Mar. 7: TRID – a new acronym for us to remember; letters on brokers & the CFPB, the role of credit unions, and gfees

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...

With 104 business days left until the August 1 implementation of “TRID” (because the RTID from RESPA-TILA doesn’t roll off of one’s tongue so well), the heat is picking up on the upcoming changes in the Truth in Lending Act paperwork.

 

Citi sent out, “This is the second in our series of planned communications regarding the Truth in Lending Act (TILA)/Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure Rule (Rule) that will be effective for most mortgage applications taken on or after August 1, 2015. By now, we trust that every approved Correspondent is deeply immersed in planning and testing system/process changes to ensure implementation of the Rule, internally and/or with your loan origination system vendor (LOS Vendor). As in the past, Citi will continue to rely on each Correspondent’s legal compliance (and all other) representations and warranties under the Loan Purchase Agreement.

 

“As stated in our January announcement, Citi’s goal is to make your transition to the Rule as streamlined as possible for Loans intended for sale to us.  We are nearing conclusion of our first round of internal Correspondent channel systems development around Rule implementation and will soon turn our attention to communicating an initial set of Citi Correspondent Lending best practices/requirements to help you align your Rule implementation with our process.

 

“In the meantime, we thought it might be helpful to share the attached chart highlighting some of the changes Citi has identified for its Retail originations process to assist you in determining how your Rule implementation might impact your relationship with us.  As has been the case in the past with legal/regulatory/investor compliance changes, much of our Correspondent process is developed to align with the Citi Retail process (to the extent possible).   Please keep the attached chart in mind as you continue your process/system planning and development.

 

“As a reminder, complete information on the Rule and the new forms may be found on the CFPB website. We are communicating the most recent Rule information available to us; however, the CFPB is still issuing clarifications that may impact our process and policies.  If you have any questions regarding the Rule, including differing interpretations, please do not hesitate to contact your Account Executive or the National Client Services Team at 800-967-2205.  We want this transition to the Rule to be as smooth as possible for everyone.”

 

And I received this note from someone within SunTrust’s Mortgage and Consumer Lending Marketing group. “Just a quick note to let you know that SunTrust LOs and Account Managers are leading the way in informing and educating the real estate and lending population that you mentioned in your blog. All of our LOs and AMs have gone through ‘Train the Trainer’ sessions and are fully prepared to present on this topic to Realtors, Title companies and Correspondent Clients. In fact, we have been delivering TRID Presentations since December. I am pleased to say that our Realtor and Lending partners are happy with the quality of our very simple and easy to understand materials. Our currency is our positive approach to this topic. We are treating this as an opportunity to improve the overall client experience and this is resonating very well with our partners. We have a full marketing calendar between now and August where we will keep delivering relevant information through emails and presentations. We are having fun with this! I am not kidding. Our Loan Officers and Account Managers are excited about talking to anyone and everyone who wants to be informed of this change.”

 

Fun with TRID? Take it away SunTrust!

 

Moving into letters from readers, on the topic of whether or not the CFPB has the desire, will, or financial motivation to examine brokers (“If the CFPB ever begins entering broker shops it will be a miracle if many survive. They cannot handle the load being dictated by the regulators and many are just skating by. Can you imagine what a 3-5 person shop must spend for compliance, accounting, education, mock audits, processing etc.? Sure they are not responsible for a lot as a broker but…. they still must comply and I would bet most cannot keep up.”) a while back Roy S. wrote, “At 30,000 feet and knowing a lot of brokers you are probably correct. Being a broker myself the most important thing is document retention…I mean EVERYTHING. We fall into that 3-5 person size and I have one full-time person dedicated to finance, NMLS, audit and compliance.

 

“Brokers stay under the radar of CFPB for a couple reasons. There is no money for a lawsuit. There is little discrimination because your typical broker will try to get a loan done for a Martian if there is a complete application. We don’t service (the source of many lawsuits) rules: we have the luxury of big brother (the wholesaler) to keep us compliant with GFE and TIL. Education is easy…it’s mandated for license renewal. Processing? (Don’t outsource it). Additional profit centers? No such thing for a broker. (If you are a broker and think adding title, real estate, or credit repair is a good idea, then you are not doing enough home loans.) At this time risk = funding your own loans.

 

“Lastly, what we have seen since 2010 is an increase in profit margin. Our cost for compliance increase is a fraction of the cost increase for banks and lenders. This allows us to take the margin difference, and collect roughly 125 bps more than pre-2010. Still, there’s just no money in it for the CFPB to audit brokers. Having said that, it is VERY difficult to do anything wrong based partly what is described above. You would have to be rather dumb and reckless to get in trouble as a broker. Feel free to tell me if I am crazy. I love Brokering and believe it is still the most efficient delivery mechanism to the secondary market.”

 

The industry continues to bristle at the CFPB’s attempt to direct consumers to lenders with the lowest rates regardless of service levels or experience. Richard wrote a note directly to the CFPB: “To Whom It May Concern – I applaud many of your efforts to provide protection and education to the public on the topics covered on your ‘owning-a-home’ website.  However, I take issue with your ‘Check interest rates for your situation’ beta test.

