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News From NAMB: November 3, 2016

John Councilman
Nov 03, 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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Freddie Mac Wows With Its Profit
Freddie Mac made a whopping $2.3 billion-dollar net profit in the third quarter. That was double what the GSE made in the 2nd quarter, which was a good quarter. Freddie said they aren’t expecting much in way of loan losses in the immediate future. No wonder the government wanted to take them over.

Wells Fargo Pays $50 Million Over Padded Appraisal Fees
As if Wells Fargo doesn’t have enough problems, they were embroiled in a class-action lawsuit over broker price opinions when loans go into default. The suit alleged that BPOs should only cost about $30 to $50 dollars and Wells charged borrowers about $125. This hefty settlement could be just Wells trying to clear their plate to repair their reputation. There were 250,000 people affected. Even at $100/person that is only $25 million.

Consumers Continue to File Less Mortgage Complaints
The number of consumer complaints regarding mortgages fell by 9% when compared to the 3rd quarter of 2015. Student loans are beginning to feel the heat by doubling since 2015. Bank accounts had the 2nd highest rate of increase.  Perhaps Wells Fargo isn’t the only one irritating consumers. Debt collection now has nearly twice the number of complaints as mortgages and credit reporting has jumped past mortgages as well. The “most common issues identified by consumers are problems with managing, opening or closing an account (32 percent) and unauthorized transactions or other transaction issues (30 percent).” Equifax won gold with the most complaints, followed by the other two bureaus, then the four big banks. Complaints against mortgage brokers are non-existent but they are the only ones with compensation caps and inability to order appraisals.

Why Did the CFPB Send Brokers HMDA Warning?
Even attorneys are wondering why brokers were sent a HMDA warning letter by the CFPB. Normally, HMDA only applies to the entity making the credit decision. However, the CFPB gave examples in the 2015 HMDA regulations that identify situations where brokers do make the credit decision. When an application is never sent to a lender because the broker determines it does not meet the criteria of the lender or mortgage insurer, the originating company, i.e. the broker, reports if the meet the threshold requirements. It appears the CFPB used Call Reports to determine companies that were not filing.

Homeownership Crawls Off the Bottom
After hitting the lowest homeownership rate since records have been kept, there was a slight increase in the 3rd quarter. The rate went from 63.1% to 63.4% making it the 2nd lowest rate in history. We are hardly gaining and that is with things like 1% down, super-low rates, and low-score programs.

CFPB… Much More Than a Regulator
The CFPB was created as a regulator but its vision is far beyond that. We learned in QM that Dodd/Frank and the CFPB believe they should set underwriting standards for mortgages. The CFPB also is charged with being a consumer educator. Now, the CFPB takes it one step further with Project Catalyst. This is project that promotes innovation and technology. It is clear the CFPB wants companies to adopt the technology they believe is good for consumers and has even berated software companies. One of their goals is “Empowering consumers to make day-to-day decisions or adopt spending and savings habits.” Are consumers currently unable to make day-to-day decisions?  They also want businesses to reduce operating expenses. Some believe that could start at the CFPB.

Mortgage Employers in Compensation War
If you are an LO, you are no doubt receiving e-mails promising a $20,000 sign-on bonus. If you look on employment sites, you will find nearly everyone is offering LOs a bonus to come work for them. Rob Chrisman reports that the same is true of processors and underwriters. An employee search firm says, “The war for processors and underwriters is as intense as I have ever seen it.”

Treasury Doesn’t Want Fannie Takeover Thinking Revealed
A federal judge ruled that the documents that resulted in the government taking all of Fannie and Freddie’s profits be given to GSE shareholder’s attorneys. For some reason, the Obama Administration does not want these documents to see the light of day. So, they are filing a motion that claims “presidential communications privilege.” Without getting too technical, the government is saying releasing these documents would give too much insight into the housing policy thinking of the Obama Administration. You can read the motion here if you have too much time on your hands.

Could FHA go Back to .55 MIP This Year?
There are many experts who believe that FHA will turn in a very strong audit this year and will cut the annual premium back to .55%, the levels of a few years ago. With the GSEs showing excellent profits and loan risk extremely low, it does seem possible that FHA could follow USDA and cut premiums. The audit is expected out this month.

