News From NAMB: August 18, 2017

The minutes from Wednesday’s Federal Reserve meeting revealed one of the largest divisions of opinion we have seen.  Clearly, the current economy makes no sense to the group.  We have full employment but wage pressure seems contained, neither producers not retailers are raising prices, home sales are red hot, and yet we have no inflation and possibly deflation.  So, what does the Fed do?  One side says, “Nothing.”  The other side sees the potential for severe inflation to suddenly break out.  Experts say there is no chance of a rate hike in September and only 50-50 for a hike by year’s end.  One thing they may do at the September meeting is set the time and parameters for reducing the Fed’s bond portfolio.  The good news is that the Fed rate hikes have driven down mortgage rates.

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The New York Department of Financial Services fined Veterans United for not rebating to the borrower excess lender closing cost credits.  New York claims Veterans United retained surplus lender credit to the tune of $360,286.39.  It doesn’t appear this was lender comp that exceeded broker compensation since they are referred to as being a lender.  It seems Veterans disclosed the amount they were going to pay in closing costs and when the closing costs were less, the company just paid the lower costs and didn’t pass on the additional that they promised to the borrower.  Because these were VA loans, the borrower couldn’t get cash back.  The appropriate action would be to have a principal reduction.  By the time the state tacked on 9% interest and a $500,000 fine, the $360,000 they failed to pay ballooned to a $1.1 million-dollar payout.

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We often hear about the advantages that having a warehouse line gives you. Some say, “We can close faster.”  Not likely with today’s wholesalers.  Many are underwriting in 24 hours or same day.  Same with conditions.  For those who say you can adjust your own underwriting guidelines to eliminate overlays, so does wholesale.  If you are closing before all conditions are met, you may not be long for this business.  You may be able to play the market by holding for a little while, then selling, but that is very risky.  On the other hand, wholesale lenders are offering a diversity of products that can’t be matched by any retail lender unless they also broker.  The real dividing line though is turning out to be technology.  Large wholesale lenders can invest in technology that smaller bankers can’t afford.  A good example is click-through disclosures and fully automated verifications.  Many systems offer protection from misdisclosure.  United Wholesale just added the ability to do click-through closing with a video notary in states where it is allowed.  Wow!

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Pay Day Lenders and those opposed to the Arbitration rule say the CFPB doesn’t allow industry groups the same access for input that it gives to consumer groups.  The CFPB must disclose all input it receives regarding a rule.  Trade groups have complained to Congress that the CFPB meets far more often with consumer groups than it does with industry groups.  The next question is, “Does the CFPB give equal access to the various trade groups?”  There is little question that it does not.

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A Washington, DC couple were contacted by their title company via email to send in their deposit on the home they were purchasing.  The title company received the money and all was OK until the couple received a 2nd email that used the name of the same trusted employee instructing them to send in the rest of the money, apparently to a different account.  It turns out the bank account belonged to a scammer.  Now, the buyers are suing Federal Title claiming that the title company was negligent in its cyber security, causing the loss.  They not only want their money, they want damages.

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In its July 2017 Monthly Complaint Report, the CFPB reports on how well companies are responding to complaints.  The report claims that 97% of the companies had timely responses. However, 82% of mortgage complaints were simply closed out by the company after entering an explanation with no change or relief.  Only 3% received any monetary adjustment.  Unfortunately, it appears mortgage companies had the highest percentage of consumers who were dissatisfied with the response of all financial products.  The CFPB says nothing about its success rate or attempts to reconcile these complaints.  One must wonder, with such a small number of apparently valid complaints, whether the Complaint Database is that valuable. 

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One thing I learned for certain at the Florida conference is that alternative lending is back with a bang.  It looked almost like the times before the implosion with dozens of alternative lenders on display.  I can just imagine what NAMB National will be like in October.  For example, many were offering bank statement programs at good rates and non-owner programs based on just cash flow.  Most bank statement programs require 12 to 24 months.  Citadel announced it is now going to offer a 1-month bank statement program for borrowers with a 700 plus score.  If you’re not keeping up by attending NAMB conferences, you are going to be left behind.

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All of us have a question now and then about something the CFPB enforces.  You used to have to email them but it appears they are trying to be more proactive.  The Bureau has now set up an easy to use Web form where you can submit questions.  They say it will take 10 to 15 days to get an answer.

