Not Advertising FHA?  Watch Out!
The Justice Department just reached a settlement with two Ohio and Indiana banks over violations of the Fair Housing Act and ECOA.  The claim was Redlining.  The two banks located their branches outside predominantly black areas.  They had less than average mortgage applications from black borrowers.  The banks didn’t hire LOs from the black areas.  All of that added up to Redlining.  What else should they have done?  One of the things on DOJ’s list was they should have advertised government loan programs like FHA because they are popular with minorities.


Why the CFPB Became a Target
There is no question that the CFPB is under fire, especially from Republican members of Congress and the President-elect.  An interesting article in the National Review believes it is because the CFPB became an extension of the Democratic party.  The CFPB Director was Democrat appointed and had at least 5 years where Republicans would have no say in what he did, not even a Republican President.  The agency was staffed totally by Democrats.  How do we know that?  100% of CFPB staff political donations went to Democrats.  The article even goes so far as to say the agency didn’t want to hire anyone who did not have a liberal political bent.  That has left an agency opposed to the party in power which the author claims is its downfall.


Mortgage Applications Take Nasty Dip
The MBA’s Market Composite Index, a measure of mortgage loan application volume, decreased 12% from two weeks earlier.  Unadjusted for the season, the Index decreased 48 percent compared to two weeks ago.  The Refinance Index decreased 22 percent from two weeks ago.  The seasonally adjusted Purchase Index decreased 2 percent from two weeks earlier. The unadjusted Purchase Index decreased 41 percent compared with two weeks ago and was 1% lower than the same week one year ago.  Before anyone pushes an alarm button, one survey does not a market make.


Federal Reserve Steps Up MBS Buys
The Federal Reserve is buying Mortgage-Backed Securities issued by Fannie, Freddie, etc. from the proceeds of loans they had purchased being paid off.  Because there have been a lot of payoffs, the Fed is buying more agency mortgage securities now that in the past few years.  They had bought $124 billion from September 14th to December 12th, 2016 and expect to buy another $39 billion from December 12th to January 12th.  That is the lion’s share of Fannie/Freddie bonds.  No wonder rates are still so low.


FHA To Require Counselors to Pass Tests, Be Certified
It seems HUD is not totally satisfied with the performance of its housing counselors. So, HUD is making them all get certified. To become certified, the counselor must pass a standardized written exam and work for a HUD-approved entity. The rule takes effect Jan. 13, 2017 and counselors will have 36 months to become certified.


Maxine Waters Says She Will Fight Trump Every Inch of the Way
Maxine Waters is the ranking Democrat on the House Financial Services Committee. That is the committee that passes laws regarding the mortgage industry. Waters claims Trump “said he’s going to bring down Dodd-Frank and he’s going to get rid of the Consumer Financial Protection Bureau, I’m going to fight him every inch of the way.” When asked if she would meet with Trump, Waters snapped, “Oh no, I won’t go.  I’m not going to sit down with him. I’m not going to go. I’m not going to pretend. Enough pretending. This business of calling names and lying and retreating on your promises, etc. Why should I trust him to be any different with me?


New York Implements Tough Cyber Security Rules
The New York Department of Financial Services (DFS) issued a revised cybersecurity rule for financial institutions.  It requires many security requirements that will be expensive and difficult for small companies to comply with.  The rule requires entities to have a Chief Information Security Officer.  I suppose that means the owner of a small mortgage brokerage has yet another title.  The more onerous question is whether simply naming someone who has no qualifications is going to result in problems with DFS and other entities like the CFPB who want multi-layered compliance personnel.


CFPB Fines Equifax and TransUnion Over Scores
The Consumer Financial Protection Bureau is still handing out fines. This time, TransUnion and Equifax were fined $23 million for how they marketed credit scores to consumers.  The CFPB claims they misstated the cost and usefulness of the credit scores the two were selling.  TransUnion was selling Vantage Score and Equifax was selling a proprietary score, not FICO scores that are commonly used in mortgages.  There are tons of other companies doing something similar so this could be a deep well for the CFPB.


USDA Expanding Manufactured Housing Loans
Under current rules, the USDA Rural Housing Program will only refinance existing manufactured home loans that were originally financed through its guarantee program.  Under a new pilot program in Colorado, Illinois, Louisiana, New York, Ohio, Texas, Vermont, New Hampshire and Wyoming, non-USDA financing can be refinanced.  This will allow more people to benefit from USDA’s low guarantee rates.  The down side is the manufactured homes will still have to meet HUD’s requirements, including the foundation rules.


Will FHA Lower Premiums Soon?
UWM CEO Mat Ishbia thinks it is likely that FHA will drop its annual MIP by 30 basis points now that the FHA fund is above the mandated 2% reserve rate. In his 3 Points video, Ishbia, thinks it will happen before President Obama leaves office.  Historically, FHA did fine with a .55% annual mortgage insurance premium.


Is Gender Identity Training in Your Future?
HUD is now requiring various people who do business with HUD to have gender identity training.  This is to maintain compliance with the Equal Access Rule and Gender Identity Rule. HUD is providing a webinar that will provide “LGBT Language 101” training to aid participants in increasing their knowledge and skills in using appropriate, inclusive language.


Builders Constructing Apartments, Not Condos
According to the National Association of Home Builders, apartments are 92% of the multi-family construction.  The only place condos seem to be in favor is Florida.  Renters are staying put, creating more demand for rentals.  FHA is currently in the process of relaxing its condominium rules which could help lower-income borrowers become homeowners.


Home Buying Low on Top Priorities
A new study by the National Foundation for Credit Counseling (NFCC) shows 80 percent of respondents listed paying down debt as their primary financial goal for 2017. Buying a home was a very distant second place, capturing only 10%, followed by growing personal savings at 5% and purchasing an automobile at 2%.  Easy credit and student loans are causing a drag on the homeownership rate.


Essential Guide to Help Millennials
Loan Originators are still looking for the keys to unlock the trove of Millennial buyers.  Millennials are somewhat conservative.  They remember what happened to their parents during the housing implosion so they fear debt.  They are also in love with tech.  Old houses that have no tech features just don’t excite them.  Perhaps this blog by Kelly White will help.


Maryland Merges Broker and Banker Groups
The Maryland Association of Mortgage Professionals (MAMP) and the Maryland Mortgage Bankers Association (MMBA) have merged the trade associations effective January 1st. The merger was pushed as a necessity to adequately fund the two groups and to have a more effective voice in the state legislature. The agreement requires that the board consist of both bankers and brokers. The association has not yet determined if it will affiliate with national trade groups. As an association member and a broker, it is a little distressing that the old MAMP site now just ports you to the banker site.


Rate Outlook
The Federal Reserve released the minutes from its December meeting this week.  This the meeting where the Fed decided to raise rates by ¼.  The minutes are not exactly bullish but the Fed does think economics will improve in 2017.  They have said they will probably raise rates 3 more times in 2017, in small increments.  Most of that is based on the economic stimulus Donald

Trump is promising, which they believe to be inflationary.  We should remember that the Fed promised 4 rate hikes in 2016 and only delivered one.

The BLS Jobs Report, the largest economic news of the month, comes out tomorrow.

So far, this week, ADP employment was a weaker than expected 153K. Analysts looked for a reading of 170K. Weekly jobless claims were 235K, expected 265K.  That is much lower than anyone expected and well below the 250K lower end of the range.  Perhaps no one wanted to lay people off at Christmas or no one wanted to leave home to file this time of year.

The markets are taking it all in stride and rates are pretty much flat now for 2 weeks while traders try to figure out what the new year will bring.  As you know, nothing stays flat so be prepared for the jobs report tomorrow.



 

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.

 

 

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

United Wholesale (Advertisement)
Now is the time to grow your purchase business. With UWM’s exclusive Conventional 1% Down with Equity Boost program, you have a competitive edge to get more buyers in the door. Your borrower puts down 1%, UWM contributes 2% toward the downpayment, giving them 3% equity at closing. Learn more at UWM.com.


CFPB vs. PHH Case Heats Up Again
For those who may have been asleep in 2016, the DC Court of Appeals ruled that having a single Director who doesn’t answer to the President is unconstitutional. In addition, the court ruled the CFPB has misinterpreted RESPA. The CFPB filed a request for a review by the full DC Court several weeks ago, and now PHH has responded as well as the Solicitor General. The Solicitor General’s filing is very revealing. His idea is for the court to just rule that the CFPB misinterpreted RESPA and the case against PHH should be dropped. It appears the SG doesn’t really want them to solidify the ruling that the Director is unconstitutional. One must wonder if the Director is unconstitutional whether any of the rules he has promulgated are valid.


Are FHA Guidelines Impossible to Interpret Correctly?
In the last FHA Lender Insight, Post Endorsement Technical Reviews (PETR) showed 53% of the loans reviewed had material guideline violations. Admittedly, 40% of the loans reviewed had an early payment default. Are we to believe FHA underwriters are that ill-trained? Is management pushing loans through that shouldn’t be closed? Or, are FHA guidelines subjective? The big banks think it is the later and are not writing many FHA loans.


Another Lender Pays $48 Million for FHA Violations
United Shore Financial Services has agreed to pay $48 million for violating FHA guidelines from 2006 to 2011. DOJ claims USFS improperly pressured underwriters to approve FHA mortgages and used a formula that tied underwriter compensation to the percentage of loans approved. DOJ said direct endorsement underwriters did not personally review appraisal reports. Finally, DOJ said USFS did not self-report QC findings.


