Mar. 15: Here on the Ides of March, MBA’s school for LOs; lots of investor updates – ARM changes are everywhere

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...

Is capitalism on the ropes? “Colorado Girl Scouts Not Allowed To Sell Cookies Outside Pot Shops”!? This is after one Girl Scout sold 100 boxes in two hours: http://www.huffingtonpost.com/2014/02/24/girl-scouts-cookies-marijuana_n_4847290.html.

 

Putting a hopeful end to the current vein of the “preferred builder lender” situation, MBA president Dave Stevens contributes, “The required use provision in RESPA http://www.respalawyer.com/2008/12/respa_reform_required_use_defi.html was at the crux of your post last Saturday. The question/debate is whether a buyer is required to use the affiliated lender to purchase the home. This debate is about whether receipt of discounts only applying to the use of the affiliate constitutes a violation of required use. HUD broached this subject a few years ago but withdrew after the builders filed suit: http://floridatitleagent.wordpress.com/2009/05/13/hud-withdraws-new-required-use-definition-under-final-respa-rule. I was FHA commissioner at the time of that debate and RESPA was under my authority. It was never resolved and after pulling the lawsuit, HUD posted a request for comment on the subject but the office of regulatory affairs was moved. It is now under the authority of the CFPB.”

 

Mr. Stevens’ note continued: “Here is a Ken Harney piece about HUD asking questions about required use in 2010, again while I was commissioner. But as is common knowledge, it was never resolved after the transfer to the CFPB. I’m not saying it would have changed the rule, and I am not advocating for one outcome or another, just that it never was resolved: http://www.washingtonpost.com/wp-dyn/content/article/2010/06/10/AR2010061006057.html.”

 

To sum things up, it is human nature to want to do business with a company that you are comfortable with, or where there are efficiencies. If done correctly, the consumer and the businesses come out ahead. If you see something illegal, report it to the CFPB: whistleblower@cfpb.gov – ‘nuff said.

 

Check this out. The MBA is offering a “School of Loan Origination.” “MBA Education’s dynamic School of Loan Origination (SOLO) training program is critical to companies looking to recruit new MLOs that need basic training. Within four weeks, your new MLOs will obtain the foundational skills needed to begin originating quality loans in a purchase-market environment. SOLO is a comprehensive, instructor-guided online program – making it easy for new MLOs to train without leaving the office. This valuable course provides everything your new MLO needs to become effective, productive and profitable.” There are all kinds of topics, material, and features – check it out at web site for details.

 

Speaking of the MBA, congratulations to Chris George, President and CEO of CMG Financial, who was presented with The Hall of Honor Award by the MBA and Wingspan Gives Back. The award was presented at MBA’s 2014 Mid-Winter Housing Finance Conference in Avon, CO. The Hall of Honor Award is designed to recognize both corporations and individual corporate leaders who have committed their support to the military community on both a national and local level.

 

Let’s really play catch up with some recent agency, investor, and lender news to help give folks a sense of trends in underwriting and pricing changes. Yes, there is actually some good news out there. And there are a lot of ARM changes worth noting.

 

Effective immediately, BAML is no longer ordering pre-borrower funding CDAs on behalf of lenders due to the ECOA changes; instead, lenders will need to order their own CDA and/or field review from Clear Capital, which is the current approved vendor.  In addition, BAML will no longer review loan-level waiver requests on a pre-borrower funding basis, and Lendermail will not discuss anything on a specific loan.

 

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.

 

US Bank is now offering 5/1 ARM loans with a 2/2/5 cap structure and a new FHLMC Super Conforming 7/1 LIBOR ARM program.  The latter is available for primary residences, second homes, and investment properties and offers a cash-out option.  The new program is subject to the same 5/2/5 cap structure of the existing FHLMC Conforming 7/1 LIBOR ARM.

 

US Bank is offering its correspondent lenders an extended rate lock option that allows the loan to be floated down to the current market within 30 days of closing if the market improves.  Non-applicable fee options are no longer accepted but the Elite LIBOR ARM series and 10/1 Interest Only ARMs are now eligible.

 

Per Regulation Z, Wells Fargo is requiring that all individuals who have an ownership interest in the property be provided with a fully executed Notice of Right to Cancel.  This applies to all loans, including those where a non-vested individual is deemed to have an ownership due to state laws based on community property, homestead, dower/curtesy, etc.  Wells will also accept a Spousal Waiver, Warranty Deed, or transactional Quit Claim that shows that the non-vested individual no longer has an interest in the property in lieu of the Notice of Right to Cancel.

 

Wells has updated guidance to state that electronically signed documents from TPOs or mobile apps will be ineligible for purchase and that electronic signatures may not be applied to multiple electronic records simultaneously.  Loan packages with electronically signed documents must include evidence of Borrower Consent Language showing that the borrower agreed to receive and sign any application documents as such.

 

SunTrust has revised its guidelines on long-term disability and age of documents and removed its co-signed debt inclusion, minimum borrower contribution requirements in cases where gift funds are being used, and declining income overlays to align with FNMA.  In addition, the evidence of continuance of gift funds overlay, declining income overlay, and the requirement that borrowers using foreign income to qualify must be US citizens have all been removed.

 

To align with industry standards, Citi has updated its seasoning/aging policy to require all loans registered on or after February 22nd to be purchased no more than 90 days after the loan was closed, and the loan’s payment history must reflect that all payments were made as agreed.  All construction to permanent loans must be purchased within 90 days of the modification.

