Aug. 22: CFPB’s eClosing pilot program details; homeownership counseling; PACE update; classic joke for a Friday

The race to the bottom, in terms of guidelines or razor-thin pricing margins, prompted on industry vet to send me, “There’s a lot of space in the mortgage cemetery.” Names like Thornburg, Countrywide, or WAMU are left to discussions of lawsuits, but plenty of firms, and their names, are alive and kicking. For example, Cole Taylor Mortgage is now part of MB Financial Bank (“MB Financial, Inc. completes acquisition of Taylor Capital; Cole Taylor Bank is merged into MB Financial Bank”). And regarding news yesterday that Pinnacle Mortgage Group is being acquired by UAMC, it bears mentioning that PMG has no relation whatsoever to Pinnacle Capital Mortgage based in Roseville, CA.


In some pretty big news, the CFPB announced its mortgage eClosing pilot participants as the CFPB has taken it upon itself to assess the benefits of electronic mortgage closings. “The three-month pilot will begin later this year, and will explore how the increased use of technology during the mortgage closing process could affect consumer understanding and engagement and save time and money for consumers, lenders, and other market participants. ‘Mortgage closings can be stressful, confusing, and overwhelming,’ said CFPB Director Richard Cordray. ‘We believe that eClosings have the potential to create a better process for everyone involved. This eClosing pilot project will provide valuable insight as we work to improve the closing experience for consumers.’ Of course, any experienced LO or mortgage company CEO will tell you that paperwork has increased tenfold in defense of being sued, fined, or put out of business by regulators or through class action lawsuits.


Negative comments aside, congrats to the vendors (Accenture Mortgage Cadence; DocMagic, Inc.; eLynx; Pavaso, Inc.; and PiersonPatterson, LLP) and creditors (Blanco National Bank; Boeing Employees Credit Union; Franklin First Financial, Ltd.; Flagstar Bank; Mountain America Credit Union; Sierra Pacific Mortgage; and Universal American Mortgage Company.)


The eClosing pilot program is not part of a rulemaking process, but rather is designed to identify best practices in the marketplace. The eClosing pilot guidelines announced in April of 2014 can be found at eClosings.


I’m glad I’m not Heloise from Good Housekeeping magazine, she gets the hard questions. While waiting for my dental appointment, I read, “How do you clean tarnished or darkened copper-bottomed saucepans? “ Who would have guessed the secret lies, not in throwing them away before your wife gets home, but in a common condiment? I on the other hand, I get asked more mortgage specific things like, “Rob, we recently received a notice from an investors, advising us that there is a “Homeownership Counseling” requirement with applications dated on or after August 1, 2014, related to providing a complete list of HUD-approved housing counseling agencies to applicants. Have you heard of this requirement, and what must we include in our disclosures? Yes, the requirement that a written list of homeownership counseling organizations be given to all applicants for federally related mortgages within three business days of receipt of the application has been in effect since January 10, 2014. As I noted some time ago, an originator can fulfill this requirement in one of two ways: the first is to obtain the list through the CFPB website, and the second method is for the originator to generate lists by independently using the same HUD data that CFPB uses. An acknowledgement of receipt of the list is not required under the regulations; however, it is required by many investors. As such, you should check with your investors as to their requirements in this regard.


Both FNMA and Freddie have come out with announcements concerning properties in California and secured energy efficient home improvements (also known as “PACE Loans”).  The announcement from FNMA is listed below.  Neither FNMA nor Freddie will accept a loan that includes a 1st lien PACE Loan. Several California counties have announced energy retrofit programs that permit the imposition of first-lien priority to secure energy efficient home improvements.


M&T Bank sent out a reminder it will not be screening the SONYMA Plus programs for adherence to the 3% Points and Fees test under CFPB’s definition. The Correspondent is responsible for ensuring regulatory requirements on loans sold to M&T.


