Jan. 20: Sales Manager jobs; CFPB penalizes lender on kickbacks & referrals; webinar on buybacks; CFPB on advertising

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...

To be honest, I have no interest in tracking all the predictions, forecasts, and research reports from scores of entities – but some are decent. For example, Zillow has some interesting new research reports out there, coupled with maybe even more interesting 2014 predictions.  With its extensive database of home sales and listings, Zillow has compiled comprehensive and detailed data on the number of days it takes to sell a home across the nation. Not only do we have this metric for hundreds of markets, but Zillow has also tracked its value over time from the beginning of 2010 in order to surface the seasonal nature of the housing market and reveal just how quickly homes are selling. It’s interesting and informative: http://www.zillow.com/blog/research/2013/11/13/zillow-days-on-market/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+ZillowResearchBlog+%28Zillow+Real+Estate+Research%29&utm_content=Yahoo%21+Mail. Before prosecco corks start popping, the Fed reports $221B of home equity loans will hit their 10 year mark soon & might begin to default. The number is about 40% of all home equity lines currently outstanding.

 

Direct Valuation Solutions, Inc. (DVS), a provider of cloud-based valuation fulfillment software, is actively recruiting experienced Regional Sales Managers for Southern California, Pacific Northwest and Rocky Mountain Regions. “The DVS Platform (http://directvaluationsolutions.com/) provides an efficient, compliant, cost effective and profitable alternative to AMCs  for lenders to reclaim their own appraiser panel and automate the appraisal assignment, workflow tracking, quality control, payment processing, UCDP upload and borrower delivery of the completed appraisal.  Lenders realize superior service levels and quality by establishing lender/ appraiser relationships while still being AIR compliant.” The ideal candidate should have strong connections developed through mortgage banking and correspondent channels and be a self-motivated professional.  Interested candidates should send their resume to info@directvaluationsolutions.com.

 

While we wait for the it to put forth a final rule on Lender & Borrower paid compensation, the CFPB is reportedly looking at how financial product and service providers advertise to consumers. As part of the review, the CFPB said it found direct marketing happened most often through internet display and search (44%), direct mail (22%), direct response TV advertising (16%), direct response print ads (8%) and social networking (4%). Banks should review how they advertise through these and other channels to ensure they don’t get sidewise with regulators given this focus. Here is a refresher: http://www.consumerfinance.gov/newsroom/consumer-financial-protection-bureau-warns-companies-against-misleading-consumers-with-false-mortgage-advertisements/.

 

Many organizations consider the time after Christmas, and before the New Year, as a period of….shall we say, minimal productivity? At the very least a time to use vacation days accrued, instead of sitting at your desk wondering if those Christmas cookies from the investor care package sitting in the break room are still good. Apparently the CFPB is on a different calendar. On December 30, the agency posted to the Federal Register (that would be our nations BLOG: http://www.gpo.gov/fdsys/pkg/FR-2013-12-30/pdf/2013-31223.pdf) a notice adjusting the thresholds of the asset-size exemptions for collecting HMDA data and establishing an escrow account for certain mortgage loans under TILA. Ballard Spahr writes, “Pursuant to Regulation C, which implements HMDA, depository institutions with assets below an annually adjusted threshold are exempt from HMDA data collection requirements. In its notice, the CFPB increased the 2013 threshold of $42 million to $43 million for 2014. Thus, depository institutions with assets of $43 million or less as of December 31, 2013 will be exempt from collecting HMDA data in 2014.”  Also, as many know Reg Z requires creditors to establish an escrow account to pay property taxes and insurance premiums for certain first-lien higher-priced mortgages. The rule contains an exemption for creditors that operate predominantly in rural or underserved areas that meet certain other criteria, including an annually adjusted asset-size threshold. In its release, the CFPB increased the 2013 threshold from $2 billion to $2.028 billion for 2014.