Loan Originators Acting as Investment Advisors
Opes Advisors of Cupertino, Calif. is offering borrowers financial planning along with taking a mortgage application. It has become quite popular with borrowers. The company originated $3 billion in loans last year with its dual-licensed originators. The company claims there is never any attempt to sell any financial service other than a mortgage. However, they use software to show would-be borrowers how purchasing a house fits into their total financial picture, currently and years into the future.


HUD Secretary Calls Trump Corrupt
In a rant that no one can remember a departing cabinet member making in previous transitions, HUD Secretary Julian Castro let loose on Donald Trump. Castro tweeted, “Trump-the shadiest, most corrupt guy to take the Oval Office, will have no strong federal checks and balances.” It appears Castro has no desire to give incoming HUD Secretary Ben Carson any tips either. Castro has yet to speak with Carson.  Castro was expected to play a major role if Clinton had been elected which would explain the hard feelings.


Treasury Department Calls for Mortgage Guarantee Fund
In a Treasury Department blog, the Department is calling for a government controlled mortgage insurance fund. Anyone who wanted to fund a mortgage could pay a fee and get a government guarantee if the loan met the fund criteria. There is a lot strange about this blog. First, current Treasury Department policy is aligned to the current administration that only has a few more weeks. Second, don’t we have a program that gives a 100% guarantee for a fee if loans meet its criteria? It’s called FHA.


Poll Says Trump Voters Like the CFPB
A poll by Morning Consult says that 41% of Trump voters want the CFPB left alone. 15% want to expand the agency’s powers. 17% are not sure what they want to do with the CFPB. Only 7% want the President-elect to get rid of the agency. A sizeable group, 21%, want Trump to limit the agency’s power. Do you wonder how Morning Consult found Trump voters? They predicted Hillary would win just a day before the election by not finding them.


Banks Still Being Sued for Big Money Over Subprime Loans
One would think subprime was over and forgotten about. Not so. Deutsche Bank and Credit Suisse just agreed to pay a combined $12.5 billion in penalties and restitution for their part in the mortgage crisis. Barclays, another subprime giant, has decided not to settle, perhaps hoping they can delay their Justice Department suit until Donald Trump puts his people in DOJ. There is nothing to indicate DOJ would drop the suit but Barclays apparently feels it is worth the risk. Wells Fargo just settled with ResCap under allegations the bank forced it into bankruptcy.


U.S. Home Affordability Drops to 8-Year Low in Q4 2016
RealtyTrac/Attom reports that homes are becoming unaffordable. It is the worst it has been in 8 years. That period equates to the time of Obama’s presidency and the mortgage crisis. Housing prices have done well under Obama, rising to pre-crisis levels. The problem is incomes haven’t done anywhere near as well. Now, with rising rates, many people are priced out of the market.


Pending Homes Sales Drop
Realtors had been optimistic that November would be a good month. No one anticipated the sharp rise in rates. It sent pending contracts to the lowest level this year. Combined with higher home prices, some borrowers were priced out of the market. On the positive side, it has been an incredible year. Home sales for the year are best since 2006. Even with a drop, sales could still be very respectable in 2017.


CFPB Site Has Loads of Mortgage Statistics
As part of its Consumer Credit Trends initiative, the CFPB is making available a huge amount of data and research on mortgages. You can see charts of how many mortgage have been originated, even state by state. The data lags a little but they claim actual closed originations are up 69.7% over October of last year. One thing they should note is TRID threw the brakes on originations in the last quarter of 2015 and into 2016. Another interesting chart is on subprime originations. Although they have plummeted, they remain proportionate to higher scores.


Young People Living With Parents Hits All-Time High
We shouldn’t wonder why millennials aren’t driving the housing market. It is far more comfy and cheaper to live with their parents. For the first time since records have been kept, the percentage of adult children 18 to 34 living at home has soared to 40%. Young people can find jobs more easily but are not being paid as much. Analysts at Trulia believe that trend will continue indefinitely. I wonder how many old LOs have moved in with their kids?


Cordray Is Not Quitting
It appears CFPB Director Richard Cordray has no intentions of quitting. Donald Trump will have to fire him, that is if the courts allow it. Jen Howard, a CFPB spokeswoman, e-mailed the Wall Street Journal saying Cordray “was confirmed by a bipartisan group of 66 senators to serve a term until July 2018 and has no plans to step down.”


Hensarling Bill Would Put CFPB Employees on GS Pay Scale
Currently, CFPB employees are on the Federal Reserve pay scale. The Fed pays very well. The GS scale would mean about a 25% pay cut for most CFPB employees. Banking regulators all pay better than the GS scale. The OCC, FDIC, the Fed, and some other bank regulators all have exemptions from the GS pay scale. CFPB supporters claim this would make it difficult for the CFPB to hire or retain quality employees. Hensarling’s Financial Choice Act would also bring the agency under the congressional appropriations process.


Why Flood Insurance Woes Continue
Last April, the House passed H.R. 2901 by a 419-0 vote which would have allowed Fannie Mae and Freddie Mac to accept private flood insurance policies. The Senate ignored it, citing insufficiently capitalized private companies could not protect the GSEs. But, the program is $23 billion in the hole. The problem is about 30,000 properties have been flooded over five times on average, representing 10.6% of the claims. In addition, the premiums are not high enough to pay the claims.


Seller-Financing Takes Another Hit
Seller-Financed and private loans took another setback this month. Statistics show that lead paint poisoning is much more prevalent in seller-financed home purchases. Realtors don’t like seller financing because it is often done without a real estate agent so they have been quick to point out that a seller-financed home may have repair problems and are structured in a way that doesn’t protect buyers. Seller financing also took a hit when the CFPB wrote its ability to repay rules where seller-financing may not be exempt.



Rate Outlook
Rates are slightly better to close the year after hitting the current higher near 4.5% in the middle of this month. Consumer confidence is soaring as people like what they are hearing from Donald Trump. Some of the fears associated with Trump appear to be abating which were partially responsible to the run-up in rates. Yesterday, the five-year treasury note auction hit an all-time high for indirect participation. That means bond traders think rates will roll back a little.

The dollar is at a 14-year high as investors overseas buy U.S. bonds. No wonder. Eurozone central banks are now able to go lower than the -.40 basis point yield. Yes, you heard it right. The Eurozone banks are paying less than -.4%. It’s kind of like subprime in reverse. But, that is good news for U.S. bonds.

Unemployment is about where it has been at 265,000 jobless claims this week. That is within the 250,000 to 300,000 range where it has been for a long time.

Tomorrow, we have the seven-year treasury auction. That is expected to be well-received like the five-year auction.

If this is a stopping point or a breather on the way up is unknown. Rates could go down a little but it is unlikely they will hit levels seen a few months ago.



 

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.

 

 

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

United Wholesale (Advertisement)
Now is the time to grow your purchase business. With UWM’s exclusive Conventional 1% Down with Equity Boost program, you have a competitive edge to get more buyers in the door. Your borrower puts down 1%, UWM contributes 2% toward the downpayment, giving them 3% equity at closing. Learn more at UWM.com.


Fannie Says Rates Will Not Stop Rising Home Prices
Fannie Mae’s chief economist, Doug Duncan, posits that rising interest rates may slow or stop rate and term refis and even slow purchases but will not stop home prices from increasing. He bases that on history such as 2013 when rates went up 1.1% but home prices still went up. He also cites the late 1970s, when rates were in the upper teens. Duncan says home prices still increased during that period.  Duncan claims that as long as income is growing, home prices will grow, irrespective of interest rates. He seems to have missed one factor and that is if rate increases exceed income increases, it would have the same effect as declining income.


Senate Democrats Want Answers From Mnunchin
Ranking member of Senate Banking, Sherrod Brown, sent a letter to Treasury Secretary nominee Steven Mnuchin about his views on housing. As could be expected, many of the questions are accusatory.  Brown wants to know if Mnuchin will support Dodd/Frank and its regulations. He also wants to know why a person associated with a “foreclosure mill” would be supportive of fair housing. He especially wants answers on the nominee’s public statements about taking Fannie and Freddie out of conservatorship.


Trump Advisor Doesn’t Want to Repeal Dodd/Frank
Donald Trump has tapped Carl Icahn as his special advisor on business regulations. As proof the people on Wall Street often disagree, Icahn doesn’t want to do away with Dodd/Frank and has views that differ from Trump’s nominee for Treasury Secretary. That seems contradictory since Icahn said it was time to "break free of excessive regulation." The answer may be found is an earlier statement where Icahn said Dodd/Frank “went too far.” It seems Icahn prefers to modify rather than repeal.


It’s Taking Longer to Close Loans Again
Just when we thought TRID was going to make it so easy to close loans that we could close them faster than in the 2000s, we have a setback. It appears people were closing them so fast that they were making some mistakes so the time to close is edging back to all-time highs according to Ellie Mae.


Carson Already Under Fire
Dr. Ben Carson, who has been nominated for HUD Secretary, doesn’t have a lot of experience with HUD or FHA. One would think that would be the substance of political attacks. Except, that isn’t completely unusual. Instead, Jeff Merkley, the senator from Oregon who is responsible for the current LO comp rules, is more upset by Carson’s attitude toward poverty. He is particularly incensed by Carson’s statement that “poverty is really more of a choice than anything else.”


Higher Rates Haven’t Stopped Mortgage Applications
Despite the sharp increase in mortgage rates, MBA reports that mortgage applications were up 2.5% last week. Defying those who claimed mortgages would slow drastically, both the purchase and refinance indexes jumped by 3% over the previous week. Rates jumped all the way to 4.41% this past week.