Fairway Independent’s wholesale group alerted brokers about the USDA Annual Guarantee Fee increase effective October 1. “In order to prepare for the planned October 1st annual guarantee fee increase to .50% from the current .40% rate, we’ve created a disclosure you (brokers) may wish to begin providing to your USDA loan applicants between now and October 1st. This disclosure will help you initiate conversation with borrowers to assure they are informed that their annual fee may be increased if their loan does receive conditional loan commitment from Rural Development prior to October 1. We recommend the following guidance in this interim period while we await implementation of the annual guarantee fee increase: with the turn times we are experiencing from USDA – Fairway Wholesale Lending will require that new applications taken or submitted to Fairway on or after Monday August 18, 2014 will require the new annual fee be disclosed. As a reminder, Administrative Notice AN-4757 dated 04/21/2014 originally announced the anticipated annual guarantee fee increase.”


WesLend’s Direct Arm program was updated to reiterate if subordinate financing is present on the loan, the CLTV must be used to calculate the Loan Level Price Adjustment (LLPA). Its Jumbo product was revised to clarify that, when a Non-Occupant Co-Borrower exists, the max DTI ratio for the Occupying Borrower is 40%.


FAMC Correspondent NationalBulletin 2014-24 includes updates on Conventional DU 9.1 Release Notes, PIW Release Notes, Number of Financed Properties, FHA Product Guidance on Non Profits, Debts Paid by Business, All Products Funds to Close Access Letters, Clarifications All Products Funds Reimbursed Paid by Credit Card, Conventional Reserve Requirements, FHA 92900-LT & 92900A Forms, USDA Annual Fee and Rural Area Definition and FHA Repair Inspection Documentation. Bulletin 2014-23 includes information regarding Kansas Appraisals and Automated Valuation Model Requirement’s along with Maryland Automatic Subordination on Refinance Transactions.


FCMKC July updates include program changes effective July 31st.


Wells Fargo FundingNewsflash include the following topics:  Non-Conforming Loan Policy Enhancements, Updated Median Home Price Policy-Non-Conforming Loans, Updated Delivery Expiration Date for Loans with 60 Day and Greater Locks, Updated Tax Service Fee Schedule, Reminder Regarding Interim Procedure for Homeownership Counseling Disclosure to be Retired.


PennyMac Correspondent Lending Group has posted a new announcement Homeownership Counseling Disclosure.



Cole Taylor Mortgage Wholesale announced its ability to close FHA immediately without delays following its merger with MB Financial Bank, N.A.


Effective with Best Efforts locks and Mandatory commitments created on Monday, August 18, 2014, Nationstar Mortgage will no longer charge the -.25bps (basis points) price adjuster for loans with a DTI (Debt-to-income) greater than 45%.


Someone recently asked me, or more accurately told me, the Fed owned a majority interesting in all outstanding MBS issuance. That made for a good conversation; however, it is not entirely accurate. From outsourced data fragments and bank analyst papers I have read, as of the 1st of June, the Federal Reserve and the U.S. Treasury combined, owned a little over 30% of all outstanding agency MBS passthroughs. Of the $5.7 trillion market, the Federal Reserve and Treasury own $1.7 trillion, followed by Banks and Credit Unions who own a $1.4 trillion share, followed by small holdings (less than half a trillion per) by the GSE’s, overseas investors, state and local governments, mortgage REIT’s, and domestic money managers. The largest share in the “others” category in with domestic money managers, who on the aggregate own approximately $750 billion of the current market; this is interesting for a number of reasons, including that this share of the market is the smallest it has been since before 2006, and noteworthy considering their holdings have declined by about $320–325 billion since the Fed had initiated the QE 3 program to only $760 billion. Also their current volume of agency MBS is less than their holdings at the end of the QE 1 program (which was in March 2010).


