Sep. 11: Bank M&A; TRID is everywhere; the cost of regulation for banks & nonbanks; a poignant “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...

Just when I think I know everything, along comes… shemitah. Huh? Industry vet David Wind alerted me to the fact that the end of the Shemitah year is on Sept. 13. During the last two cycles, we witnessed historic stock market crashes on the very last day of the Shemitah year. After 9-11, on September 17, 2001 the Dow plunged 684 points – a record that held for seven years until the end of the next Shemitah cycle when on Sept. 29, 2008 the Dow plummeted 777 points, which still today remains the greatest one-day stock market crash of all time in the United States. Now we are in another Shemitah year which ends on Sept. 13. So will we see a stock market crash in the United States on Sept. 13? No we will not, because that day is a Sunday. And TRID isn’t until October 3.

 

In job news Greg Frost is looking for a few more branch partners. “Yes, it’s the same Greg Frost who was the mortgage industry’s first billion dollar Loan Originator and current popular motivational sales trainer. Greg’s organization currently has Branch Partners in New Mexico, Arizona, California, Colorado, Texas, South Dakota, Illinois, Iowa and Mississippi. If you’re operating in one of these states, and would like to investigate his very profitable Branch Partner business model, just click here to schedule a confidential conversation with Greg. Imagine working with and being mentored by one of the industry’s’ most prolific mortgage professionals. Click Here now.”

 

Embrace Home Loans announced that John McGinty has joined up as its Southeast regional lending executive. In his new role, McGinty will head all retail sales production and recruiting efforts in the Southeast region. And Union Mortgage Group, a non-bank affiliate of Union Bankshares Corportation, welcomed Dave Baer to its team as the branch manager of the Fairfax, Virginia office.

 

While we’re on employment, is the residential loan officer job at a bank going to go the way of the pinsetter in a bowling alley, the guy who delivered blocks of ice for the refrigerator, or lectors (people hired to read the news to illiterate cigar rollers)? It is doubtful. But along comes a headline saying, “Traditional bank mortgages are losing ground to nonbank lenders, especially in cities with a hot housing market” and it makes one wonder.

 

But staffing, including revenue-generating employees, at the 10 largest investment banks has decreased 2% annually since 2011, according to Coalition Analytics. Much of the reduction has been attributed to regulatory changes and pay restrictions. Revenue declined 4% in the first half of this year compared with the same period in 2014.

 

The nation continues to lose depository banks – not because they’re going out of business but because of mergers and acquisitions. It is becoming more and more expensive to own and operate any kind of financial service business: a sign of the times but continuing to limit consumer choices. The latest Fed research shows total deposits at all US banks are currently at a record level of $10.9T. Not surprisingly JPMorgan, Wells Fargo, Bank of America and Citibank hold about 40% of the total. The state of US banks for the March-to-June period was strong on capital and credit quality despite low interest rates. The quarter saw only one insured US commercial bank failure.

 

M&A? Just in the last week we learned that in Pennsylvania (“Cook with coal!”) NexTier Bank ($977mm) will acquire Eureka Bank ($157mm) for about $35mm in cash. In South Dakota (“At least we’re closer to you than North Dakota”) First Dakota National Bank ($1.2B) will acquire Dakota State Bank ($35mm). In Nebraska (“Ask about our state motto contest”) Home Federal Savings and Loan Association of Grand Island ($227mm) will acquire Home Federal Savings and Loan Association of Nebraska ($52mm). Up in Massachusetts (“Our taxes are lower than Sweden’s”) Randolph Savings Bank ($388mm) will acquire First Federal Savings Bank of Boston ($73mm). Fifth Third Bank ($139B, OH) will sell 17 branches in PA to First National Bank of Pennsylvania ($16B, PA). In Iowa (“We do amazing things with corn”) Washington State Bank ($233mm) will acquire Columbus Junction State Bank ($52mm). And in Wisconsin (“Come cut our cheese”) Nicolet National Bank ($1.2B) will merge with Baylake Bank ($980mm) creating a large community bank.

