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News From NAMB: October 27, 2016

John Councilman
Oct 27, 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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NMLS Says Licensing Numbers Increasing
The National Mortgage Licensing System just released statistics from the 2nd quarter report. It shows moderate growth in licenses overall and has some interesting numbers. State-licensed companies grew by 1.68% from the same period last year. Originators grew by 7.46% from the previous year. Federally registered originators declined by 3.9%. Looking at states, we see some strange things. Massachusetts had only 54 new companies apply for a license and 22 of them withdrew their application, the highest number in that nation. Virginia and Georgia had the highest number of MLO withdraws, where over 20% withdrew. Florida and Tennessee had the most MLO licenses denied. Virginia and Georgia had the most licenses terminated. It is interesting that Georgia, Tennessee and Virginia had nearly as many new MLO applications as much more populous states like Florida and Texas.

Fannie Mae Says No More Worries of Buybacks
Fannie Mae claims lenders can make loans without fear of reps and warranties being violated. The concept has been dubbed “Day 1 Certainty.” As part of Day 1 Certainty, Fannie Mae is offering income, assets, and employment validation services to lenders through Desktop Underwriter. In addition, Fannie will provide freedom from reps and warranties on appraised values through Collateral Underwriter when a property receives a qualifying score. Income is available now.  Assets will go online December 10th.

Fannie Expands Refis to 97% and More Changes
In the same announcement as Day 1, Fannie slipped in another major change. If the current loan is owned by Fannie Mae, you will be able to do a 97% limited cash-out refinance under Home Ready. If the borrower completes homebuyer education, Fannie will give a $500 credit to the lender and allow ratios to exceed 45% all the way up to 50%. These changes will be effective December 10th. A few more goodies in the announcement are: wage garnishments will no longer have to be paid before closing, co-borrower self-employment will no longer have to be considered, even if there is a loss, a property with an accessory dwelling unit can be counted as a single-family home.

Bank of America Doubles 3% Down, No PMI Program
Bank of America is upping its commitment to its partnership with Self Help Ventures from $500 million o $1 billion dollars. All you need is a 660 score and take housing counseling to qualify. It requires no reserves and no cash, since borrowers can use approved secondary financing, grants, or even cash on hand. The program also considers non-traditional forms of credit to demonstrate credit history. Applicants’ income cannot exceed 100 percent of the HUD area median income. Loan can be up to $417,000, a pretty good indicator that those income figures are pretty liberal. Freddie Mac is bankrolling the loans. If this works, who needs all those rules and PMI and FHA? Things are always wonderful in an upward-moving market.

CFPB Sends 44 Lenders and Brokers Warning Letter
The CFPB warned 44 lenders and brokers that they may be in violation of the Home Mortgage Disclosure Act (HMDA). It appears the lowered reporting requirement triggers enacted last year were met and they had not reported. If a firm originated more than $25 million in home mortgage loans in the preceding year they must report. Most of the final rule’s provisions will go into effect on January 1, 2018.

Re/Max to Open Mortgage Broker Franchises
Re/Max, the giant real estate franchise, plans to offer a mortgage broker franchise. Motto Mortgage will operate out of the Re/Max office and attempt to give a one-stop buying/financing option. It appears Re/Max is trying to recruit people who are currently MLOs for another company to join their network. This is a little different twist than the PHH/Century 21 model.

CFPB Not Cowed By PHH Case
CFPB Director Cordray made it clear that they have no intention of backing away from RESPA enforcement actions similar to the PHH case or in other areas of RESPA. Speaking to the MBA conference this week, Cordray said the PHH decision is not final and the CFPB may appeal. In the meantime, he outlined three areas where the Bureau will focus, Consumer Complaints, Redlining, and RESPA, which includes MSAs.

Private Flood Insurance Is on the Way
After finding a tough road getting legislation passed that would require private flood insurance to be acceptable, the idea took an end run around Congress. After a strong push, an FDIC/OCC proposed rule would force banks to accept private flood insurance.  The bill that would have given private flood insurance parity with FEMA insurance died in the Senate after passing the House unanimously. In states like Florida, few if any home-owners insurance companies are capitalized well enough to have an A.M. Best rating. There is a real question if these insurers would have enough reserves to rebuild after a natural disaster.  Ditto for private flood insurance.

Cordray Says CFPB is Big Part of Housing Recovery
CFPB Director Richard Cordray is giving the CFPB a large portion of the credit for the housing recovery. Cordray points to the increases in home purchases since CFPB mortgage rules went into effect in 2014 and 2015. That may be a little hard to claim since in 2014 existing home sales were down 4% vs. a steady increase from 2011 to 2013, before the first mortgage rules took effect. It may be safer to claim that the CFPB rules, like QM, haven’t stopped the housing recovery as some feared. But, Cordray admits, “The secondary market for mortgage financing remains moribund.” The real truth is that if the Fed stops buying most of the residential mortgage securities, things may go from moribund to morbid.