 

But we’re not done with the CFPB. Late last week it ordered a Missouri mortgage lender, Fidelity Mortgage Corporation, and its former owner and current president, Mark Figert, to pay $81,076 for funneling illegal kickbacks to a bank in exchange for real estate referrals. According to the Consent Order, the lender had entered into an agreement with a bank in which the bank referred borrowers to the lender in exchange for kickbacks disguised as payments made by the lender for renting office space within the bank. The Order states that during the relevant period, the principal had “managerial responsibility for [the lender] and materially participated in the conduct of its affairs,” thereby making him a “related person” for purposes of Dodd-Frank Title 10.  The bank was not named as a target.

 

Compliance folks know that the Section 8 kickback prohibition allows payments for good or facilities actually furnished or services actually performed. The Consent Order references a 1996 HUD policy statement that discussed this provision in the context of office rentals. The policy statement indicated that in determining whether rent payments were disguised referral fees, HUD would look at the general market value of the rental property, not its value to a settlement service provider. According to the Consent Order, the average monthly rent paid by the mortgage lender to the bank was substantially more than monthly rents for comparable space not located within a bank. But hey, don’t take my word for it: http://www.consumerfinance.gov/newsroom/cfpb-takes-action-against-mortgage-kickbacks/.

 

Sometimes the question comes up, “Does my Loan Processor need an NMLS Number and State License?” Under the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act), a person must be licensed before engaging in the business of a mortgage loan originator. The Dodd-Frank Act defines a Mortgage Loan Originator (MLO) as “an individual who (1) takes a residential mortgage loan application and (2) offers or negotiates terms of a residential mortgage loan for compensation or gain.” Ordinarily, a processor is exempted from the definition of MLO and licensing under the SAFE Act, if the processor performs “administrative or clerical tasks” only, and is an “employee” subject to the supervision and control of a licensed mortgage broker, correspondent lender or lender. Other processor functions include, but may not be limited to, “the receipt, collection, and distribution of information common for the processing or underwriting of a loan in the residential mortgage industry and communication with a consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan.”

 

A processor is prohibited from performing loan origination activity, such as assisting a mortgage applicant in completing the application, except that the processor may clarify where required information must be entered on the 1003. The processor may not discuss rates, programs, analyze credit, advise or recommend loan programs or products, or other credit options that may be available to the mortgage applicant. When a mortgage company requires or negligently causes a processor to work outside the scope of “purely clerical” responsibilities, it runs the risk of substantial non-compliance under the SAFE Act, risking significant administrative fines. If a mortgage company elects to use an independent processor (1099 contractor), the company should request and verify that the contract processor has met his or her obligations for registration and licensing in the NMLS Registry. While certain states have nuanced requirements, the SAFE Act requires independent underwriters and processors to be duly licensed, unless such individuals are employed by an independent processor and/or underwriting company that has met its specific licensing requirement under State Law.

 

Finally, the CFPB has issued reminders to mortgage entities (brokers, correspondents, lenders) to establish procedures designed to ensure that any third party with which the institution has arrangements related to mortgage loan origination has policies and procedures that comply with the SAFE Act and its regulatory implementation. The CFPB has made it clear that financial institutions are responsible for ensuring that their service providers act in a compliant fashion: http://mortgage.nationwidelicensingsystem.org/Pages/Default.aspx.

 

Whether someone is an LO, a processor, or an underwriter, they should know where to find HUD income data. Here is the web site to obtain the HUD Median Income by State and County: http://www.huduser.org/portal/datasets/il.html.

 

Even without the current compliance environment, companies continue to have their hands filled with buyback requests. The CMLA and AMLG published a “Complimentary Comprehensive Repurchase/Make-Whole Defense Webinar”:http://origin.library.constantcontact.com/download/get/file/1112147084887-41/1-9-14+Webinar+Repurchase-RFC+wihout+notes.pdf; any questions should be addressed to James Brody with AMLG: jbrody@americanmlg.com or www.americanmlg.com.