 

Citi has discontinued the Conversion option for its Conventional ARM products and has removed the “purchase by” date for loans in the pipeline other than standard document and loan seasoning requirements.

 

For all construction to permanent transactions, Citi is now permitting the LTV to be calculated based on the appraisal value for both rate/term and cash-out refinances instead of using the lesser of the appraisal value or cost of construction based on how many months the lot has been owned.

 

Per the Texas Supreme Court’s recent decision on the 3% fee cap on Texas 50(a)(6) transactions, Citi has clarified that escrow impounds, interim interest, and bona fide discount points are not to be included in the fee limitation test.

 

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.

 

Franklin American has aligned its guidelines to align with the Agencies on the calculation requirements for stocks, bonds, mutual funds, and retirement assets as reserves and on the payment of fees outside of closing by credit card.  The guidelines on calculating the property value for construction conversion mortgages has also been expanded to encompass FHMLC policy.  For VA products, FAMC has updated the definition of Eligible Veterans/Borrowers to include same-sex married couples when approved by the VA.

 

FAMC has rolled out a new Conventional 10/1 ARM product, available for purchases, rate/term refis, and cash-out refis.  The program uses the same cap structure (5/2/5) and qualifying rate guidelines as the Conventional 7/1.

 

PennyMac is now offering a Jumbo program to all correspondent lenders with a TNW of $2.5m and above.  Loan amounts of up to $2m are available for 1-unit purchase transactions with an LTV at or below 70% and a FICO of at least 720.

 

New Penn has expanded its Government guidelines to allow FICOs down to 580, higher DTIs, and previously modified mortgages.  For FHA products, condos, down payment assistance, and flipped properties are now permitted, while FHA Streamline transactions allow up to 55% DTI and LTVs/CLTVs up to 97.5% and 125%, respectively.  Standard VA borrowers (10-, 15-, 20-, and 30-year Fixed and 3/1 and 5/1 ARMs) may have a DTI up to 60% and take cash out with LTVs/CLTVs up to 100%.  For VA IRRRLs, borrowers may have a FICO score as low as 620, subject to a maximum DTI of 50% and maximum LTV/CLTV of 95%, and transactions with FICO scores of 700 and over do not require an appraisal or AVM.

 

New Penn is now offering a 100% cash-out option as part of its VA program, which is available for 15- and 30-year fixed transactions; requires no down payment on purchase; permits condos and PUDs; and allows borrowers to combine mortgage liens, pay off debt, or collect cash in hand.  The minimum FICO is 620, but high balance loans will be permitted for borrowers with FICOs of 660 and over.

 

PHH has relaxed the eligibility guidelines for its Conventional Conforming Fixed program such that the minimum FICO for owner-occupied cash-out refinances has been reduced from 720 for 660 for LTVs from 80-85%, which also applies to applicable second home purchases and rate/term refinances.  The LTV limit of 80% for loans over $417,000 on properties in Alaska and Hawaii has been removed as well, effective for both Conventional Conforming Fixed and ARM products.  Effective for Conventional Conforming Plus Fixed products, the minimum loan amount for properties in Alaska and Hawaii has been changed to $625,501, while the minimum for LTVs over 80% is $417,001.

 

PHH has updated its age of documentation requirements for Conventional Conforming products to require that credit and preliminary documents be dated no more than 120 days prior to the note date; this includes verifications of employment, income and source of funds, payment histories, and title reports.  This replaces the previous 90-day limit for credit documents.

PHH has raised the maximum allowed financed properties from four to six for borrowers with multiple financed properties that are purchasing or refinancing an investment property or second home.  In order to qualify, the borrower must have a FICO of at least 720, and when rental income is used for qualifications, PHH will review the tax returns and transcripts.  This option is not available for HARP loans.

 

Fifth Third has launched its new Non-Agency Jumbo product, which offers loan amounts up to $2 million and LTVS up to 80%.  Minimum FICO scores start at 700 and cash-out refinances are permitted.  The product is available on a non-delegated basis.

 

Nationstar has clarified that loans requiring Section 8 Housing Service are ineligible for purchase; that USDA borrowers cannot have any lates in the last 12 months for both mortgage and rental history; and that Conventional borrowers will need to supply the full 12 months’ cancelled checks, a VOR from a professional management company or credit supplement if required by the AUS.  Effective for all borrowers, the mortgage/rental history must be current as of closing.

 

Kinecta has made several changes to its product suite, including streamlining the minimum FICO and maximum LTV for Agency Fixed loans, rolling out a new 90% CLTV product for Piggyback HELOCs and Fixed Seconds, changing the FICO requirement for Agency ARMs to the minimum stipulated by DU, and updating the Jumbo 5/1 ARM cap structure from 5/2/5 to 2/2/5.

 

 

(Warning: R-rated.)

A woman and a baby were in the doctor’s examining room, waiting for the doctor to come in for the baby’s first exam.

The doctor arrived, and examined the baby, checked his weight, and being a little concerned, asked if the baby was breast-fed or bottle-fed.

“Breast-fed,” she replied.

“Well, strip down to your waist,” the doctor ordered.

She did. He pinched her nipples, pressed, kneaded, and rubbed both breasts for a while in a very professional and detailed examination.

Motioning to her to get dressed, the doctor said, “No wonder this baby is underweight. You don’t have any milk.”

“I know,” she said, “I’m his Grandma. But I’m glad I came in.”

 

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.)