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News From NAMB: December 17, 2015

John Councilman
Dec 17, 2015

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 Fed Raised Rates. So What?
 In perhaps one of the tamest Fed moves in recent history, the Fed finally got the courage to raise rates by a mere 0.25 percent. The net effect was nothing. Rates actually are doing better since some were worried they could raise by 0.5 percent. Even overseas, no one paid any attention. Two things could be a net effect. First, because the cost of money went from essentially 0 percent to 0.25 percent, there was a 250 percent increase in the cost of borrowing for some people, especially foreign entities. Second, it appears this is the only the first rise so there could be some angst about the future.

What the Appropriations Bill Did and Didn’t Do for Mortgages
It seems pretty clear that a lot of compromise went into the House bill that funds the government for next year. The Jump Start rider prevents the government from taking Fannie and Freddie private until the end of 2017. It also prevents using G-fees to fund other government programs. The appropriations bill also extended PMI deductibility and tax forgiveness for short sales. What it didn’t do is revise Dodd-Frank or affect the Consumer Financial Protection Bureau. It also did not include a TRID grace period. It added ½ trillion to the deficit. Many are saying it was a win for Democrats and Paul Ryan and a loss for conservatives. I take that back … conservatives did get a phrase, "None of the funds made available in this or any other act may be used to pay for the painting of a portrait of an officer or employee of the federal government, including the president."

NAMB Meets With CFPB Director
NAMB’s president, leg chair, and Diversity Committee met with CFPB director Richard Cordray to discuss issues unique to wholesale lending. The good news is that Director Cordray was very positive about the role of mortgage brokers. NAMB is concerned that compensation caps for small loans is affecting low to moderate income borrowers. NAMB believes the solution is contained in HR 3393 which removes lender-paid compensation caps.

All Is Not Wonderful With TRID
Moody's recently reported that 90 percent of the loans they reviewed for securitization had TRID violations. No matter how small these violations are, they could be offered as a TILA defense in a foreclosure. The potential for buybacks is significant. Of course one must wonder about technical violations since the final rule and the CFPB’s implementation guides are at odds on a few things. More lenders are bringing stories of difficulties with TRID. Those who are picky about ensuring everything is right are seeing slowdowns and delays. Even software powerhouse Ellie Mae is admitting that lenders are having problems. It appears many closing disclosures are being changed right up to closing. Makes one wonder what really changed from the HUD-1 days.

Fannie Mae 97 No Match for FHA/VA
Despite requiring less downpayment and sometimes offering a lower payment than FHA, Fannie and Freddie’s 97 program has virtually no market share. So far, according to Black Knight, Fannie and Freddie’s 97 accounts for only 2.3 percent of the loans with an LTV greater than 95 percent. FHA and VA account for over 90 percent. Portfolio products by credit unions or non-profits had 6.8 percent. The GSEs had zero percent of the market below a 660 score. It is little wonder why Fannie has just made some major changes.

CFPB Looking At All Referrals, Not Just MSAs
In a recent report, Barclays claims, "The CFPB seems to be taking the stance that referrals of any type are not a 'bona fide service' and that the exchange of anything of value tied to referred business could be considered a kickback." The report goes on to say, “Referrals are widespread among builders, brokers, and the entire mortgage complex … and the CFPB seems willing to go against long-established precedents in its policing of the industry.” Originators are noting that builders are attempting to change some of the way they push borrowers to their affiliated mortgage company.

Bill Would Force Fannie Mae to Use Scores Other Than FICO
The Credit Score Competition Act, HR 4211, was introduced in the House by Ed Royce, a Republican and Terri Sewell, a Democrat. It seems FHFA pushes Fannie and Freddie to use an older version of FICO which is more or less limited to credit bureau data. The bill would allow alternative credit histories to be used as part of the score and open the GSEs to scores other than FICO. Needless to say, that made the people at Vantage Score deliriously happy.

Branches Need Close Scrutiny
Nearly every week, we hear of LOs being charged with wrongdoing at branches. Sometimes that high producer is using unethical or illegal practices to bring in the loans. The latest example is a branch of Finance of America where six individuals, including a real estate attorney, a real estate agent, a licensed loan originator, a former loan officer, a loan processor and a real estate investor, were charged in a 22-count indictment. Charges include identity theft and defrauding HUD. Finance of America is bankrolled by Blackstone Group so they can afford the buybacks.

Will New US Bank President Still Want Brokers?
Tom Wind, former executive VP at Everbank, is taking over as the new president of US Bank’s mortgage division. Brokers were dropped by Everbank back in 2013. Prior to working at Everbank he served as CEO of mortgage lending at JP Morgan Chase and was President of CitiMortgage. US Bank is the sole megabank still working with mortgage brokers.

Rate Outlook
The Fed raised rates to no one’s surprise. Mortgage rates had already priced in hike which was more symbolic than substantive. Not a single FOMC voting member dissented.

Now the question is, “What will the Fed do in the next year?”  In their statement they said, "The stance of monetary policy remains accommodative after this increase," the committee said in its statement, "thereby supporting further improvement in the labor market conditions and a return to two percent inflation."

At this time, the Fed signaled that any future increases will be small and perhaps spaced out. "The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run."

This morning, rates were slightly better. Jobless claims remain in the 250K to 300K range at 271,000 this week and new jobless claims remain around 2,200. Leading economic indicators (LEI) rose 0.4 percent, stronger than the expected increase of 0.1 percent. But, the Philadelphia Fed survey of conditions in the Mid-Atlantic region, fell 5.9 percent. Traders’ expectations were for a rise of two percent. There is no significant economic news tomorrow.

I wouldn’t look for any large drops in rates at this time or any large upticks either. It looks like a tender and mild Christmas season.


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 [email protected].

Dec 17, 2015