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News From NAMB: October 29, 2015

John Councilman
Oct 29, 2015

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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Are Early TRID Closings Compliant?
There are many companies touting that they have already closed TRID loans in eight days. One I noticed put the schedule on their web site with the timeline. The question is, “Was it fully compliant?” After taking David Luna’s education course at NAMB National, I’m not certain it was. If you look closely, it looks as though they ordered the appraisal before they had an Intent to Proceed and had an Intent to Proceed before the LE was sent. Hopefully, they did not collect a fee for the appraisal prior to the Intent to Proceed. However, the word “imposed” does not seem to mean collected. We can see from the regulation that many fees are “imposed” that are not collected until settlement. Therefore, Dave believes you may not even order an appraisal prior to the Intent to Proceed, if you intend to collect for it at some later date or at settlement. Remember, merely signing the LE does not express an Intent to Proceed. This also makes us aware that dates alone are not sufficient. You may also need exact times.

Cordray Clearly Dislikes Arbitration
Speaking to the CFPB’s Consumer Advisory Council, Richard Cordray excoriated mandatory arbitration clauses found in many financial contracts.  Cordray said, “Companies use them, in particular, to block class action lawsuits, providing themselves with a free pass from being held accountable by their customers in the courts.” He pointed out, “Companies could still have an arbitration clause, but they would have to say explicitly that it does not apply to cases brought on behalf of a class.” Class actions are supposed to penalize big companies for many tiny infractions not worth an individual suit. The question is, “Isn’t that the CFPB’s job?”

Call Your Senators on TRID Delay Bill
H.R. 3192, which delays TRID enforcement and suits until February, has passed the House. You should call your senator and ask them to sign on to S. 1711, the companion bill in the Senate. The President has threatened to veto this important legislation so we need as many senators as possible to vote for it. The CFPB has been very lukewarm on how harsh they will be on TRID enforcement. The real threat is class-action lawyers who can take the smallest error and ask for damages plus legal fees.  Hungry lawyers could even attack small companies for the legal fees.

Congress Gets HUD Moving on Condo Loans
After Representative Blaine Luetkemeyer introduced H.R. 3700 and 56 members of Congress complained in a letter, it appears HUD has gotten the message that they need to revamp condo approvals. In a recent meeting at George Washington University, HUD Secretary Castro, when pressed if there would be relief by the end of the year, said, “Our folks are working on that.”  FHA condo loan endorsements have dropped to 22,800 in 2014 from 57,800 a year earlier.  The Secretary also fielded questions on why it so difficult to buy a home.

Things TRID Has Taught Us About Our Lenders
We haven’t learned as much new about TRID rules as we have about wholesale lenders implementing it.  Some are doing very well and are quite flexible. Others are a real pain. Some wholesalers are requiring the fee portion of the LE to be filled out by the title company before you can give it to the borrower. Many put you through the third degree if the title company is not the one quoted on the LE. Still others won’t let you touch anything while many lenders will let you input the closing cost data yourself. Some will even let you use their software to create an LE with no lender showing. It has become clear that quite a few wholesale lenders’ technology is poor while some have technology that is intuitive and state of the art.  How wholesalers handle this transition could make a big difference in their market share.

Internet vs. Face-to-Face LOs… Has the Time Come?
This year’s MBA chairman, Bill Emerson of Quicken Loans, believes younger borrowers prefer online origination over face-to-face. He claims Quicken’s “consumer-direct” channel is more efficient than going through a traditional loan originator.  Quicken and other online companies are experiencing strong growth. Especially interesting is Emerson’s claim that Realtors like the online process. He says their system allows real estate agents "unprecedented access to their clients' loan information so they can simply log in to a portal and know exactly where the loan is in the origination process." There is little doubt that technology is playing an ever-greater role in mortgage origination. The question is whether borrowers and Realtors will choose the computer over originators they can meet in person.

FHA’s Student Loan Screw Up
Some have speculated that student loans may not be hurting purchases, citing college graduates make more. I don’t buy it. FHA’s decision to add deferred student loans to debt at 2% of the balance will definitely stop a fair number of borrowers. With the average student loan pressing $30,000, this is $600/month. It is particularly strange when Fannie Mae changed from 2% to 1% a year ago because 1% more closely resembled the actual payment. Even conservative USDA is at 1%.

Speaking of FHA Changes, Does the News Media Have a Clue?
It is little wonder the public and lawmakers don’t understand our industry. I happened to see an article by one of the nation’s leading newspapers on the FHA changes. Can you spot all of the misleading statements and errors in this article? I’ll publish the name of the person who catches the most.

Cordray Now Says He Has Authority Over School Accreditation
The CFPB has decided to investigate the Accrediting Council for Independent Colleges and Schools, the largest accrediting agency of private colleges. That has raised the ire of the chairmen of the Senate and House education committees who said dipping into accreditation issues is an "unprecedented overreach" and "raises serious concerns regarding jurisdiction." Speaking at a POLITICO Morning Money breakfast, Cordray said CFPB has authority over "those who provide financial products and services, or provide material substantial assistance to those who do." He added: "If an accrediting agency is facilitating for-profit colleges at misleading consumers, treating them unfairly and deceptively, then that's something we should look at." It appears the CFPB doesn’t think the Department of Education is doing its job so they will.

