News From NAMB: December 28, 2017
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News From NAMB: December 28, 2017

December 28, 2017
Top Story
What was the Top Story of 2017?  Here’s your chance to name the news that was most important to you as the Top Story of 2017.  Send me an e-mail with a little blurb why your choice was the most important story of 2017.  I’ll include some choice comments from our responses.

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CFPB Says No Penalties for 2018 HMDA Errors
The CFPB has announced that it does not intend to assess penalties with respect to errors in HMDA data collected in 2018.  The Bureau intends to engage in a rulemaking to reconsider various aspects of the 2015 HMDA Rule that was set to start January 1st.  Part of the CFPB’s reasoning is that software systems are not yet fully ready for implementation.  This is yet another small change the interim Director Mick Mulvaney has implemented.

Are You Ready for HMDA Changes?
Many of our readers think they can ignore the changes to HMDA but that is only partially true.  Even if you are a small broker, there are changes that affect you.  Beginning January 1st, you must do several things.  You could choose to use the new URLA, but Fannie Mae doesn’t allow that for their loans for another year.  Or, you must make certain you are using the new Demographic Addendum to the 1003.  If you use that, you should use the revised page 3 without the demographic information.  Even though the CFPB is backing away somewhat from enforcement of its rule, that does not give freedom not to collect the data.

Democrats Tie Up Montgomery Nomination
Former FHA Commissioner Brian Montgomery received a sizeable margin for approval from the Senate Banking Committee for a second term.  A few Democrats voted against his confirmation, but the confirmation process moved to whole Senate to be approved.  Usually, this sort of nomination is approved on a voice vote.  After approving several other HUD nominees, Senator Elizabeth Warren and 4 other Democrat senators have called for a recorded vote for Montgomery.  A senator may challenge a voice vote and request a recorded vote. The request requires it to be seconded by one-fifth of the senators present.  Out of courtesy, most members of the party will second the request.  It looks like it will be January before FHA gets someone at the helm.

FHFA Seeks Input On Use of FICO
The Federal Housing Finance Agency has come under increasing pressure to use more updated credit score models and scores other than FICO.  Currently, Fannie and Freddie use only Classic FICO, FICO 9 and VantageScore 3.0.   Classic FICO is used for product eligibility and loan pricing.  In addition, the Enterprises have recently implemented changes that allow their automated underwriting systems to evaluate borrowers who do not have a Classic FICO credit score.  FHFA is looking into using new score models.  They have opened a request for information where anyone can comment on which scoring system the GSEs should use.  A panel discussion in DC on this issue questions the benefit of the GSEs making changes to alternative scoring models.

Banks File for Exemption from Appraisals
Two banks have filed for an exemption from being required to use a licensed or certified appraiser.  One is in rural Oklahoma, an area where there are few appraisers.  But the other is in metropolitan Nashville where there are lots of appraisers.  Tristar Bank is complaining that they “are having a difficult time receiving appraisals in a reasonable amount of time. The time delay and added cost is negatively impacting our clients.”  Appraisers fear the Tristar request, if granted, will create a ripple effect.  The Appraisal Subcommittee will decide whether to accept the waivers.

Louisiana Real Estate Appraiser Board Overcomes FTC Action
The Louisiana Real Estate Appraisal Board has filed a motion to dismiss the complaint against them by the FTC.  To prevent AMCs from assigning appraisals based on low bid, the Board had written rules that required appraisers to be paid the median wage established by a survey.  The FTC claimed this was price fixing.  The motion for dismissal of the FTC action includes many letters of support from industry participants.  The only comment in opposition is from REVAA, the trade association that represents AMCs.

Why Are Many Who Want to Own Not Buying?
With home prices escalating, one would surmise that people can’t afford to buy.  But, there are many who are not buying for other reasons.  A new survey by Value Insured found that people are worried that that homes are overvalued.  A widely cited study by Corelogic claims 48% of the top 50 markets are over-valued.  How they define over-valued?  When “home prices are at least 10 percent higher than the long-term, sustainable level.”  Sounds kind of subjective doesn’t it?  Value Insured also found that the #1 impediment for Millennials is still downpayment.  Value Insured is a provider of downpayment insurance.  

Experian Dragged Into New Data Breach
A company you’ve probably never heard of, Alteryx, had purchased a huge database of information from Experian.  It contained 248 categories of personal information but not names and social security numbers.  They seemed to not have considered how easy it would be to access the 36-gigabyte database that was stored on Amazon Web Services’ storage “buckets.” Experian says they only sell their data to people who have security measures in place.  That is being questioned.  The upshot is that repositories could become much more concerned about enforcing their contracts.  Experian currently requires 256 bit encryption of data stored on your computer and that your cell phone use a password if you access credit reports from it.  Peer-to-peer networks are not allowed, and you must have a password-protected screen saver of not more than 30 minutes.  You are supposed to have audit trails and test your systems as often as every 15 days.  I wonder how many small companies do all of that?

Will the Real CFPB Director Please Stand Up?
Depending on which side of the aisle you are on, whom you believe is the acting CFPB Director.  President Trump believes he has the authority to appoint the acting Director while Richard Cordray believed he had that power in Dodd/Frank.  So far, the President is winning.  But, some other agency laws count resignation as “unavailability,” the wording used in Dodd/Frank.  This has made Trump’s argument to be that the Vacancies Act does not override the President’s ability to remove an acting Director and appoint his own.  Leandra English’s argument is that the Vacancies Act only applies when the law is silent and Dodd/Frank does provide for the Director to appoint the Deputy Director who takes over when the Director is “unavailable.”   What would English do if she was put in power?  One would think she may start as many actions as possible while Senate Democrats delayed a permanent appointment.  The judge asked her attorney hard questions leading one to believe he is again leaning in Trump’s favor.

