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News From NAMB: December 3, 2015

John Councilman
Dec 03, 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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Cordray and American Banker in a Spat
Richard Cordray decided enough is enough and decided to take on the American Banker story claiming the CFPB complaint database is riddled with errors. Regarding the charge that one complaint can generate records against many businesses, Cordray admitted, “We would indeed create multiple complaints, one for each company, and then give each company the opportunity to confirm or deny a customer relationship.” American Banker did not back down though and stands by their story. Since Cordray claims authority over tangential industries like software vendors and school accreditors, could he be thinking he is in charge of the financial press?

House Study Calls CFPB Studies “Junk Science”
It is clear that the House Financial Services Chair, Jeb Hensarling, has no love for the CFPB. Republican committee staffers just released a study that says the CFPB’s statistical methodology for identifying African Americans was so flawed that it could only identify 19 out 100 correctly. The study goes on to accuse the CFPB of “unfair, abusive, and deceptive tactics of its own. The ironic part is that the label “junk science” started inside the CFPB, when the Assistant Director for Fair Lending wrote that she feared revealing the CFPB’s methodology would open it to the junk science claim.

Lender Answer to TRID LE… Over-Estimate
At a recent conference, I asked lenders who require that they prepare the Loan Estimate, how they plan to overcome tolerance issues. The overwhelming answer was to over-estimate. For example, when issuing an LE before they see the contract, they default all of the transfer taxes to the maximum. Title fees and insurance are defaulted to a national company that guarantees the title fees, of course, not counting any discounts. There seems to be wide disagreement as to whether surveys are indirectly required by the lender, but you can pack them in also. They argue this is the best available information at the time. Really?

More Work Doesn’t Justify Higher Loan Fees
Sage Bank of Massachusetts agreed to pay $1.2 million to settle allegations they charged African-American and Hispanic borrowers more than whites. The bank’s president said they paid their loan originators more for loans that didn’t have a continuous work history or readily available tax returns, under the belief that these loans required more work. The Department of Justice did not accept that excuse.

U.S. House Says, “Let’s Make All Portfolio Loans QM”
The United States House of Representatives just passed a bill that would essentially make any portfolio loan a QM. The only criteria would be that the depository plans to hold the loan for its life and it informs the consumer that is their intent. HR 1210 passed the House with a 255-174 vote and has been passed to the Senate Banking Committee. Unfortunately, it would not apply to non-banks. The White House has already threatened a veto even though the CBO says the risk to the economy is virtually non-existent.

Quicken Threatens to Dump FHA
Quicken Loans is embroiled in a skirmish with FHA over an insignificant number of loans. It seems Quicken is looking at their liability down the road, claiming FHA is asking for full indemnification for issues smaller than $50. Franklin American was just fined $70 million by FHA. Although Quicken is the largest FHA lender and the large banks have cut back on FHA, it appears FHA has plenty of business and is calling Quicken’s bluff.

HARP Still Happening
One would have thought everyone who would have refinanced under HARP had already done so. Not quite. FHFA reports 25,824 people did a HARP loan in the 3rd quarter, down from 31,561 in the 2nd quarter. So far, 3,359,471 have taken advantage of the program. This year, 24 percent still had an LTV greater than 105 percent showing the housing recovery is not complete.

Obama Signs Bill Cutting Fannie/Freddie Salaries
There is little doubt that the public is still pretty upset over the Fannie/Freddie bailout. Elected officials took the cue and cut back the heads of both agencies from $4 million to $600,000/year. Some say they can’t get top talent for that pay. But, FHA is doing pretty well and no one there even makes close to $600,000.

Fannie/Freddie G-fees Will Not Fund Highways
Congress appears to have found some money to fund highway construction and repair other than Fannie and Freddie G-fees.  Your efforts pushed the House to overwhelmingly defeat using G-fees. Now, the Senate has agreed not to tax homeowners.  Lawmakers were especially concerned that funding highways being tied to Fannie and Freddie may keep them around forever. The transportation bill goes for a formal vote on Thursday. Our thanks to Senator Mike Crapo of Idaho for leading that fight in the Senate.  If you live in Idaho, call his office and thank him. Also, thank Jeb Hensarling who held firm on the House version.

Not Having Much Credit Hard on Millennials
A recent study by the Urban Institute shows many young people have no debt. 54.5% of those ages 18 to 22 have no debt. 39.2% of those between 23 and 27 have no debt while only 18.1% of people aged 63 to 67 have no debt. Perhaps the parents and grandparents are all in debt for their kids. Interestingly, the study notes that 39.2% of those 23 to 27 year-olds that have no debt have a median credit score of only 524.  No wonder they have no debt and certainly they won’t have a mortgage. I wonder if just a few collections without other credit dooms these Millennials to the credit scrap pile?