 

“Every effort should be taken to obtain as much detail about a homebuyers/homeowners circumstances to avoid setting the wrong expectations  Websites like this are infamously inaccurate for the simple fact that the do not fully anticipate all the possibilities and as a result set a false expectation.  This is a rookie mistake, and the cause of much frustration.  Stick to your knitting!  Educate the public on the process of shopping for a mortgage and get out of the business of setting rate expectations. I have resuscitated many transactions where the price quoted, by a competitor, does not mirror the circumstances for the prospect and recovery from this can be painful for the homebuyer/homeowner.

 

“As a tax payer & homeowner I do not want my tax dollars spent to provide rates from banks and credit unions, your data source, while not considering the other options available by brokers and mortgage bankers. This website could be compared to the newspaper quotes that many don’t take seriously and in fact are referred to as loss leaders to get prospects to call. The Federal Government should not be in the business of quoting rates in the same way that they should not be involved in quoting the cost of a laptop or appliance. Do a good job at educating and get out of the business of quoting rates. Signed – a concerned citizen, tax payer and licensed mortgage professional.”

 

Speaking of entities that offer home loans, Jill Peterson, Sr. Sales Consultant with CU Members Mortgage, spoke out: “I wanted to clarify a few issues regarding credit unions, their tax-exempt status and the concept of ‘fewer restrictions’, especially as it pertains to the potential chartering of a Seminole Indian credit union. In exchange for the tax-exempt status, credit unions are restricted on the method by which they raise capital. (By the way, the bar is set high for credit unions in terms of net worth requirements – by the federal and state regulations.) Credit unions cannot sell shares but may only raise capital through the retention of earnings. Therefore a credit union must deliver a reasonable level of income, of which all or a portion is retained to adequately fund the reserve accounts and permit future growth. My read of the articles that discuss the Seminole’s interest in opening a credit union indicates that they feel that there would be fewer lending restrictions for their members (i.e., those belonging to the tribe) at a credit union than at a bank. Yes, that may be true, because credit unions, while strictly regulated by federal and/or state agencies, are chartered to serve their members in a responsible manner. That’s where they will balance reasonable underwriting to accommodate the needs of their field of membership against the risk and required loan loss reserves that they must retain. Where they will not have the same flexibility as other financial institutions (thereby ‘leveling the playing field’) is in the amount of business lending that they will be permitted to do (and that number will probably be $0 or close to it in the first several years). In my experience, much of the business that this potential credit union could do would be of no interest to many banks, therefore a credit union would make all the sense in the world.”

 

Switching gears, the commentary had discussed security versus whole loan gfee differences. Preston Schiroky wrote, “Dan Cutaia makes an interesting argument about the Cash Window at the GSEs, saying that ‘as a matter of public record the FHFA [should] publish a list of each and every company doing business with the Agencies, identified by name, along with their corresponding G-Fee schedule.’ One has to wonder about the potential downside of publishing this information.  For example, one can compare it to the situation of depositories borrowing money at the Fed discount window.  If the discount window happens to be a relatively expensive form of short-term borrowing, then if the Fed were to publish which depositories are using the discount window in the near-term, it could further exacerbate any credit and liquidity issues those depositories may be facing in the near-term. (The Fed began publishing this information in 2012, but on a two-year lag.)

 

“Similarly, if certain originators have significantly higher G-Fee schedules than others, signaling that their collateral has faster prepayments and/or they present higher counterparty risk, then the market can react to this information as well, if published. The pricing on collateral the originators pool themselves could decrease, and their credit and liquidity costs could increase. This positive feedback loop could add further fuel to competitive pressures against these originators. If higher G-Fees tend to accrue to small originators, just as in the case where smaller depositories are more likely to rely on the Fed discount window, then disclosing who pays the highest fees in the near-term may ultimately structure the marketplace so as to favor larger participants. If the Agencies did disclose, it may be preferable they do so on a multi-year lag. This would provide transparency over the long-term into how fairly they are pursuing public policy objectives, but without impacting the functioning of the markets as they are happening in the near-term.”

 

 

2015 Church Service

PASTOR: “Praise the Lord!”

CONGREGATION: Hallelujah!”

PASTOR: “Will everyone please turn on their tablet, PC, iPad, smart phone, and Kindle Bibles to 1 Corinthians, 13:13. And please switch on your Bluetooth to download the sermon.”

P-a-u-s-e……

“Now, Let us pray committing this week into God’s hands. Open your Apps, BBM, Twitter and Facebook, and chat with God.”

S-i-l-e-n-c-e

“As we take our Sunday tithes and offerings, please have your credit and debit cards ready. You can log on to the church Wi-Fi using the password ‘Lord909887.’ The ushers will circulate mobile card swipe machines among the worshipers. Those who prefer to make electronic fund transfers are directed to computers and laptops at the rear of the church.”

The Pastor continued. “Those who prefer to use iPads can open them. Those who prefer telephone banking, take out your cell phones to transfer your contributions to the church account.”

The holy atmosphere of the church becomes truly electrified as ALL the smart phones, iPads, PCs and laptops beep and flicker!

Final Blessing and Closing Announcements.

  1. This week’s ministry cell meetings will be held on the various Facebook group pages where the usual group chatting takes place. Please log in and don’t miss out.
  2. Thursday’s Bible study will be held live on Skype at 1900hrs GMT. Please don’t miss out.
  3. You can follow your Pastor on Twitter this weekend for counselling and prayers.

God bless and have a nice day.

And Jesus wept…..

 

 

Rob

 

(Copyright 2015 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.)