MBA Chief Attacks Mortgage Regulation, Regulators
David Stevens, Mortgage Bankers’ CEO, came down hard on regulations that make it difficult to give mortgages to deserving borrowers. Stevens said. “Because the regulatory framework is too often redundant—state regulations piled on top of federal regulations, piled on top of international rules, often conflicting with each other. No wonder you have no choice, but the most conservative lending posture in order to meet the lowest common regulatory denominator.” He went on to attack “overly aggressive and sometimes inappropriate enforcement actions by some key government agencies.” Stevens revealed at the conference that he has a very aggressive form of cancer that he is fighting.  We wish him the best and hope he can beat what he calls “the beast.”

FHA Updates Condo Guidelines
The Housing Opportunity Through Modernization Act of 2016, abbreviated HOTMA, required FHA to liberalize its condo rules. FHA has finally gotten around to that with Mortgagee Letter 2016-15. First, HUD defines owner-occupied for purposes of condo approval to be both primary residences and 2nd homes. HUD reminds us that following the 2008 crisis, owner occupancy requirements for condos were as high as 80%. HUD is now willing to accept condos with a 35% ratio if there are compensating factors for the association (and you thought compensating factors were only for borrowers). Factors such as good reserves, low arrearages, and long-term financial stability will allow the 35% ratio. FHA has published a rule that will allow them to implement other changes such as “site condos” to their guidelines.

Non-Banks Have Lion’s Share of Low Down Mortgages
With banks shying away from FHA and holding a lot of jumbo paper that requires a heavier downpayment, nonbanks are originating most of the low downpayment loans. The numbers are dramatic according to the latest research by ATTOM. The study claims 7 of the top 10 lenders in the country are non-banks now.

FHFA May Liberalize Investment Loans
It appears FHFA has come to the realization that not everyone should own a home. In a recent speech, FHFA Director Mel Watt said Fannie and Freddie will be looking at ways to lower costs in the rental market. One good way would be to eliminate some of the harsh additional fees imposed on investment properties by the GSEs.    

Justice Ready to Sue Moody’s Over Subprime Ratings
Back in the subprime heydays, rating agencies seemed to be giving a good rating to all sorts of mortgage-backed securities and collateralized debt obligations. S&P paid $1.5 billion in fines and settlements last year, all stemming from the same period. The statute of limitations on bank fraud is 10 years, if that is what is being claimed. The Justice Department is expected to hit Moody’s with at least as much as S&P.  The net result will likely be that bond ratings will cost much more, disincentivizing raising private capital for mortgages.

Purchase Applications Slow a Little
Applications for purchase mortgages slowed a little from last week according to the MBA. However, they are still 9% better than this time last year. Don’t count out refis. The refinance share of mortgage activity increased to 62.7%, up from 61.5 percent the previous week. Refis are still the dominant source of mortgage applications. MBA is forecasting purchase markets in excess of $1 trillion to continue for 2017 and 2018.

New Home Sales Figures Super-Hot
Builders should be very happy with sales numbers. They reported to the Census Bureau that new homes increased a modest 3.9% from August but a whopping 29.8% from August of last year.

Will Stumpf Face Criminal Charges?
There are certainly those who think Wells CEO should face charges, claiming he was operating a “criminal enterprise.” Others say the Justice Department promised to investigate and prosecute top officials of large companies that were breaking the law. An even more bizarre suggestion is that regulators should require top brass at major banks to certify annually that their company is “fraud free.” That is somewhat similar to what FHA has been requiring and the banks fled from. It would seem nearly impossible to know if the company or loans were free of fraud. Makes one wonder if anyone would want to run a big bank.

Where Do CFPB Fines and Penalties Go?
Dodd/Frank established the Civil Penalty Fund that all those fines go into. The CFPB is funded by the Federal Reserve, not he Penalty Fund. The Fund is to be used to compensate those harmed by financial transactions and to provide financial literacy education. There is a quirk to this. Wells Fargo only damaged consumers to the tune of about $3 million based on latest figures. That leaves $97 million for financial literacy. You can start universities with less than that. I wonder who is watching the fund’s outlays?

Rate Outlook
This was a fairly light week for economic news. Until Thursday, it was only treasury auctions which were about average for longer-term instruments. Today, jobless claims continued to edge up after dropping below 250,000 several weeks ago. Jobless claims came in at 258,000, more or less as expected. Durable Goods were down .1% vs. the expected up .1%. That did not help rates though because bond traders are looking at tons of economic news starting tomorrow.

Tomorrow, we have GDP and Employment Costs. Monday, we start with personal income and PCE Core Inflation which is watched closely by the Fed. We have a Fed meeting mid-week where they could raise rates but that is unlikely.  December is the bet unless something horrible happens next week. ADP gives their employment numbers Wednesday and the Bureau of Labor Statistics gives their Jobs Report on Friday.  It is little wonder rates are going up a little as lenders see a potential for sharp increases.

So far, Brexit hasn’t hurt the UK. Things are actually looking better economically there. Then, there is election day on Tuesday. The race appears to be tightening which is making some people nervous. It is probably a little late to lock unless you are a real pessimist. If your borrower is happy with current rates, it would seem prudent to lock.


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].



Oct 27, 2016