Zillow Paints Dreary 2016 Housing Picture
Zillow says there are a lot of negatives facing housing in 2016.  For starters, interest rates will be 50% higher than they were a few years ago. They believe people will not be willing to sell, forcing home prices to go even higher due to scarcity. Rents will continue to climb pushing government to give loans to people who can barely afford them. Millennials will have to stay with mom and pop or live with friends.  That may not be all bad if you can get your kids to mow the lawn, clean, and do dishes.

Should You Give Your Borrowers the 10 Commandments?
Some California originators have created their own 10 Commandments just for mortgage applicants. It is so cute you may want to steal them and put them on top of the pile of disclosures to sign or in a PDF. It could save a few loans if they pay attention to them.

New FHA Guidelines Affecting Some Borrowers
Although we have pointed out the changes to FHA guidelines put in place in September, a little review is in order. It is very likely that some borrowers will not be able to get an FHA loan based on the new criteria even though they could have under the old guidelines. As originators, we need to engrain these changes in our minds.

Equifax Says Confidence in Economy is Pushing Mortgages
In its Credit Trends Report, Equifax believes that mortgage debt is slowly rising again, showing consumer confidence in the economy. Borrowers see real estate gaining in value rather than potentially putting them underwater. Mortgage debt still has a way to go to catch up with pre-recession levels though.

Risk From a Data Breach May be Less
Many mortgage and banking people don’t sleep at night worrying that their data is not secure and a hacker may get in. The question is, “What is you liability?” Surprisingly, an FTC judge just ruled that despite two data breaches a company was not liable. The reason? There was no proof that the company’s practices were likely to harm consumers which was proven by a lack of any consumers who were harmed by the breach.

How to Get Millennials to Buy Houses… Give Them Pot
It appears marijuana has created a housing boom in Colorado. Why not? Warehouse space in Denver is gone so you can have a “grow house” and make your mortgage payment. The next question is, “Could you get a Fannie loan since your home is being used for a commercial purpose?”  A Millennial blog says if you are under 30 you should have a good time and spend your money on that. But, maybe your house can make you money. It seems Denver has also become a national destination to blow away your troubles for a weekend. Watch out Las Vegas.

Rate Outlook
A funny spat has broken out between Fed Chair Janet Yellen and consumer advocate Ralph Nader. Nader accused Yellen and the Fed of harming the elderly (which both he and Yellen are) by keeping rates so low savings have nearly no return. Nader, who normally runs with the politically correct crowd, suggested that Yellen ought to talk to her husband, implying he knows more than she does. "Chairwoman Yellen, I think you should sit down with your Nobel Prize winning husband, economist George Akerlof, who is known to be consumer-sensitive," Nader chided. Yellen took a few days and fired back a blistering letter to Nader that should keep him quiet for a while.

Besides the entertainment value in the letters, Yellen tipped the Fed’s hand by saying, "An overly aggressive increase in rates would at most benefit savers only temporarily."  "Rather, it would undercut the economic expansion, necessitating a lasting return to low interest rates. Other countries have paid a heavy price for being forced to reverse course."  One would take that to mean a ¼% hike is more likely than a ½% hike in December or if ½% is chosen, little will follow for a while.

Yellen reassured the Economic Club of Washington that the Fed has not predetermined to raise rates.  One interesting quote from Yellen is that she says “that is a day that I expect we are all looking forward to” since it means the recovery is fully in place.

We are one week away from a possible government shutdown. Both sides are showing signs of very slight compromise but are still far apart. If things deteriorate, get ready for more jitters.

Tomorrow, we get the November jobs report.  Normally, that would create a lot of jitters. But, with the Fed already presumed to be raising the discount rate, only a real dearth of jobs may mean anything.  A huge number could force something higher than a ¼% raise.  Europe’s woes haven’t seemed to have fazed the U.S. economy. Things are so bad there Germany is still giving you less than you put into one of their bonds at maturity. Can’t imagine why anyone would buy them when could at least make something in the U.S.

Rates have been taking a drubbing yesterday and today with decent job information from ADP and unemployment staying steady.  Most analysts expect a good jobs report tomorrow which may push rates higher yet.  Short-term treasuries are at a 5 ½ year high which will push up ARM rates.


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 03, 2015