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News From NAMB: November 10, 2016

John Councilman
Nov 10, 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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What Will Trump Do with Dodd/Frank, CFPB?
During the campaign, Donald Trump promised to dismantle Dodd/Frank and cut regulations. The question remains, “Which parts of Dodd/Frank would Trump attempt to dismantle?” There is a lot more to the law than mortgages. Now that a federal appeals court has ruled that the CFPB Director serves at the pleasure of the President, Richard Cordray could be replaced and the new CFPB Director could rewrite all of the rules promulgated under Cordray. Trump may not move on Dodd/Frank right away since he has so many more pressing items such as Obama Care and immigration. Can you imagine rewriting all of the software for new rules and retraining everyone?

Lots More PIWs Coming
According to Mat Ishbia, Fannie Mae intends to solve a large portion of the appraiser shortage by issuing a lot more appraisal PIWs. Ishbia, in his 3 Points video, claims Fannie will issue PIWs on 25% of rate and term refinances. That is as much as 10 times the current level. The enhanced PIW waivers go online December 10th for rate and term refinances that have a previous appraisal in Collateral Underwriter. These loans will often receive a PIW rather than needing a full appraisal. Freddie Mac says they will be something similar with more purchase mortgages.

Fannie Mae Isn’t Waiting to March Ahead
Fannie Mae is beginning to act like the old Fannie, despite the fact they don’t control their future. The GSE is creating new programs such as income and asset verification tools, automated guideline protection found in Day 1, and specialty cash-out programs like student loan cash-out. So, what’s next? Fannie Mae CEO, Timothy Mayopoulos, says Fannie is developing tools that will make certain loans are compliant with the maze of mortgage regulations. It seems they will offer all the technology needed to originate mortgages before long. Will anyone need a mortgage software package?

Wells Fargo Now Facing Mortgage Scrutiny
Wells Fargo announced on its SEC filings that it is discussing potential issues with regulators regarding its mortgage practices. The Residential Mortgage-Backed Securities Working Group of the Financial Fraud Enforcement Task Force, which includes officials from the Justice Department and the SEC, has raised “potential theories of liability” surrounding the bank’s handling of residential mortgages and FIRREA in particular. The details are yet unknown but you can be certain it will cost Wells Fargo lots of legal fees and more settlements.

Hot Buttons for Your Compliance Management Systems
The CFPB mentions what they are particularly looking for in a Compliance Management System. Yes, you are supposed to have one, even if you are a one-person shop. Number one  on the list is an up-to-date fair lending policy statement, documenting the policies, procedures, and decision-making on providing language services. Number two is regular fair lending training for all employees and, again, providing language services. If you have no provision for handling non-English speaking borrowers, it is likely the CFPB is not going to be happy.

Wholesale Lenders Letting Brokers in on Servicing
Several wholesale lenders turn over the trigger leads to the broker who originated the loan when the borrower is applying for a new mortgage. The weak spot in that approach is your borrower has already made the decision to apply elsewhere. Caliber Home Loans believes they can improve on that. They review their servicing portfolio monthly. If a customer can potentially save money by refinancing or is in the market to purchase a home, Caliber will identify the record and send the customer information regarding possible refinance or new purchase options via e-mail and mail, as permitted. The next step is the big change. Your name and contact details will be included in the e-mail should they choose to use your company for their financing needs.

Would You Like to Offer Your Own Construction Loans?
Construction loans are a little more difficult and risky than selling whole loans so you do need some experience if you want to jump into this area. But, if you are a correspondent or mini-core, First Tennessee Bank is offering warehouse lines so you can do your own construction loans. You must have a standard warehouse line with them first. Starting line size is $3 million.

FHA Condo Rule Changes Fall Short
Congress sent a very clear message to FHA that they needed to loosen their condo rules. FHA said, “OK,” but put in a lot of hoops condo buyers still have to jump through. They did lower the owner-occupant ratio from 50% to 35% and they have proposed a rule that would allow spot condos. But, they are requiring low occupancy-rate condos to document that the project has 20% financial reserves and that no more than 10 percent of the units are in arrears on HOA dues. Associations must provide three years of "acceptable" financial documents for review as well.

Who Needs All Those Duplicative Docs?
We get tax returns and insist that borrowers sign them when we get what they actually filed with the IRS through transcripts. Most lenders are still asking for bank statements when that information is available through an online service. I’ve had lenders insist on a standard VOE for FHA when we had a very complete one through the Work Number. The good news is that some lenders are waking up. Several wholesale lenders are adopting Fannie Mae’s DU validation service aimed at avoiding duplicative documentation. But that is only for conventional loans.  I’m certain there are some grumpy old FHA review underwriters at the HOCs who will think this is awful because they want to compare multiple documents. But, they are about to be unneeded. Technology is remaking the mortgage industry and FHA will have to move forward as well.

PHH Fined $28 Million by New York
PHH may have escaped a huge fine from the CFPB, but it is not out of hot water. The company has agreed to pay the New York Department of Financial Services $28 million over numerous infractions between 2010 and 2014. Most of the violations were servicing related but at least three were related to origination. PHH had LOs with expired licenses or LOs from another PHH entity take applications. PHH had inadequate controls to ensure that electronic signatures appearing on applications were those of the mortgage loan originators who actually took the application. Finally, PHH’s compensation plan failed to prevent against steering borrowers into risky or unnecessarily high-cost loans or basing a mortgage loan originator’s compensation on the terms of the loan. Combined with major losses in servicing and legal fees, things are not good at PHH.

Fannie Mae Has Profitable 3rd Quarter
Last week, Freddie Mac doubled its net profit. That news was followed by a good quarter for Fannie Mae. While not as impressive as Freddie’s performance, Fannie turned in a respectable profit of $3.2 billion dollars.

Will Fannie and Freddie Be Forced to Allow Marijuana Income?    
With at least seven states approving recreational marijuana and many others approving medical marijuana without a prescription, there will have to be an industry to meet the demand. It is unclear whether Congress will be forced to legalize its use or Fannie and Freddie can simply move forward.

Rate Outlook
Donald Trump was elected and, so far, the stock market hasn’t imploded. To the contrary, it has surged to an all-time high. When news began to show that Trump would win, stock futures dropped nearly 800 points. It was gloom and doom.  But, when people who own stocks started buying, things turned positive quickly. Makes one wonder who was driving down stock prices and who was driving them up. There is little doubt whom the big players in the stock market wanted for president.

Unfortunately, when stocks do well, bonds tend to do poorly. Mortgage rates have taken a nasty hit yesterday and today despite decent demand for longer-term securities. There looms a huge question on what Trump will do at the Federal Reserve. Our biggest question is whether he will want the Fed to keep buying most of the residential mortgage securities. If not, rates will shoot up.

Some are explaining the bond jump on Trump’s promise to pump a trillion dollars into making the U.S. infrastructure state of the art. Others claim the Trump tax cuts will increase the deficit and devalue the dollar. The good news is the blood-letting has reversed a bit this morning.

Last Friday, the BLS job report showed a mediocre 169,000 jobs were created.  If the election hadn’t been so surprising, we probably would have had better rates this week.  This was a light week for news and tomorrow the bond market is closed.  Jobless claims were a little better at 254,000 vs last week’s 265,000.

Everyone thinks it is a foregone conclusion the Fed will raise rates ¼ in December. I wouldn’t be totally certain of that since Trump would take that as a direct attack on the beginning of his presidency.  He had already accused the Fed of being sympathetic to Barak Obama and Hillary Clinton. At least we aren’t bored.


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].




Nov 10, 2016