July 5: CFPB update; lender and investor updates – is now the time to sell stock? Rates rise more on unemployment data

On this half-staffed Friday, let’s take a look at what is the CFPB is up to. Quite a bit, but one can start by digesting the 171 pages currently out for public comment. Compliance folks everywhere are busy going through Amendments to the 2013 Mortgage Rules under the Equal Credit Opportunity Act (Regulation B), Real Estate Settlement Procedures Act (Regulation X), and the Truth in Lending Act (Regulation Z): http://files.consumerfinance.gov/f/201306_cfpb_proposed-modifications_mortgage-rules.pdf.


And as a reminder, since I am still periodically asked about this, the CFPB also announced actions against real estate kickbacks. (Yes, I know that this is over a month ago, but let it serve as a reminder.) Here you go: http://www.consumerfinance.gov/pressreleases/the-cfpb-takes-action-against-real-estate-kickbacks/


Recently a colleague of mine used the word “morass” to describe the current environment between law makers and the CFBP. I can’t think of a better, more descriptive word. Continuing the advancement of their argument that the CFPB is not sufficiently accountable to Congress, members of the House Financial Services Committee made the CFPB’s spending habits the focus of criticism at the committee’s hearing recently on “CFPB Budget Review.” The CFO of the Consumer Financial Protection Bureau, Stephen Agostini, in a prepared statement (http://www.consumerfinance.gov/testimonies/chief-financial-officer-agostini-before-the-house-financial-services-committee/), discussed the agencies financial directions for the remainder of 2013 and 2014. He indicated that over these two fiscal years, the Division of Supervision, Enforcement, and Fair Lending will have the largest increase in funding to support additional staff and systems development. He also indicated that during this period, more than 40 percent of the growth in CFPB staff will support Supervision, Enforcement, and Fair Lending activities. The CFPB’s budgets fund an expected 1,214 full time employees in FY 2013 and 1,545 in FY 2014. The HFSC focused its attention on wage disparity between what the Fed pays their top people, and what the CFBP pays theirs; Mr. Agostini was also questioned regarding the recent money being spent on CFPB office renovations. It’s still undetermined, however, whether the HFSC lawmakers were upset with the amount of money the CFPB is spending, or are just merely upset that they’re not the ones spending it: http://financialservices.house.gov/news/documentprint.aspx?DocumentID=339512.


The CFPB will ultimately oversee laws effecting consumer data protection and data usage by banking institutions, and in a strange twist, the U.S. Chamber of Commerce has recently become concerned with the CFPB’s accumulation of such data.  In a recent Ballard Spahr CFPB Monitor, they write, “the CFPB had been demanding voluminous amounts of information from banks related to credit cards and other financial products and services and had also been buying data from vendors about various financial products such as auto and payday loans. According to the report, the CFPB was using the information to build a database to inform its enforcement and rulemaking activities.” The CFPB Director has since defended the agencies efforts as “necessary for informing its rulemaking, including its performance of cost-benefit analyses, and fulfilling the CFPB’s reporting responsibilities to Congress.” The Chamber of Commerce indicates in its letter sent to the CFPB, that their data collection efforts are unlawful because the Bureau has not issued a “rule or order” as required by Section 1022 of Dodd-Frank. In response, the CFPB has taken the position that its data collection does not violate the prohibition in Dodd-Frank barring the CFPB from “obtain[ing] records from covered persons and service providers…for purposes of gathering or analyzing the personally identifiable information of consumers.” Didn’t the NSA issue the same statement? A full list of charges…..er, I mean accusations….can be found here: http://www.bloomberg.com/news/2013-06-20/banks-charge-consumer-bureau-big-data-collection-breaks-law.html



Let’s move through some lender, investor, and agency news – some of it is actually good.