Existing Home Sales Up Again
Existing home sales are still getting hotter with November turning in the best sales numbers since 2007. As usual, the numbers must be looked at beyond the headline.  Since these numbers include multi-family sales, we find that single-family sales, which include, homes, condos and co-ops, were actually down .4%. The Northeast and South showed gains while the West and Mid-West lost a little ground.  First-time buyers are still making up about a third of purchases.


Mortgages Aren’t the Only Ones Slammed by False Claims Act
The Justice Department has vigorously prosecuted huge settlements under the False Claims Act for FHA violations. The DOJ collected $1.6 billion in 2016 alone from FHA mortgagees. That came in 2nd to the healthcare industry which paid $2.5 billion. DOJ collected $4.7 billion total under the act in 2016. 2014 was the banner year when the big banks were hit for a total under the Act of $6.13 billion.


Loan Officer Recruitment and Retention Study Released
Floify, a mortgage automation company, just completed a study of 13,000 loan originators that explains what attracts an LO and keeps them onboard. Top performing LOs, those who originate over $21 million a year, want access to technology, production support, compensation, good management and company culture, competitive rates, diverse products, training, and marketing support. These aren’t surprising. It should be noted that these LOs are willing to jump ship in less than three months and on average they have worked for 5 different lenders.


CFPB Makes It Nearly Impossible to Be a Private Lender
Most private lenders are individuals. The CFPB’s new servicing rule makes it impossible for sole proprietors to make residential loans. The agency doesn’t seem to realize that not every loan servicer is a big corporation. The new rule requires servicers (anyone who collects payments on a mortgage) to review files for loss mitigation. If they turn down loss mitigation, “An appeal shall be reviewed by different personnel than those responsible for evaluating the borrower's complete loss mitigation application.” In another area, the CFPB says that a vacant property can still be a primary residence. Strange.


Ad Campaign “The CFPB Man”
The United States Consumer Coalition is running ads this Christmas called “The CFPB Man.” The ads portray the CFPB watching over consumer’s shoulders, seeing what they are buying and how they are paying. The USCC says the ads are designed to inform the public that the CFPB is gathering data on 95% of Americans for their purposes and the CFPB can’t ensure that the data they collect is secure.


What Would You Do With FHA?
That is the question that asked by one of the people being considered for FHA Commissioner. Ed Brady is currently chairman of the National Association of Homebuilders. When asked by Mreport what he thinks needs to be done he more or less said we need to make certain we keep FHA but make it better. Spoken safely. There are others that are pushing to get government out of the mortgage business. It should be an interesting time.


Rate Outlook
Rates continued to claim a little higher this week although the pace of rate increases has slowed. Thank goodness or we would be at 5%.  In reality, rates have jumped far more than what the Fed is doing on economic news that is still mixed. Most of the increase is based on optimism that Trump will revive the economy and jobs. There is also fear that his trillion-dollar infrastructure plan will cause inflation.

All of the week’s economic news came out today except for new home sales. There was a lot of news but very little that would change things.

It is somewhat ironic that as President Obama leaves office, Gross Domestic Product (GDP) is finally looking up. For the second month in a row, GDP was over 3%, something had alluded Obama for most of his 8 years in office. GDP increased by 3.5% in the most recent release.

Jobless claims spiked a little in the past week, something a little unusual at Christmas time. Mom isn’t getting a new fridge or stove for Christmas at many houses. Big ticket items reflected in Durable Goods were down 4.6%. That wasn’t unexpected though.

The PCE Price index was unchanged vs. expected up 0.1%. The Fed watches this measure of inflation very closely. Incomes were up 0.3%, showing a little wage inflation. Outlays were up 0.2%, in line with expectations. Leading Economic Indicators were unchanged, showing more of the slow growth we have been experiencing. Finally, the FHFA house price index up 0.4% vs. the expected up 0.6%. 

Looks like you can have a peaceful Christmas.



 

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.

 

 

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

United Wholesale (Advertisement)
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Four Bank Trade Associations Call for CFPB Commission
The presidents of the Consumer Bankers Association, Independent Community Bankers of America, Credit Union National Association, and the National Association of Federal Credit Unions sent a letter to the Senate Banking Committee urging them to change the CFPB Director to a five-person commission. The letter charges that the current setup gives the “sole director unprecedented authority over financial institutions with minimal oversight.” In contrast, a “bipartisan board or commission will provide a balanced and deliberative approach.”


The Latest From Congress on Fannie and Freddie
Democrats and Republicans have new bills being introduced to change Fannie and Freddie. The Republican bill is sponsored by Ed Royce of California. Royce’s bill, HR 6487 would require those selling to the GDEs to take a first risk position. It would also increase G-Fees. One should note that Royce’s top contributors are banks and credit unions. Three Democrats, led by Rep. John Delany of Maryland, have introduced a bill that would also create risk sharing. Neither bill has the blessed of committee leadership at this time.


NMLS Says Renewals are Pouring In
There are 581,000 licenses managed within the NMLS. Sixty-three percent were submitted for renewal and more than half (230,000) were approved. That is 35,000 ahead of last year.  There is a little puffing in the NMS numbers since companies and LOs hold multiple licenses. But it is clear that non-banks have been hiring, growing, and gaining market share.


Fannie and Freddie to Make Mobile Home Loans
Fannie Mae and Freddie Mac had promised a while back to begin doing more mobile home loans. When I say “mobile” that is the correct word. The GSEs are apparently going to start making loans on manufactured homes that are not permanently attached to land. It seems they have gotten the horse ahead of the cart. It is still extremely difficult to do a manufactured housing loan on a single-wide or older unit that is permanently affixed to land. It makes no sense to jump straight to chattel loans when land could be mortgaged that does not depreciate in the same way as mobile homes. In addition, guidelines on manufactured homes with land could be eased.


Refinance Prospects Drop By More Than 50%
Rates continue to rise creating a huge drop in homeowners who would profit from a refinance. The number of prospects is dramatic. According to Black Knight Financial Services, the pool has dropped from 8.3 million to around four million. Since around 55 percent of mortgages over the past year were refinances, is likely there will need to be a contraction with possible layoffs in the industry.


Big Banks Defending Dodd/Frank
The big mega banks are telling Donald Trump, “Don’t mess with Dodd/Frank.” Why on earth would they do that? The obvious answer is that it gives them  an advantage. Big companies can deal more easily with the tons of regulations that Dodd/Frank spawned. Small companies don’t have extra people reviewing other people’s work. Nothing in what the banks want changed has anything to do with mortgages. They like the fact that Dodd/Frank forces them to use good sense in lending.


VA Has Record Year
There was a time when even veterans opted for some other type of 100 percent financing rather than VA. Times have changed and veterans are rediscovering their home loan benefit. The year 2016 was a record year for VA. VA now accounts for nearly 10 percent of the market. VA purchase loans rose nearly 10 percent from last year to 353,002, while refi activity rose 14.1 percent.


Fed May Taper MBS Buying
According to Rob Chrisman, the Federal Reserve will begin tapering its buying of Fannie/Freddie Mortgage-Backed Securities later in 2017. Right now, they are buying $1 to $2 billion a day of MBSs. That’s about $400 to $500 billion a year which accounts for most of the GSE’s production. The Fed is only reinvesting prepays now which will automatically slow their purchase if rates continue to climb. All of this points to higher rates in the future. Hopefully, we will not have over stimulation and see something like what happened in the Carter years.


Risker Loan Security Receives AAA Rating
Both Fitch and DBRS rating agencies assigned AAA grades to bonds backed by riskier, recently made home loans. Fitch projects a loss of 24.75 percent and DBRS projects a loss of 23 percent for the AAA-rated tranche. There are apparently some mitigating factors that created the rating such as scores above 700, bank statement income verification, and average assets of over $150,000. What they may forgetting is that quite a few states do not allow deficiency judgments, something that burned a lot of Alt-A investors.


New Home Sales Up
Not everything is gloom and doom. News home sales applications continued to increase in November. Applications were up 7.5 percent from October and 12 percent better than this time last year. Home prices fell slightly on average to $329,389 in November from $329,634 a month earlier. Mortgage applications were down last week. Surprisingly, refis did a little better than purchases for the week.


SOFI Enters Jumbo Securitization Market
SOFI has a keen eye on the mortgage market, striking specials deals with Fannie Mae and now issuing private securities to reach the jumbo market. For now, the offering is small but is expected to grow. SOFI is going after the elite jumbos with scores in excess of 760 and high cash reserves. The company is known for cutting red tape which may be attractive to many prime jumbo borrowers.



Rate Outlook
The big news of the week is that that Fed is raising short-term rates by 0.25 percent. It would have been a shock to the markets if the Fed had not raised. The hike is only part of the news. People will be parsing the Fed announcement to see how the Fed views the economy and what future Fed policy will be. The announcement was quite aggressive for the Fed. They are promising three rate hikes in the coming year when the market was expecting only two. The net result is mortgage rates are shooting up.

Part of the effect on rates came from the Producer Price Index which jumped .4% and the core also +.4%. That really is not surprising since the PPI hasn’t been in sync with the CPI so it was time for it to catch up.  Nonetheless, it raised inflation fears and we are in a very strong trend toward higher rates.

Retail Sales were only up .1%, which was lower than expected.  Industrial production fell 0.4% and capacity utilization stood at 75.  These were a little worse than expected.  The Consumer Price Index was up, but nowhere near as strong as the Producer Price Index, coming in at .2%.  Jobless claims dipped a little but still remain above the 250K threshold. 

