Oct. 4: Lawsuit settlement report; more shutdown chatter – I will be glad when this 4506-T confusion is finished

Rob Chrisman

Rob Chrisman began his career in mortgage banking – primarily capital markets – 31 years ago in 1985 with First California Mortgage, assisting in Secondary Marketing until 1988, when he joined Tuttle & Co., a leading mortgage pipeline risk management firm. He was an account manager and partner at Tuttle & Co. until 1996, when he moved to Scotland with his family for 9 months. Read more...

As we head into the home stretch in baseball, here’s a 20 second video of a nifty first pitch: http://www.liveleak.com/view?i=377_1373069332. (It copies a move I make getting out of bed every morning.)

 

We’ll catch up on the plethora of shutdown updates in a bit, but let’s spend a moment catching up with settlements. Because if the big guys can settle, maybe they’ll be amenable to settling with the little guys! According to a release from Citi, the bank will pay Freddie Mac $395 million, all of which is covered by its existing mortgage repurchase reserves as of the end of Q2. The agreement covers claims for breaches of representations and warranties on 3.7 million loans sold between 2000 and 2012. Jane Fraser, CEO of CitiMortgage, said the agreement “marks another important milestone in successfully resolving Citi’s remaining legacy mortgage issues.”

 

Even Wells Fargo has to pony up settlement money occasionally. “The Coach”said it will pay $780 million in cash to Freddie Mac to resolve substantially all repurchase liabilities on home loans sold to the government-controlled mortgage company prior to 2009. The largest U.S. mortgage lender said the settlement was reached on September 27 and totaled $869 million before adjusting for credits related to prior loan repurchases:

http://www.foxbusiness.com/industries/2013/09/30/wells-fargo-to-pay-freddie-mac-780m-to-settle-mortgage-claims/.

 

But Wells is not done. Like a dog on a Milk Bone, New York is going after the company over the lack of compliance in the servicing settlement: http://dealbook.nytimes.com/2013/10/01/new-york-set-to-sue-wells-fargo-over-mortgages/?_r=0.

 

SunTrust Banks has agreed to a $65 million settlement with Freddie Mac involving refunds it must make for faulty mortgages. ‘The accord covers about 312,000 loans made from 2000-08,’ SunTrust said this week in a written statement. The deal includes a one-time cash payment of $40 million to Freddie Mac and $25 million in credits for previous repurchases.

 

Bank of America has agreed to pay $32 million to settle charges that it made harassing debt collection calls to customers’ cell phones, in what is believed to be the largest cash payout ever under a 1991 law meant to protect consumers from unwanted calls.

http://www.reuters.com/article/2013/09/30/us-bankofamerica-robocalls-settle-idUSBRE98T0XE20130930.

 

The press doesn’t have much else to talk about besides the partial shutdown – certainly no unemployment data this morning. So let’s see what a decent cross-section of aggregators, lenders, and law firms.

 

From Texas, Black, Mann & Graham, L.L.P. stated, “Below is information that we have received from FHA in regards to the Government shutdown. 1. Will the government shutdown affect the processing or closing of FHA-insured loans? FHA will have limited staff during a shutdown and the processing or closing FHA –insured loans may be delayed.  All FHA underwriting and processing requirements remain in force during the government shutdown and no loan may proceed that cannot fulfill those requirements. 2. Will Lenders have access to FHA Connection? Lenders will be able to access FHA Connection, however FHA Connection interfaces to other systems may not be available, or if available these other systems may not be fully supported so FHA Connection processes may not be fully functional. At this time we do not have complete information on the potential impact on some FHA Connection functionality. 3. Can a lender obtain a new FHA case number? Yes. Lenders will be able to obtain a FHA case number from the FHA Connection. Please note that all FHA underwriting and processing requirements would remain in force on loans originated during the government shutdown regardless of system limitations during the shutdown period.”

 

Its update continued. “4. Will the Credit Alert Interactive Voice Response System (CAIVRS) be available? Yes. CAIVRS will be available to determine if a borrower has a delinquent federal debt. 5. Will FHA TOTAL Scorecard be available for lenders? Yes. FHA TOTAL Scorecard will be available. Lenders can close loans. As noted, all FHA underwriting and processing requirements do remain in force on loans originated during the government shutdown. 6. Will lenders be able to get password resets for FHA Connection? Lenders will be able to continue to utilize the automated password reset options on FHA Connection, but resets that require FHA employee direct assistance will not be available.

