July 30: Mortgage jobs; EverBank to focus on correspondent; CFPB weighs in on ECOA & ARM disclosures; FHA MIP disclosure issue?

Uh oh, just as I head to New York, this comes up. When the new MIP rules went into effect, disclosures needed to be updated. A very informal poll of correspondent investors indicates that some lenders got it wrong, and under disclosure rules, it isn’t necessarily curable, which creates loans that are unsalable due to compliance errors, but are otherwise perfectly fine from a credit perspective. Although scratch & dented buyers might be tantalized, this could be a nightmare for lenders. (For example, under the “lender and investor news” section below, look at Wells Fargo’s most recent bulletin.) So are companies going to go back to borrowers, where this is an issue, and try to refinance them from a 3.50% loan into a 4.5% loan, AND tell the borrower they will be paying for insurance for the life the loan instead of a shorter term (which may have been inaccurately disclosed)? That would be an interesting conversation.


Banks and mortgage companies are continuing to hire. Headquartered in Milwaukee, Wisconsin, Bank Mutual is searching for a Secondary Market Analyst who will be responsible for pipeline management, including committing and delivering mortgage loans into the secondary market. This position conducts research and analysis and prepares reports working closely with management to develop secondary market strategies for use in setting and realizing profit objectives. The person will be responsible for monitoring market conditions, managing interest rate risk, creating daily rate sheets, product development, maintaining internal pricing models, management reporting and other ad hoc products.  The ideal candidate will have a Bachelor’s Degree in Accounting, Finance, Economics, or a related field and five to seven years of progressively increasingly responsibility in the mortgage lending industry with emphasis in the area of pipeline management with at least two years in a lead or supervisory position. Founded in 1892, Bank Mutual is one of the largest Wisconsin-based, federally-chartered banks with a strategic network of 76 bank offices staffed by experienced professionals who are committed to their local communities. It has assets of over $2.5 billion. For more information, contact Sharon.ensweiler@bankmutual.com or visit its website at www.bankmutual.com to apply.


Out west, American Pacific Mortgage, a “Top 25” retail mortgage bank, is looking to partner with top producing, purchase-focused Branch Managers and Loan Originators. APM, headquartered in Roseville CA, funded over $3.6 billion in 2012 and is on pace to fund over $4.4 billion in 2013. Founded and run by originators, American Pacific has a “unique perspective when it comes to the needs of their originators and takes a fanatical approach to branch service and support.  With innovative and strategic programs like Keys on Time, Fast Track Funding and the soon to be released Lock and Buy, American Pacific Mortgage provides purchase focused Originators with the tools and operational support necessary to distinguish themselves in today’s competitive market.”  If you are interested in hearing how American Pacific Mortgage can help you increase your purchase loan production, please contact Mike Haden at mhaden@apmortgage.com and for more information on the company visit www.apmortgage.com.


After a dormancy of several years, ARMs are also on the move, and lenders have ramped up training for all departments on handling them – a company sure does not want to mess up a disclosure on these animals!  Regulation Z has been amended with regard to the content of the “early” ARM Program Disclosure that is required for all lenders originating adjustable rate mortgages that are subject to 12 C.F.R. 1026.19(b). The change is a result of the new Reg Z servicing requirements that were published by the Consumer Financial Protection Bureau. The final regulation can be found here: http://files.consumerfinance.gov/f/201301_cfpb_final-rule_servicing-tila.pdf.


What would the day be without a little CFPB chatter? The CFPB has issued “ECOA Baseline Review Procedures” (http://files.consumerfinance.gov/f/201307_cfpb_ecoa_baseline-review-module-fair-lending.pdf)” to be used by its examiners.  (The CFPB has labeled the procedures “guidance” and did not add them to its Supervision and Examination Manual.)  The procedures consist of six “baseline review modules” for examiners to use “during ECOA baseline reviews to identify and analyze risks of ECOA violations, to facilitate the identification of certain types of ECOA and Regulation B violations, and to inform fair lending prioritization decisions for future CFPB reviews.”  The procedures indicate that ECOA baseline reviews are one of three types of fair lending reviews conducted by the CFPB.  The other reviews are ECOA targeted reviews (conducted using the ECOA examination procedures in the Manual) that focus on specific areas of fair lending risk and HMDA reviews.  