CFPB Database Shows Mortgage Complaints Still Increasing
The CFPB only showed one category where complaints are decreasing. Hard to believe but it is payday loans. Mortgage complaints continue to rise. It is unclear if more people are dissatisfied or people are just catching on to the complaint database. The figures are a bit misleading though. Nearly all of the complaints are about servicing, not origination. There were 3,790 mortgage complaints in September and less than 10% had anything to do with origination. People like to get money; they hate to pay it. Even more fascinating is not a single complaint was against a mortgage broker.

VA Expands Lender’s Ability to Correct COE
Many people do not know that you can correct errors on the Certificate of Eligibility on VA’s WebLGY Web site. Lenders can correct the first, middle, and suffix portion of the Veteran's name.The last name change will require supporting documentation and VA review. You can also correct the Veteran's contact information and the Branch of Service. If an active loan exists, lenders can change the COE type and request a restoration of entitlement but restoration requires VA review. New features allow a refresh all the information on a COE such as tour information, loan status, and compensation from Department of Defense records. If the completed tour is retrieved, then the active-duty condition is removed from the COE and the lender may proceed with the loan application.

CFPB Will be Collecting Even More Data
The CFPB finalized its HMDA rule last week. If you hated HMDA reporting before, you will really hate it now. There will be a lot more information required in addition to race such as credit score, property information, qualifying ratios, loan features such as teaser rates, and value. Each loan will have the originator’s NMLS identifier that could be used to track individual originator’s ECOA behavior. The data will also include whether the loan was brokered. Fortunately, data collection will not begin until Jan. 1, 2018.

Fannie/Freddie May Give Appraisal Rep/Warranty Relief
FHA Director Mel Watt told the MBA conference that next year there may be possible appraisal-related representation and warranty relief. That may be good news for brokers and smaller lenders as well as big companies. Most appraisals are pushed to large appraisal management companies that can afford to defend their appraisals. The unfortunate part is those AMCs often take the lion’s share of the appraisal fee, driving up the cost of appraisals and pushing more experienced appraisers out. Lenders may even be willing to create appraiser panels if they feel more confident about buybacks. 

Housing Just Now Reaching Worst Levels of Previous Years
While housing construction may look good compared to a few years ago, it is still pretty horrible. When you look at single-family home starts they are just now reaching the worst levels of other recessions over the last 40-plus years. We have a long way to go to build just the homes we needed 30 years ago much less for our expanded population. New home sales in August looked promising at 529,000 only to crater in September to just 468,00. Sales in the South and West were still OK but the Northeast was 61% below August levels. House prices should continue to go up sharply though based on the law of supply and demand.

Quicken CEO Takes Chairmanship of MBA – His Agenda
Bill Emerson, the CEO of Quicken Loans, took over as chairman of the Mortgage Bankers Association in October. Emerson’s acceptance speech contained the typical calls for unity, diversity, and technological advancement. What really stood out in the speech came a little further in. Emerson clearly has a bone to pick with the regulators. He asserted, “The enforcement regime that exists today is irresponsible and creates true access to credit issues.” Wow! Emerson thinks the Department of Justice has unfairly attacked Quicken for trivial FHA violations. He and Dave Stevens are launching an attack on the False Claims Act that Stevens claims is too much force for minor infractions. As a side note, Emerson was part of the Penn State football national championship team. Winning is everything to him.

How to Deal With Zombie Debt
You may not even know what “Zombie Debt” is but I assure you that you’ve experienced it. You have a borrower who has a 720 score and looks like a slam dunk. Suddenly, just before settlement, the have a 620 score. What happened? A collection has been filed for a debt that was already paid. Worse yet, it can be a suit or a judgment on a paid debt that they didn’t ignored The FTC offers some answers on dealing with these but it often takes far too long and harms a lot of people in the chain. Interesting that this hasn’t been a CFPB focus.

Political Front
With Paul Ryan the new Speaker of the House, we should at least know where he stands, or better yet, where he has stood. A thoughtful article in National Mortgage News looks at Ryan’s stands on various issues strictly from the mortgage perspective. He is not one screaming for the dismantling of the CFPB but he does have a record of wanting to reign them in. He is not a proponent of Dodd/Frank but he hasn’t been a raucous voice to repeal it. Ryan doesn’t like Fannie and Freddie and would like to wind them down within five years and return mortgages to private capital. It will be interesting to see how he stands up to very vocal and partisan comrades.

Rate Outlook
The House passed an $80 billion budget deal, 266-167, that increases spending caps for two years and raises the debt limit until March 2017. Republican leaders were able to rally enough GOP lawmakers, with a strong assist from Democrats, to pass the bill over the objections of hardline conservatives.

The Senate is expected to clear the measure, which would effectively draw to a close the era of budget battles that helped define President Barack Obama's relationship with Congress.

Why did rates spike yesterday?

The Federal Reserve did not raise rates, to no one’s surprise, but they did imply that the economy is growing at a nice pace.  Good economic news, bad rates.  It’s that simple.  Rates were solidly ½ point worse yesterday and have lost another ¼ point so far today.

Looking a little deeper, the Fed’s logic is not apparent.  The GDP was up only 1.5% today, down from the 3.9% last month and even below the average 2.1% over the past few years.  The homeownership rate for September only showed a miniscule gain for the first time in 2 years.  The Fed is still not happy with job growth and wants a little inflation.  Inflation is so low social security won’t even be giving a raise this year. 

But, Fed watchers are betting on a December or January hike.  The economic boom must be hidden somewhere in figures the Fed isn’t showing.

Lots of economic news tomorrow, PCE inflation, Employment cost, Personal Income, and U of M Consumer Sentiment.  That is enough news to stop the rout of continue it.


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 29, 2015