Ginnie Mae Worried About Selling Their Securities
Ginnie Mae president Ted Tozer says his “biggest fear right now is that we might be running out of servicing capacity. People tell me when they put a block out they may have only one or two bidders on it." Tozer worries that nonbanks could hit a liquidity crisis if demand worsens. There is a plethora of reasons for the dearth of buyers. Low rates, CFPB servicing rules, FHA being punitive over certifications, Basel III making servicing less attractive to banks, etc.

SOFI Gets Special Cash-Out Rate From Fannie Mae
It looks as though Fannie Mae is carving out special programs for various lenders. SOFI is offering a cash-out refi that is ¼% cheaper than other cash-out refis because it will be used to pay off or pay down student loans. SOFI, who was originally known as something as an alternative to Fannie Mae, has now become a Fannie seller servicer. Can’t beat them? Join them.

HomeBridge is Buying Prospect Mortgage
HomeBridge Mortgage announced it is buying Prospect Mortgage. The two are the largest 203K lenders in the nation. HomeBridge is the new name for REMN which uses the old name only for East coast wholesale. Prospect initially came to fame as an MSA with Wells Fargo. When MSAs lost favor with the CFPB, Wells bailed which made Prospect a takeover target. The new company will be the sixth largest mortgage lender in the country.

Zillow Turns in Huge Profit
After Zillow was finally able to extricate itself from the lawsuit with, it showed a nice profit. After losing $26 million last year, Zillow earned $6.8 million this year. After acquiring it next-largest competitor, Trulia, Zillow really has very little competition other than Next year looks even better for the online portal.

MBA Names Its First Hispanic Chairman
The Mortgage Bankers Association installed Rodrigo Lopez as its first Hispanic chairman in the association’s 103-year history.  Lopez is executive chairman of NorthMarq Capital, a commercial/multi-family lender.  He had served on MBA’s board and was chair of MBA's Diversity and Inclusion Committee.

Crapo Would Likely Head Senate Banking
For those of you die-hard political junkies at NAMB like me, we always like to know in whose hands we fall in Congress. If the Senate remains Republican, Mike Crapo of Idaho is the likely chair. He is a little less conservative than Richard Shelby, the current chair, and may strike some deals. We hope they aren’t deals that fall on the little people in this business. If Democrats wrest control of the Senate, the chair will go to Sherrod Brown of Ohio. He is a pretty hard line liberal but he is no Elizabeth Warren. Brown has held the party line on no changes to Dodd/Frank.

Rate Outlook
The Fed minutes declare the U.S. economy is doing better all the time.  But, as expected, they did not raise the discount rate at their meeting this week. Unless some really bad economic news comes out this coming week, we can assume the Fed will raise rates in December. We are very near full employment and the CPI indicates we are close to the magical 2% inflation rate the Fed has been waiting for. Even if the Fed raises in December, it will likely only be ¼% and other raises will be spaced out and small.

That hardly means the economy is on fire, if that is even what we want. Small businesses, such as brokers and small lenders are not there to fuel the economy. People are not starting new businesses. In 1977, 16% of U.S. firms were less than one year old. Now, that share had fallen to less than 8%. The unemployment figures are somewhat misleading since we have a much larger share of the population not working than in recent history. Goldman Sachs says small firms are less competitive now because regulations are tipped in the favor of large firms. Small business also need to borrow without a lot of red tape. Dodd/Frank is red tape. The takeaway is we will not see the U.S. as one of the fastest growing economies but it likely won’t have any sharp jolts either. Regulation has its benefits and its detractions.

This week, rates have seen a slight slide, not uncommon on the first week of the month when there is a lot of economic news. Starting with the inflation news last Friday, we have seen a slight heating of the economy. GDP grew faster than it has in several years. Wage costs pushed up more than expected. PCE inflation, a key Fed measure was only up .1% which tended to tame the rate increases. Then, ADP showed a smaller than expected gain in payrolls for the week.  That also gave rates a little break.

This morning, Weekly Jobless Claims continued to rise from below 250,000 a few weeks ago to 265,000 this week. Productivity in Q3 rose 3.1% and labor costs increase 0.3%. Expectations were for increases of 1.8% and 1.2% respectively.  That contradicts somewhat the wage costs released last Friday.  Finally, Factory Orders rose 0.3%, near expectations.

Tomorrow is the behemoth of rate influencers, the BLS jobs report. If the report is good, it more or less seals the Fed raising rates in December. If we are to get any rate relief, it won’t be until this report comes out tomorrow.


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 03, 2016