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News From NAMB: May 5, 2016

John Councilman
May 05, 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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CFPB to Open TRID for Possible Significant Rewrite
The CFPB dropped a bombshell when it announced to NAMB and other trade groups that it was reopening TRID for possible major changes that require a new rule-making beginning in July. One of the biggest impediments to TRID is the lack of certainty. The CFPB acknowledged in their letter that “informal” and “verbal” guidance that they refuse to put into an FAQ make everyone feel uneasy. They suggest that they could put a lot of the informal guidance into the rule. Of course, that would make the rule 5,000 pages instead of less than 2,000. Can you imagine how dizzy everyone will be with more training and software changes?  Have they thought that perhaps they have too much micro-managing in the rule like rounding 4 or 5 different ways and having to alphabetize fees and have exact fee names?  As much as we all hate it, issuing the CD 3 days before closing is likely to stay. It does seem silly to have 3 more days to rescind though. You can be certain NAMB will be presenting your input which you can direct to [email protected].

USDA To Cut Upfront and Annual Guarantee Fees
Beginning October 1, 2016 the USDA Rural Housing upfront guarantee fee will take a huge drop from 2.75% to 1.0% of the loan amount. The annual fee will change from 0.50% to 0.35% of the average principal balance. People in rural areas have proven to be great credit risks. Rural USDA must review its fees annually so this will be in place until September 30, 2017. 

Appraisers Call For Hearings to Improve Appraisal Regulations
An acute shortage of appraisers has put pressure on everyone from The Appraisal Foundation (TAF) to state regulators to lenders to resolve the problem. Dodd/Frank served to permanently entrench appraisal management companies and form a cumbersome “firewall” between appraisers and those who use them. Five of the major players in the appraisal arena are calling for hearings in the House and Senate. The strange part of this is that the Appraisal Qualifications Board at TAF has pushed appraisal education requirements to the point where young people are not entering the business. A hearing may create some reactions the AQB may not like. Meanwhile, the VA system that everyone used to hate looks better all the time.

Freddie Mac Loses Money, May Be In Trouble
After turning in some nice profits for a few years, Freddie Mac is beginning to seesaw between profitable quarters and losing quarters. Freddie lost money in the 3rd quarter of 2015, made a nice profit in the 4th quarter and now has lost $354 million dollars in the 1st quarter of 2016. Freddie’s stockholders blame the GSE’s inability to build income-producing assets for the loss since the Treasury Department is taking all of their profits. Freddie claims it still has a $1 billion net worth but others claim the firm has negative equity. In a flurry of conflicting statements, the GSE stated, “Freddie Mac currently faces a risk of a draw.” It’s CEO claims all of this was just paper losses and everything is fine. The losses seem to be attributable to interest rate risk rather than credit risk.

Homeownership Dropping Again
One would think with all of the housing activity that more people would own homes. But, the Census Bureau says we are once again pushing the all-time low set in February of 2015. After 2 quarters of gains, the rate dropped to 63.5% just .1% better than the 48-year low of 63.4%. The west is the area of lowest homeownership where only 58.7% own their home. 

Are First-Time Buyers Back In the Market?
It depends on your definition of first-time buyer. If take that to mean what it says, they have not owned a home before, there is no real gain according to NAR. But, if you take the Fannie Mae data where first-time buyer simply means they haven’t owned a home in 3 years, there is a large increase. People who owned and may have not been a homeowner for a while due to the implosion, are definitely showing a huge increase.

Suit Claims HUD Disparate Impact Rule Disagrees With Supreme Court
Last year, the Supreme Court upheld the use of disparate impact as an illegal form of discrimination. Disparate impact essentially says you are guilty of discrimination simply because something you did failed to give equal results. A suit has been filed that claims HUD’s rule on this contradicts the Supreme Court ruling. The Court emphatically stated that a mere racial imbalance, standing alone, does not establish a prima facie case of disparate impact. The HUD rule is at odds with that.

More Private Flood Insurance May Be Likely
After some twists and turns, HR 2901 passed the full House of Representatives. It would make it easier for smaller, state-approved companies to get in the flood insurance business and take some of the burden off FEMA. The question is whether private insurers will want to be in that business and whether they will be competitive. A companion bill has been introduced in the Senate which is expected to sail through like the House Bill. One should be wary of state-chartered insurance companies who have a history of being too thinly capitalized.

