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News From NAMB: September 15, 2016

John Councilman
Sep 15, 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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LOs May Become General Lending Officers
You may be asking, “What is a general lending officer?” It is someone who not only originates mortgages but other financial products. The mortgage originator may be expected to offer insurance, banking products, and even such things as credit cards and student loans. The main reason big firms are involved in mortgages is to sell other products as well. Sometimes big banks carry cross-selling too far as is demonstrated in the next story. It is possible brokers will leverage their trusted relationship to offer products from the wholesale lender or even from companies who will offer products through mortgage brokers.

Wells Fargo Scandal May Have Mortgage Fallout
Wells Fargo has been under investigation since January for its questionable cross-marketing practices. The CFPB finally jumped in and fined them $100 million plus $35 million to the OCC and $50 million to Los Angeles and the investigation is not over. Wells was charged with opening credit cards without authorization, transferring money from a deposit account to an unauthorized account, and even creating phony email accounts to enroll people in online banking. They charged monthly maintenance fees, nonsufficient fund fees, overdraft charges, and other fees that they will have to refund. Already, Wells has said it will modify its internal mortgage compensation but Wells Mortgage will not change. The question is “Will Wells be willing to pay as much for servicing without the cross-selling hook? Fees are generally run up by people with lower scores. Will Wells still want lower-score mortgage borrowers? Amazing that 5,300 were fired. That many people don’t decide to do the same thing without orders from above. But, the executive in charge is retiring with a $125 million package. Of course the agreement contains the clause that Wells entered the agreement “without admitting or denying the findings.” Democrats are heralding the CFPB’s actions and are expected to grill Wells’ CEO in the 20th in a Senate hearing on the matter. Wells has certainly raised the ire of many. Housing Wire’s Brena Swanson did an excellent job of looking through the CFPB database and found other banks with similar complaints. The CFPB director promised they will be looking for these type of behavior as a warning to others. 

10 Bold Predictions
I have to hand it to Brad Finkelstein of National Mortgage News, he has chutzpah. Brad makes some pretty bold predictions about the future of the mortgage industry. First, he says Fannie and Freddie will have no government guarantee or special privileges; they will have to make it as private entities. Next, brokers will make a big comeback. You really don’t need crystal ball for that one. Another prediction is that appraisers will become obsolete and underwriters will fall to the same fate. I’m not betting on any of these except the revival of the mortgage broker but it makes interesting reading.

Credit Reporting Accused of Massive Errors
With the three major credit bureaus taking the top spot every time on the CFPB’s complaint database, they didn’t need a very negative article in one of the nation’s largest newspapers. A reporter for WHYY TV in Philadelphia found himself with a horribly incorrect credit report and background check. He claims these are careless errors that are damaging the American public and must stop.

More Pre-Purchase Education May Be On the Way
Research by Vanderbilt University indicates the odds of foreclosure were 42% lower for those who completed a homebuyer education class compared to those who did not. A doctoral student, compared borrowers who took classes and others who did not. In the first half of 2002, recipients of Tennessee downpayment assistance did not have to take classes. But by July, the agency started requiring the course. Otherwise, the demographic, geographic and financial characteristics for all the recipients that year were nearly identical. One can be certain HUD and Fannie Mae will look at this data intently.

House Financial Services Advances Dodd/Frank Replacement
With very little change from its enrollment, HR 5983, the “Financial CHOICE Act of 2016” was marked up and passed by the House Financial Services Committee. The biggest change that affects mortgages would be to create a bi-partisan panel to oversee the CFPB rather than a single director. Democrats vehemently oppose the bill, saying they want to expand the powers of the CFPB rather than restrict the agency.

Strange Ruling On GSE Conservatorship
A federal judge in Kentucky dismissed another suit claiming the Treasury Department acted illegally in its conservatorship of Fannie Mae and Freddie Mac. While the outcome was not unexpected, the reasoning could best be described as unusual. The court willingly accepted Congress’ preemption of court interference in the GSEs’ conservatorship. In times past courts were more subservient to Congress but not so much recently. This judge feels she is powerless to act which may push the conservatorship up to the Supreme Court, if they are willing to hear it. The other strange part is that FHFA has a duty to conserve the GSEs’ assets unless they put the GSEs in receivership, which FHFA has not done. FHFA has neither conserved nor started liquidation, abdicating both duties, but this judge is not willing to do anything about it.

Will Homeownership Continue to Decline?
There are many who think the American Dream of owning your own home may be a thing of the past. They believe the rate of homeownership is likely to continue to decline further into the mid-to-low 50s from a high near 70% in the mid-2000s. Changes in demographic trends, increased regulation and stagnant real incomes all work to make the dream of homeownership more difficult to achieve. Millennials have the lowest rate of home ownership of all. This would not be good news for the mortgage industry.

Regions Bank Latest to Pay Huge FHA Fine
It seems almost anyone who wrote FHA loans over the past decade is a target of the Justice Department for fines. Regions has agreed to pay a $52.4 million dollar fine. It all stems from the FHA certification that the loan conformed to FHA guidelines and rules. Theoretically, even the tiniest infraction causes the certification to be actionable under the false claims act. A few smaller mortgage companies have paid up also although they haven’t made the headlines.