 

And more: “1. How will the government shutdown affect the processing or closing of my FHA-insured loan? The shutdown may delay the processing or closing of your FHA-insured loan.  Please contact your lender for the exact status of your FHA loan. 2. If I’m selling my home to a buyer utilizing FHA-insured financing will I still be able to complete the sale? The shutdown may delay the processing or closing of your FHA-insured loan.  Please contact your lender for the exact status of your FHA loan. 3. Who can I contact about a health or safety issue with a HUD-owned property in my neighborhood? The staff at the FHA Resource Center (1-800-CALL-FHA) can provide contact information for contractors responsible for the maintenance of HUD-owned properties. 4. Will I be able to place a bid on a HUD-owned property via the HUD Home Bid site during the shutdown? Yes. FHA contractors will handle the sale of HUD Homes and the bidding site (www.hud.gov/hudhomes) will be available and maintained during a shutdown.

 

Franklin American spread the word that, “FAMC has determined to temporarily allow Conventional conforming loans to be purchased without the requirement to obtain IRS Tax Transcripts for loans closed on or after October 1, 2013. The current requirement for the 4506‐T to be signed at application and at closing remains unchanged. Additionally, as Tax Transcripts are not required for non‐credit qualifying streamlines and VA IRRRLs, these loans continue to be eligible in accordance with FAMC guidelines. FAMC is currently researching all other FHA/VA, USDA, and Non‐Conforming Jumbo products. Unless specifically mentioned above, IRS Tax Transcripts continue to be required on these product types prior to closing or purchase by FAMC.”

 

“Due to the limited government shutdown, Lenders are advised of the following requirements for loan delivery and purchase by Envoy Mortgage: IRS Tax Transcripts – In order to assist Lenders during this temporary shutdown, Envoy Mortgage will purchase loans without the validated tax transcripts. A fully completed 4506-T, signed and dated by the borrower(s) at time of application and again at closing, must be included in each loan file delivered for purchase. All other income documentation required by the AUS or Envoy’s guidelines must be included in each loan file delivered for purchase. For VOEs – Verification of the borrower’s employment will be required before loan purchase based on our current published policies. USDA – Rural Housing – The USDA-Rural Housing website is currently unavailable. There will be no new Conditional Commitments or Loan Note Guarantees issued during the shutdown period. All loans delivered to Envoy Mortgage for purchase must include a Conditional Commitment with no restrictions. The failure to include any of the required documents above will result in the delay of loan purchase.”

 

Wells Fargo correspondents received, regarding 4506-T and Tax Transcripts, “Effective on all Loans (delegated and Wells Fargo Prior Approval) with a Note date on or after September 25, 2013, Wells Fargo Funding – we will not require Sellers to provide tax transcripts. A fully executed 4506-T form must be provided for all income-contributing borrowers. Verbal Verification of Employment – effective on loans with a Note date on or after October 1, 2013, for borrowers employed by the federal government where a verification of employment (VOE) cannot be obtained, Wells Fargo Funding will allow the Seller to obtain the VOE after Closing, but prior to Loan delivery to Wells Fargo Funding. If the VOE cannot be obtained prior to delivery, it will be ineligible for purchase by Wells Fargo Funding. In the event the VOE is not completed in the time prescribed in Wells Fargo Funding Seller Guide Section 500.02: Required Documentation for Prior Approval Loans, the Seller must provide a letter of explanation about the timing. Note: This change applies only to borrowers who are employed by the government where the government office providing the verification is closed due to the shutdown. No Change to Policy Regarding Social Security Number Verification – Any Social Security Number discrepancies will require reconciliation via the Social Security Administration to be eligible for purchase.”

 

“During the government shutdown, Kinecta requires all borrowers to complete the 4506-T. However, Kinecta will not hold up funding/closing if transcripts are not available.”

 

“Although Carrington continues to accept submissions for the USDA loan program, a USDA loan will not fund without conditional approval issued by USDA.   All submissions will have limited underwriting performed including initial disclosures and initial review. Despite the government shutdown, Carrington Mortgage Services, Wholesales Lending Division, continues to fund FHA & VA loans using alternate documentation to meet 4506T requirements on a deal by deal basis.”

