Nov. 2: Letters on Nationstar, HOEPA, borrower privacy; reminder of agency udpates; clever joke

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...

November already? In the fall of 1621, the Pilgrims, early settlers of Plymouth Colony, held a three-day feast to celebrate a bountiful harvest, an event many regard as the nation’s first Thanksgiving. The Wampanoag, the Indians in attendance, also played a lead role. The legacy of thanks and the feast have survived the centuries, as the event became a national holiday 150 years ago (Oct. 3, 1863) when President Abraham Lincoln proclaimed the last Thursday of November as a national day of thanksgiving. Later, President Franklin Roosevelt clarified that Thanksgiving should always be celebrated on the fourth Thursday of the month to encourage earlier holiday shopping, never on the occasional fifth Thursday.

 

As usual, the actuaries deep inside the Census Bureau are there to give us some numbers. Dinners might be held at the 115 million occupied housing units in the nation, which contain 4.4 million multi-generational households (3 or more generations). There are about 23 million U.S. residents of English ancestry as of 2012 – 684k living in Massachusetts. And there are 6,500 Wampanoag Indians here, half of whom reside in Massachusetts.

 

What is going on out there around the nation?

 

This letter from New Jersey: “Rob, it has been one year, and we’re dealing with increased property values and increased foreclosures – go figure: http://www.nydailynews.com/new-york/hurricane-sandy/foreclosures-surge-post-sandy-rises-rise-article-1.1500990.”

 

“Hi Rob, I’ve been doing a lot of research into the genius regulations that go into effect Jan 10. Specifically, I’ve been reading the 2013 HOEPA “Small Entity Compliance Guide” that I downloaded from the CFPB website. (Kudos to them for at least trying to make important information available to the industry.) On page 7, Item IV, 3rd check box down it reads “Compensation paid by a creditor to retail loan officers: Include the amount the creditor pays to its loan officer employees for their work on the transaction.” This is in reference to fees included in the 3%. Please correct me if I’m wrong: If my LO does a loan for $100K and we charge 1% ($1000) and pay them .5% ($500) then we would have to include $1500 in the 3% fees. I’ve talked to several colleagues and none of could see any sense in this at all. What am I missing? Why is this even being considered?” Here is the document: http://files.consumerfinance.gov/f/201308_cfpb_atr-qm-implementation-guide_final.pdf

 

Here is one a little off the beaten path, but hopefully may be of some use to our vets in the business! “I’m a researcher with the academic resource site, OnlineColleges.net, and I am working on a college planning and financial aid guide for service members. The guide is comprehensive, but easy to use, covering everything from earning college credit through military service, to the various ways veterans and active military can pay for school. Service members from every branch of the military will find the information they’re looking for in one place. You can check it out here: http://www.onlinecolleges.net/for-students/college-guide-for-veterans.”

Rumors have been swirling around Nationstar, especially on the wholesale channel. But I received this note attesting to the correspondent channel: “I would like to point out to you that I am seller to Nationstar (correspondent) and they seem to be taking some knocks from you in recent weeks/months. They (Nationstar) did go through some growing pains in September that backed up loans getting bought. And they gave sellers a free way out into a market rally which I am sure let some sellers pick up a few bucks. Since then I have had very quick purchase times and zero issues with getting loans bought. I don’t know if the broker side is the ‘less committed side’ of the company you are speaking about but I can tell you the correspondent channel is easy to work with and buys loans quickly. They are also competitively priced. In a time of increased regulation, and the big players (Wells and Chase) not being as aggressive as they were in the past, I think we need to, as an industry, support and accurately report on any liquidity sources that are there to help us advance as an industry. I just wanted you to know about my experience with this company.”

 

Alex Stenback with Alerus has some observations on GSE reform. “GSE reform in a nutshell: raise (and re-raise) fees, drop limits, hope that private capital steps in – in other words, make mortgages more expensive for everyone. What a great plan! It is astonishing when considering all the play that the ‘mortgage standards are too tight’ theme is getting (big brains like Bernanke, Ranieri, et. al. are waving this flag.) Though it must be said that FHA successfully pushed a ton of market share onto GSE using this ‘price ourselves out of the market’ model, it remains to be seen whether the private sector will backstop the GSE’s when they try this.” I don’t know if I have a drone outside my window right now. I do know that it seems every intersection has cameras, and that every site on the web I visit is recorded. I received this short, but misleadingly simple question: “With Google changing their privacy rules, how many mortgage companies have back tested their secured loan applications to make sure borrower information doesn’t show up on the web? Is Google CFPB compliant? Seriously, the next big thing on the government radar should be privacy of consumer data. I have seen quite a few articles on Google changing their privacy rules without a lot of notice.  If you are on Google Plus or Chrome, you should be paying attention to your privacy settings. Privacy breaches of consumer data are always after the fact.  Today I read they increased the Adobe breach numbers to over 75 million affected users! What about mobile apps?  If a new software vendor with a tool for easy loan applications changes their privacy rules 6 months from now after they hook you with their easy to use software, who owns the data and is the info secure?  If you are like me, you probably don’t read the terms, click agree, and jump right in. How does a mortgage banker with loan officers using iPads and iPhones to take loan applications maintain privacy of consumer information?” Raise that one with your IT staff the next time conversation drags.