Another shocker was released when the Philadelphia Fed reported economic activity in the Mid-Atlantic region jumped to 21.5 when experts expected 9.

If we keep getting unexpected large spikes in economic areas and the Fed signaling lots of increases, bond traders are going to push rates up more and more.  Until something breaks this trend, there is no end in sight to the rate increases.



 

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.

 

 

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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FHA Raises Loan Limits
FHA followed Fannie and Freddie in announcing the 2017 loan limits. FHA’s nationwide minimum limit is 65 percent of the conforming limit or $271,050 in 2016 and $275,650 for 2017. In high-cost areas like California and Washington, D.C., the limits will rise from $625,500 to $636,150, matching those of the GSEs. When you look at the counties where the limits increased, it is mainly those at the minimum and they will stay at the minimum. That makes FHA unavailable to a large portion of homebuyers in many areas of the country. It is good news that markets don’t seem to be declining, although the limit is not reduced if the local median price declines.


Fannie Mae Says No PIWs on Purchases
Fannie Mae has decided to back off on its promise to increase Property Inspection Waivers (PIWs). Effective Dec. 10th, no purchase or construction loan will receive a PIW although cash-out refinances now can. Fannie explains that they want the data from purchases to populate property information in Collateral Underwriter. They are dumping the $75 fee when you use a PIW. Freddie still offers Minimum Assessment Feedback so you may want to run your purchase through LP also.


CFPB Goes After Three HECM Lenders
American Advisors Group, Reverse Mortgage Solutions, and Aegean Financial were accused with deceptive advertising practices.  The CFPB claimed they advertised that consumers could not lose their home and that they would have the right to stay in their home for the rest of their lives.  Other alleged misrepresentations included telling potential customers that they would have no monthly payments and that with a reverse mortgage they would be able to pay off all debts.  Another charge was that heirs would inherit the home, without disclosing any conditions of the inheritance when. in fact, heirs frequently are not able to keep the home.  The total penalties to all three companies was less than $1 million dollars, not enough to outweigh the profit the companies no doubt made.


More Lenders Trying Non-QM or Alt-QM
Investors are hungry for mortgages that give a higher yield. So mortgage lenders are obliging by creating a variety of products that don’t fit any of the agency buckets.  Angel Oak and Citadel have been in the non-QM space for a while but now mainstream wholesalers have joined in.  New Penn and Homebridge are offering bank statement programs for self-employed borrowers that look at lot alike.  Advancial Credit Union is offering an asset depletion program, a little different twist on qualifying on assets.  Some smaller wholesale lenders get even more aggressive, especially where they can put a loan into non-owner or business purpose.  You shouldn’t miss NAMB East in Atlanta where over 100 wholesale lenders are expected to display.


Lenders Are Making More on Loans
The Mortgage Bankers Association released figures on loan origination costs and profits per loan. The news is good for lenders. Profit per loan was up to $1,773 compared to $1,686 in the 2nd quarter. The cost to originate a loan is one of the reasons for the increased profit, dropping to $6,969. That is considerably better than when TRID started when costs were well over $7,000 but still high compared to 2008 when it cost only $5,850 per loan.


FHA False Claims Extended to Corporate Officers
We have heard how the Justice Department has been getting hundreds of millions of dollars, even billions in some cases, from banks and mortgage companies for certifying FHA loans met requirements when they didn’t.  A high-level corporate officer must sign the certification of compliance.  A Chicago attorney who had run afoul of the law for other reasons certified that no officer was under indictment when he was.  A federal judge just handed down a $10 million-dollar verdict personally against the attorney, who was a corporate officer.  This attorney appears to have some issues but why were no officers of any of the big banks hit personally under false claims?


NonBanks Still Hiring in October
Last week’s Bureau of Labor Statistics job report for October showed nonbanks were still hiring at a good clip. Of course that was before the election and the sharp jump in interest rates. Refinance volume has plummeted because of the jump in rates. It will be interesting to see if purchases slow as a result of the increased rates.


Looking Behind the Carson HUD Nomination
Many people were scratching their heads over the nomination of Ben Carson as HUD Secretary. One would have thought the good doctor would have been appointed to Health and Human Services. HUD secretaries are seldom people with a deep housing background. They are usually politicians. The bigger question is, “Who will fill key HUD posts?” Housing Wire is guessing at a few who would be likely candidates for Assistant Secretary. My choice for FHA Commissioner would be Brian Montgomery. He has intimate knowledge of how FHA works and would still be a good advocate for FHA in a Republican administration.


Fintech Firms Offered National Bank Charters
You may not recognize the names of more than a few fintech firms but they are moving into the territory of banks and mortgage lending. Most people have heard of PayPal and Sofi but few may have heard of Stripe of Avant. Little by little these firms are chipping away at lending, investment, credit cards, and more that have been the purview of banks. In an interesting move, the OCC has offered the firms a “special purpose” national bank charter if they receive deposits, pay checks or lend money. The benefit to the firms is the evasion of many state laws. The question is whether non-bank mortgage companies would want such a charter for the same reason.


Trivia Question …
Is a borrower legally required to sign the lender’s Patriot Act disclosure? You can find the answer at the following link. Thanks to Jonathan Foxx and Lender’s Compliance Group for this update on NAMB’s LinkedIn Group.



Rate Outlook
The stock market continues to soar, hitting new records several times. When stocks do well, investors choose them over bonds. There seems to be a euphoria over a pro-business president taking office.

Last week, the jobs report was about or slightly below average for the year. It certainly shouldn’t stop the Fed from hiking rates at their Dec. 13-14 meeting. It would be a huge surprise if the Fed didn’t raise rates so that is pretty much baked into current interest rates.

The Fed actually has three tools that they use to manipulate the economy. We hear the most about the Fed interest rate but the Fed also controls somewhat the value of the dollar and the Fed's balance sheet.  You can read more about this in an enlightening article. So far, the Fed is not cutting its balance sheet much on buying mortgage-backed securities. If they do that, rates are likely to soar.

In economic news, most of the news was as expected. Productivity increased somewhat, the Trade Deficit had little change, Retail Sales continued to show gains although many stores said Black Friday sales were below expectations.

Jobless claims came in at 258,000, more or less where they have been for months.

The only remaining economic news for the week is Consumer Sentiment tomorrow. That is not likely to change rates.

It looks like we are holding steady on rates for the past few days. It seems unlikely we are headed back to the lower rates before the election. More small increases are a likely possibility.



 

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.

 

 

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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Fannie/Freddie Raise Loan Limits
Fannie Mae and Freddie Mac announced the new conforming loan limits for 2017 will be $424,100, up from the current $417,000. $7,000 is not exactly an exciting increase but this is first increase since 2006.  In high-cost areas like California and Washington, D.C., the limits will rise from $625,500 to $636,150. The rationale is that home prices have finally exceeded 2007 levels. This will also affect FHA since the lowest FHA limit is 65 percent of the conforming limit or $271,050 in 2016. A limit is not reduced if the local median price declines.


Trump’s CFPB Interface Named
President-elect Donald Trump named Paul Atkins as the member of his “landing team” to interface to the CFPB. Atkins is a longtime critic of heavy regulation who has served several terms as a director of the SEC. He fought for entry of small firms into the market while at the SEC. Trump has promised to dismantle Dodd/Frank. It is unclear whether that means totally revamping or eliminating the CFPB. Even if the CFPB survives, Trump could virtually stop any new regulations and enforcement actions.


HUD Inspector General Says HUD Bookkeeping is Worthless
It seems HUD and its Inspector General are often at odds. There is the war over using YSP for downpayments. Now, the OIG is saying HUD’s books are useless. The OIG claims HUD accounts contain material weaknesses that include “significant deficiencies” in internal controls, and five instances of “noncompliance with applicable laws and regulations.” HUD officials apparently don’t understand what they’re doing is wrong. They claim they are following Generally Accepted Accounting Principles.


Carson Said to Accept HUD Nomination
Dr. Ben Carson, the renowned neurosurgeon, has agreed to serve as HUD Secretary in Donald Trump’s administration according to published reports. It is a little outside Carson’s area of expertise, but he wouldn’t be the first one. Carson knows what it’s like to live in public housing, having been raised by a single mom in downtown Detroit.


Refinance Boom May be Over
Refinance mortgage applications continue to decline sharply according to recent data from the Mortgage Bankers Association. The refinance share of the market has dumped nearly 10% since rates shot up after the election. Rates are the highest they have been since 2014. Kroll Bond Ratings has gone so far as to say: “We believe that this year is also likely to be the peak in terms of lending volumes for years to come.”


Processors May Be Endangered Species
The processor who chases employment verifications, VOEs, tax returns and W-2s is likely to be unnecessary as the industry morphs. United Wholesale Mortgage (UWM) is introducing the doc-less mortgage process where UWM gets the income, asset, and tax return documentation. It is likely this will spread to other processes and documentation. Processors will still be needed to verify information not available online but the work load will be far less, even now.


Quicken Lobbyist to Head HUD Transition
Donald Trump named Shawn Krause, Quicken’s lobbyist, to the team overseeing the transition at the Department of Housing and Urban Development. This is particularly interesting since Quicken is embroiled in a lawsuit regarding FHA loans. One must wonder if the Trump administration will abandon that suit.  "Shawn Krause has done nearly everything there is to do in the mortgage industry," said Quicken Loans CEO Bill Emerson. "Having her on a landing team inside HUD, with her skill and knowledge, is one of the best things that could happen to HUD."