Borrowers Don’t Buy Because They Simply Don’t Know
The National Association of Realtors released a study that shows nearly 50% of those surveyed said they strongly agree that now is a good time to buy a home. So, why aren’t Realtors besieged? It’s because nearly a third of borrowers think you need at least 20% down and very few know you can get in with 3% or less down. Be an educator.

How Long Does an Inquiry Affect FICO?
FICO has changed its stand on inquires quite a bit over the years.  Recently, FICO changed its stance on inquiries.  It is a little complicated.  Here is a good video with the latest information.

M&T Bank Jumps Back Into Wholesale
Once a fair-sized player in wholesale origination, M&T Bank is back in full force in the game. They are soliciting new brokers. M&T used to be the largest 203K lender in the nation. They worked with NAMB to create the streamlined 203K. Many banks are now seeing Wholesale as the best place for growth in the mortgage industry.

Four Questions to Ask a Mortgage Broker
As usual, the press shows its vast ignorance of the mortgage business. Nerd Wallet, who gets a lot of coverage on sites like Yahoo, tries to advise borrowers how to find a good mortgage broker. The sad part is that the author clearly has lumped every originator into the mortgage broker basket. Most of the advice is somewhat usable but the article fails to even relate all of the advantages of using a real mortgage broker like having many lenders with differing programs. The article even thinks borrowers can shop for their own appraiser. We still have a lot of educating to do.

Warren Wants to Know Why Bank Execs Not Prosecuted
Senator Elizabeth Warren has sent inquiries to the FBI and the Department of Justice to find out why bank executives who admitted to breaking the law were not prosecuted. Warren argues that if Hillary Clinton’s investigation was made public, why not the investigation of the banks? I don’t suppose Warren is suggesting that Clinton be prosecuted though. Perhaps it all hinges on criminal intent. I wonder if the CFPB will let me off on a RESPA violation if I didn’t intend to do it?

Ditech Giving Loans to Rejectees
Ditech is trying to improve its borrower satisfaction rating by giving 2,000 borrowers who were rejected a loan. The program, in cooperation with HLP, a Baltimore-based non-profit, will give people who were rejected a chance at home ownership. HLP claims to have developed a credit modeling program that will determine if someone is a good candidate for the program.

New Company Buys a Piece of Homes Instead of Lending
Point is no longer just the name of mortgage software. A new company is using the name to buy a share of homes. It is really a bizarre idea. Let’s face it, mortgages are hard to do, you can never foreclose, and subprime borrowers can’t get a loan, even if they have equity. So some smart guys in California decided to offer to buy a percentage of the home at a discount. There is no payment and no interest but you must refinance or sell within 10 years. It may work if property values hold. It will be interesting to see if the CFPB thinks this is a form of evading their lending rules.

CFPB Deputy Director to Speak at NAMB National
You won’t want to miss the #2 man at the CFPB who will be the keynote speaker at NAMB National. David Silberman, CFPB Deputy Director, will be speaking Sunday, Sept. 25 at 1:00 p.m. Seating is limited. NAMB National is the largest trade show for mortgage originators in the United States. Learn about new wholesale lenders and new loan programs.  Plus, learn how to sell more loans and keep compliant with rules that are constantly changing. There are thousands of $$$ too! It all happens Sept. 24-25 at the Luxor Las Vegas.

Celebrity Golf This Year at NAMB National
Charity Golf International will be joining NAMB’s golf outing! Royal Links Las Vegas has recreated 11 of the most fabled holes in the world of golf all into one course. You can play the "Postage Stamp" at Royal Troon and the "Road Hole" at St. Andrews and other holes from world-famous courses. This is a once-in-a-lifetime golfing opportunity with all proceeds going to NAMB’s Legislative Action Fund.  It’s just five-minutes from the Las Vegas Strip. Join NAMB on Sunday, Sept. 25, 2016. This could sell out so register online to ensure your place. Onsite registration begins at 6:30 a.m. PT and Shotgun start is promptly at 7:00 a.m. PT.

Rate Outlook
The Fed FOMC will meet next week to discuss whether they want to raise rates. Pressure is mounting for the Fed to act. The odds would have been better if the employment report for August had been better. Only 151,000 jobs were created which is far below the 200,000 that would have likely pushed the Fed to raise.  A Fed hike is not likely to affect fixed mortgages in the short term but could tank stocks and slightly bump HELOCS.

Now, Donald Trump is accusing the Fed of playing politics that favor Obama/Clinton. Trump says they have kept rates low so Obama would look good and Clinton would get elected. Even if they raise rates Trump says it will be so small as to do nothing.

It is beginning to look like there may not be a Fed rate hike at the meeting next week. The Fed is notorious for sending warning shots so no one is surprised. Fed governor Lael Brainard just made a speech that indicates the Fed will not raise rates this month. Brainard says current Fed policy is “new normal.”

Nearly all of this week’s economic news is packed into today and tomorrow. Jobless claims are still in the 250K to 300K range coming in at 260K. The Producer Price Index was unchanged showing inflation is pretty dead. The Core PPI was up 0.1% as expected. Retail sales were down more than expected at -0.3%, vs. the expected down 0.1%. Industrial production down 0.4% as expected and capacity use was slightly lower at 75.5 vs. the expected 75.7.

Tomorrow brings the Consumer Price Index and factory orders. Look for prices to be pretty much flat and factory orders to be down somewhat. Overall, expect rates to be flat.


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].


Sep 15, 2016