July 21: Correspondent & Ops jobs; IRS drama continues; FHA’s memo on DPA programs; fallout from Fannie & Freddie’s gfees

“Rob, I find it very interesting that the FHFA reported that the Agencies have selected smaller and less financially stable companies to receive lower g-fees than they give the big banks, as you recently pointed out in your link to the report. Do you think that the FHFA will produce similar report on the other side of the equation – with regard to whether the Agencies are treating repurchase demands or cures differently by counterparty, also segregating according to counterparty size?” (The anonymous note continues below.)


In expansion news, Envoy’s Correspondent Lending Division is pleased to announce the additions of three new Regional Account Managers to develop and grow the following geographies.  Sue Anderson has joined Envoy CLD to develop the New England market; Jud Marcus for the Southeast and Kym Wright for Southern California.  To complete their sales team, Envoy has one position remaining for a seasoned Correspondent Regional Account Manager to develop the Southwest (AZ, NM, CO, UT and NV). The right person will need to reside within this region. “If you like succeeding – be a part of a champion lending team and experience the difference at Envoy by forwarding your resume to Todd Potter, CMB. Envoy CLD offers Best Effort, SLM and Bulk execution and is a FNMA, FHLMC and GNMA seller/servicer.”


And a 30 year old company in the northeast is looking for an experienced SVP of Credit Risk and Underwriting. The company is a Ginnie, Fannie, and Freddie approved lender, issuer and servicer with a large servicing portfolio. 100% of all loans are servicing retained and the company is currently funding $1B per month in loan originations through correspondent, third party origination and retail channels. If you are interested please forward your resume to me at rchrisman@robchrisman.com.


A quick congrats to Kristin Powell the new SVP, Director of Mortgage Lending for Asheville, North Carolina’s HomeTrust Bank. Ms. Powell reports to Hunter Westbrook, EVP, and Chief Banking Officer.


“Rob, here’s one for you. The Government agency guidelines require tax transcripts from IRS to ensure loan quality control (one agency requires something from another agency). The IRS database gets hacked and they freeze customer’s account due to possible identity theft and won’t release transcripts. The IRS requires an in person visit at closest IRS office (about 75 mile from customer’s home) to ID them and release transcripts. But wait… my customer has no vehicle, is disabled and can’t afford a cab for a 150 mile trip + waiting time at the IRS. Customer gets discouraged and withdraws application.”


Yes, this continues to be a problem. For example, last month California’s Mountain West Financial sent brokers: “Currently the IRS is rejecting tax transcripts requested by third parties for reasons of possible identity theft or misuse of tax transcripts. Messaging received from the IRS may state one of the following: ‘Due to limitations, the IRS is unable to process this request.’ In this case, the IRS will mail a notification to the Borrower to explain the reason. ‘Please contact your Borrower.’ ‘The IRS rejected this request and cannot provide the reason for rejection due to their security regulations.’ In these instances, the IRS will not issue the tax transcripts directly to the lender. The Borrower must obtain their tax transcripts directly from the IRS and provide them to MWF. (The usual process has been shut down) due to unauthorized access to tax payer information through this application. In lieu of providing tax transcripts, obtain the IRS rejection notice received from the tax vendor, including the rejection code, and provide a written explanation. In addition, a new 4506-T must be signed at closing. Under all other circumstances, transcripts are required. Inaccurately completing the 4506-T will result in a rejection (address on 4506-T not matching tax return address) must be rectified by accurately completing the 4506-T and obtaining the applicable tax transcripts. Currently, the IRS is taking approximately 5 business days to complete tax transcripts request, so be sure to order these as early as possible in the loan process.


The plot in the HUD/OIG/Nova sitcom thickened Monday when Ed Golding, the Principal Deputy Assistant Secretary for Housing and Head of the FHA, sent out a memo. Mr. Golding, besides holding the informal honor of the longest job title, sought to clear things up with the title, “FHA’s Position on Down Payment Assistance Programs.” “In light of a recent audit by HUD’s Office of Inspector General, I want to take this opportunity to reaffirm FHA’s support of certain down payment assistance programs, like those run by State Housing Finance Agencies. These programs help creditworthy families buy their first homes in communities across the country – responsibly expanding access to credit. The intent of our rules regarding down payment assistance is clear and allows HFAs the discretion necessary to fund these programs appropriately. HUD is taking active steps to completely resolve the issues raised in the audit and to provide proper clarity and guidance to the market. Here is a link to the audit: https://www.hudoig.gov/sites/default/files/documents/2015-LA-1005.pdf.” Thank you Mr. Golding!


Continuing on with the links between government and housing, the anonymous note from above continued. “Since the Agencies are basically wards of the state, it would be a very telling story…and makes one wonder if in addition in addition to accepting lower ‘premiums’ to cover that risk in the form of G-Fees, the tax payer is also footing more of the repurchase or cure bill for smaller companies with regard to the repurchase risk.”


Yes, the percentage of loans Fannie Mae and Freddie Mac buy from small lenders has climbed dramatically, purportedly because g-fees are no longer much lower for large lenders. That’s certainly true, but a big part of it may be that the FHFA has motivated F&F to make it easier to become approved. Lots of smaller lenders who never applied before now find the process much more user-friendly. We’ll see how the counterparty risk is monitored. And if you have questions, ask your Fannie & Freddie rep!


Given my capital markets background and consulting, I found this note particularly interesting. “What’s very interesting is that Fannie is reportedly doing two-way pair-offs on forward cash trades, at least with a few of its larger customers. If you roll it out, they won’t pay, I guess they don’t want to encourage it. The bid/ask is ~13bp. Fannie will also pay up for specified pool eligible loans if you can give them a million or more. Over at Freddie, it reportedly will pay up for any volume and at the moment seem to be willing to pay much closer to market. The competition between these two drunks is picking up!” [Editor’s disclaimer: I can neither confirm nor deny this – it is best to ask your Freddie or Fannie rep about available programs and secondary marketing execution.]