 

At this point every lender, depository bank or not, had better be a compliance company that happens to do mortgages. That is not a terrible thing, but there is a cost – typically borne by the consumer. Such is life. But the Community Home Lenders Association released a detailed side by side chart comparing regulation of non-bank mortgage lenders to banks. The comparison shows that non-banks are more regulated on the consumer front (SAFE Act and no exemptions from CFPB exams) – while there is virtually identical regulation on the servicing and net worth front when it comes to federal agency loans – which is what non-banks concentrate on. It is plain wrong to think that non-bank mortgage lenders are not really regulated.”

 

TRID… what are we, as an industry, going to talk about after October 3rd? Doing business with more women and minority-owned firms? Where the holiday party is this year?

 

Some companies are using TRID to their advantage. For example, Financial Partners Credit Union, one of Southern California’s largest credit unions, has introduced a 15-day closing guarantee for purchase loans. The Credit Union guarantees its members and real estate partners that they will be “ready to close” a home loan in 15 business days or provide the member with a closing credit of up to $850. Recent changes to disclosure guidelines to be implemented by Consumer Financial Protection Bureau could potentially increase mortgage closing times for many lenders up to 45 days or longer. By utilizing efficient processes and focusing on rapid handling at every step, Financial Partners is able to commit to a 15 business day closing period.

 

OneTrust Home Loans has chosen Simplifile as its partner and online service provider to collaborate with settlement agents and meet compliance requirements for the CFPB’s TILA-RESPA Integrated Disclosures (TRID) rule. Last week, OneTrust successfully began submitting production files through Simplifile to their settlement agents.

 

Provident Funding spread the word to its brokers, “Prior to the implementation of TRID, brokers have had the ability to resubmit applications to LP/DU before completing the Initial Registration process. For applications subject to TRID (applications dated 10/3/2015 or later): the ability to resubmit applications to LP/DU is only available after Initial Registration has been completed and before Final Registration has been started. This new status is referred to as: Initial Registration Complete – Pending Confirmation of Final Loan Terms. To confirm the final loan terms, brokers can either lock the loan or start the Final Registration process with the interest rate floating. Once a loan is locked, brokers cannot rerun LP/DU.

 

“In order to proceed with Final Registration, the applicant’s Intent to Proceed must be received by Provident Funding. An Intent to Proceed form will be included with all initial disclosures for applicants to acknowledge. Brokers need to collect all borrower emails and encourage applicants to opt-in to electronic delivery. Applicants can acknowledge their intent to proceed through the e-disclosures website and avoid potential delays. If applicants fail to opt-in to electronic delivery, they must sign and date the form, the executed form must be uploaded to Proviscan, and Provident Funding must confirm the correct form was submitted. Only after the Intent to Proceed has been received can the applicant’s credit documentation (income, assets, etc.) be uploaded to Proviscan in order to complete Final Registration. The Intent to Proceed is also required before an appraisal can be ordered.”

 

Critics will argue that a 28 page manual from the CFPB for the TILA-RESPA change process is not exactly simplifying things.

 

And if you are seeing “Resources to help you comply” for the first time with 15 business days left, well, good luck because all of your competitors have probably committed them to memory. How about this one where the CFPB underplays the impact of TRID on loan closings?

 

Sun West sent out its training for the remainder of the month including, “TRID Overview for Wholesale and Correspondent Partners! And another TRID Overview for Wholesale and Correspondent Partners!

 

Join BuckleySandler for a discussion on the 15th focusing on what purchasers of mortgage loans need to know about TRID in order to manage risk, particularly the provisions that carry assignee liability and present the most difficult diligence issues.

 

As October 3rd approaches, Wells Fargo Funding is providing reminder tips. Keep the following in mind for Loans originated under TRID: Evidence of Compliance – All Loan Estimate (LE) and Closing Disclosures (CD) disclosed to the consumer must be provided to Wells Fargo Funding as part of the Closed Loan file.  CD Signature Requirements At Closing –Wells Fargo Funding will continue to require evidence that the borrowers acknowledged the actual terms and costs of their Loan, as required by Regulation Z. Therefore, Wells will require that the final CD be signed and dated at Closing by all applicable, interested parties. Assumability Option – As communicated in Newsflash C15-012, dated February 23, 2015, Sellers should ensure proper assumption indication on applicable disclosures. This newsflash as well as past newsflashes are available on Wells website.

