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News From NAMB: June 16, 2016

John Councilman
Jun 16, 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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Speaker of the House Promises to Roll Back Dodd/Frank
House Speaker Paul Ryan unveiled the framework of a major plan to change a great deal about Dodd/Frank claiming it may have been needed in 2008 but is harming the economy now. Among the changes would be creating a five-person commission to run the CFPB, returning more regulatory power to states, and undo some of its regulations. Ryan also proposes to wind down Fannie and Freddie. Since it is unlikely Republican will lose control of the House, Ryan will likely proceed with his plan.

New Uniform Loan App Worries Some
The big lending trades are concerned about a possible addition to the new URLA. FHFA is proposing to include a question that asks borrowers to indicate their language preference. The groups are worried that could mean a compliance violation could occur if the borrower wasn’t provided disclosures in their preferred language. The form was slated to come out June 13th but it looks like it is still being edited. You can learn about some of the changes on Freddie’s Web site.

Another Meltdown Would Require Major Bailouts
The FHFA’s annual report to Congress shows that Fannie and Freddie would likely fare as bad or worse than they did in 2008. Under the stress tests, the GSEs could need upward of $100 billion dollars. Not surprising considering they have been sending all profits to the Treasury. On a brighter note, the Federal Home Loan Banks look like they could make it through another meltdown.

Zillow Claims to Have Made Zestimate More Accurate
Zillow launched an update this week to the Zestimate algorithm, that purports to improve its accuracy. Zillow claims the update will improve the national median error rate from 8 percent to 6 percent. For those who are skeptics, Zillow adds in a footnote that “Half of all Zestimates are within 6 percent of the selling price, and half are off by more than 6 percent.” I would bet the majority of the “within 6%” are townhouses or condos. is also now in the estimate business. Have you noticed the landing page for Zillow is nearly identical now to One very interesting feature of Zillow is that owners can fill in data that may not exist elsewhere making it a somewhat unique, albeit unverified, database.

If No One Wants Servicing, SRP/Lender Comp Could Dry Up
The federal government and federal agencies are making mortgage servicing a lot less attractive. Basel III limits to 10 percent how much MSR's could count toward the common equity component of banks.  Fannie Mae, Freddie Mac and FHA all require more net worth the more you service. Increased servicing also increases your liquidity and capital ratio requirements. There are quite a few voices claiming that non-banks are too thinly capitalized and want to increase their capital requirements. If banks don’t want servicing and non-banks can’t meet higher capital requirements, servicing could become unprofitable which would filter back to the cost of originations.

Consumers Not Receiving Accurate Title Costs on LE in Most States
The American Land Title Association has been complaining about the way TRID handles simultaneous title insurance discounts for some time. Forced overstating of title costs is not beneficial to borrowers either. ALTA sees the reopening of TRID this summer as a way for the CFPB to fix the issue. NAMB and 74 members of Congress have taken this position as well.

Fannie Mae Pushes Back Release of DU 10.0
Fannie Mae announced it is delaying the release of DU 10.0 with no real explanation and no rescheduled date set. Fannie simply said “we encountered issues with the testing environment.” Insiders are blaming the delay of difficulty implementing trended data. Most believe the introduction will be postponed until at least August.

CFPB Adds More to eRegulations Tool
The CFPB has designed a search tool for all of the regulations it is charged with making and overseeing called eRegulations. It is different than tools lawyers and mortgage professionals use in that it is designed to be used by consumers. There are some consumer explanations on the site that may be helpful that are not found elsewhere. You may be surprised at how well the search function works. Try a search in the RESPA section for “mortgage broker” for example.  Pretty good for a free tool.

CFPB Has Problems with Its Internal Controls
The Government Accountability Office (GAO) released a report this week that shows the CFPB is not minding its own business very well. “GAO identified deficiencies in CFPB’s internal control over accounting for property, equipment, and software that collectively constituted a significant deficiency in CFPB’s internal control over financial reporting.”

Caliber Trying to Sell Its Non-Prime Product on Wall Street
Caliber Home Loans has been taking in loans that didn’t fit the Fannie/Freddie bucket for some time and now wants to securitize them. Despite the fact that the average borrower has $230,000 in liquid reserves and an LTV less than 60%, the loans are downgraded to a single “A” where the best rating is “AAA.” 47% had a bankruptcy, foreclosure, or short sale. Makes one wonder how you get $230,000 in liquid assets when you recently declared bankruptcy or walked away in a foreclosure or short sale. This offering may tell us if there is hunger for sub-prime securities.