 

California wholesaler Sierra Pacific Mortgage wrote its clients: “Fannie Mae, Freddie Mac & the VA are business as usual. FHA is mostly business as usual…USDA is closed until the government reopens.  GUS is not functioning.  What this means is that if you do not have GUS approval and a correct final commitment, we will not be able to go forward on the loan until the government reopens…“The most significant issue is that of inability to validate IRS transcripts while the IRS is closed, and our investors have not modified their requirement for validated transcripts on all loans prior to purchase. The good news is that we ordered transcripts on every loan received in the center by Sept. 27, in advance of the shut-down. Our temporary plan for new business or pipeline with “un”-validated transcripts during this shut-down is as follows: We will continue to require and submit executed 4506T forms for processing to our vendor with the understanding that results will not be available until the government reopens. We will fund purchase transactions without the validated tax returns even though these are not considered to be in saleable condition. Any loans approved under the Sierra Direct program, whether purchase or refi, may also close without the validated tax returns as long as AUS approval can be validated. Other refinance transactions will not be closed unless validated transcripts are received and reviewed once the government reopens.”

 

PennyMac ruled, “As a result of the government shutdown, tax transcript requests will not be processed by the IRS. Effective with note dates on or after September 26, 2013, PennyMac will temporarily suspend the requirement for tax transcripts, except in the following cases: Where there is an investor requirement (such as Fannie Mae’s 5-10 multiple financed properties), and all jumbo loans. PennyMac will continue to require form 4506-T to be signed by the borrower(s) at closing.”

 

Cole Taylor Mortgage “will temporarily suspend our requirement for IRS transcripts prior to closing with the following exceptions: all jumbo products, and transactions with five (5) or more financed properties. Please note that CTM will continue to require a fully executed 4506T form prior to final approval; however, the closing and funding of the transaction will not be contingent up on the receipt of the IRS transcripts. VVOE for Government Furloughed Employment – the closing and funding of a transaction will not be affected by the inability to obtain a VVOE for a government employee. CTM will obtain the VVOE for these borrowers when the government becomes operational. Flood Insurance – for properties located in a Special Flood Hazard area, flood insurance will be obtainable through FEMA.”

 

Parkside Lending broadcast, “During the government shutdown, 4506-T transcripts and SSA results are not available. The policies outlined below are temporary; however are effective immediately, and will automatically expire when the federal government resumes full operations. Additional guidance may be provided, depending on the length of the shutdown.” There is a temporary policy for the 4506-T: “Signing of the 4506-T at application and closing remains in place. However, the current requirement for 4506-T transcripts is being suspended for all loan products with the exception of those listed here. The following products require 4506-T transcripts and cannot be cleared to close until the transcripts are received: Jumbo Arms (I&II), and Jumbo Fixed (I&II). Parkside retains the right to pull transcripts once available and as a result, post-closing conditions may apply.

 

Meanwhile, much of the government fails to govern, and the shutdown, and looming debt ceiling deadline, are waiting to be “kicked down the road.” Interestingly enough, rates have only improved slightly this week in spite of the possible huge negative impacts on the economy that this is having. Loans continue to be funded, and the Fed continues to buy them: net buying totaled $14.7 billion for the week ending October 2 which equated to a $2.9 billion per day average, while supply from mortgage bankers averaged $1.4 billion per day. Yesterday agency MBS prices improved about .125 in price, and the yield on the 10-yr closed at 2.61%. The nonfarm payrolls number is postponed, but that said today’s calendar is not a total loss with several Fed speeches on tap along with some prepayment results to be announced on existing MBS. Rate-wise we are basically unchanged from Thursday’s closing levels.

 

 

“Top 10 Things You’ll Never Hear the CFPB and Their Auditors Say”:

10. These loans look perfect.

9.   We believe some responsibility should be put on the consumer for the housing collapse.

8.   We agree these regulations do seem excessive.

7.   Who are Dodd and Frank?

6.   The Big Banks aren’t the bad guys.

5.   When we need to make payroll we investigate JPMorganChase.

4.   We see value in “no doc” loan products in today’s market.

3.   CFPB stands for “Collecting Fines for the Poor Borrowers”.

2.   We know exactly how to define a Qualified Mortgage.

1.   We are just going to give you a warning this time.

 

Rob

Copyright 2013 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)