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Many of who have been around for a while remember the days when GMAC Mortgage and ResCap were the giants of the industry.  When GM started having financial problems, they sold off most of the various parts of GMAC and GMAC morphed into Ally Bank.  In 2013, Ally sold off most of its mortgage assets, including Ditech, to Walter Investment.  It hasn’t been good for Walter ever since.  Walter and Ditech have gone through various management changes and Walter has suffered horrendous loses, as much $490 million in one quarter of 2016.  The 2nd quarter of 2017 was better than some past quarters but the company still lost $94 million.  Walter recently announced it is trying to avoid bankruptcy by restructuring debt with its largest creditors.

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One of the things I have noticed is that even lenders who have a retail division are treating the broker or correspondent who originated the loan as the borrower’s contact.  At the FAMP show, wholesaler lenders were quick to point out that they are sending trigger leads on loans in their portfolio back to the originating broker.  I received a notice the other day that a borrower of mine had listed their home for sale.  That means they are probably in the market for a new purchase loan.  As technology increases, this is a big value-add to the broker and creates a sense of loyalty to the wholesale lender.

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Fannie Mae has jumped on the band wagon with automated verification.  This week, they sent out a request for more technology providers to interface directly to their systems.  Most of those already interfacing are credit providers and origination software companies.  The hitch is that Fannie really only has 2 automated providers, Equifax for employment and Form Free for assets.  The providers they are seeking are just interfaces to these two or ones that provide 4506 data. Equifax has quietly been buying up anyone who provides income verification and it looks like it is paying off. 

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Not to be outdone by Fannie Mae, Freddie Mac is giving Immediate Certainty in many areas.  Freddie allows appraisals to be uploaded into its Loan Collateral Advisor®.  Then, submit the loan to Loan Product Advisor where you can see eligibility messaging.  You then receive final confirmation of rep and warranty relief when you deliver the loan through the Selling System. The question is, “If all of this is automated, couldn’t we simply have a direct interface from appraisers to Fannie and Freddie and forget about AMCs and review appraisers?”  Appraiser E&O would cover any materially incorrect data inputted into the system.

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There are two separate reports that indicate CFPB Director Richard Cordray may have violated the Hatch Act which prohibits political activity by federal employees. The first, uncovered by WXVU, says Cordray had a phone call with the chairman of the Hamilton County Democratic Party.  A report by the Cleveland Plain Dealer questions whether or not Cordray discussed participating in the upcoming Ohio gubernatorial debates.  The Republican Governor’s Conference is seeking to free information on such things as using his consumerfinance.gov email and government cell phone for political activity.

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New home starts are inching upward but nowhere near fast enough to meet demand.  There were 4.1% more new homes being built than in July of 2016.  On the surface, that seems good but Freddie Mac’s chief economist explained at the Florida Conference that we are about 400,000 units short of what we need just to meet demand.  Buyers seeking a residence must compete with those who want 2nd homes and investment properties.  We also lose several hundred thousand homes a year.

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National real estate broker Redfin’s stock has soared, nearly doubling in a week.  Investors believe residential real estate has nowhere to go but up.  But, stocks compete for investor money and that means there is less for other companies in the sector such as Zillow.  With the CFPB looking to stem some of Zillow’s money-making services to mortgage companies and real estate agents, Zillow’s stock has dropped about 20% over the past week.  Zillow’s CEO has lashed out at Redfin saying it has, “no buyers’ agents on the other side of those listings. And that is a threat to organized real estate.”  Is Redfin all that revolutionary?  Hardly.  Their 1% listing without a real listing agent is outrageous when you consider most flat fee agents only charge a few hundred dollars.

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A company most of us have never heard of thinks so.  HomeLight evaluates 30 million transactions around the country to identify the best agents for any given region.  The company claims sellers who use its service sell their homes 29 days faster than average and they sell for 3.5% more than the industry average.  They take a referral fee when agents close business sourced on its platform.  There seems to be one problem here.  A Settlement Service includes “services rendered by a real estate professional.”  If you take a fee for the mere referral of a Settlement Service, that is a RESPA violation.  I’m certain their lawyers looked at this but so did Zillow’s.

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Smaller states can put on great conferences.  More than ever originators need keep up to date with all of the do and don’ts of this industry.  With non-QM heating up, the wide variance in loan programs, and even how lenders view Fannie, Freddie, FHA, and VA programs, your income and your reputation are at stake if you’re not taking advantage of state conferences.  The Louisiana conference is being held August 24th and 25th at the New Orleans Hilton Riverside Hotel.  You can simply sit back and listen as David Luna makes getting your 8 hours of continuing education easy.  For western states, the Utah Association always puts on a first-rate conference.  The keynote speaker is Congresswoman Mia Love.

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John Councilman, CMC, CRMS of AMC Mortgage Corporation in Ft. Myers, Fla. is 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.

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