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News From NAMB: September 1, 2016

John Councilman
Sep 01, 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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Is a National License Possible for Non-Banks?
The Office of the Comptroller of the Currency seems willing to consider creation of a federal financial services charter. Currently, banks slip past many state consumer protection laws with a national license. Fintech firms are the first to push for a similar nationwide license for non-bank firms that offer financial services. State regulators are not happy about it.  If this gets traction, it could be the end of state licensing and state consumer protection laws.


Colorado Bans MSAs
The Colorado Division of Insurance banned marketing services agreements (MSAs) between title companies and the mortgage industry, effective Aug. 15th. The ban was introduced based on the CFPB’s very negative view of MSAs. It is too early to tell if other states will follow suit and what effect it will have on loan originators.


New 1003 … Useful Update or Government Boondoggle?
As I had mentioned last week, the same people who designed the CFPB’s disclosures designed the new Fannie/Freddie loan application. It has ballooned to 7 pages from 4. A few years ago, it was only 2 pages. Nearly all the new application verbosity is aimed at an “improved consumer experience.” The funny part is that consumers seldom, if ever, fill out the application.  Originators sit in front of a notebook computer or take the information over the phone.  Most of it is imported from the credit report.  Did FHFA think to speak to real originators?  Of course not.  They surveyed consumers, who only see a completed application, and big-wigs at mortgage banking companies.  It seems HMDA data has become more important than whether the borrower can repay the loan.  They now say that car ownership is irrelevant.  Really?  I remember when underwriters looked at the age of cars to see if a car loan wasn’t showing on the credit report.  Right now, the form only supports one borrower but don’t despair, a new PDF will be coming soon that lets you expand and contract sections.  That is a programming nightmare since mortgage software does not enter data on a PDF.  Instead, the software will have to add and expand sections on the fly while maintaining the graphics when it prints, no small feat.  Is it really better for consumers?  It does not have the extremely important payment comparison between current house payment and proposed house payment.  There is no Details of Transaction section.  Borrowers will have to go to the Loan Estimate for that which forces lenders to misstate the amount of cash needed to close.  After being left out of the loop, originators are just now seeing how flawed this form is.


Moodys Says It Likes New Application
Originators may not be impressed by the new loan application but Moodys bond ratings is. They like the idea that gifts are more detailed. They also like the idea that it will push data transfer to MISMO and presumably away from Fannie Mae 3.2. I think Moodys doesn’t understand that both file formats put the same data in the same holes in DU or LP. MISMO has myriads more data fields that the new application will not include. The idea that gifts are somehow not adequately vetted is not shared by originators who find tracing gifts overly documented by most underwriters.


FHFA Announces New Streamlined Refi Program
Along with extending HARP until October of 2017, the Federal Housing Finance Agency announced it will release a streamlined refinance program similar to HARP in October of 2017 when HARP expires.  This program will be for borrowers whose LTV ratio exceeds Fannie and Freddie’s maximum limits.  There will be no minimum credit score, no maximum debt-to-income ratio or maximum LTV, and an appraisal often will not be required.  Sounds great, but one must wonder why it is limited to high LTV loans only.  Aren’t there a lot of people with equity who would like to refinance but can’t because of credit score or debt ratio?  FHFA is also presuming that rates will still be low in the fall of 2017 which may not be the case.


CFPB Insists It Has No Statute of Limitations
Don’t throw out those loan files that are molding in your garage. The CFPB has ordered First National Bank of Omaha to pay $32.25 million for alleged violations dating all the way back to 1997, 14 years before the CFPB opened. The Consumer Financial Protection Act has a three-year statute of limitations but the CFPB says it has no statute of limitations on administrative proceedings where they mete out fines.


The Future is Electronic Verification of Assets and Income
We have all heard the ads for Rocket Mortgage and its ability to verify information quickly.  How can Rocket do it?  There are companies who are using technology to verify all of this information by simply providing a name and social security number.  Companies like Early Warning can provide an amazing amount of information without account numbers, bank statements or pay stubs.


Mortgage Ads Mislead Consumers
USA Today published a scathing article on mortgage advertising this week.  They claim the ads for mortgages are worse than shopping for cars.  The two big offenses, according to the article, are fees are not clearly presented and what loan-to-value, credit score, etc. required are not obvious.


CFPB Should Be Happy About This News
First American’s Loan Application Defect Index indicates that loan defects are dropping year after year. The chief economist at First American gives the credit to mortgage compliance rules. “The benefits in compliant loan production processes are becoming more clearly evident, particularly for refinance transactions, in the big declines we are observing in loan application and mortgage defect risk.”


