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News From NAMB: February 8, 2018

John Councilman
Feb 08, 2018

Top Story: Quicken Knocks Wells Fargo Out as Top Retail Lender
Wells Fargo has held the top spot as the nation’s largest retail mortgage lender for many years.  In 2014, upstart Quicken, started by billionaire Dan Gilbert, had only half the retail production of Wells.  But, the gap slowly narrowed and now Quicken has taken the top spot in the 4th quarter of 2017 according to Inside Mortgage Finance.  At one time, Countrywide had the top spot but fell in the mortgage crisis.  Wells recently fired its head of mortgage lending, adding to its problems.  Wells still dwarfs Quicken when correspondent loans are added to their originations.

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House Passes Mortgage Choice Act
The House passed the H.R. 1153, the Mortgage Choice Act, by a 280 to 131 vote.  The bill’s most lauded section removes affiliated business arrangements from the 3% points and fees cap required for QM status as long as the fees are reasonable.  The bill was pushed hard by credit unions and others who have their own title company.

Fannie and Freddie May Be Totally Revamped in the Blink of an Eye
You may wonder how Fannie and Freddie could be totally changed in a matter of days considering Congress has been stalemated for years on that issue.  That is only the case because Mel Watt, FHFA Director, wants Congress to make the changes.  Next year, President Trump gets to appoint a new FHFA Director who may decide he wants to completely change them.  We have focused on the power of the CFPB Director but the FHFA Director is another unaccountable head of an “independent agency” that can do whatever he pleases. That became abundantly clear in a House Financial Services Committee hearing today featuring Treasury Secretary Mnuchin.  The Director has the unchecked power to take them out of conservatorship or completely change the way they operate.

CFPB No Longer Enforcing Discrimination?
The Office of Fair Lending and Equal Opportunity at the CFPB has been involved in several high-profile discrimination cases against lenders.  The CFPB drew fire on one of the cases for using last names as a means of determining who was a racial or ethnic minority.  It appears that office as been moved out of enforcement into the Director’s Office.  Some have taken it to mean the unit will no longer enforce discrimination actions.  The unit will be in charge of “advocacy, coordination and education,” according to an email sent by Acting Director Mulvaney.  A spokesman for Mulvaney disputes the claim that he is weakening the unit, saying he is “elevating” the office and the CFPB will still pursue fair lending cases. 

OCC Backs Up Changes At CFPB
The Comptroller of the Currency, Joseph Otting, met with Acting CFPB Director Mick Mulvaney to discuss coordinating regulatory efforts.  Otting came away impressed.  “I have been impressed with Mick’s leadership and emphasis on operational efficiency and excellence. I share his willingness to reevaluate practices and programs that result in regulatory overreach and unnecessary burden that adversely affect banks’ ability to serve their customers. We have a common belief that our financial system functions best, when it works for everyone,” Otting said.  “Unnecessary regulatory burden is a waste that places a drag on our entire economy without making the system safer or fairer.”

Fannie Mae Updates Policy on Unpaid Income Taxes
Fannie Mae is clarifying when a borrower can still obtain a mortgage when they have outstanding income taxes due.  In Announcement SEL 2018-01 Fannie says tax payment due may remain open as long as there is a payment plan in effect and no lien in the subject property’s county has been filed.  The payments must be current and one payment made.

Is Mulvaney Letting Equifax Off the Hook?
Reuters is reporting that Acting CFPB Director Mick Mulvaney is pulling back from investigating the Equifax breach according to unnamed sources.  Their sources say the CFPB has not ordered subpoenas against Equifax or sought sworn testimony from executives, routine steps when launching a full-scale probe.  In addition, it appears the CFPB will not be doing on-the-ground tests of how Equifax protects data, an idea backed by Richard Cordray.   The CFPB also recently rebuffed bank regulators at the Federal Reserve, FDIC, and OCC who offered to help with on-site exams of credit bureaus.  Others are saying the CFPB is simply allowing the Federal Trade Commission to take the lead, a course agreed upon much earlier.  So much spin out there.