There are six Modules, too lengthy to list here, but they address things like a company’s fair lending supervisory history, fair lending compliance management system, risks related to mortgage lending policies and procedures, risks related to mortgage servicing, and so on.  Modules III, V and VI, which address products, contain some common themes.  All seek information on whether underwriting policies vary on a prohibited basis (such as by setting stricter income requirements for elderly or younger applicants or unmarried versus married applicants) or contain factors that could have a disproportionately negative, unjustified impact on a prohibited basis (such as requiring a minimum loan amount or restricting types of property as collateral). They all also seek information about pricing policies that could have a similar impact on a prohibited basis (such as pricing policies that vary by zip code), the availability of “tier bump” options (policies that permit upgrading a borrower from a higher cost category to a lower cost category, and so on. CFPB watchers believe that the baseline review procedures reflect the CFPB’s intention to use the disparate impact theory to establish a violation of the ECOA and Reg B.  They demand careful review by all creditors subject to CFPB supervision. Raise your hand – who wants to start a mortgage company?


AIG, parent of MI company United Guarantee, turned some heads yesterday with some news that reflects the burden of compliance. The news prompted on broker to write, “When federal agencies impost rules so strict that even the major institutions retreat from the sector, how is small business to remain in compliance? Worse yet, how did the rule meet RFA compliance?” Here is the link: http://mobile.bloomberg.com/news/2013-07-29/aig-to-return-deposits-shut-bank-accounts-in-dodd-frank-retreat.html?cmpid=.


Turning to the securities market, yesterday the commentary, in discussing Freddie’s risk-sharing $500 million deal last week, noted, “The risk-weighting charge would likely be much higher if banks held the security; analysts believe that this could be an attractive investment opportunity for a number of mortgage REITs that invest in mortgage credit risk including Redwood Trust, PennyMac, Two Harbors, and American Capital Mortgage.” A noted senior West Coast bond analyst wrote, “Hi Rob, on background, the structure that Freddie used for the risk sharing deal resulted in it not being a REIT qualified asset, which means it had very limited appeal to a REIT.”


The market is certainly hoping for more and successful non-agency deals. The last one was last week when JPMorgan Chase issued its third private-label residential mortgage-backed securities deal of the year. But analysts commented that the 389 loan, $345 million 30-yr transaction had/has a relatively weak representations and warranties framework. Compared to other post-crisis reps and warrants plans, this deal employs an anemic standard, which includes materiality factors, the use of knowledge qualifiers as well as sunset provisions that allow for certain representations to expire within three to six years after the closing date, analysts with DBRS suggested. JPMorgan mortgages made up about 45% of the pool, with loans also coming from First Republic Bank (28%), Residential Pacific Mortgage, PHH Mortgage and Coldwell Banker Home Loans. The weighted average borrower credit score is 763, which is good, although there is a high geographic concentration of the pool in California and a number of other major metropolitan areas. (Gee, where do they think jumbo loans come from?)


Let’s look at some investor news.


Wells send this out yesterday, important enough to repeat in its entirety. “The most recent FHA Annual MIP changes became effective with Case Files assigned on or after June 3, 2013. HUD disclosures must be in compliance with the FHA MIP updates. Wells Fargo has observed significant disclosure errors as detailed below; these errors cannot be cured after the borrower has signed the documents. Closed loans with such errors are not eligible for purchase. Sellers are reminded under Seller Guide Section 300.02, 55: FHA and VA Guidelines, the Seller Represents, Warrants and Covenants the following to Wells Fargo as to each Loan offered for sale under the Program Documents: Each FHA or VA Loan sold to Wells Fargo meets all requirements and guidelines in effect for such Loan as prescribed by FHA or VA, as applicable, and Wells Fargo, at the time of Wells Fargo’s purchase. The Seller further warrants that each such insurable or guaranteeable Loan is eligible for inclusion in a Ginnie Mae pool. Disclosures with MIP errors: Below are the type of errors we are observing for the following required disclosures: HUD Form 92900-A: Addendum to Uniform Residential Loan Application; HUD Form 92900-B: Important Notice to Homebuyers; FHA Informed Consumer Choice Disclosure Notice; HUD Form 92900-A: Addendum to Uniform Residential Loan Application. Field 12B of this form must reflect the total term the MIP must be maintained for the loan. We have observed Case Files assigned on or after June 3, 2013, reflecting the incorrect MIP term in this field.

