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News From NAMB--June 4, 2015

John Councilman
Jun 04, 2015

You may have noticed that News From NAMB is not just links to other media stories but also goes to primary sources. Because NAMB is deeply involved in so many facets of our industry, we find important information that may not be reported elsewhere. Best of all, it is free to NAMB members. News From NAMB is sponsored exclusively by United Wholesale Mortgage

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CFPB delays TRID enforcement ... kind of
There will be no delay in TRID implementation but the CFPB has agreed to be “sensitive” to good faith efforts to implement the TRID rule. The letter to Congress by Richard Cordray means he heard they are not pleased with a hard line approach to implementation but does not give what they asked for in their letter. How long the CFPB will be “sensitive” is also not revealed in the letter.

CFPB clarifies decrease in APR
In the same letter to Congress, Cordray clarified that a decrease in the APR will not trigger the three-day waiting period. There are only three things that trigger the additional three-day waiting period, a 1/8 percent upward change in APR (1/4 percent for irregular loans). Also, the addition of a prepayment penalty or change of loan program will cause the delay. That had also been a concern of Congress.

In the letter, Cordray says a change where an “APR of greater than 1/8 of a percentage point for a fixed-rate loan or 1/4 of a percentage point for an adjustable-rate loan.”  It seems the CFPB may need a little sensitivity since the rule says in:

Paragraph 22(a)(3)
The annual percentage rate for an irregular transaction is considered accurate if it varies in either direction by not more than 1/4 of one percentage point from the actual annual percentage rate. This tolerance is intended for more complex transactions that do not call for a single advance and a regular series of equal payments at equal intervals. The 1/4 of one percentage point tolerance may be used, for example, in a construction loan where advances are made as construction progresses, or in a transaction where payments vary to reflect the consumer's seasonal income. It may also be used in transactions with graduated payment schedules where the contract commits the consumer to several series of payments in different amounts. It does not apply, however, to loans with variable rate features where the initial disclosures are based on a regular amortization schedule over the life of the loan, even though payments may later change because of the variable rate feature.

Provident to pay $9 million for varying broker fees
Provident Funding has agreed to pay $9 million for allowing brokers to make more on African Americans and Hispanic loans. Wells Fargo paid out hundreds of millions on similar charges a few years ago although it involved subprime lending. It was common practice, prior to the LO Comp Rule to charge borrowers different percentages and fees. This case is a huge warning for brokers and wholesalers that allow a different payment scheme, even for lender-paid vs. borrower. The CFPB accused Provident of allowing brokers to have “unguided discretion to determine the total broker fees they would charge.” 

Another charge is that Provident was supposed to have meaningful “monitoring to determine whether the total broker fees it charged differed significantly for borrowers of differing races or national origin.”  DOJ claims Provident was supposed to “offer fair lending training to, or require fair lending training of, mortgage brokers with whom it conducted business.

Supreme Court says underwater liens are secured
When houses went underwater, there often was no equity to cover the second lien. Since there was no equity, some reasoned that you could declare bankruptcy and have the second lien totally wiped out like any other unsecured loan. The Supreme Court said the second lien holder is still secured, irrespective of whether there is partial equity or no equity

Quicken wins a skirmish in its war with DOJ
Quicken has won the right to have its suit against the Department of Justice and HUD heard before the DOJ’s case against them. That will allow Quicken to present its case in Michigan rather than in Washington, D.C. The DOJ may even have to come to Michigan for its case. While it isn’t a major victory, it is a favorable ruling for Quicken as each side tries to get every advantage they can. DOJ is saying Quicken violated FHA guidelines to make extra money. Quicken is saying they follow FHA guidelines better than any other large lender and they will not admit to wrongdoing they didn’t commit.

First Tennessee pays $212 million on FHA violations
Rather than fight like Quicken, First Tennessee Bank is going to pay $212.5 million for FHA origination violations. In 2008, First Tennessee sold their mortgage business to Metlife, who just paid up over $123 million for similar violations.  Supposedly, First Tennessee violated FHA guidelines on a very high percentage of the loans they underwrote.

Why non-banks are taking over mortgages
A new Harvard study offers three changes to the non-bank model that makes them more competitive. The new non-banks are:

1. Subject to much more regulation and supervision;
2. More active in mortgage servicing than ever before; and
3. Using technology to transform the mortgage market.

Those all may be true but I could have saved a lot of money by telling them that banks are simply too conservative and harder to deal with.

FEMA official says flood insurance in meltdown
Deputy Associate Administrator for FEMA, Brad Kieserman told Congress that FEMA needs a complete rework. One of the biggest problems is FEMA pays insurance agents 1/3 of the premium on a continuing basis. Then, he claims too many people are having to sue to get flood benefits because there are too few people working at FEMA. There is going to one elss because he is leaving to take a higher-paying job with Red Cross. Amazing what charities pay.

Win a free trip to Las Vegas!
NAMB is offering you chance to win a free to trip to NAMB National in Las Vegas this October. The prize goes to the person who comes up with the best reason they are a mortgage pro. You may submit text (no more than two sentences), a picture with text, or a video. Entering the contest is a simple. You must start your post with “I am a #mortgagepro because …” to be a valid entry. Enter today by posting your reason to Facebook, Twitter or Instagram.

Rate outlook
We have seen a continuation of the upward trend in interest rates. There is a lot more at play than just the Federal Reserve. It is the general mentality that is driving rates up. The simple answer is, people are not buying lower interest bonds.

Greece is still falling apart and default becomes more likely. The Eurozone is experiencing a bond selloff that is affecting U.S. bond rates. The mentality is that rates are going up and low-interest bonds are being sold.

The news this week would have normally have driven rates down.

ADP Payrolls were up less than expected, core PCE inflation posted at +0.1 percent instead of the expected +0.3 percent.

Weekly jobless claims printed at 276K and continuing claims, a summation of all receiving benefits, at 2,196K. Economists’ expectations were for claims to print at 280K and continuing claims to come at 2,215K.

Productivity in Q1/2015 fell 3.1 percent.

Tomorrow is the most important rate indicator, the BLS jobs report. A strong jobs report could push the Fed to raise rates this month. A weak report would push a rate hike back to the fall or later. No one is expecting a horrible report so rates are not likely to fall back much.


Jun 04, 2015