First, this from the WSJ: “Stonegate Mortgage Corporation, a leading, non-bank, integrated mortgage company focused on originating, acquiring, selling, financing and servicing U.S. residential mortgage loans, announced today that it plans to conduct a registered initial public offering of its common stock. The offering is expected to commence after the Securities and Exchange Commission (SEC) completes the review process initiated by the Company’s confidential submission on Friday June 28, 2013 of its draft registration statement, subject to market and other conditions. The number of shares to be offered and the price range for the offering have not been determined. This announcement is being made pursuant to and in accordance with Rule 135 under the Securities Act of 1933. As required by Rule 135, this press release does not constitute an offer to sell or the solicitation of an offer to buy securities, and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of that jurisdiction.”


Meanwhile, PSM Holdings, operating through its subsidiary PrimeSource Mortgage, an Oklahoma-based mortgage company, is selling its own stock to obtain loan production of smaller brokerages. “The current environment isn’t the best for acquisitions,” said CEO, Ron Hanna. “What we have found is a lot of brokerages wanting to move their production to a [banking] platform… we have great warehouse lines on credit and have no limit to production,” he said. The lender registered as a mortgage licensee recently in California in order to start “boarding” California companies’ loan production on to its own platform, Hanna said. All the while, companies that join PrimeSource are able to buy the companies’ stock. “This is very attractive to have people join us,” Hanna added.


Way out west in Northern California, Landmark Mortgage Group, was recently recognized, for the fourth consecutive year, by readers of Pleasanton Weekly as the Best Mortgage Company for the newspaper’s Readers Choice Award 2013. Landmark Mortgage Group is a division of Opes Advisors, Inc., a mortgage bank and wealth management firm offering integrated personal financial services encompassing real estate, real estate financing and investment management.


Fannie Mae has revised several of its income documentation requirements and will now be accepting the final year-to-date paystub in place of the W-2 in cases where it discloses the same information as the W-2.  Capital losses that are identified on schedule D of IRS Form 1040 do not have to be considered when calculating income or liabilities, and child support for borrowers who are separated and do not have a separation agreement that specifies child support payments will not be considered.


As a result of the May 6th Ability to Repay announcement, Fannie Mae is delaying the full implementation of Phase II of the ULDD update in order to accommodate the additional data requirements.  The new eligibility data points, along with the revisions to the Phase I requirements, are now scheduled to be supported by Q1 of 2014 at the latest.  Note, however, that Freddie Mac is not altering its ULDD Phase II requirements timeline and that lenders should be prepared for the August 25th deadline by conducting the relevant data analyses.


Fannie’s EarlyCheck is also set to be updated to speed up batch submission response, incorporate two new edits, and begin accepting a new MI company identifier as of July 22ndVersion 4.0 of the Condo Project Manager application is set to be released on that date as well and will include new certification questions on fee delinquencies and single entity ownership, commercial space, and project ineligibility.


US Bank is lowering it guaranty requirements for its VA Jumbo 15- and 30-year Fixed and 5/1 ARM products such that loan amounts from $417,000.01 to $650,000 must have 25% minimum guaranty.  Loan amounts up to $1 million must have 30% minimum guaranty.


Per the new Agency guidelines, US Bank has increased the maximum allowed age of credit documents for Conventional loans from 90 to 120 days.  This includes credit reports and employment, income, asset, and any other credit documentation; note that the requirements for the age of appraisal documentation have not changed.


For all of its Fannie products, Fifth Third is extending the maximum age of property valuations and certain underwriting documentations to within four months of the Note date.  This includes appraisals, Property Fieldwork Waivers (for DU Refi Plus), AUS findings, credit reports, and income and asset documentation.  The existing 10-business day requirement for verbal verification of employment and the 30-calendar day requirement for verification of the existence of self-employment remain unchanged.


Fifth Third is now requiring that business tax returns be verified by an executed 4506-T before obtaining full approval to document the borrower’s income.  These must be signed by an authorized officer of the company, and as a reminder, a 4506-T cannot be used in place of tax returns.


Further to its previous announcement, Fifth Third has clarified that Conforming Fully Amortizing Fixed ARMs and Agency Super Conforming ARMs require a minimum of 12% mortgage insurance coverage but that this does not apply to My Community and Home Possible products.