Judge Stays Overtime Rule
A federal judge issued a stay on The Department of Labor’s overtime rule scheduled to go into effect Dec. 1st. The rule would have raised wages $23,660 to $47,476 to avoid overtime. The judge made comments in his opinion that indicate the rule goes beyond the Labor Department’s authority. He believes only Congress can make such rules. This rule would have had a powerful impact on mortgage companies who have loan originators who often work long hours.


CFPB Not Staying Quiet
The CFPB has not been cowered into silence despite all of the negative comments following the election. They just released Compliance Bulletin 2016- 03 which states, “Tying bonuses or employment status to unrealistic sales goals or to the terms of transactions may intentionally or unintentionally encourage illegal practices.” This is a warning to mortgage companies as well as banks that steering of any kind is illegal, especially if it is not in the best interest of the consumer.


Could Trump Presidency Bring Banks Back to Mortgages?
Every indication is that Donald Trump and his appointees have every intention of stopping the practice of collecting huge fines from banks over minor violations, particularly on FHA loans. Not long ago, banks accounted for as much as 70% of mortgage originations. They have the resources to regain market share if they so choose.


Zillow’s View of the 2017 Housing Market
Zillow paints a mostly rosy picture of the housing market for 2017. They believe home prices will continue to climb by 3.6%, millennials will buy more homes, and people will buy suburban homes due to high prices in cities. Something interesting they pointed out is the Trump promise of huge infrastructure spending may cause a shortage of construction workers. That may drive up new home costs. As a side note, Zillow was just required to pay $6 million for alleged labor law violations.


Trump Names Treasury Secretary
Trump has named Steven Mnunchin as Secretary of the Treasury. Mnuchin runs a hedge fund and was a long-time partner at Goldman Sachs. He put together a group of investors to buy out the old IndyMac bank where he had to liquidate over 36,000 mortgages. "We've been in the business of regional banking and we understand what it is to make loans," Mnuchin told CNBC. In that interview Mnuchin said, “We’ll allow—We’ll cap mortgage interest but allow some deductibility.” He wants to roll back much of Dodd/Frank, but he has only mentioned the parts that affect banks and Wall Street. Mnuchin believes the government conservatorship of Fannie Mae and Freddie Mac should end and that the private market should have more of a share in the mortgage market. Mnuchin’s comments sent Fannie and Freddie stock soaring today.


Sean Duffy to Take Over Critical House Committee
Representative Sean Duffy, who wowed the audience at NAMB’s Legislative Conference the prior year, is likely to take over the House subcommittee on Capital Markets and Government Sponsored Enterprises. Scott Garrett of New Jersey was slotted to take that spot, but lost his reelection bid. Duffy has chaired the Financial Services Subcommittee on Oversight and Investigations since 2014.


UWM Removes Escrow Waiver Fee
Most mortgage lenders charge a .25% fee to waive escrows. United Wholesale breaks new ground by removing the escrow waiver fee up to a 90% LTV.  This will only be available for conventional loans.


Home Prices Hit New Record
Home prices have broken through 2006 levels nationally according to Case-Shiller. Many areas have seen incredible escalation while others have not returned to the earlier highs. Critics have pointed out that when one considers inflation, prices are still 20% lower than in 2006.


Freddie Mac Clears the Way for Digital Mortgages
Freddie Mac has released an official list of approved eMortgage vendors to encourage the use of digital mortgages. This allows for the creation, signing and storing electronic promissory notes, known as eNotes, Sellers don't need special approvals to use electronic documents as long as they meet the requirements in Freddie’s Seller/Servicer Guide.


Fraud Case Against Countrywide Dead
The fraud case against Bank of America/Countrywide has stopped. The government had originally leveled a $1.27 billion-dollar penalty against Bank of America, but that penalty was thrown out by the Second US Circuit Court of Appeals in May, according to the Wall Street Journal. The appeals court ruled that Countrywide’s actions in a program known as “The Hustle” hadn’t amounted to fraud. This also voided the fraud verdict against former Countrywide executive Rebecca Mairone (now Rebecca Steele), one of the few individuals prosecuted for her alleged role in the financial crisis. Like Countrywide, Steele had been accused of knowingly pushing shoddy mortgage bonds on Fannie Mae and Freddie Mac.


Rate Outlook
Rates continue to edge upward as stocks soar. Most experts believe what Trump is proposing will be inflationary so they are predicting higher rates.

The ADP payroll report said the economy added 216K jobs, sharply higher than the expected 160K. ADP is often the precursor to the BLS report set for release this Friday. The BLS report is generally regarded as the most influential economic report. If the BLS report follows the ADP report, it will simply seal the Fed’s interest rate raise in December.

Personal income rose 0.6% and outlays 0.3%. Economists’ expectations were for income to rise 0.4% and outlays to rise 0.5%. The inflation component of the report, core PCE, rose 0.1% as expected.  Consumer Confidence was a shocker, coming in at 107.1, the highest level in many years.  People are convinced things will get better.

GDP was revised up for the 3rd quarter to 3.2%. This was the first time during the Obama administration’s tenure that it moved past 3% which will help to preserve his legacy.

Weekly jobless claims were over the estimated 258,000 at 268,000 and up slightly from previous weeks.

Prepare for volatility as traders are reacting to news that doesn’t have huge substance yet.  They are assuming what is being bantered will come to pass.  No one is certain what a complete reversal of the last eight years will do to the economy so professionals generally choose to exercise caution.  Don’t look for a rate pullback of any consequence any time soon.  The impetus is for higher rates and it takes something dramatic to break a trend.



 

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.

 

Happy Thanksgiving From NAMB!
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

United Wholesale (Advertisement)
Looking for a competitive advantage? Look no further than Instant M.I. from United Wholesale Mortgage. With Instant M.I., there’s no need for a second underwrite from the M.I. companies, which can cause closing delays and last-minute conditions. That means you get M.I. in minutes, not days, providing peace of mind for you and your borrower. Learn more at UWM.com.


 CFPB Files for Rehearing in PHH Case
The CFPB is still smarting over the tremendous drubbing they took in the PHH case.  The appeals court set aside the $109 million penalty on PHH, ruled against the CFPB’s interpretation of Section 8 of RESPA, and said the Director can be removed by the president at will.  That means president Trump could fire Richard Cordray the moment he is sworn in.  The CFPB had little choice but to file for reconsideration by the entire body of the court. The wording of the CFPB’s appeal seems to set the case up for appeal to the Supreme Court if the court en banc does not reverse the opinion.


Things Look Dark for CFPB Director
If not overturned or stayed, Richard Cordray could be out of a job the day president Trump is sworn in. Even if the full court is willing to rehear the case, which is rare, it seems Trump could turn it over to the Justice Department which will be headed by Jeff Sessions, no fan of Dodd/Frank. They may decide to stop all appeals. The CFPB is currently appealing to the full DC appeals court and could petition the Supreme Court. If the full court decides to rehear the case, none of the existing decision would stand and it more or less starts over. That would be the best possible outcome for the CFPB.


Ben Carson Says He Has Been Offered HUD Secretary
Dr. Ben Carson told Neil Cavuto in a Fox News interview that he has been offered the job of HUD Secretary. Carson seems to view the job as an opportunity to heal what is wrong in big cities. There was no mention of FHA or housing per se. Carson citied the fact that he worked in an inner-city hospital as his resume for the job.


Hensarling on the Road Slamming Dodd/Frank
House Financial Services chair Jeb Hensarling has been speaking at various function this past week and Dodd/Frank is getting roasted. Hensarling has introduced a bill, the Financial Choice Act that would repeal and replace Dodd/Frank. Speaking a housing forum in Dallas, Hensarling called Dodd/Frank “a grave mistake.” Speaking to the Exchequer Club, Hensarling claims the law makes it harder to achieve the American dream. Hensarling says he has been meeting with Donald Trump and it is just of matter of when and how to repeal Dodd/Frank. There are those who believe Trump will tap Hensarling as the next Treasury Secretary.


GAO Study Not Flattering to FHFA
The Government Accountability Office made a study of how well FHFA has done its job. The findings were not complimentary of FHFA. The study found, “Taxpayer dollars remain at risk. Although FHFA has established goals for the conservatorships, its goals have been somewhat in tension with each other. In addition, the actions taken by FHFA to implement its goals have lacked a consistent direction over time, and FHFA has not clarified how to balance different priorities.” Essentially, FHFA has not done a great job managing the GSEs. 


CFPB Still Using Mystery Shoppers
The CFPB used mystery shoppers several years ago in the Bancorpsouth case but little has been heard about it lately. A magazine article claims the CFPB is still using them. The CFPB will send in equally qualified white and non-white borrowers to see if minority applicants were treated worse, given a higher interest rate, or the denial rate is higher.


Trump Plans to Trim Power of FSOC
You may not know what FSOC is if you work for a non-bank. It is the short name for the Financial Services Oversight Council and it is composed of all of the major financial regulators such as the CFPB, OCC, NCUA, FHFA, etc. These regulators get together through FSOC to see what the current issues are that need regulation. Donald Trump has appointed Alex Pollock, a vocal critic of regulation to be his advisor on the council. That has been taken as a sign Trump wants to weaken or eliminate FSOC.


Ban on Servicer Robo-Calls Good for Brokers
Servicers often use Robo-Calling to solicit borrowers in their portfolio to refinance or even remind them that they also provide purchase mortgages.  Mortgage brokers do not have a servicing portfolio to call and they don’t have a right to call customers on the Do-Not-Call List after 18 months.  The FCC just ruled against the MBA who asked for servicers to be able to Robo-Call loans they service or Robo-Text them. This opens an opportunity to brokers to refi those loans.


