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News From NAMB: September 8, 2017

John Councilman
Sep 08, 2017

Top Story: It Wasn’t Subprime Mortgages After All
The more we research, the more we realize that, while subprime played a part, it was not the primary cause of the mortgage crisis. A new study by the National Bureau of Economic Research says it was real estate speculators and flippers who created the problem. The authors used a huge panel of credit file data to examine the evolution of defaults between 1999 and 2013. Their findings suggest an alternative narrative that challenges the large role of subprime credit in the crisis.  They found that credit growth between 2001 and 2007 was concentrated in the prime segment, while debt to high risk borrowers was virtually constant.  The rise in mortgage defaults during the crisis was concentrated in the middle of the credit score distribution, and mostly attributable to real estate investors.

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Flood Insurance Has $1.4 Billion Annual Shortfall
The Congressional Budget Office said the National Flood Insurance Program fell short by $1.4 billion in 2016.  While that is not a trivial sum, it is far from a catastrophe.  The problem is that year over year, that adds up so the program is in the hole by about $24 billion.  The problem is coastal properties that flood often and severely.  Inland properties turn a $200 million surplus for the program.  The main cause of losses is hurricane-related storm surges followed by river flooding.  Congress is faced with a simple choice; do they want to subsidize flood insurance for coastal properties.

Judge Strikes Down Obama Overtime Rule
The Obama administration had released a rule that would have jumped the minimum amount before overtime is mandatory from $23,660 annually to $47,476.  The nuances of labor law would have made it difficult to have commissioned LOs.  The judge, an Obama appointee, had put the rule on hold in December and has now struck it down.  The judge said that the Department of Labor improperly looked at salaries instead of job descriptions when determining whether a worker should be eligible for overtime pay.  President Trump had promised to undo the rule if judges failed to do so.

CFPB Shuts Down Credit Repair Company
In September of 2016, the CFPB filed a lawsuit alleging that Prime Marketing Holdings made misleading and unsubstantiated statements about its ability to improve consumers’ credit scores by removing negative information from their credit reports.  The CFPB claimed Prime collected fees for credit repair services before giving the promised results, which is prohibited by federal law.  The company charged consumers initial fees, set-up fees, and monthly fees that often equaled $89.99 per month.  Prime and its owners agreed to pay a $150,000 fine and never operate a credit repair company.  Not bad for a company that raked in $20 million over 3 years.

MBA Says VA Appraiser Shortage Harms Veterans
The Mortgage Bankers Association wrote a letter to VA decrying a shortage of VA appraisers.  The letter states, “Because of the lack of VA appraisers, a seller may opt for a non-VA contract when multiple offers exist. If the seller does accept the contract with VA loan terms, the postponement could result in an extension of the contract, penalty fees or loss of earnest money deposit by the Veteran.”  MBA would like VA to start using PIWs instead of appraisers, like Fannie Mae and Freddie Mac.

Refis Crack 50% Again
Refinance applications had been pushing close to the 50% mark and this past week broke through.  The Mortgage Bankers Association reported that refinances made up 50.9% of applications last week.  The survey said rates had dropped to the lowest level since the elections, driving the refi boom.  All applications were up 3.3%, with the Refinance Index up 5% and the Purchase Index up 1%. Releases Competitor to Zestimate
The other powerhouse real estate web site,, is now offering home value estimates with a new tool called “My Home.”  It lacks the decisioning information on screen that Zillow provides… for now.  In a quick test, Zillow came in about 5% higher in value on every one of the 10 properties I entered in several different states.  It was interesting to see that recognized property improvements and additions such as bathrooms and bedroom count that Zillow didn’t.  It must search county records for those changes.  It will not give a value for a home that is currently listed for sale.  After all, it is a Realtor site.

CFPB Bumps Small Loan Comp Limit
Don’t get excited.  The CFPB just adjusted the QM 3% cap for compensation to $105,158.  So, you can get 4% instead of 3% up to that loan amount.  You can also make 5% on tiny loans up to $63,095.  These are merely adjustments for inflation based on the Consumer Price Index.

