News From NAMB: October 26, 2017
UWM Expands Elite Program
UWM’S Elite box just got bigger… a lot bigger. Conventional Elite now starts at 700 FICO/$200K/80% LTV, and FHA and VA Elite now start at 680 FICO/$125K, which means more of your borrowers now qualify for some of the best pricing in the industry. You’ll also enjoy UWM’s premium service, including 15-day turn times and direct communication with your account executive, underwriters and closers. Learn more about Elite at UWM.com.
Carson Says He is Addressing False Claims Issue
Do Mortgage Companies Still Need Processors?
Surprise! ARMs Are Outperforming Fixed-Rates
Now, ARMs have less than half the serious delinquency rate of fixed-rates.
Government Agencies Circle to Attack CFPB, Congress Intervenes
Brian Montgomery, former FHA Commissioner for a number of years, has been nominated by Donald Trump to be FHA Commissioner once again. He will be facing Senate questioning today. NAMB believes Montgomery would be an excellent FHA Commissioner, based on his previous tenure. NAMB has written to the Senate Banking Committee in support of his nomination. It would seem to be a shoe-in with Montgomery’s credentials. But, nothing in DC can be taken for granted. Some people are concerned that Montgomery worked as a consultant for many of the big banks after leaving HUD. One suggestion is that he should recuse himself when one of those companies is involved.
Ditech Parent Filing for Chapter 11
Walter Investment Management Corporation, the parent of Ditech and Reverse Mortgage Solutions, has said it is filing for Chapter 11 bankruptcy protection. Walter had bought the servicing rights to troubled loans from the big banks at what everyone believed were fire-sale prices. Although many are pessimistic, if Walter were to liquidate, these toxic loans could go back on the balance sheet of the banks who sold them, so we may see a very generous Chapter 11 plan. Ditech and Reverse Mortgage Solutions, will continue their ordinary operations. Walter says it has "ample liquidity to support its businesses and the costs of the restructuring." The reorganization is expected to be completed by Jan. 31.
Freddie Mac has joined Fannie Mae in relaxing the requirements for student loans. Loans in repayment can use .5% of the balance rather than being forced to confirm the actual payment when it is not on the credit report. Previously, a new appraisal was required when the Settlement date was more than 120 days after the Note date. Now, when the Settlement Date is more than 120 days after the Note Date, Sellers may now warrant the value of the subject property is not less than the appraisal.
David Motley, the incoming MBA Chairman, is not fond of how the CFPB determines what is legal or illegal. Speaking at the MBA conference, Motley essentially called regulation by enforcement a practice where no one is certain what is right or wrong that is bad regulation. Another area Motley thinks needs attention is the lack of housing supply and listings. He believes lenders have a role to play in getting builders to increase construction.
The battle rages on as to whether it is cheaper to rent than to buy. Freddie Mac multi-family conducted a survey where 76% of renters say they believe it is cheaper to rent than to buy. Freddie also offers a rent vs. buy calculator on their site that may be useful to determine which is cheaper. If you are buying a $150,000 condo with $200/month condo fees, instead of renting an apartment for $1,000, you would come out much better renting, to the tune of $14,913 over 7 years. This does not consider tax benefits of owning. But, if your rent is $1,200 you would save $1,306 by buying over 7 years.
NAMB Creates Task Force to Examine Mortgage Interest Deduction
Flood Insurance Gets Money to Avoid Shutdown
Watt Says Alternatives to FICO a Good Way Off
FHFA Director Mel Watt calls a possible move by the GSEs to a score other than FICO “complex.” Fannie Mae says, “Credit scores are not an integral part of DU's risk assessment because DU performs its own analysis of the credit report data.” But Fannie Mae does not ignore scores either. They use FICO scores for floors, such as 620 for most programs. They also base their loan level price adjustments on FICO scores. Watt is concerned whether alternative scores predict default as well as FICO. He reiterates that competing scores could create a race to the bottom much like happened at the credit rating agencies a few years back. His comments indicate we will not see changes until at least 2019.
Credit Scores May Not be Great Predictors for Mortgages
No one disputes that credit scores are a valid tool to quickly assess how a loan will perform. They are particularly effective for credit cards but there are indications they are not the holy grail for mortgages. Although Fannie Mae charges fees for certain levels, they don’t underwrite based on scores but on the credit profile. New evidence shows states and cities with lower scores often outperform those with higher scores when it comes to foreclosures. States in the deep South like Louisiana, Mississippi, and Alabama have the lowest scores but fare much better than states like Delaware, New Jersey, and Maryland that have higher scores.
Many people had predicted a mortgage slowdown in 2018. Even of purchases held, despite predicted higher rates, they reasoned that fewer refinances would provide a drag on the market. Now, economists are thinking housing will continue to be strong, allowing purchase-money mortgages to augment fewer refis. Fannie Mae is predicting a year with total volume similar to 2017.
When one looks at the National Association of Realtors report for September, it says existing home sales were just a slight bit better than August but 1.5% lower than last year. Redfin says home sales are down 8.1% from last year. Some of the difference is that Redfin does not survey the entire market, just the markets where they have offices. Everyone blames lack of inventory for the lackluster sales.
MBA’s top economists are predicting a rise in interest rates to the upper 4s in 2018 and above 5% in 2019. That may be correct but nearly all of the economists predicted something similar for 2017. We live in a volatile world. Long-term rate predictions never seem to be that accurate.