AIG Entering Mortgage Business
Although AIG just sold off United Guaranty mortgage insurance, it wants in on the mortgage business. The giant company intends to invest in mortgages and securitize them. They will purchase loans from banks and non-banks rather than enter the retail market. It would seem likely a company this size could offer wholesale lenders jumbo product that competes with the big banks.


HECM Program Weighing Down FHA
FHA’s recent audit was good, even excellent, if it were not for the HECM program. The FHA reverse mortgage program went form a positive $6.8 billion value to a $7.7 billion-dollar liability. That is preventing FHA from cutting its mortgage insurance premium. Brian Montgomery, former FHA Commissioner, believes HECMs must be pulled from the Mutual Fund, where forward mortgages are insured, to a special risk fund.


People are Not Listing Their Houses for Sale
Redfin reports that the number of listings for sale dropped 8.6 percent compared to last year, marking 13 consecutive months of annual declines and the largest year-over-year decline since May 2013. The trend seems to be even fewer listings which is making inventory tighter. Their research shows Florida as the area with the most price increases and Seattle with the fastest time on market.


House Leaders Ask Obama Not to Write Any Final Rules
President Obama has been known for using executive power to write new rules. Republicans, who now have control of both houses of Congress and the incoming presidency, are asking him not to write new rules in his last few weeks in office. They warn, “Should you ignore this counsel, please be aware that we will work with our colleagues to ensure that Congress scrutinizes your actions—and, if appropriate, overturns them—pursuant to the Congressional Review Act.”


Existing Home Sales Up
After hitting a peak in June, existing home sales started to slide back a little until this month. Sales were up for October, even slightly surpassing June, according to the National Association of Realtors. Home prices are still slightly below June levels and have trended downward each month since June.


Be Careful, There is Still Fraud Out There
Freddie Mac is warning originators the fraud is alive and well, but they are getting better at detecting it. Fraud can be perpetrated by originators, real estate agents, and borrowers. It can be misrepresentation or omission. But, fraudsters are getting more sophisticated. They have been known to set up fake employers with a Web site and addresses. Interested parties are setting up contributions in advance of the purchase to evade detection. Originating a fraudulent loan can fall back against the lender or broker and even the originator. It is sometimes tough to prove you didn’t know there was fraud.


FTC Warns Against Rent-to-Purchase
The FTC is warning consumers that Rent-to-Own is not a good idea. The FTC believes that the practice is filled with potential scams. Many times the person offering a property isn’t even the owner. Even if everything looks pretty legit, renters can lose the option to buy if they are late on just one payment. The FTC believes it is better to try to buy the normal way with a mortgage.


Rate Outlook
There are a lot of people thinking Donald Trump being elected president will fuel strong economic growth and inflation. Fannie Mae does not appear to be one of them. They believe some of Trump’s promises will fuel growth, an others, such as tariffs will slow growth. Their net assessment is that growth in 2017 will be pretty much like 2016. If so, rates aren’t likely to continue rising much.

The Fed has more or less painted itself in a corner for a rate hike this year and this is their last chance.  Bloomberg puts the odds at 100%.  Janet Yellen cities the unemployment rate being at 4.9% as showing excellent job growth.  That is only a survey.  How can the job market be getting better when 30% fewer jobs were created in 2016 than in 2015?  Is she possibly meaning wages which are increasing slightly?  Yellen made a particularly strange statement to Bloomberg, saying the recent pace of jobs gains “cannot continue indefinitely.”  On one hand, it seems the Fed is thinking Donald Trump just might turn the economy around but on the other, they don’t believe current job growth will continue.

The DOW just passed 19,000, breaking a barrier that it could get past for more than 2 years after hitting 18,000.  When stocks do well, bonds don’t.  We are seeing that in mortgage rates where we have just experienced the highest jump in rates in 41 months.

Due to the Thanksgiving holiday, all of the economic news was crammed into Wednesday.  Weekly jobless claims were 251K versus the expected 243K. Durable goods orders rose 4.8% versus the expected 1.1% increase. Consumer sentiment was 93.8, expected 91.6.  New home sales were the one dark spot, dropping 1.9% below September but 17.8% better than October 2015.

Even economic data out of the Eurozone is beginning to show a little strength. Services PMI rose to the highest levels seen in almost a year and manufacturing PMI rose to the highest level in several years.

The surge in durable goods orders gained the most attention.  It was far better than expected and mean people are willing to spend on a new fridge or washer.  That means they have income and are willing to spend.

The Federal Reserve minutes said the economy is strengthening and a rate hike is coming soon.  No surprise there.

Where are rates headed?  It’s hard to stop momentum and rate hikes have the momentum at the moment.  It will take something dramatic to slow down the rate increases so we are likely going to see at least a little higher rates. The 7-year Treasury auction was consumed with vigor so not everyone is thinking bonds are going higher.  That should keep further rate pressures tame if there are lots of buyers at current rates.



 

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.

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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FHA Releases Best Report in 10 Years, No Premium Cut
FHA just released its 2016 actuarial report this week. It shows FHA well above the 2% capital reserve requirement. There is a lot more useful information in the report which shows 83% of endorsements went to non-bank lenders. Banks have fled FHA thanks to DOJ suits. FHA remains primarily a purchase loan program despite the huge refinance market this year. FHA’s market share is still growing up from about 16% of purchases in 2014 to about 22% for 2015/2016. Ed Golding, current FHA head, doused any hopes of a premium cut in announcing the good report.


Appraisal System Roasted Before Congress
The House Financial Services Committee heard from various stakeholders in the appraisal industry this week. It was not testimony that bodes well for the profession. Most insisted that the current appraisal system needs an overhaul. The Appraisal Foundation, who testified at the hearing, has established a perfectly fine set of standards and high qualifications. The problem is, it has discouraged entry into the profession and irritated lenders and home builders. That became obvious at the hearing.


Ginnie Mae Wants to Crack Down on Serial Refinancing
Some originators and some borrowers like to refinance a VA or FHA loans when the minimum savings requirement of those agencies is met. Ginnie Mae bond issuers are concerned that it could harm Ginnie servicers and Ginnie Mae itself. Lenders who refinance a Ginnie loan in less than six months will be segregated and bunched together in special pools, which means they will be penalized in terms of pricing starting February 1st. VA is considering writing guidelines that would prohibit or restrict refinancing within a six-month period.


Two Potential Trump HUD Secretaries Are Touted
Donald Trump is said to be considering two people for HUD Secretary and they couldn’t be more different. Pamela Patenaude, president of the J. Ronald Terwilliger Foundation for Housing America's Families, is a prominent former HUD employee. She oversaw community planning and development at HUD and now presides over an affordable housing group. The other possible HUD Secretary is Rob Astorino,  Atorini gained national prominence for his legal fight against HUD and the Justice Department over a federal court settlement challenging the racial diversity in Westchester’s affordable housing locations. In essence, he has a sour taste about HUD’s handling of community development.


Nearly 25% of Mortgage Applicants Unhappy With Lender
J.D. Power claims 27% of first-time buyers rue their choice of mortgage lender during the homebuying process. 21% of all homebuyers felt the same way. The bad news is 72% of first-time buyers in the group said they were pressured to take a particular loan. The good news is that is an improvement over previous surveys. At the top of the satisfaction list was Quicken, followed by Citi and Ditech.  Power’s survey produces results that seem to disagree with the CFPB’s complaint database where Citi racked up the most consumer complaints, right behind the three credit bureaus. They did do better than the other big banks with mortgage complaints but they write a lot less mortgages.


Mortgage Applications Take Serious Hit
Mortgage applications took a 10% drop from the previous week thanks to a sharp rise in interest rates. The hit was especially hard on refis which dropped 11%. Purchases dropped 6%. Two areas that actually increased slightly were FHA and VA. If rates continue to suffer, we could see further drops.


Trump Would Not Eliminate the Mortgage Interest Deduction
"There's nothing in the plan that currently would bring that under attack," says Steve Calk, a member of Trump's economic advisory council.  Prior to Trump’s election, MBA CEO David Stevens had suggested that MBA might be willing to discuss cutting the mortgage interest deduction as part of a larger tax reform package. Stevens and others pointed out that the deduction is used more by middle-class borrowers than low-income ones. He later walked back those statements.


Banks Forcing Bonds Out of Jumbo Market
Residential mortgage securities for jumbo loans are down nearly 50% this year compared to last.  There are two explanations that both play together.  First, banks love high-quality jumbo loans and offer rates even better than Fannie Mae loans at times.  Second, bond investors still like the government guarantee and are under no pressure from regulators to make home loans.


Fannie and Freddie Risk-Sharing is Great, Right?  Maybe.
Fannie Mae and Freddie Mac have been entering into risk-sharing agreements with those selling them loans.  The selling lender takes a certain portion of the risk and gets a special deal from the GSEs.  Those deals include lower G-fees. Right now, with defaults at an extreme low point, lenders get all the benefit because there is little risk.  Some people think Fannie and Freddie are giving away the store since they could be making the profit on that risk. Time will tell.


Quicken Wins a Skirmish in War with HUD/DOJ
Quicken Loans won a small but important battle in court this week. The case will be moved from Washington, DC to Detroit. It will not only be easier for Quicken to have the case heard in Detroit, it may give a friendlier venue. Quicken, the nation’s #1 FHA lender, claims it has the best FHA record in the business and the Department of Justice is simply extorting money from lenders.