Zillow Rakes In More Money From Originators
In the hot battle between Zillow and, Zillow says it is winning. Zillow and its sister, Trulia, garner over twice the web traffic of rival according to web analytics. Zillow sales are way up, especially to real estate agents and mortgage originators. The mortgage segment revenue increased by an amazing 65%. It’s not hard to see where originators are spending their advertising budget. Despite all of the great increases in traffic and revenue, Zillow still managed to lose $47 million which is a slight improvement.

Dodd/Frank Becomes the “Too Much” Law
Dodd/Frank has become the law associated with the word “too.” We have “Too big to fail.” The Florida financial regulator coined the phrase, “Too small to comply.” Former FDIC Chair William Isaacs called it “too complex.” Another name recently coined is, “Too unwieldy to implement.” Perhaps the Economist summed it up best when it called the law, “Too big not to fail.” Recent court cases indicate much of it may fail.

Bank Preemption From State Laws Being Chipped Away
Banks have enjoyed exemptions from many state laws courtesy of the National Bank Act.  Little by little, courts and even Dodd/Frank are eroding that. Now, the 2nd Circuit Appeals Court has proclaimed that Notes sold from a bank to a non-bank lose the preemption of the bank. This would force banks to hold paper if they can’t sell it to another bank or sell it only to non-banks in selected states. Erosion of preemption is why banks don’t want their originators to be limited by state licensing.

Purchases and Refinance Mortgages Slowing
The most recent MBA survey shows that purchase applications are no longer gaining although they are 13% better than at this time last year. Purchase apps actually decreased .1% this week. Refinances have dropped to 52.9% compared with approximately 60% a few weeks back. Even with low rates, there are only so many people with higher rates. The housing market in my area seems to have hit a wall on more expensive homes. That is inevitable when price increases keep outpacing wages.

CFPB Releases On-Demand Webinar On TRID Answers
On April 12th, the CFPB put on a webinar that promised to answer specific questions that various stakeholders have raised to the Bureau related to the TRID rule. Now, you can replay the webinar online. For those of you who are expecting some real life examples like those that you used to get in old Truth-in-Lending commentaries, you won’t get them. I am going to save this link for those times when I’m having difficulty going to sleep.

Former Ginnie Mae President Says It Should Split From HUD
Joseph Murin, the prior president of Ginnie Mae, says HUD is not giving Ginnie Mae the budget it needs to function properly. Murin thinks a better fit would be FHFA, the overseer of Fannie and Freddie. With Freddie showing signs of needing a government draw, many would question giving FHFA another major source of funding, especially when it carries an explicit government guarantee. There is little question that HUD only gives a tiny portion of its budget to FHA and Ginnie, something that needs reconsideration. 

What Would Happen If Court Rules CFPB Director Unconstitutional?
People are having fun speculating what would happen if the Appeals Court in the PHH case rules a single Director for the CFPB is unconstitutional. The issue seems to be that the Director can only be removed for “cause.” Most speculate that the court may rule that the president can remove the CFPB Director whenever he wants but likely will not require a commission to run the agency. The effect of that will be little or nothing unless the presidency changes. Then it is very likely the Director will be replaced. Of course, Congress can change the agency’s structure and even abolish it or strengthen it, depending on who gets elected.

Rate Outlook
The first week of the month is usually a big week for rate-changing economic news. There are 3 jobs reports this week, ADP payrolls, Weekly jobless claims, and the big one, the Labor Department’s employment report, which comes out tomorrow.

So far this week, like last week, economic news was on the negative side which is good for keeping rates low. Of course, rates seem to be hitting a shelf of resistance because everyone still thinks rates are going up this year. That type of thinking severely hurt Freddie Mac as well as lenders.

The ISM Index, which measures manufacturing growth, fell to 50.8 in April, down from 51.8 in March. Anything greater than 50 indicates manufacturing growth, so it was anemic growth. Construction spending growth seems to be slowing but is solidly ahead of last year at this time. The biggest gainer was multi-family and the biggest loser was commercial construction. Single family fell in the middle with moderate gains. In response, FHFA raised the cap on the amount of multifamily loans Fannie Mae and Freddie Mac can buy to $35 billion effective immediately.

ADP Payrolls came in with a 156,000 job gain vs. the expected 196,000 gain. Factory orders were one area that exceeded expectations, up 1.1% vs. the expected .5%. Weekly jobless claim jumped sharply today to 274,000 giving rates a little help.


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].



May 05, 2016