News From NAMB: April 6, 2017

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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The CFPB must think the entire DC Court of Appeals is its best shot at keeping its Director and perhaps its right to exist. In the brief that the CFPB filed just before the deadline, the say the full court MUST rule on the constitutionality issue. Many on the CFPB’s side had wanted the court only to rule on the RESPA claim, not the constitutionality issues. Republican appointees still outnumber Democratic appointees but they must feel the odds are better than the Supreme Court.

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During the first few years, no one wanted to challenge adverse findings by the CFPB.  Most simply settled. Since the PHH case, companies have begun to take the CFPB to court and the CFPB hasn’t been faring that well. PHH gave the CFPB such a drubbing that it may cost the Director his job. A district court judge dismissed a lawsuit that the CFPB filed against the payment processor Intercept Corp. and harshly criticized the bureau for failing to present enough evidence. Pathfinder Payment Solutions, an independent sales organization, asked a judge to sanction the CFPB, claiming the agency “knowingly exceeded its statutory authority, deliberately disregarded the law and consciously distorted the facts.” 

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Speaking to the CEOs of the big banks, President Trump promised to "do a very major haircut on Dodd Frank." Trump told the bankers “We are absolutely destroying these horrible regulations that have been placed over your heads, not over the last eight years, over the last 20 and 25 years.” The bank CEOs, who have done quite well under Dodd/Frank, have been reserved about Dodd/Frank changes. But, they are warming to the idea of regulatory cuts. Jamie Dimon wants to relax FHA requirements that have cost Chase a lot of money.  

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Richard Cordray walked into the most adversarial hearing in his career. Committee Chair Jeb Hensarling started things off by saying, “Under the PHH case [the President] can dismiss you at will. Under Dodd-Frank, you can be removed for cause. Either way, I believe the President is clearly justified in dismissing you and I call upon the President–yet again–to do just that, and to do it immediately.” Cordray was calm and deliberate, simply reading his testimony, enumerating what the CFPB has done lately. He fielded questions adeptly, as usual, with the help of Democrat Congress members. The CFPB accompanying 190-page report is available for those who have the time.

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The sharp rise in home prices has generated an interesting side-effect. Homeowners have gained equity even though they have only owned the home for a few years. They are now tapping that equity at the fastest rate in eight years. Even more unexpected, one of largest groups pulling out cash is millennials. Many are choosing HELOCs but others are simply refinancing. Cash-out refinances accounted for nearly half of all refinances in the last quarter of 2016. With rates up a bit, some believe the cash-out boom will die off but there should still be plenty of people who want some cash. 

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The American Bankers Association’s 24th annual Real Estate Lending Survey revealed that fewer non-QM loans are being made as time passes. In 2013, non-QM loans accounted for 16% of the surveyed banks’ production. The number fell to only 9% in 2016. The biggest obstacle is the 43% qualifying ratio. The banks are increasingly selling off the loans they make rather than keeping them in portfolio.

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Jamie Dimon is known for a bit of hyperbole but he does make sense in his latest letter to Chase shareholders. Dimon claims Dodd/Frank spawned so many regulations that if stacked, all 14,000 pages would stand 6 feet tall. He says it costs $181/year to service a performing loan and $2,386 to service a loan in default. So, lenders don’t want loans that have any potential for delinquency. As a result, Dimon claims $300 billion a year in loans were not made or $1 trillion over three years.

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Fannie Mae and Freddie Mac have been building a robust property database that seems to be on track to cut the need for appraisals. Currently, Fannie allows Property Inspection Waivers and Freddie has Property Inspection Alternatives, but only on refinances. According to Mat Ishbia, Freddie is going to start giving waivers to purchase loans. Ishbia also talks about big lenders wanting to put a prepay on VA loans.

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If you have a curiosity about who ran into trouble with the FHA Mortgagee Review Board recently, HUD has published a list in the Federal Register. Most of the big fines over the past two years you probably already know about. Then, there are those companies that failed to renew timely and others who now fail to meet FHA approval standards.

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HUD Secretary Ben Carson told an audience in DC that the $6 billion cut from HUD’s budget will be covered in the trillion-dollar infrastructure plan.  Most of the cuts were to public housing such as the popular Section 8 program rather than FHA which normally pays its own way.

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We constantly hear that young people are not buying homes because they are paying significant student loan debt. William Dudley, president the Federal Reserve Bank of New York is just another in long list of notables that blame student loan debt for millennials not buying. One must ponder if the cost of education has become too high. I pay little attention to whether an LO or processor has a degree. I don’t see the big difference in employee quality. We hire using a competency test and it works out much better. It would also help if the GSEs and FHA used the projected payments for the current year rather than the 1% or amortized method.

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They say people live up to their names and that is apparently the case with Richmond Fed Chair Jeffrey Lacker. Lacker admitted he leaked Fed policy information to an analyst who used it to help clients make trading decisions a day early.  Lacker continually wanted the Fed to raise rates and didn’t like the Fed buying mortgage-backed securities something less than a favorite with our industry. Despite the fact that his leak appears to have illegally profited people, his attorney says no charges will be brought against him. Of course not.

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One would think that issues that occurred more than 10 years ago were off bounds. Not in the case of MDR Mortgage and its president. He was indicted on an unrelated securities violation in 2005 and certified on his HUD renewal that he had no indictments. HUD and the Department of Justice sued and won $10 million dollars against him personally. The case is under appeal.

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We can actually lobby this year and have a possibility something we are lobbying for could be passed or changed. That makes this Legislative Conference, April 22-25, particularly important. You will hear from members of Congress, the CFPB, and other groups that make things happen in DC. This is your chance to shape what laws will determine how you do business. It’s a beautiful time of year in DC so plan a tour while you are here. Hotel rooms are filling fast so register now.

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