Disparate Impact Wins in Supreme Court but Loses in District Court
No, that isn’t a mistake. You can win at the Supreme Court and still lose the case in the lower court. Here is what happened: The Supreme Court said Disparate Impact is a legitimate claim under the Fair Housing Act. The case went back to the district court who said the tests established by the Supreme Court weren’t met and dismissed the case. It may be more difficult to win a claim under Disparate Impact than previously thought, at least for the moment.

You Must Buy Trended Data, even if You Don’t Need It National Mortgage News reports that Equifax and Trans Union will only sell you a credit report with trended data now. That is unfortunate since trended data is not needed by Freddie Mac at this time and is not needed at all by all of the alternative loans. Monopolies can soak consumers at will. Interesting that government hasn’t labeled the repositories as monopolies. Why Millennials Don’t Buy A recent survey by Redfin found that the number one reason Millennials don’t buy is affordability. Yes, it is cheaper to live in mom and dad’s basement. But, a lot of these younger folks who are renting are feeling the sting of landlords who never seem to be satisfied. Many times it is much cheaper to buy than rent. So, the number one reason Millennials buy is rent is too high. Does that give any ideas as to where to direct your marketing? Are You Happy with Appraisal Turn Times and Cost? The Stratmor Group is conducting a survey about appraisal turn times and costs. You are invited to participate in the survey. It appears more and more areas of the country are experiencing extremely long turn times and costs are beginning to skyrocket. NAMB will be addressing this issue at our Wholesale Summit with the top wholesale lenders next month in Las Vegas. Mortgage Banker Profits Double Thanks to a sharp drop in interest rates, mortgage bankers were able to double the $825 per loan they made in the first quarter to $1,686 per loan in the second quarter of 2016. Other factors that helped were increased loan amounts, more productivity of employees, and cuts to overhead. On the other hand, servicing revenue was down as lenders try to do everything the CFPB want them to. Mortgage Complaints Continue to Drop Mortgage complaints have dropped solidly into 3rd place in the CFPB’s complaint database. Debt collection and credit reporting have taken the top honors. The three repositories, Equifax, Experian and Trans Union had the most complaints followed by the big banks. It will take quite a bit for mortgages to drop to 4th place which is currently held by bank account complaints. Existing Home Contracts Revive in July Although actual sales in July dropped for the first time in several years in July, pending home contracts edged up in July to the 2nd highest level in a decade. That’s right, we are selling more homes than at any time since 2006 and August looks like it will be a record month. There is a lot of purchase business out there. In an interesting side note, builders are said to be constructing smaller and less expensive homes to draw first-time buyers in. Home sales are beginning to take a toll on rentals. Morningstar is reporting the 4th straight month rental vacancies for single-family homes have increased. Zillow Getting Some Hefty Competition Compass is a new site that will focus on broker listings, for both rental and purchase. The site takes a cut of the transactions instead of generating revenue through ads. Sounds a little more like Realtor.com than Zillow. Banks Closing Branches Is Opportunity Banks are closing many more branches than opening new ones. That means that borrowers seeking mortgages will have less places where they can walk in and be solicited for a mortgage by the bank. Banks will be less convenient. This is a great opportunity for non-banks to provide services where banks are pulling back. 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, September 25th at 1:00 PM. 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 $$$ in giveaways too! It all happens September 24-25 at the Luxor Las Vegas. Great Golfing This Year at NAMB National 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, September 25, 2016. This could sell out so register online to ensure your place. Onsite registration begins at 6:30am PT and Shotgun start is promptly at 7:00am PT. Rate Outlook In Fed Speak, Janet Yellen gave the strongest indication yet that the Fed is about to raise their discount rate again. Speaking in Jackson Hole, Yellen said, “Based on this economic outlook, the FOMC continues to anticipate that gradual increases in the federal funds rate will be appropriate over time to achieve and sustain employment and inflation near our statutory objectives.” Yellen went on to say, “Indeed, in light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months.” Based on comments by other Fed governors as well, a September rate hike should not be ruled out. The Fed and many bond traders will be looking very closely at the economic news coming out this week which is the most important week of the month. So far, the economic news this week is mostly positive (not favorable to rates). Income was up .4%, outlays were up .3%, and PCE core inflation was up .1%. Consumer confidence came in at 101.1 vs. the expected 97, showing consumers are pretty bullish. Although these were all positive, they were pretty much as expected. Today, Jobless Claims were 263,000 in line with expectations and productivity dropped .6%, slightly more than expected. Even though these were either flat or negative, rates worsened a little ahead of the biggest economic news of the month, the Bureau of Labor Statistics Jobs Report. If jobs are close to 200,000 or better, it is very possible the Fed could hike rates at its September 16-17th meeting. That may actually help mortgage rates since it will put a damper on stocks and will be viewed as fighting inflation.