Specifically per HUD, effective with Case Files assigned on or after June 3, 2013, when the LTV is less than or equal to 90%, the annual MIP will be assessed until the end of the mortgage term or the first 11 years of the mortgage term, whichever occurs first. For all Loans closed with an LTV less than or equal to 90 percent at the time of origination, the annual MIP will be assessed until the end of the mortgage term or for the first 11 years of the mortgage term, whichever occurs first. For all Loans closed with an LTV greater than 90 percent at the time of origination, FHA will assess the annual MIP until the end of the mortgage term or for the first 30 years of the term, whichever occurs first. Note: The option to drop MIP once the LTV reaches 78% has been eliminated for Case Files assigned on or after June 3, 2013.”


Wells’ bulletin, which has more information so for full details one should read it, goes on to discuss the HUD Form 92900-B: Important Notice to Homebuyers: HUD updated this form as “Version 6/2013” to provide language that conforms to the new MIP policy. The previous “Version 12/2004” should continue to print for the pre-June 3rd version of the disclosure We have observed Case Files assigned on or after June 3, 2013, disclosing the incorrect MIP terms options to the consumer.” Lenders are scrambling to do reviews of their recent FHA loans.


“After careful consideration, EverBank has decided to focus its third party origination business solely on Correspondent Lending. As a result we are discontinuing our Wholesale broker channel. As you know, our roots are in the mortgage business and residential lending will continue to be an important part of our future. Rest assured, we are committed not only to maintaining current service levels for our Correspondent clients but ensuring a smooth wind down of our broker operations.” The bulletin goes on to list the important cut-off dates that brokers should pay attention to – all loans must fund by October 1. “This decision, though difficult, will allow us to focus on our growing Correspondent business and developing the enhancements that will make it easier for clients to do business with us in the future.” And thus EverBank joins the ranks of Wells, BofA, MetLife, PHH, and others.


(I was immediately deluged with AE opportunities from existing wholesalers. For example, “For the Sales Staff at EverBank, if they are looking for a Wholesale Lender committed to the wholesale / Mini-Correspondent business they should check out Freedom Mortgage where we not only have the tools and service, but also a very competitive price.” Contact Keith Bilodeau at keith.bilodeau@freedommortgage.com.)


For housing news, Monday we had NAR’s Pending Home Sales. It had a dip in June, attributed to rising interest rates and rising home prices. The PHSI reflects signed home purchase contracts and is a leading indicator of home sales. Contracts are generally expected to become closed transactions within two months. This does not always happen, however, and Lawrence Yun, NAR chief economist, said some sales cancellations in June could be linked to higher rates.


Rates? They didn’t do much Monday, aside from creeping up ever so slightly, and stocks sold off ever so slightly. Tomorrow is the Fed’s announcement, and most believe that the FED will not make any modifications to asset purchase pace of forward guidance at this meeting, but clearly the market will be hanging on to every word of the speech. And why not, given the Fed is taking out about 50% off production now, and with lower volumes is ramping up to about 70% in September and October. The 10-yr closed Monday at 2.59%.



A man took his Rottweiler to the vet and said to him, “My dog is cross-eyed. Is there anything you can do for it?”

“Well,” said the vet, “let’s have a look at him.”

So he picks the dog up by the ears and has a good look at its eyes.

“Well,” says the vet, “I’m going to have to put him down.”

“Just because he’s cross-eyed?” says the man.

“No, because he’s heavy,” says the vet.



Rob Copyright 2013 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