How Old Should an Originator Be?
There are some that say you must be under 30 to communicate with an under 30.  Considering the average age of an LO is about 46 years old, that would be a problem, if true.  A new survey by the Stratmor Group says young, first-time buyers, are just as happy with their older LOs as those over 40.  A few other interesting takeaways from the study are that LOs don’t start leaving the business until they are over 60 and some keep working when they are over 70.  The study shows a nice increase in LOs under 30 and the average refinancer is 51 years old.

FTC Provides Sample Letter to Contest Credit Report Errors
When talking to consumers, many of us have found borrowers are not certain how they should contest errors in their credit report.  The Federal Trade Commission has come to the rescue with a sample letter to dispute those errors.  It includes all of the necessary elements that prevent a creditor from simply ignoring them and forms a proper basis for borrowers to take legal action against those reporting erroneous information.

Non-QM Set to Triple Next Year
The giant bond rating agency, Standard & Poors, claims the non-QM market will double or triple in 2018.  One of the reasons non-QM is growing so quickly is it provides funding for borrowers who have been on the sidelines for years.  S&P also believes rates will come down as more non-prime loans are securitized.

PACE Loans Ignore FHA Ban
Recently, FHA said it will no longer insure loans with PACE clean energy financing.  Most PACE loans are made through Renovate America, a for-profit company.  Many states and counties gave these loans super-priority over existing mortgages, kind of like a tax lien, that transfer with the property.  There are hundreds of thousands of them out there, many done without proof of income.  One would have thought with FHA, Fannie Mae, and Freddie Mac all refusing to allow a purchase or refinance with these in place, it would have had a serious impact.  But, they can’t prevent borrowers from taking them out even though it may stop them from selling or refinancing, something borrowers may not be aware of.  Federal investigations haven’t stopped them nor have legislative efforts.  With states allowing super-priority, there is hardly any risk to Renovate America.  They have just gotten a huge credit line increase, doubling their capacity.

Government Didn’t Shut At Christmas
To no one’s surprise, the House and Senate found a way to bury their differences and prevent a government shutdown at midnight Friday.  This stop-gap resolution funds things through January 19th when the game continues.   It took the Senate until nearly midnight, but it seems everyone just decided to go home.  The resolution contains the "pay-go" waiver that suspends rules that prevent the government from enacting expensive new programs, like the GOP tax cuts, unless there is enough money in the current year's budget to pay for them.  This freed President Trump to sign the tax cuts immediately without any real repercussions.

FHFA Looking to Revise Appraisal Forms
As one of its 2018 priorities, FHFA says in its 2018 Scorecard that it wants to “research, assess, and begin planning for appraisal process modernization, which could include revised appraisal forms and data requirements.”  Now that we have a 17-page loan application coming soon, does that mean a 6-page appraisal form is inadequate?  What will appraisers charge for more pages?

CFPB Implements HMDA Calculator
If you have to report HMDA data, the CFPB is offering a new Rate Spread Calculator, file format checker, and digit checker.  It is supposed to determine if the loan is a covered loan.  It is not exactly user-friendly, offering HMDA codes instead of actual choices.  Just to see what it would do, I entered some data within the ranges and it gave me the error “Sorry, an error has occurred.  Please try again later. If the problem persists, contact HMDA Help.” These tools seem to presume that many HMDA reporters will do so manually which could be an arduous task.

Japanese Company Swallows Major U.S. Finance Firm
In a deal originally announced back in February, Japan’s Softbank is acquiring Fortress Investment, the owner of NationStar, aka Mr. Cooper, and New Penn Financial.  New Penn’s parent, Shellpoint, had just been acquired by Fortress and now Fortress has been acquired.  Fortress had also acquired Corevest, a rental portfolio and fix and flip lender.  SoftBank itself revived online lender SOFI.  There are no doubt many more mortgage-related ties to SoftBank.  With over a trillion dollars in gross revenue, SoftBank appears to be a name you will hear a lot more about.

Rate Outlook
What will tax reform do for interest rates?  So far, very little.  If what Republicans are hoping happens, strong economic growth with higher wages and consumer spending, rates could go up commensurately.  If Democrats are right and this has little effect on the economy other than increasing corporate earnings, rates will stay the same or fall.  It all hinges on inflation.  So far, it just isn’t there despite quite a bit of good economic news.
 
Last week, PCE inflation was up a mere .1%.  Very good news for rates.
 
Durable goods were a bit disappointing, up 1.3% instead of the expected 2.8%. Personal income rose 0.4% as expected.  Outlays rose 0.4% versus the expected 0.3% increase.  New home sales were terrific at 733,000.  Far better than the 652,000 analysts expected and the best numbers since 2007.  U of M Consumer sentiment was down a little at 95.9 versus the expected 97.3.
 
The official Consumer Confidence report showed slight cooling as well, down to 122.1 from the expected 128, still good though.  The S&P/Case-Shiller housing cost index showed home prices rose 6.2% over the previous year.  That is still 1.3% below the all-time high in major metro areas.
 
Weekly Jobless Claims remained the same as last week at 245,000.
 
This week was a slow one for market-moving economic news, but did have a fair amount of treasury auctions.  You get a 1.922% yield on the 2-year and only 2.245% on the 5-year.  The two-year auction and the 5-year were slow.  Today’s 7-year auction yielded 2.37% with moderate demand.  It appears it is still not enough yield to excite anyone or it could be the time of year.  With traders willing to take on longer-term notes for a very slight yield benefit, one must wonder if they believe rates are going nowhere.
 
Mortgage rates have more or less ignored all of this economic news and have meandered slightly better as everyone enjoys the mid-holiday break.

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