Liz Warren Threatens Trump
I would say Elizabeth Warren is a bit upset about Trump winning the presidency. She has made it clear that she is not going to cower in a corner. In her latest rant, Warren told Trump that he had better “remove the lobbyists and financial bigwigs from your transition team and reinstate a group of advisors who will fight for the interests of all Americans.” If not she threatened to “oppose you every step of the way.  I will track your every move, and I will remind Americans, every day, of the actions you take that fail them.”  Whew!



Rate Outlook
So far, the election of Donald Trump has had the opposite effect on the stock market than everyone predicted.  The market has soared to all-time highs which has unfortunately driven up interest rates.  Trump continues to baffle the prognosticators.  Trump doesn’t always follow through with his fiery rhetoric which seems to put people at ease.  He now is saying he may not replace Janet Yellen as Fed chair but will not nominate her for a 2nd term.

Now, we have the Fed dilemma, should they raise rates in December as most believe is expected?  If so, what is the criteria?  How do they justify it?  Inflation is still less than 2%, much lower by the Fed’s favorite measure, PCE.  Stronger employment?  Hardly.  In 2015 the average monthly job creation was 228,000.  In 2016, so far, it is only 180,000.  Then, there is GDP which is hardly on fire.  I’m certain the Fed can spin it based on what they saying about the labor market at past meetings.  According to the media, now that Trump was elected everyone is worried about inflation.  Really?

It may be the Fed is realizing that we must not only consider employment but pension funds and social security.  Almost half of our population is on a pension or social security.  If pension funds can’t get enough return due to low rates and bouncing stock values, a lot of people will be in financial trouble.  Social Security is not doing well either.  One must wonder if the Federal Reserve is thinking about raising rates based on that.

Right now, economic news doesn’t seem to be in the driver’s seat for interest rates.  Nonetheless, Retail Sales rose 0.8%.  Economists’ expectations were for sales to increase 0.6%. 

The Producer Price Index was unchanged in October, rose 0.3 percent in September and were unchanged in August.  At the producer level, this shows little or no pressure for prices to rise.

Consumer prices rose 0.4% and the core value, which excludes the volatile food and energy components, rose 0.1%. Expectations were for CPI to rise 0.4% and 0.2% respectively. Housing starts printed at 1,323K versus the expected 1187K. Housing starts jumped by the most since 1982 in October.  The Philly fed index came in at 7.6 versus the expected 8.

Weekly jobless claims printed at 235K, far below the 250,000 marker.  People are holding on to employees in anticipation of economic growth.  All of this bodes well for the economy and the new president but not particularly good for rates.



 

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.

 

 

 

 

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

United Wholesale (Advertisement)
UWM gives your loans a running start. You can submit applications without waiting for supporting income documents from your borrowers. The borrowers just e-sign the application package, you click “Order Income” and then submit it to UWM. Their new Automated Income Verification process verifies income without pay stubs or W2s and you won’t need to provide other supporting docs until after you receive your approval. Learn more at UWM.com.



What Will Trump Do with Dodd/Frank, CFPB?
During the campaign, Donald Trump promised to dismantle Dodd/Frank and cut regulations. The question remains, “Which parts of Dodd/Frank would Trump attempt to dismantle?” There is a lot more to the law than mortgages. Now that a federal appeals court has ruled that the CFPB Director serves at the pleasure of the President, Richard Cordray could be replaced and the new CFPB Director could rewrite all of the rules promulgated under Cordray. Trump may not move on Dodd/Frank right away since he has so many more pressing items such as Obama Care and immigration. Can you imagine rewriting all of the software for new rules and retraining everyone?


Lots More PIWs Coming
According to Mat Ishbia, Fannie Mae intends to solve a large portion of the appraiser shortage by issuing a lot more appraisal PIWs. Ishbia, in his 3 Points video, claims Fannie will issue PIWs on 25% of rate and term refinances. That is as much as 10 times the current level. The enhanced PIW waivers go online December 10th for rate and term refinances that have a previous appraisal in Collateral Underwriter. These loans will often receive a PIW rather than needing a full appraisal. Freddie Mac says they will be something similar with more purchase mortgages.


Fannie Mae Isn’t Waiting to March Ahead
Fannie Mae is beginning to act like the old Fannie, despite the fact they don’t control their future. The GSE is creating new programs such as income and asset verification tools, automated guideline protection found in Day 1, and specialty cash-out programs like student loan cash-out. So, what’s next? Fannie Mae CEO, Timothy Mayopoulos, says Fannie is developing tools that will make certain loans are compliant with the maze of mortgage regulations. It seems they will offer all the technology needed to originate mortgages before long. Will anyone need a mortgage software package?


Wells Fargo Now Facing Mortgage Scrutiny
Wells Fargo announced on its SEC filings that it is discussing potential issues with regulators regarding its mortgage practices. The Residential Mortgage-Backed Securities Working Group of the Financial Fraud Enforcement Task Force, which includes officials from the Justice Department and the SEC, has raised “potential theories of liability” surrounding the bank’s handling of residential mortgages and FIRREA in particular. The details are yet unknown but you can be certain it will cost Wells Fargo lots of legal fees and more settlements.


Hot Buttons for Your Compliance Management Systems
The CFPB mentions what they are particularly looking for in a Compliance Management System. Yes, you are supposed to have one, even if you are a one-person shop. Number one  on the list is an up-to-date fair lending policy statement, documenting the policies, procedures, and decision-making on providing language services. Number two is regular fair lending training for all employees and, again, providing language services. If you have no provision for handling non-English speaking borrowers, it is likely the CFPB is not going to be happy.


Wholesale Lenders Letting Brokers in on Servicing
Several wholesale lenders turn over the trigger leads to the broker who originated the loan when the borrower is applying for a new mortgage. The weak spot in that approach is your borrower has already made the decision to apply elsewhere. Caliber Home Loans believes they can improve on that. They review their servicing portfolio monthly. If a customer can potentially save money by refinancing or is in the market to purchase a home, Caliber will identify the record and send the customer information regarding possible refinance or new purchase options via e-mail and mail, as permitted. The next step is the big change. Your name and contact details will be included in the e-mail should they choose to use your company for their financing needs.


Would You Like to Offer Your Own Construction Loans?
Construction loans are a little more difficult and risky than selling whole loans so you do need some experience if you want to jump into this area. But, if you are a correspondent or mini-core, First Tennessee Bank is offering warehouse lines so you can do your own construction loans. You must have a standard warehouse line with them first. Starting line size is $3 million.


FHA Condo Rule Changes Fall Short
Congress sent a very clear message to FHA that they needed to loosen their condo rules. FHA said, “OK,” but put in a lot of hoops condo buyers still have to jump through. They did lower the owner-occupant ratio from 50% to 35% and they have proposed a rule that would allow spot condos. But, they are requiring low occupancy-rate condos to document that the project has 20% financial reserves and that no more than 10 percent of the units are in arrears on HOA dues. Associations must provide three years of "acceptable" financial documents for review as well.


Who Needs All Those Duplicative Docs?
We get tax returns and insist that borrowers sign them when we get what they actually filed with the IRS through transcripts. Most lenders are still asking for bank statements when that information is available through an online service. I’ve had lenders insist on a standard VOE for FHA when we had a very complete one through the Work Number. The good news is that some lenders are waking up. Several wholesale lenders are adopting Fannie Mae’s DU validation service aimed at avoiding duplicative documentation. But that is only for conventional loans.  I’m certain there are some grumpy old FHA review underwriters at the HOCs who will think this is awful because they want to compare multiple documents. But, they are about to be unneeded. Technology is remaking the mortgage industry and FHA will have to move forward as well.


PHH Fined $28 Million by New York
PHH may have escaped a huge fine from the CFPB, but it is not out of hot water. The company has agreed to pay the New York Department of Financial Services $28 million over numerous infractions between 2010 and 2014. Most of the violations were servicing related but at least three were related to origination. PHH had LOs with expired licenses or LOs from another PHH entity take applications. PHH had inadequate controls to ensure that electronic signatures appearing on applications were those of the mortgage loan originators who actually took the application. Finally, PHH’s compensation plan failed to prevent against steering borrowers into risky or unnecessarily high-cost loans or basing a mortgage loan originator’s compensation on the terms of the loan. Combined with major losses in servicing and legal fees, things are not good at PHH.


Fannie Mae Has Profitable 3rd Quarter
Last week, Freddie Mac doubled its net profit. That news was followed by a good quarter for Fannie Mae. While not as impressive as Freddie’s performance, Fannie turned in a respectable profit of $3.2 billion dollars.


Will Fannie and Freddie Be Forced to Allow Marijuana Income?    
With at least seven states approving recreational marijuana and many others approving medical marijuana without a prescription, there will have to be an industry to meet the demand. It is unclear whether Congress will be forced to legalize its use or Fannie and Freddie can simply move forward.



Rate Outlook
Donald Trump was elected and, so far, the stock market hasn’t imploded. To the contrary, it has surged to an all-time high. When news began to show that Trump would win, stock futures dropped nearly 800 points. It was gloom and doom.  But, when people who own stocks started buying, things turned positive quickly. Makes one wonder who was driving down stock prices and who was driving them up. There is little doubt whom the big players in the stock market wanted for president.

Unfortunately, when stocks do well, bonds tend to do poorly. Mortgage rates have taken a nasty hit yesterday and today despite decent demand for longer-term securities. There looms a huge question on what Trump will do at the Federal Reserve. Our biggest question is whether he will want the Fed to keep buying most of the residential mortgage securities. If not, rates will shoot up.

Some are explaining the bond jump on Trump’s promise to pump a trillion dollars into making the U.S. infrastructure state of the art. Others claim the Trump tax cuts will increase the deficit and devalue the dollar. The good news is the blood-letting has reversed a bit this morning.