Judge Dismisses Credit Union Lawsuit Against Mulvaney Appointment
Lower East Side People’s Federal Credit Union brought suit claiming President Trump attempted an illegal hostile takeover of the CFPB, throwing the Credit Union and other credit unions and banks into a state of regulatory chaos and appointed an Acting Director whose mission is to destroy a Bureau that protects thousands of the Credit Union’s members.  A New York judge threw the case out saying the credit union lacked legal authority to sue.

Freddie Mac Wants Loans Less Than $200,000
In a reverse twist to how loans are normally priced, Freddie Mac is offering an incentive for loans between less than $200,000.  The incentive began on February 1, 2018 and only pertains to 30-year fixed rate mortgages.  Like everything in DC, they have an acronym, LLB, for low loan balance.  For now, the incentive is only for original loan amounts that are >$175K and ≤$200K.  Because they don’t have a specific cash benefit like an LLPA, it doesn’t seem to be reflected in wholesale rate sheets yet. 

Despite Rise in Rates, Applications Increase
Rates have taken a nasty spoke upward based on strong economic statistics.  The good news is that it hasn’t yet affected mortgage applications.  It could be that buyers are racing to get in before rates jump even more.  The MBA reports application were up .7% from the previous week and 4% from the week before that.  The purchase index was 8% better than this time last year.  Refinances have dipped to 46.4% of the market, still very respectable.

English Gets Court Date in Appeals Court
Leandra English’s claim to be Acting CFPB Director was thrown out in short order by a DC Court of Appeals judge a month ago.  But English is not giving up.  She was able to get an expedited hearing before the DC Court of Appeals.  That, in itself, indicates the appeals court believes her case may have merit.  This is also the court laden with Obama appointees that just overruled several of its own judges and ruled the CFPB director structure constitutional.  The trial date will be April 12th.  Can you imagine the insanity that would happen if they threw out Mick Mulvaney and all that he has recently done?  Then, what if the Supreme Court threw her out again?

Seckel Mortgage Head Being Prosecuted
Normally, HUD simply suspends, fines, or disbars FHA mortgagees who violate FHA guidelines and rules.  In the case of Seckel Mortgage, things were so egregious that the U.S. Attorney’s Office in Pennsylvania is prosecuting the owner, John Seckel.  HUD says Seckel kept his FHA-approved status by filing four financial statements that he had forged. He also filed false certifications.  He could face up to 8 years in prison.

DiTech is New Walter Investment Name
Walter Investment was a strong player in the real estate finance business until they bought the remnants of GMAC Mortgage.  It looked like a steal but it turned out to be an anchor that sent Walter into bankruptcy where it is currently undergoing restructuring.  The only real profit maker was DiTech, the subsidiary that deals in wholesale and correspondent lending out of the old Fort Washington, PA offices of GMAC.  Walter hasn’t been able to keep a CEO, the 5th in 2 years just resigned.  Now, Walter is renaming itself DiTech Holding Corporation.  Funny how big companies think changing the name will change the company’s image.  Consumers catch on pretty quickly.

Buying A Home Still A High Priority
75% of Americans say buying a home is a priority, according to a new NerdWallet survey conducted online by Harris Poll.  Harris surveyed more than 2,000 U.S. adults for the study.  The good news is that 32% of those surveyed said they plan to buy a house within 10 years.  64% believed buying a house is a good investment but 56% said they just don’t have the money to buy.

Wire Fraud Scam Complaints Skyrocketing
Scammers love to target real estate transactions because it is one of the few places unsophisticated consumers transfer large amounts of money.  The FBI’s Internet Crime Complaint Center reports that wire-fraud scam complaints from real estate title companies spiked by 480% in 2016.  Not only are title companies under assault, so are mortgage lenders and brokers.  It is not uncommon to get several attempts to launch a virus or trojan every day.  Once a villain has access to your computer, they can easily find your clients and dup them out of their money.  The FBI has provided tips that people in the industry and consumers can use to prevent these scams.  Giving a written warning is helpful but you may want to tell your borrowers verbally how to ensure they are dealing with the correct party.