House Bill Would Remake CFPB Complaint Database
H.R. 5413, the CFPB Data Accountability Act, has been introduced in the House of Representatives by Rep. Matt Salmon of Arizona. Salmon says the CFPB’s complaint database is confusing to consumers and essentially unusable. H.R. 5413 would require the CFPB to verify the legitimacy of each complaint and organize the complaints in such a way that searches would be more meaningful. Information that could be construed as private could not be entered in the database.

Mortgage Applications Down a Bit?
This week’s MBA survey of mortgage applications is somewhat mixed. The seasonally adjusted figures show applications down, especially for purchases, indicating a slowing housing market. But, unadjusted numbers took a huge jump up from the previous week, which was a particularly horrible week for applications. Just in case you are trying to understand what seasonally adjusted really means, here is a good article.

Big Housing Trades and Housing Advocates At Odds on GSEs
The largest housing trade associations sent a letter to FHFA Director Mel Watt pushing him not to do anything else with Fannie and Freddie reform. The gist of their letter is that Congress needs to reform the GSEs, not FHFA, to avoid benefitting any hedge funds. The letter also seems to be an attempt to thwart recapitalizing the GSEs, which has been suggested by dozens of housing advocates. The letter states their goal is “fixing the structural flaws that led to the breakdown of the housing finance system.” However, the letter contains nothing that lists which flaws they want corrected. 

MBA’s Stevens Campaigning Against Recapitalizing GSEs
Following up on last week’s letter to Mel Watt, MBA’s Dave Stevens is writing op-eds trying to make certain Fannie and Freddie don’t have any money. His logic seems to be having the GSEs borrow from the Treasury, which is essentially a taxpayers bail out. He really doesn’t go into what he wants reformed in his commentary either. It obviously didn’t sit well with readers where 25 took the time to lambast his ideas.

CFPB Spending Big Bucks on Advertising
The Consumer Financial Protection Bureau has spent $15.3 million in FY 2016 on advertising according to the Wall Street Journal. That is 2.5% of the Bureau’s total budget and dwarfs most mortgage companies’ ad budget. Not surprisingly, their ads are created by the same agency that made the ads for Barack Obama and Hillary Clinton. 

Quicken Loans Founder Bidding on Yahoo
Dan Gilbert, founder of Quicken loans is bidding to buy Yahoo for $5 billion. Quicken considers itself as much of a technology company as a mortgage company so it may not seem as far-fetched as it may sound. Gilbert made his fortune in mortgages but has branched out into sports and gambling. Everything he touches seems to turn to gold so watch out Google. Gilbert is reportedly worth about $4 billion.

Want a Mortgage on a Grow House?
I don’t know who else is offering to finance marijuana businesses but one company is boldly promoting they will. Commercial Mortgage Consultants says they will finance your grow house. These companies make pretty good money so it’s not surprising. You won’t get a bounced check because banks won’t deal with the pot business.

Rate Outlook
The Federal Reserve ended it meeting this week with a decision to keep rates unchanged.  This was no surprise so mortgage rates have not been affected.  Chair Janet Yellen blamed slowing job creation as the culprit.  With the horrible jobs report and continually declining job creation, Yellen made a statement that is somewhat humorous, “the labor market strengthens further.”  I suppose she didn’t want to spook anyone that the jobs picture isn’t looking good at the moment.  Her formal state didn’t mention the strong possibility Britain will withdraw from the Euro Zone.  Seems like a smart move.

Meanwhile, international news is beginning to worry U.S. bond traders.  German rates just turned negative, joining Japan and Switzerland.  That means if you buy those countries bonds they will charge you instead of paying interest.  You may wonder why anyone would pay somebody to hold their money.  If you have big bucks, you can’t keep it under a mattress so you are paying a “convenience” fee.  So, why not invest in the U.S. where we don’t have negative rates?   There are tax reasons of moving money and investing internationally as well as possible losses due to currency fluctuations, to name a few reasons.

 Europe is nervous whether Britain will decide whether to pull out of the Euro Zone.  The vote comes next week and polls show withdrawal gaining steam.

In economic news, retail sales show American consumers have money to spend and they are spending it driving retail sales up ½%.  Producer prices rose 0.4% and the core value, which excludes food and energy, rose 0.3%.  Expectations were for PPI to rise 0.3% and 0.1% respectively.  Industrial production fell 0.4% and capacity utilization was 74.9. Traders were expecting production to fall 0.1% and utilization at 75.2.

Weekly jobless claims remain stable at 277,000.  The Philadelphia Fed Survey showed surprising strength in the mid-Atlantic region after some disappointing previous figures.  The Consumer Price Index (CPI) was tame at .2% for both total and core. 

Mortgage rates are looking very good.  With rates this low, there should be plenty of people looking to refi and purchase homes.



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].


Jun 16, 2016