Last Friday, the BLS job report showed a mediocre 169,000 jobs were created.  If the election hadn’t been so surprising, we probably would have had better rates this week.  This was a light week for news and tomorrow the bond market is closed.  Jobless claims were a little better at 254,000 vs last week’s 265,000.

Everyone thinks it is a foregone conclusion the Fed will raise rates ¼ in December. I wouldn’t be totally certain of that since Trump would take that as a direct attack on the beginning of his presidency.  He had already accused the Fed of being sympathetic to Barak Obama and Hillary Clinton. At least we aren’t bored.



 

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.

 

 

 

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

United Wholesale (Advertisement)
UWM gives your loans a running start. You can submit applications without waiting for supporting income documents from your borrowers. The borrowers just e-sign the application package, you click “Order Income” and then submit it to UWM. Their new Automated Income Verification process verifies income without pay stubs or W2s and you won’t need to provide other supporting docs until after you receive your approval. Learn more at UWM.com


Freddie Mac Wows With Its Profit
Freddie Mac made a whopping $2.3 billion-dollar net profit in the third quarter. That was double what the GSE made in the 2nd quarter, which was a good quarter. Freddie said they aren’t expecting much in way of loan losses in the immediate future. No wonder the government wanted to take them over.


Wells Fargo Pays $50 Million Over Padded Appraisal Fees
As if Wells Fargo doesn’t have enough problems, they were embroiled in a class-action lawsuit over broker price opinions when loans go into default. The suit alleged that BPOs should only cost about $30 to $50 dollars and Wells charged borrowers about $125. This hefty settlement could be just Wells trying to clear their plate to repair their reputation. There were 250,000 people affected. Even at $100/person that is only $25 million.


Consumers Continue to File Less Mortgage Complaints
The number of consumer complaints regarding mortgages fell by 9% when compared to the 3rd quarter of 2015. Student loans are beginning to feel the heat by doubling since 2015. Bank accounts had the 2nd highest rate of increase.  Perhaps Wells Fargo isn’t the only one irritating consumers. Debt collection now has nearly twice the number of complaints as mortgages and credit reporting has jumped past mortgages as well. The “most common issues identified by consumers are problems with managing, opening or closing an account (32 percent) and unauthorized transactions or other transaction issues (30 percent).” Equifax won gold with the most complaints, followed by the other two bureaus, then the four big banks. Complaints against mortgage brokers are non-existent but they are the only ones with compensation caps and inability to order appraisals.


Why Did the CFPB Send Brokers HMDA Warning?
Even attorneys are wondering why brokers were sent a HMDA warning letter by the CFPB. Normally, HMDA only applies to the entity making the credit decision. However, the CFPB gave examples in the 2015 HMDA regulations that identify situations where brokers do make the credit decision. When an application is never sent to a lender because the broker determines it does not meet the criteria of the lender or mortgage insurer, the originating company, i.e. the broker, reports if the meet the threshold requirements. It appears the CFPB used Call Reports to determine companies that were not filing.


Homeownership Crawls Off the Bottom
After hitting the lowest homeownership rate since records have been kept, there was a slight increase in the 3rd quarter. The rate went from 63.1% to 63.4% making it the 2nd lowest rate in history. We are hardly gaining and that is with things like 1% down, super-low rates, and low-score programs.


CFPB… Much More Than a Regulator
The CFPB was created as a regulator but its vision is far beyond that. We learned in QM that Dodd/Frank and the CFPB believe they should set underwriting standards for mortgages. The CFPB also is charged with being a consumer educator. Now, the CFPB takes it one step further with Project Catalyst. This is project that promotes innovation and technology. It is clear the CFPB wants companies to adopt the technology they believe is good for consumers and has even berated software companies. One of their goals is “Empowering consumers to make day-to-day decisions or adopt spending and savings habits.” Are consumers currently unable to make day-to-day decisions?  They also want businesses to reduce operating expenses. Some believe that could start at the CFPB.


Mortgage Employers in Compensation War
If you are an LO, you are no doubt receiving e-mails promising a $20,000 sign-on bonus. If you look on employment sites, you will find nearly everyone is offering LOs a bonus to come work for them. Rob Chrisman reports that the same is true of processors and underwriters. An employee search firm says, “The war for processors and underwriters is as intense as I have ever seen it.”


Treasury Doesn’t Want Fannie Takeover Thinking Revealed
A federal judge ruled that the documents that resulted in the government taking all of Fannie and Freddie’s profits be given to GSE shareholder’s attorneys. For some reason, the Obama Administration does not want these documents to see the light of day. So, they are filing a motion that claims “presidential communications privilege.” Without getting too technical, the government is saying releasing these documents would give too much insight into the housing policy thinking of the Obama Administration. You can read the motion here if you have too much time on your hands.


Could FHA go Back to .55 MIP This Year?
There are many experts who believe that FHA will turn in a very strong audit this year and will cut the annual premium back to .55%, the levels of a few years ago. With the GSEs showing excellent profits and loan risk extremely low, it does seem possible that FHA could follow USDA and cut premiums. The audit is expected out this month.


Ginnie Mae Worried About Selling Their Securities
Ginnie Mae president Ted Tozer says his “biggest fear right now is that we might be running out of servicing capacity. People tell me when they put a block out they may have only one or two bidders on it." Tozer worries that nonbanks could hit a liquidity crisis if demand worsens. There is a plethora of reasons for the dearth of buyers. Low rates, CFPB servicing rules, FHA being punitive over certifications, Basel III making servicing less attractive to banks, etc.


SOFI Gets Special Cash-Out Rate From Fannie Mae
It looks as though Fannie Mae is carving out special programs for various lenders. SOFI is offering a cash-out refi that is ¼% cheaper than other cash-out refis because it will be used to pay off or pay down student loans. SOFI, who was originally known as something as an alternative to Fannie Mae, has now become a Fannie seller servicer. Can’t beat them? Join them.


HomeBridge is Buying Prospect Mortgage
HomeBridge Mortgage announced it is buying Prospect Mortgage. The two are the largest 203K lenders in the nation. HomeBridge is the new name for REMN which uses the old name only for East coast wholesale. Prospect initially came to fame as an MSA with Wells Fargo. When MSAs lost favor with the CFPB, Wells bailed which made Prospect a takeover target. The new company will be the sixth largest mortgage lender in the country.


Zillow Turns in Huge Profit
After Zillow was finally able to extricate itself from the lawsuit with Realtor.com, it showed a nice profit. After losing $26 million last year, Zillow earned $6.8 million this year. After acquiring it next-largest competitor, Trulia, Zillow really has very little competition other than Realtor.com. Next year looks even better for the online portal.


MBA Names Its First Hispanic Chairman
The Mortgage Bankers Association installed Rodrigo Lopez as its first Hispanic chairman in the association’s 103-year history.  Lopez is executive chairman of NorthMarq Capital, a commercial/multi-family lender.  He had served on MBA’s board and was chair of MBA's Diversity and Inclusion Committee.


Crapo Would Likely Head Senate Banking
For those of you die-hard political junkies at NAMB like me, we always like to know in whose hands we fall in Congress. If the Senate remains Republican, Mike Crapo of Idaho is the likely chair. He is a little less conservative than Richard Shelby, the current chair, and may strike some deals. We hope they aren’t deals that fall on the little people in this business. If Democrats wrest control of the Senate, the chair will go to Sherrod Brown of Ohio. He is a pretty hard line liberal but he is no Elizabeth Warren. Brown has held the party line on no changes to Dodd/Frank.



Rate Outlook
The Fed minutes declare the U.S. economy is doing better all the time.  But, as expected, they did not raise the discount rate at their meeting this week. Unless some really bad economic news comes out this coming week, we can assume the Fed will raise rates in December. We are very near full employment and the CPI indicates we are close to the magical 2% inflation rate the Fed has been waiting for. Even if the Fed raises in December, it will likely only be ¼% and other raises will be spaced out and small.

That hardly means the economy is on fire, if that is even what we want. Small businesses, such as brokers and small lenders are not there to fuel the economy. People are not starting new businesses. In 1977, 16% of U.S. firms were less than one year old. Now, that share had fallen to less than 8%. The unemployment figures are somewhat misleading since we have a much larger share of the population not working than in recent history. Goldman Sachs says small firms are less competitive now because regulations are tipped in the favor of large firms. Small business also need to borrow without a lot of red tape. Dodd/Frank is red tape. The takeaway is we will not see the U.S. as one of the fastest growing economies but it likely won’t have any sharp jolts either. Regulation has its benefits and its detractions.

This week, rates have seen a slight slide, not uncommon on the first week of the month when there is a lot of economic news. Starting with the inflation news last Friday, we have seen a slight heating of the economy. GDP grew faster than it has in several years. Wage costs pushed up more than expected. PCE inflation, a key Fed measure was only up .1% which tended to tame the rate increases. Then, ADP showed a smaller than expected gain in payrolls for the week.  That also gave rates a little break.

This morning, Weekly Jobless Claims continued to rise from below 250,000 a few weeks ago to 265,000 this week. Productivity in Q3 rose 3.1% and labor costs increase 0.3%. Expectations were for increases of 1.8% and 1.2% respectively.  That contradicts somewhat the wage costs released last Friday.  Finally, Factory Orders rose 0.3%, near expectations.

Tomorrow is the behemoth of rate influencers, the BLS jobs report. If the report is good, it more or less seals the Fed raising rates in December. If we are to get any rate relief, it won’t be until this report comes out tomorrow.



 

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.