A large percentage of the questions I get asked while I travel around, center on volatility…or VOL…or Vega for some, even though there’s a difference between the technical definition of the terms. I take it all to mean, “Hey Rob, tell me about the unknowns out there, and how it may affect my business.” As I have written in the past, uncertainty in any market leads to an increase in potential volatility, and 4Q14 has all the making for a perfect storm. Mid-term elections will be the primary driver of a lot of what we hear and experience over the next few months, followed by macro employment numbers (reading tea leaves, as it’s become known), and as Wells Fargo reminds us, don’t forget about the debt ceiling which is looming….again? “The next key deadline for policymakers is Sept. 30th, the end of the current federal fiscal year.


It seems like the inventory issue that has plagued Realtors and lenders is dissipating. Yesterday we learned that Existing-Home Sales for July were +2.4% to their highest annual pace of the year, but are still down 4.3% year-over-year. There are two sides of every story, however, and “distressed homes” (foreclosures and short sales) accounted for 9% of July sales, down from 15% a year ago.  NAR chief economist’s Lawrence Yun conjectured that affordability is likely to decline in upcoming years. “Although interest rates have fallen in recent months, median family incomes are still lagging behind price gains, and mortgage rates will inevitably rise with the upcoming changes in monetary policy.”  The median existing-home price for all housing types in July was $222,900, 4.9% higher YOY, the 29th consecutive month of year-over-year price gains.  Total housing inventory at the end of July rose 3.5% to 2.37 million existing homes available for sale, which represents a 5.5-month supply at the current sales pace. Unsold inventory is 5.8% higher than a year ago.


In other news, the Conference Board’s index of U.S. leading indicators climbed 0.9% after a 0.6% gain in June. In spite of the strong news, agency MBS prices end higher and tighter (to Treasury securities): the 10-yr price improved by 6/32, closing at a yield of 2.41% and MBS prices did the same (better by .125-.250). For today the calendar is very sparse aside from the two big Jackson Hole speeches (Yellen at 9AM CST and Mario Draghi at 1:30PM CST). In the early going the 10-yr is at 2.39% and agency MBS prices better by about .125.



CURTAIN RODS  On the first day after his divorce, he sadly packed his belongings into boxes, crates and suitcases. On the second day, he had the movers come and collect his things. On the third day, he sat down for the last time at their beautiful dining-room table, by candle-light; he put on some soft background music, and feasted on a pound of shrimp, a jar of caviar, a bottle of spring-water, 3 cans of sardines. When he’d finished, he went into each and every room and deposited a few half-eaten shrimps dipped in caviar, and some sardines into the hollow center of the curtain rods. He then cleaned up the kitchen and left. On the fourth day, the wife came back with her new boyfriend, and at first all was bliss. Then, slowly, the house began to smell.  They tried everything; cleaning, mopping, and airing-out the place. Vents were checked for dead rodents, and carpets were steam cleaned. Air fresheners were hung everywhere. Exterminators were brought in to set off gas canisters, during which time the two had to move out for a few days, and in the end they even paid to replace the expensive wool carpeting. Nothing worked! People stopped coming over to visit. Repairmen refused to work in the house…The maid quit. Finally, they couldn’t take the stench any longer, and decided they had to move, but a month later – even though they’d cut their price in half – they couldn’t find a buyer for such a stinky house. Word got out, and eventually even the local realtors refused to return their calls. Finally, unable to wait any longer for a purchaser, they had to borrow a huge sum of money from the bank to purchase a new place. Then the ex called the woman and asked how things were going. She told him the saga of the rotting house. He listened politely and said that he missed his old home terribly and would be willing to reduce his divorce settlement in exchange for having the house. Knowing he could have no idea how bad the smell really was, she agreed on a price that was only 1/10 nth of what the house had been worth … but only if he would sign the papers that very day. He agreed, and within two hours her lawyers delivered the completed paperwork. A week later the woman and her boyfriend stood smiling as they watched the moving company pack everything to take to their new home and to spite the ex-husband… they even took the curtain rods!  I LOVE A HAPPY ENDING, DON’T YOU?




(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.)

Rob Chrisman