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News From NAMB: December 8, 2016

John Councilman
Dec 08, 2016

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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FHA Raises Loan Limits
FHA followed Fannie and Freddie in announcing the 2017 loan limits. FHA’s nationwide minimum limit is 65 percent of the conforming limit or $271,050 in 2016 and $275,650 for 2017. In high-cost areas like California and Washington, D.C., the limits will rise from $625,500 to $636,150, matching those of the GSEs. When you look at the counties where the limits increased, it is mainly those at the minimum and they will stay at the minimum. That makes FHA unavailable to a large portion of homebuyers in many areas of the country. It is good news that markets don’t seem to be declining, although the limit is not reduced if the local median price declines.

Fannie Mae Says No PIWs on Purchases
Fannie Mae has decided to back off on its promise to increase Property Inspection Waivers (PIWs). Effective Dec. 10th, no purchase or construction loan will receive a PIW although cash-out refinances now can. Fannie explains that they want the data from purchases to populate property information in Collateral Underwriter. They are dumping the $75 fee when you use a PIW. Freddie still offers Minimum Assessment Feedback so you may want to run your purchase through LP also.

CFPB Goes After Three HECM Lenders
American Advisors Group, Reverse Mortgage Solutions, and Aegean Financial were accused with deceptive advertising practices.  The CFPB claimed they advertised that consumers could not lose their home and that they would have the right to stay in their home for the rest of their lives.  Other alleged misrepresentations included telling potential customers that they would have no monthly payments and that with a reverse mortgage they would be able to pay off all debts.  Another charge was that heirs would inherit the home, without disclosing any conditions of the inheritance when. in fact, heirs frequently are not able to keep the home.  The total penalties to all three companies was less than $1 million dollars, not enough to outweigh the profit the companies no doubt made.

More Lenders Trying Non-QM or Alt-QM
Investors are hungry for mortgages that give a higher yield. So mortgage lenders are obliging by creating a variety of products that don’t fit any of the agency buckets.  Angel Oak and Citadel have been in the non-QM space for a while but now mainstream wholesalers have joined in.  New Penn and Homebridge are offering bank statement programs for self-employed borrowers that look at lot alike.  Advancial Credit Union is offering an asset depletion program, a little different twist on qualifying on assets.  Some smaller wholesale lenders get even more aggressive, especially where they can put a loan into non-owner or business purpose.  You shouldn’t miss NAMB East in Atlanta where over 100 wholesale lenders are expected to display.

Lenders Are Making More on Loans
The Mortgage Bankers Association released figures on loan origination costs and profits per loan. The news is good for lenders. Profit per loan was up to $1,773 compared to $1,686 in the 2nd quarter. The cost to originate a loan is one of the reasons for the increased profit, dropping to $6,969. That is considerably better than when TRID started when costs were well over $7,000 but still high compared to 2008 when it cost only $5,850 per loan.

FHA False Claims Extended to Corporate Officers
We have heard how the Justice Department has been getting hundreds of millions of dollars, even billions in some cases, from banks and mortgage companies for certifying FHA loans met requirements when they didn’t.  A high-level corporate officer must sign the certification of compliance.  A Chicago attorney who had run afoul of the law for other reasons certified that no officer was under indictment when he was.  A federal judge just handed down a $10 million-dollar verdict personally against the attorney, who was a corporate officer.  This attorney appears to have some issues but why were no officers of any of the big banks hit personally under false claims?

NonBanks Still Hiring in October
Last week’s Bureau of Labor Statistics job report for October showed nonbanks were still hiring at a good clip. Of course that was before the election and the sharp jump in interest rates. Refinance volume has plummeted because of the jump in rates. It will be interesting to see if purchases slow as a result of the increased rates.

Looking Behind the Carson HUD Nomination
Many people were scratching their heads over the nomination of Ben Carson as HUD Secretary. One would have thought the good doctor would have been appointed to Health and Human Services. HUD secretaries are seldom people with a deep housing background. They are usually politicians. The bigger question is, “Who will fill key HUD posts?” Housing Wire is guessing at a few who would be likely candidates for Assistant Secretary. My choice for FHA Commissioner would be Brian Montgomery. He has intimate knowledge of how FHA works and would still be a good advocate for FHA in a Republican administration.

Fintech Firms Offered National Bank Charters
You may not recognize the names of more than a few fintech firms but they are moving into the territory of banks and mortgage lending. Most people have heard of PayPal and Sofi but few may have heard of Stripe of Avant. Little by little these firms are chipping away at lending, investment, credit cards, and more that have been the purview of banks. In an interesting move, the OCC has offered the firms a “special purpose” national bank charter if they receive deposits, pay checks or lend money. The benefit to the firms is the evasion of many state laws. The question is whether non-bank mortgage companies would want such a charter for the same reason.

Trivia Question …
Is a borrower legally required to sign the lender’s Patriot Act disclosure? You can find the answer at the following link. Thanks to Jonathan Foxx and Lender’s Compliance Group for this update on NAMB’s LinkedIn Group.

Rate Outlook
The stock market continues to soar, hitting new records several times. When stocks do well, investors choose them over bonds. There seems to be a euphoria over a pro-business president taking office.

Last week, the jobs report was about or slightly below average for the year. It certainly shouldn’t stop the Fed from hiking rates at their Dec. 13-14 meeting. It would be a huge surprise if the Fed didn’t raise rates so that is pretty much baked into current interest rates.

The Fed actually has three tools that they use to manipulate the economy. We hear the most about the Fed interest rate but the Fed also controls somewhat the value of the dollar and the Fed's balance sheet.  You can read more about this in an enlightening article. So far, the Fed is not cutting its balance sheet much on buying mortgage-backed securities. If they do that, rates are likely to soar.

In economic news, most of the news was as expected. Productivity increased somewhat, the Trade Deficit had little change, Retail Sales continued to show gains although many stores said Black Friday sales were below expectations.

Jobless claims came in at 258,000, more or less where they have been for months.

The only remaining economic news for the week is Consumer Sentiment tomorrow. That is not likely to change rates.

It looks like we are holding steady on rates for the past few days. It seems unlikely we are headed back to the lower rates before the election. More small increases are a likely possibility.


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 08, 2016