Franklin American has updated its Non-Conforming Fixed Rate guidelines to state that appraisals completed on the subject property on or after a disaster declaration date need to include three comparable post-disaster sales or commentary from the appraiser on why comparables are not available as of August 1stIn addition, FAMC is no longer allowing Non-Conforming Fixed Rate loans for employees of approved correspondent lenders, effective immediately.


FAMC has revised its condo approval process guidelines for its FHA products, reducing the owner occupancy percentage from 50% to 30% and increasing the investor percentage from 10% to 50% and the HOA delinquency from 30 to 60 days for all condo certifications.  For all FHA transactions, FAMC will accept DPA funds at closing with a letter of legal obligation from the relevant government entity and is now allowing non-occupant co-borrowers on the original loan to remain on the new loan to meet qualifying cash-out requirements.  For circumstances where the borrower is one of multiple owners of an account, FHA guidelines now require that all non-borrower parties provide a written statement authorizing the borrower to have full access and use of the funds in question.


Kinecta is expanding its DU Refi Plus program and now allows a maximum of 125% LTV on 10- and 15-year loan terms to match the maximum for 20- and 30-year loans, replacing the previous maximum of 105%.


M&T has updated its VA IRRRL guidelines for non-M&T-to-M&T-serviced transactions to state that the LTV has to be calculated using the new appraisal value and the total loan amount (including the VA Funding Fee) and cannot exceed 100% on all transactions.  For FHA loans, guidelines have been revised to align with the HUD handbook, which requires that the Up-Front Mortgage Insurance Premium be entirely financed into the mortgage or paid entirely in cash and that all mortgage amounts must be rounded down to the nearest dollar.  Any UFMIP amounts paid in cash will be added to the total cash settlement requirements.


Affiliated Mortgage is now applying its new Service Release Premiums to all products.  For all re-locks, the SRP will be based on the schedules in effect at the time of the re-lock.


Parkside Lending is expanding guidelines for its Freddie Mac Super Conforming guidelines to allow LTVs below 60%, subject to LP findings.  Non-occupant co-borrower blended ratio are now allowed on loans with an LP Accept recommendation will be permitted so long as the subject property is a one-unit primary residence for the occupying borrower, the LTV is 80% or below, the transaction is a purchase or rate/term refinance, and the non-occupant co-borrower is an immediate family member.  The occupant borrower, meanwhile, must not own any other properties, and have a standard source of income. Parkside has also increased the maximum DTI it will accept to 50%; all transactions with DTI over 45% will require proof of 12 months’ reserves.


Rates began going up in early May, and things worsened June 19 with the communications from the Federal Reserve’s Open Market Committee meeting. Lately they’ve stabilized, but still, the focus is almost entirely on the jobs markets. This is in spite of other data, such as weaker European data, no inflation, and the possibility of things slowing down in the housing market.


According to the latest Reuters News survey, the median estimate was for the June employment situation summary was for +165k headline payrolls, +175k private payrolls, and a 7.5% unemployment rate. Historically, the June NFP report has a strong tendency to disappoint relative to the market consensus. Over the last 16 years, the BLS count has arrived under expectations 75% of the time with an average miss of -70k. Four of the last five reports on June job growth have been below expectations. The best as-reported job growth for any June in the last 13 years is +146k (2005), some 20k below the current consensus.


But it did not disappoint this time around. Payrolls were +195k, and April and May were revised higher by a total of 70k. The headline Unemployment Rate came in unchanged at 7.6% and hourly earnings were up 10 cents an hour. Overall it was viewed as a very strong number. Stocks are reacting well, but this newsletter is not about stocks. The 10-yr’s yield, which closed Wednesday at 2.50%, and pre-number was 2.56%, is up to 2.63%. The mortgage-backed security markets, which are trading all day today but don’t look for great liquidity later on, show agency MBS prices worse by .375-.625, depending on coupon.



Communication is, and always has been, important. But sometimes there is a difference in the sexes: women enjoy having someone listen, whereas men just want to fix things: https://dl.dropbox.com/u/7031610/FileChute/868799_10151629388598162_2013668239_n.mp4.




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