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News From NAMB: December 23, 2015

John Councilman
Dec 23, 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 (UWM)

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The TRID Horror Stories Just Keep Rolling In
Last week, we reported Moodys found that 90 percent of the loans they reviewed for securitization had TRID violations. The Wall Street Journal says it’s taking three more days to close a loan. Now, Rob Chrisman, in his Dec. 17 commentary quotes a lender who wrote 50 jumbo loans and the investor is unwilling to purchase any of them. The investor claims they all had some TRID violation. That is a major problem for warehouse lenders that was foreseen long before TRID went into effect. No matter how small these violations are, they could be offered as a TILA defense in a foreclosure or trigger class-action suits. Fannie/Freddie/FHA aren’t refusing to buy loans because they have a grace period for a little while. One thing is certain, costs to consumers have to go up to support the increased labor needed for compliance. TRID is being blamed for a bad November, particularly in California. If it was just TRID throwing in temporary delays, that number should resolve in December.

Does Paying a Collection Improve Your Score?
This has been an ongoing discussion for some time. I found this short video by Dave Sullivan, one of the most knowledgeable people in the world of credit scoring, enlightening. While the bureaus keep claiming that paying a collection will not harm your score, they are speaking about more recent versions of FICO that are not used by Fannie and Freddie.

FHFA Posts Rule to Improve Manufactured and Rural Housing
Fannie Mae and Freddie Mac’s conservator has posted a rule that would force the GSEs to have a “Duty to Serve.” That means they would have to facilitate a secondary market for mortgages on residential properties in these underserved areas. In its push to better serve low to moderate income borrowers, FHFA has come to realize that borrowers with certain types of affordable housing are being left out. Most originators know that it is very difficult to finance a single-wide and even most double-wides as well as properties that have a high land-to-improvement ratio not to mention very small loans. Your comments to FHFA are being requested.

Mid-America Mortgage Buying TRID Scratch & Dent
Privately-held Mid-America Mortgage is boldly advertising that they will buy loans that have certain types of TRID non-compliance. If disclosure timing is outside of required timelines, documents are missing NMLS or real estate broker information, missed-named fees, etc. they are interested. They do not say what they plan to do with the loans.

Will 2016 Be the Revival of Alt-A?
Investors are still hungry for more yield, even if it is not huge, so there is an appetite for mortgage-backed securities that pay a higher yield. Some very heavy hitters such as Blackstone and Lone Star Funds are poising themselves for expansion in the mortgage industry. In addition, Nomura Holdings, who left mortgage securities in 2007, is offering securities from Angel Oak and some others. Barclays estimates that about $5 billion in such securities will be issued in 2016. That is not a huge number but it could escalate very quickly as many apparently qualified borrowers just don’t fit the government mold.

Is Owning a Home Superior to Renting?
Corelogic, in its latest Market Pulse, questions if owning is always better. They go so far as to state, “Ownership is often perceived as always superior but there are many reasons it may not be.” It seems that is the feeling of the general population. The homeownership rate has fallen to from 69.2% to 63.6%. It is far worse for first-time buyers where they make up only 32% of current buyers, an all-time low.

Good News For Foreign Buyers…And Those Who Lend to Them
A little-noticed provision in the recently passed budget will allow foreign investors to avoid US taxes when they sell real estate at a profit. The 1980 Foreign Investment in Real Property Tax Act, known as FIRPTA, was originally written to slow foreign investments in farms. This will no doubt attract a great deal of foreign investment in residential as well as commercial real estate which should drive real estate values even higher, especially for commercial real estate. In New York, more than 30 new towers over 1,000 feet tall are in construction with foreign money.

Flood Insurance Must be Escrowed
Starting Jan. 1, any financial institution with assets over $1 billion must escrow for flood insurance, whether or not the borrower is escrowing for other items.  This will undoubtedly do away with non-escrow loans if the property has flood insurance since many loans will be sold to large institutions.

Congress Wants to Design the Mortgage Industry
The latest budget included Jump Start which puts the redesign of Fannie and Freddie squarely in the hands of Congress. Even Republican Senator Bob Corker said in an interview with American Banker, “It's Congress's responsibility to figure out a way to create that kind of system and deal with significant reforms.” That is a little different than the original Corker legislation where there would be no “system,” just a set of standards by which private enterprise would fund all mortgages. The Washington Post is latest to join the replace Fannie chorus. The end result of everyone’s posturing is still a government guarantee sharing risk with private capital. Sounds a lot like what Fannie and Freddie are doing now.