 

The lending industry can’t escape government intervention – or taxes. “We bought our heck of a wreck of a house for $135,000 and we had to dump a ton of money into it to make it livable. We just did windows and siding and roof so now we are pretty much done. Did the inside downstairs first then did upstairs. My neighbors who paid up in the high $700,000 during the run in prices say it’s not fair because our property taxes are so low. Yes they are, but we didn’t refinance every 6 months, we didn’t pull cash out and we paid our house off early. My neighbors whine and cry, because their property tax bill is 5 times more than mine. Well, I didn’t tell you to buy at the top of the market, quit crying sour grapes! You know with all these changes in the lending business, I made up my mind: I want no part of it. We should just all shut up pay our taxes and let the government make all our choices for us, being they know what’s best for us. Remember, the scariest words we can ever hear, ‘Hello we are from your government we are here to help.’”

 

Let’s take a look at some recent agency updates to obtain a sense of the trends out there!

 

As of January 10, 2014, Fannie Mae and Freddie Mac will be requiring all servicers to comply with the servicing provisions stipulated by Dodd-Frank, which apply to all loans held in Fannie and Freddie’s respective portfolios, sold for cash and subsequently securitized into MBS pools, or sold in exchange for MBS that are part of an MBS pool serviced under the special servicing option or shared-risk pool for which Fannie or Freddie markets the acquired property.  For the full details of the regulations, refer to Fannie’s Announcement SVC-2013-20 or Freddie’s Guide Bulletin 2013-21.

 

Fannie has implemented a number of changes to the Selling Guide, the first of which amends the Power of Attorney guidelines.  The guide now addresses provisions for the use of a POA in connection with the final loan application, including certain scenarios where it is acceptable for a POA to be used to execute both the original and final applications; restrictions on certain transactions, including cash-out refinances in connection with Texas Section 50(a)(6) loans; and restrictions on borrowers who cannot use a POA due to potential financial connections to the transaction.

 

With regard to DU Refi Plus and Refi Plus, Fannie has revised the May 31, 2009 eligibility date from the date on which the original loan was acquired to the original loan’s note date.  This is apparently because “borrowers typically do not know when their loan was sold to Fannie Mae.”

As part of its efforts to standardize industry requirements for hazard insurance on condos, co-ops, and PUD projects, Fannie will no longer permit master policies that provide coverage for multiple unaffiliated projects in a single insurance policy.  This goes into effect for loans with applications dated February 1, 2104 and after.

 

Freddie Mac has updated its guidelines on deferred student loans such that they may not be excluded from the DTI ratio calculations, and if the payment is not reflected in the credit report, 1.5% of the original principal amount may be used as the default monthly payment.  All loans using the previous payment calculation or employing a payment exclusion waiver are required to fund on or before October 31st.

 

The FHA recently discovered that a technical problem with FHA Connection resulted in an incorrect MIP calculation of a 45bps annual MIP rate for certain special streamlines with terms of 15 years or less and LTVs below 78%.  The system has been updated to only allow an annual MIP of 55bps and an Upfront MIP of one bps on these loans, but any 45bps annual MIP on transactions with an assignment date between June 3rd and September 29th will be honored so long they are funded by December 31st.

 

As a reminder, the updated FHA policy on collections and disputed accounts is now in effect for all new case numbers issued apart from those for non-credit qualifying streamline refinances and HECM loans.  For manual underwrites, lenders are required to document their reasons for approving a borrower with collection accounts or judgments and must determine if they were the result of the borrower’s “disregard for financial obligations,” “inability to manage debt,” or other “extenuating circumstances.”  Loans run through TOTAL Mortgage Scorecard that receive an Accept/Approve do not require any documentation or letters of explanation even if there is evidence of judgments and/or collection accounts.  Lenders are required to perform a capacity analysis on any files with an aggregate collection accounts balance of $2000 or greater, which includes accounts of a non-purchasing spouse in a community property state except where excluded under state law.  All judgments must be paid off before the loan is eligible for FHA insurance unless a court-ordered judgment approves of the borrower’s payment agreement with the creditor, which must be documented in writing, and a minimum of three payments have been made under the terms of the agreement.  Guidance on disputed accounts has been updated to downgrade all TOTAL Mortgage Scorecard Accept/Approve loans to “Refer” when the cumulative balance of disputed derogatory credit accounts exceeds $1000, in which case a DE underwriter will be required to manually underwrite the file.

 

 

 

In catholic parochial school, students are taught that lying is a sin. However, theologians are advised that using a bit of imagination was okay to express the truth differently without lying. Here is a perfect example of those teachings: “Getting a Hairdryer through Customs.”

An attractive young woman on a flight from Ireland asked the priest beside her, “Father, may I ask a favor?”

“Of course child. What may I do for you?”

“Well, I bought my mother an expensive hair dryer for her birthday. It is unopened but well over the customs limits and I’m afraid they’ll confiscate it. Is there any way you could carry it through customs for me? Hide it under your robes perhaps?”

“I would love to help you, dear, but I must warn you, I will not lie.”

“With your honest face, Father, no one will question you.”

When they got to customs, she let the priest go first. The official asked, “Father, do you have anything to declare?”

“From the top of my head down to my waist I have nothing to declare.”

The official thought this answer strange, so asked, “And what do you have to declare from your waist to the floor?”

“I have a marvelous instrument designed to be used on a woman, but which is, to date, unused.”

Roaring with laughter, the official said, “Go ahead, Father. Next please!”

 

 

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.