 

Let’s see some relatively recent investor updates to check on trends. As always, it is best to read the full bulletin.

 

US Bank has updated its Conventional guidelines to allow borrowers to own more than two financed properties in a contiguous area (two –block radius) so long as they meet the financed property guidelines and to rate/term refinance properties listed for sale in the last 90 days.  The previous requirement that sellers have taken title to the subject property at least 90 days prior to the contract date has also been revised to allow recent sales in cases where the current sales price exceeds 10% of the seller’s acquisition if a second review of the appraisal is completed to USBHM before the loan is purchased.   To that end, loans on properties that were acquired more than 90 but less than 180 days prior to the date on the sales contract and increased in value equal to more than 20% of the acquisition price will be eligible for purchase when USBHM completes a second appraisal review.  Requirements for large deposits are now aligned with those of Freddie Mac, which state that the source of any single deposit exceeding 25% of the total monthly qualifying income must be evidenced by documentation, and any property showing rental income on Schedule E will be automatically be considered an investment rather than a second home.

 

Effective for all new locks, EverBank has removed the -.375 pricing adjustor for all 5/1 ARMs with the 2/2/5 cap structure.

 

At this point in time Franklin American will not be accepting alternative vendor forms to be used in lieu of the Income and Debt Worksheet, and lenders are reminded that if they do deliver an alternative form it must include all of the data points as disclosed on the FAMC worksheet.  Lenders are reminded that the method for calculating monthly income must be shown clearly and evidenced through documentation.

 

Homeward has announced that it will purchase rebuttable presumption HARP loans that are paying off loans currently serviced by Ocwen (e.g. Homeward-to-Homeward refis) provided that the Homeward Residual Income Test worksheet has been completed prior to closing.

 

PHH is now requiring lenders to provide a copy of the Servicing Transfer Disclosure issued to the borrower within three business days of the application date.  For lenders with delegation, this should be included in the closed loan delivery package, while loans submitted for underwriting review should include it in the underwriting submission package.

 

Carrington Mortgage is now offering FHA and VA loans for borrowers with non-traditional tradelines, available for standard programs with up to 90% LTV.  Borrowers must have two years’ tax returns and transcripts, a minimum of three credit references, no late housing payments, and a maximum of one late payment with the other credit references in the previous 12 months.

 

Mountain West Financial has updated a number of its Conventional guidelines, which now prohibit the incidental cash back to rate/term refi borrowers from exceeding the lesser of $2,000 or 2% of the principal balance of the new loan amount and require all manufactured condo projects, including detached units, to be on the FNMA approved project list.  FHA guidelines have been revised to require additional due diligence on flip transactions that contain any Identity of Interest relationships, and in cases where there is a relationship between the buyer and seller, the loan will be considered ineligible.

 

Hey – the markets are closed today – but last week things improved about .375 in price. Data released last week was generally consistent with the view that the economy will pick up momentum in 2014.

 

So if rate sheet pricing is based on mortgage-backed security pricing, how does anyone set prices when the bond market is closed? Basically, a) see if anything exciting happened in Asia or Europe, b) take Friday’s price, and c) back it off. Some companies might have estimated today’s production, and hedged it Friday. This week there just ain’t much in the way of scheduled U.S. economic news, and certainly not much until Thursday’s Initial Jobless Claims, Existing Home Sales, FHFA HPI and Leading Economic Indicators.

 

 

(Some quick snippets of questionable taste.)

Since the snow came, all the wife has done is look through the window. If it gets any worse, I’ll have to let her in.

I’ve been charged with murder for killing a man with sandpaper. To be honest I only intended to rough him up a bit.

Just a Reminder to those who stole electrical goods in last year’s riots: your one year manufacturer’s warranty runs out soon.

A boy asks his granny, “Have you seen my pills, they were labelled LSD?” His Granny replies, “Who cares about your pills, have you seen the dragons in the kitchen?!”

 

 

Rob

(Copyright 2014 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.)