First-Time Buyers Appreciate Financial Tips
One way to separate yourself from an internet portal is to give personal advice to first-time homebuyers and those who have had some financial issues.  We often take it for granted that everyone understands how to become financially strong.  Explaining things builds a relationship that can’t be done by a machine.  You get to see the borrower’s faces, interact on a one-to-one basis, and share knowledge that most computer systems can’t.  Start with the basics.  You may be surprised how little people know, even repeat buyers.

Shutdown Possible Again this Week
Both Democrats and Republicans seem in no mood for another government shutdown at the end of this week.  It appears the Senate has struck a deal that would lift spending caps and avoid a shutdown for 2 years.  It isn’t as clear in the House where Nancy Polosi opposes the bill for a lack of immigration reform and the Freedom Caucus doesn’t like the $500 billion increase in spending.  There is less fiery rhetoric this time so bets are they will avert the shutdown and Democrats will move the fight on immigration to a later date.

Tired of the Ice and Snow?
With temperatures in much of the US below freezing this week, wouldn’t it be nice to see some white beaches and temperatures above freezing?  NAMB Focus is coming right to the beach in sunny Destin, Florida February 15-17.  Focus will feature a lender trade show, breakout sessions that will help you operate your business, and keynote speaker Jeffrey Gitomer, the King of Sales.  There are non-stop flights from many cities into Fort Walton airport and it very well may all be tax deductible. 

Rate Outlook
The Bureau of Labor Statistics Employment Report came in decent but certainly not red hot.  200,000 new jobs were created while expectations were for 180,000 and unemployment remained at 4.1%.  The news that caused bonds to jump was the sharp increase in wages, up 2.9% from this time last year and the biggest increase since the recession began.  In reality, even 2.9% inflation is hardly dramatic.
Factory orders were strong, up 1.7% vs. the expected 1.3% increase.
The net result was stocks tanked and bond took a nasty spoke upward.  The good jobs report all but ensures the Fed will raise rates at its March meeting.  Interestingly, the experts aren’t really sure why stocks dumped, coming up with a half-dozen reasons.  The only thing it proves is investors are jittery.  Most feel the market went up too fast.  Bonds spiked up because no one can believe inflation is not just around the corner with all of the good economic news.  When stocks dropped like a lead balloon rates recovered as fear set in.  It looks like stocks needed a bit more correction before moving upward which is at least holding rates from jumping much higher.
The economic picture of the whole world seems to be improving.  The U.S. trade deficit increased to $53.1 billion.  That is the largest deficit since 2008 but it isn’t necessarily bad news.  Americans are doing well and buying lots of Chinese goods, to the tune of $375 billion.  But the good news is the Chinese and others are buying American goods.  U.S. exports increased by 2.5%, which will stoke our economy.
The Atlanta Fed invoked inflation fears, projecting a first quarter with GDP growth above 5%.  That would be the strongest growth we have seen in many years.  With little other than a fear of the Fed raising rates more aggressively, one would expect stocks to recover.  When stocks rebound, combined with the strong economy, mortgage rates are likely to head upward again.
The 10-year Treasury auction today was mediocre.  With rates apparently set to edge up more, it is likely a wait and see attitude is in play.
The unemployment report this morning showed very few people are applying for unemployment benefits.  Analysts were expected 234,000, a good number, but got 221,000, a very good number. 
The 30-year Treasury auction this afternoon was below average.  It appears bond traders are considering id they want to bet against interest rate trends.  Even the Europeans are talking about raising rates since the economy is picking up there.

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 [email protected].

Feb 08, 2018