Fed Vice-Chair Resigns
Federal Reserve vice-chair Stanley Fischer resigned unexpectedly this week.  Fischer was a renowned economist who taught at MIT for 20 years.  His noted students include Fed Chairman Ben Bernanke and European Central Bank chief Mario Draghi.  Fischer has been a visceral opponent of President Trump’s efforts to deregulate the financial sector.  This makes 4 vacant seats out of 7 on the Federal Reserve Board.  The Senate Banking Committee just approved Randal Quarles to fill one of the slots but he still needs full Senate approval.

Overwhelmed Congress May Not Get to Regulatory Reform
Congress returns this week to a huge and controversial agenda.  Worrying about the CFPB and Dodd/Frank may not be very high on the agenda with flood insurance reform, tax reform, terrorism, immigration, North Korea, and more taking up their time.  They may not even get around to approving nominations for federal posts like those at HUD.

Doctors Are Golden
I remember quite a few years ago that my real estate broker and our favorite S&L told me, “If you have a doctor, don’t worry about the purchase price.  You will have a loan.”  After the S&L meltdown, doctors were treated like everyone else.  They had to live within ratios and have good credit.  Suddenly, we are back to the S&L days.  Suntrust is offering 100% financing to doctors with no closing costs up to $750,000.  PhysicianLoans and Physicians Trust Mortgage are offering similar no money down products with no PMI.  The program is available to medical doctors, dentists, and veterinarians.  Some offer the program to 4th-year medical students and residents as well.

Mnuchin Says Mortgage Interest Deduction Will Remain
Treasury Secretary Steven Mnuchin reiterated to the Wall Street Journal that the Trump administration has no intention of eliminating the mortgage interest tax deduction.  Astute listeners noted that Mnuchin said they were not going to get rid of the deduction but that doesn’t say that it may not be changed.

The New Way of Counting Complaints (Not)
Many of us don’t like the way the CFPB Complaint Database works.  Most don’t believe complaints that are not thoroughly vetted should be public information.  Brokers, who register virtually no complaints, don’t like being lumped in with other people in the origination chain who get lots of complaints.  But very few want to essentially throw complaints about lawbreakers to be swept under the rug.  The FCC, who monitors the do-not-call list, internet attacks, and other communications issues, has apparently gone 180 degrees from the CFPB and would only keep one complaint on any one issue, even if there are 1,000.  Makes one wonder how policy works in DC.

NAMB National Rocks!
The nation’s most exciting mortgage show is coming to Las Vegas October 14-16th!  Great entertainment and parties are in store for attendees.  You’ll hear the fiery rhetoric of Ann Coulter who has deep insight into the Trump administration’s regulatory agenda, including the CFPB.  The leaders of the top wholesale lenders will give you tips on how to be a market leader.  Then, party on Saturday night at the incredible Omnia nightclub in Caesar’s Palace with America’s #1-rated DJ and recording artist Martin Garrix.  Sunday, the huge trade show opens with over 100 lenders on display with many new alternative programs.  Sunday night, it all culminates with Foreigner lead singer Lou Gramm and his new band.  Room reservations are selling out.  Register now

Rate Outlook
Last Friday, the Bureau of Labor Statistics Jobs Report showed a lapse in the strong job gains of  June and July.  The weak jobs report along with world political instability has pushed rates to the lowest level of 2017.
In economic new, Factory Orders were down 3.3% but that was expected.  The Fed’s Beige Book said the economy is still expanding, as expected.  They did express concern over auto sales and employment showing a slight softening.
The biggest news of the week is the effect hurricane Harvey is having on the economy.  Jobless claims jumped to 298,000, the highest level since April of 2015.  That was a 60,000 jump from the previous week.  With Irma expected to devastate Florida, and more hurricanes on the way, this could have a serious effect on the economy.
Productivity in the 2nd quarter rose 1.5% and unit labor costs increased 0.2%.  Good economic news that has little effect on rates.
With the gut punch to the economy from natural disasters and political instability, rates should stay low and the Fed is unlikely to raise rates until they see the economy stabilized.

John Councilman, CMC, CRMS of AMC Mortgage Corporation in Ft. Myers, Fla. is 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 08, 2017