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News From NAMB: November 17, 2017

John Councilman
Nov 17, 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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FHA Releases Best Report in 10 Years, No Premium Cut
FHA just released its 2016 actuarial report this week. It shows FHA well above the 2% capital reserve requirement. There is a lot more useful information in the report which shows 83% of endorsements went to non-bank lenders. Banks have fled FHA thanks to DOJ suits. FHA remains primarily a purchase loan program despite the huge refinance market this year. FHA’s market share is still growing up from about 16% of purchases in 2014 to about 22% for 2015/2016. Ed Golding, current FHA head, doused any hopes of a premium cut in announcing the good report.

Appraisal System Roasted Before Congress
The House Financial Services Committee heard from various stakeholders in the appraisal industry this week. It was not testimony that bodes well for the profession. Most insisted that the current appraisal system needs an overhaul. The Appraisal Foundation, who testified at the hearing, has established a perfectly fine set of standards and high qualifications. The problem is, it has discouraged entry into the profession and irritated lenders and home builders. That became obvious at the hearing.

Ginnie Mae Wants to Crack Down on Serial Refinancing
Some originators and some borrowers like to refinance a VA or FHA loans when the minimum savings requirement of those agencies is met. Ginnie Mae bond issuers are concerned that it could harm Ginnie servicers and Ginnie Mae itself. Lenders who refinance a Ginnie loan in less than six months will be segregated and bunched together in special pools, which means they will be penalized in terms of pricing starting February 1st. VA is considering writing guidelines that would prohibit or restrict refinancing within a six-month period.

Two Potential Trump HUD Secretaries Are Touted
Donald Trump is said to be considering two people for HUD Secretary and they couldn’t be more different. Pamela Patenaude, president of the J. Ronald Terwilliger Foundation for Housing America's Families, is a prominent former HUD employee. She oversaw community planning and development at HUD and now presides over an affordable housing group. The other possible HUD Secretary is Rob Astorino,  Atorini gained national prominence for his legal fight against HUD and the Justice Department over a federal court settlement challenging the racial diversity in Westchester’s affordable housing locations. In essence, he has a sour taste about HUD’s handling of community development.

Nearly 25% of Mortgage Applicants Unhappy With Lender
J.D. Power claims 27% of first-time buyers rue their choice of mortgage lender during the homebuying process. 21% of all homebuyers felt the same way. The bad news is 72% of first-time buyers in the group said they were pressured to take a particular loan. The good news is that is an improvement over previous surveys. At the top of the satisfaction list was Quicken, followed by Citi and Ditech.  Power’s survey produces results that seem to disagree with the CFPB’s complaint database where Citi racked up the most consumer complaints, right behind the three credit bureaus. They did do better than the other big banks with mortgage complaints but they write a lot less mortgages.

Mortgage Applications Take Serious Hit
Mortgage applications took a 10% drop from the previous week thanks to a sharp rise in interest rates. The hit was especially hard on refis which dropped 11%. Purchases dropped 6%. Two areas that actually increased slightly were FHA and VA. If rates continue to suffer, we could see further drops.

Trump Would Not Eliminate the Mortgage Interest Deduction
"There's nothing in the plan that currently would bring that under attack," says Steve Calk, a member of Trump's economic advisory council.  Prior to Trump’s election, MBA CEO David Stevens had suggested that MBA might be willing to discuss cutting the mortgage interest deduction as part of a larger tax reform package. Stevens and others pointed out that the deduction is used more by middle-class borrowers than low-income ones. He later walked back those statements.

Banks Forcing Bonds Out of Jumbo Market
Residential mortgage securities for jumbo loans are down nearly 50% this year compared to last.  There are two explanations that both play together.  First, banks love high-quality jumbo loans and offer rates even better than Fannie Mae loans at times.  Second, bond investors still like the government guarantee and are under no pressure from regulators to make home loans.

Fannie and Freddie Risk-Sharing is Great, Right?  Maybe.
Fannie Mae and Freddie Mac have been entering into risk-sharing agreements with those selling them loans.  The selling lender takes a certain portion of the risk and gets a special deal from the GSEs.  Those deals include lower G-fees. Right now, with defaults at an extreme low point, lenders get all the benefit because there is little risk.  Some people think Fannie and Freddie are giving away the store since they could be making the profit on that risk. Time will tell.

Quicken Wins a Skirmish in War with HUD/DOJ
Quicken Loans won a small but important battle in court this week. The case will be moved from Washington, DC to Detroit. It will not only be easier for Quicken to have the case heard in Detroit, it may give a friendlier venue. Quicken, the nation’s #1 FHA lender, claims it has the best FHA record in the business and the Department of Justice is simply extorting money from lenders.

Liz Warren Threatens Trump
I would say Elizabeth Warren is a bit upset about Trump winning the presidency. She has made it clear that she is not going to cower in a corner. In her latest rant, Warren told Trump that he had better “remove the lobbyists and financial bigwigs from your transition team and reinstate a group of advisors who will fight for the interests of all Americans.” If not she threatened to “oppose you every step of the way.  I will track your every move, and I will remind Americans, every day, of the actions you take that fail them.”  Whew!

Rate Outlook
So far, the election of Donald Trump has had the opposite effect on the stock market than everyone predicted.  The market has soared to all-time highs which has unfortunately driven up interest rates.  Trump continues to baffle the prognosticators.  Trump doesn’t always follow through with his fiery rhetoric which seems to put people at ease.  He now is saying he may not replace Janet Yellen as Fed chair but will not nominate her for a 2nd term.

Now, we have the Fed dilemma, should they raise rates in December as most believe is expected?  If so, what is the criteria?  How do they justify it?  Inflation is still less than 2%, much lower by the Fed’s favorite measure, PCE.  Stronger employment?  Hardly.  In 2015 the average monthly job creation was 228,000.  In 2016, so far, it is only 180,000.  Then, there is GDP which is hardly on fire.  I’m certain the Fed can spin it based on what they saying about the labor market at past meetings.  According to the media, now that Trump was elected everyone is worried about inflation.  Really?

It may be the Fed is realizing that we must not only consider employment but pension funds and social security.  Almost half of our population is on a pension or social security.  If pension funds can’t get enough return due to low rates and bouncing stock values, a lot of people will be in financial trouble.  Social Security is not doing well either.  One must wonder if the Federal Reserve is thinking about raising rates based on that.

Right now, economic news doesn’t seem to be in the driver’s seat for interest rates.  Nonetheless, Retail Sales rose 0.8%.  Economists’ expectations were for sales to increase 0.6%. 

The Producer Price Index was unchanged in October, rose 0.3 percent in September and were unchanged in August.  At the producer level, this shows little or no pressure for prices to rise.

Consumer prices rose 0.4% and the core value, which excludes the volatile food and energy components, rose 0.1%. Expectations were for CPI to rise 0.4% and 0.2% respectively. Housing starts printed at 1,323K versus the expected 1187K. Housing starts jumped by the most since 1982 in October.  The Philly fed index came in at 7.6 versus the expected 8.

Weekly jobless claims printed at 235K, far below the 250,000 marker.  People are holding on to employees in anticipation of economic growth.  All of this bodes well for the economy and the new president but not particularly good for rates.


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 17, 2016