CFPB Wants to Overrule California Foreclosure Laws
The reason this matters to originators is threefold. First, any time a lender cannot foreclose expediently, it makes loans in that state less valuable. Secondly, it could disrupt closing documents if lenders have to switch to judicial foreclosures. Finally, one only needs to see how slowly Florida, a judicial state, has recovered vs. California, primarily a non-judicial state. There is the potential that this could wipe out non-judicial foreclosure nationwide. An excellent article on this issue can be found on a prominent law firm’s analysis and why they believe the CFPB has it all wrong.

Time to Book Rooms for NAMB East!
Mark your calendars for Wednesday, March 9, 2016 to Friday, March 11, 2016, for the biggest mortgage conference east of the Mississippi. All of the major wholesale lenders are exhibiting in the sold-out exhibit hall. You will be able to talk to industry leaders,  motivational speakers, and top producers who will show you how to increase production. Plus, there will be world-class golf and top entertainment at one of Hilton Head’s finest resorts. It’s right on the ocean with average temperatures of 65 to 70 degrees. For a limited time most wholesalers have bought tickets and are giving them to their accounts, a $495 value. Ask your AE for yours.

FDIC Warns on Commercial Real Estate Lending
Since residential real estate lending is now tightly controlled by the federal government, banks and investors have turned to commercial real estate for flexible lending. Many have reduced underwriting standards to make loans that appear to be sound based on current rentals and values. The Federal Reserve and FDIC are concerned this is creating substantial risk. They are reminding lenders that rents can dry up quickly and values can plummet. The warning applies particularly to multi-family lending because apartment construction is at an all-time high, but drops in rental income could destabilize single-family as well.

Nearly Everyone Wants to Buy a Home
The good news is that people still want to own a home. The bad news is that they are worried that they can’t afford it. Nearly all (94%) young renters eventually want to buy a home, and a convincing majority still view homeownership as part of their American Dream according to a National Association of Realtors study just released. The problem is that only half of those surveyed think the economy will get better.

CFPB Plays Musical Chairs At the Top … Again
After Steve Antonakes left as Deputy Director at the bureau, Meredith Fuchs, the former General Counsel has been sitting in as Deputy. Her position as Counsel has just been filled by Mary McLeod from the State Department who will become the agency's new General Counsel next month. Meanwhile, Fuchs is leaving soon which will leave the Deputy position open unless someone is named soon. Private industry and law firms make the pay too attractive to stay. Wasn’t there supposed to be some sort of waiting period between being the regulator and then the employee or advocate?

Rate Outlook
Everyone is focused on the Fed raising the overnight rate charged to banks to gauge mortgage rates. It is true that has a psychological effect but doesn’t directly affect mortgage rates that much. What mortgage people should be watching is what the Fed decides to do with its $4.4 trillion in treasuries and mortgage bonds. If the Fed decides to stop reinvesting in mortgage-backed securities or dump them, it could easily push up mortgage rates. So far, the Fed has said nothing about stemming purchases of mortgage securities. However, it will certainly be a drag on the Fed to have coupons bearing 3% if interest rates are 6%.

The other interesting thing to watch is what will happen to the entire federal debt. The government borrows most of its money on short-term Notes. Most have doubled over the lows and are likely to quadruple the lows, pushing federal interest close to a trillion a year from a low a few years back of $233 billion. I guess the answer is to just print more money. The Fed wants inflation, so why not?

Looking at the numbers, we have an economy that continues to be slightly improving which has a slightly negative affect on rates. PCE Inflation, one of the Fed’s most important indicators, was up 0.1%, as experts expected. Durable goods orders were unchanged vs. an expected drop of 0.6%. Personal income rose 0.3% vs. the expected rise of 0.2% with personal outlays up 0.3% as expected. Consumer sentiment was 92.6 versus the expected 92 mark. New home sales were 490K versus the expected 506K.

Third quarter GDP was revised down from 2.1% to 2%. Consumer spending was healthy but exports are growing slightly weaker. Tomorrow is jobless claims which are not expected hold any surprises.

Right now, rates are a 1/3 point worse than mid-November. The experts say rates will start to edge up early next year. Now is a good time to buy if you can find a house.


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 23, 2015