 

Back in July Bill Kidwell the president of IMAAG, shared his thoughts regarding the request for comments for the TRID extension period. Kidwell suggests that the vast majority of comments came from members of the appraisal industry addressing transparency and consumer awareness of the split of appraisal fees and lack of disclosure as a serious problem, which doesn’t really matter and states that most industry comments missed the point regarding the TRID extension. Kidwell also points out that almost 700 appraisers commented on the TRID extension period and should use a different forum to address the real problem – negative consumer and industry impact caused by HCC and A.I.R.

 

Earlier this week the Federal Financial Institutions Examination Council (FFIEC) detailed steps regulators are taking to streamline and simplify regulatory reporting requirements for community banks and reduce their reporting burden. As an initial step by regulators to streamline some reporting requirements, the federal banking agencies, under the auspices of the FFIEC, are seeking comment on proposals to, in part, eliminate or revise several Call Report data items. These changes would not affect credit unions, but would simplify the reporting requirements for banks and savings associations. Comments on the data reporting requirements proposed on September 8 will be accepted within 60 days of publication in the Federal Register.

 

The National Association of Independent Housing Professionals wrote an open letter to Congress in an effort to officially notify members of the danger and drawbacks of TILA-RESPA reform. (15 business days left!)

 

What do the American Bankers Association, American Land Title Association, American Escrow Association, The Appraisal Firm Coalition, Appraisal Institute, Collateral Risk Network, Consumer Bankers Association, Community Home Lenders Association, Consumer Mortgage Coalition, Community Mortgage Lenders, Credit Union National Association, Housing Policy Council, Independent Community Bankers of America, Mortgage Bankers Association, National Association of Home Builders, National Association of Mortgage Brokers, National Association of Realtors and Real Estate Services Providers Council, Inc. have in common? They all are urging federal regulators to provide guidance on how they plan to enforce TRID’s rules. The implementation of the Truth in Lending Act/Real Estate Settlement Procedures Act integrated disclosures poses significant “challenges” to residential lenders.

 

The Consumer Financial Protection Bureau has indicated that regulators will be “sensitive to the good-faith efforts” of lender efforts to comply with what is known as TRID. But the trade groups want more specifics from regulators on what that means (Though the CFPB wrote the rule, enforcement of the new disclosures is spread out among various regulators.)

 

With all of this going on interest rates are an afterthought, and with the lack of volatility this week sometimes it feels like the bond market is still on summer vacation. Most of the news yesterday hit at 5:30AM PDT, and then we kind of chopped around after that right through the $13 billion 30-year T-bond auction. (The indirect bid – an indication of demand – was the highest ever.) Even the stock market behaved itself.

 

And we’re at the end of the week already – let’s have 3-day weekends all the time! Overnight in Asia & Europe it was quiet. We’ve had the August Producer Price Index numbers (PPI was unchanged and Core PPI was +.3%). Later is some forgettable number from Michigan regarding consumer sentiment. We closed the 10-year at 2.22% and this morning we’re at 2.20% with agency MBS prices better by .125.

 

 

This is truly a day of remembrance. And perspective – thanks to my son Robbie for sending this along.)

Today was the absolute worst day ever

And don’t try to convince me that

There’s something good in every day

Because when you take a closer look,

This world is a pretty evil place.

Even if

Some goodness does shine though once in a while

Satisfaction and happiness don’t last

And it’s not true that

It’s all in the mind and heart

Because

True happiness can be obtained

Only if ones surroundings are good

It’s not true that good exists

I’m sure you can agree that

The reality

Creates

My attitude

It’s all beyond my control

And you’ll never in a million years hear me say that

Today was a good day

 

Now read that from the bottom up.

 

 

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.)