Freddie Mac has mandated Credit Suisse as “Structuring Lead and Sole Bookrunner” and BAML as a Co-Lead Manager on its inaugural $300MM Freddie Mac Whole Loan Securities Trust (FWLS) Series 2015-SC01 transaction. The Term Sheet, CDI File, Data Tape, SPI Data and DealRoadshow Presentation are available, and Freddie Mac is handling investor calls arranged through the dealers. In addition, Freddie Mac is hosting an investor call this week to present an overview of the transaction.


The Loan Prospector® enhancements scheduled for release July 19 were delayed. In the meantime, you can continue to use Loan Prospector to evaluate and underwrite your loans according to the changes announced in Single-Family Seller/Servicer Guide Bulletin 2015-4 and 2015-7. As a reminder, the enhancements streamline the underwriting process for assets, reserves and income.


Bethany MacLean, author of “Shaky Ground: the Strange Saga of the U.S. Mortgage Giants”, wrote an op-ed piece for the New York Times titled, “Fannie and Freddie are Back, Bigger and Badder Than Ever.  In the 2008 crisis, when it looked as if Fannie and Freddie might go bankrupt, Henry M. Paulson, Jr, then the Treasury secretary, argued that their fall would cause economic catastrophe. Foreign investors, stuck with their securities, would panic, and the mortgage market would shut down. So Fannie and Freddie were put into something called conservatorship, and are now government controlled, supported by a line of credit from the Treasury.  Conservatorship was supposed to be temporary — a “time out,” according to Mr. Paulson. “We were going to stabilize the companies’ finances, reduce their importance to the mortgage market, and figure out a better system. But nothing happened.”


United Guaranty has published an announcement supporting the Fannie Mae’s Selling Guide Announcement. Effective immediately, United Guaranty’s underwriting requirements will align with the changes regarding conversion of principal residence, stocks, bonds and mutual funds, unreimbursed employee business expenses, tip income, use of IRS W-2 transcripts in lieu of W-2’s, permit prepayment penalties on subordinate liens and optional data fields on verification of employment from 1005 and 1005(S). United Guaranty’s Underwriting Requirement Guide will reflect the removal of additional reserve requirements for 1-4 unit primary residences when the borrower is retaining the current primary residences.


ditech noted the minimum loan term for all Fannie Mae and Freddie Mac Fixed Rate products has been increased from an 8 year term to a 10 year term. In addition, as of Wednesday July 1, 2015, ditech updates its investment property LPMI loan level price adjustments.


NewLeaf Wholesale Conventional guidelines have been updated to reflect the recent changes announced by Fannie Mae that impact policies related to conversion of principal residences, un-reimbursed employee expenses, stocks, bonds and mutual funds and secondary employment for self-employed borrowers.


There isn’t much going on in the bond markets these days, so let’s talk about…gold? It hit a 5-year low yesterday after China reported a lower-than-expected build in official holdings of gold. Greece reopened its banks, while maintaining a 420 euro/week withdrawal limit. Greece also received a 7.2 billion euro bridge loan from the European Financial Stability Mechanism and immediately repaid the IMF and the ECB. Greece – isn’t this all like giving your brother-in-law money so he can paying off the debt he owes you?


There are no scheduled market-moving events today. As a measure of the bond market, we closed the 10-yr Friday at 2.35%, started Monday at 2.34%, ended at 2.37%, and this morning we’re at 2.39% with agency MBS prices worse about .125.



Whether it is one’s personal life or professional life, it isn’t always rosy. Nor is there always a joke at the bottom of my commentary. My dog Sweetie died yesterday. More specifically we put her down after tests showed cancer – and operating on a 14 ½ year old border collie chow, given the recovery period and life quality and expectancy afterward, made little sense.


And so now there is the sorrow that comes with the death of a treasured pet. She had nothing in the way of material things, aside from a stuffed raccoon toy that she would carry around with her. Dogs are wiser than people. They do not waste their days hoarding property. There is nothing of value she bequeathed except her love and her faith – which she left to those who have loved her – most of all to Myrtle the cat who would curl up with her in front of the fire.


She would have asked her family to remember her always, but not to grieve for her too long. She would want us to remember that no dog has ever had a happier life, but in the last few days she sensed that it was time for her to go. I think that at the end it was a sorrow to leave us, but not a sorrow for her to die. Dogs do not fear death as we do. I’d like to think that animals accept it as part of life, not as something alien and terrible which destroys life.


So I wanted to dedicate this commentary to her, since she was indeed a part of it. When I would wrap up writing, usually around 5:30AM at home, something about my body language would tell her that it was nearly chow time. Right up to last Saturday morning, when she was taken ill in the afternoon, she would stand up, prance around, wag her tail, and look at me expectantly with her big dark eyes. It was her “commentary ritual.”


So here’s to you, Bear Dog, Skunk Dog, Chew Bone Girl. I would like to believe that she is in a Paradise where she is always young, and full of dogs that she has known through the years; where all the day one can snooze; where squirrels that run fast (but not too fast) are plentiful; where every hour is mealtime and bits of steak fall off the cutting board; where in long evenings there is a large fireplace with logs burning, and one curls oneself up and blinks into the flames and nods and dreams, remembering the good times on earth, and the love of one’s family. I will miss her dearly. This commentary’s done, Sweetie. It’s time for some kibble and a walk.






(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.)


Rob Chrisman