June 28: Lender & investor updates; letters on LO side businesses, VA fees, lack of Millennial potential, etc.

This week the commentary mentioned Fannie & Freddie investor’s thoughts on gfee levels (“A coalition of investors in Fannie Mae and Freddie Mac stock wants the Federal Housing Finance Agency to increase the guaranty fees that the two charge their seller-servicers, a position that lenders won’t be too thrilled with…Investors Unite Executive Director Tim Pagliara urged the agency to take into account ‘the critical purpose of setting appropriate guaranty fees,’ noting that the Finance Agency does not have a mandate (as conservator) to manage Fannie and Freddie as not-for-profits…”). This prompted Pete Pannes with National MI to write, “I’m all for profit, but regarding Mr. Pagliara’s comments surrounding g-fees: the imbalance in the system that existed, where privatization of GSE profits and the nationalization of losses, needs to be effectively addressed before continuing to ramp g-fees and continuing to spread a de-facto tax on the homebuyer in the form of increased costs.”

From Arizona I received this question. “I would like to start a mobile notary business, notarizing documents (mortgage documents & other documents) and plan on contracting a majority of the work out. Since I am an originator, can I own a mobile notary business as long as I am not notarizing documents on any loan I originate? I have called & emailed HUD and they point me to the HUD Handbook, specifically 4060.1 24 CFR 202.5 (I) which talks about conflicts of interest, but it doesn’t say anything about owning a separate business while being an originator. Do you have any recommendations of where I can get a straightforward answer?”

Donna Beinfeld of Donnashi Enterprises, Inc. responds, “Since notary services are part of the loan origination process, I do not believe you can charge a fee for this service without it impacting the loan originator’s compensation. From the CFPB’s manual (see link below) comes ‘FEES FOR SERVICES OTHER THAN LOAN ORIGINATION ACTIVITIES’ covered in section IV, page 24. ‘The rule excludes from the definition of compensation payments that are collected by loan originator organizations for services other than loan origination activities, such as payments for acting as a title insurance agent or issuer or a real estate broker. If you are a loan originator organization, your compensation does not include: Payments you receive and retain for bona fide and reasonable charges for services you perform that are not loan origination activities; Payments your affiliates receive and retain for bona fide and reasonable charges for services they perform that are not loan origination activities; Payments you receive and pass along to the creditor, the creditor’s affiliate, or your affiliate for bona fide and reasonable charges for services that are not loan origination activities. (Comment 36(a)-5.iv.A).’”

Illinois’ Will Y. weighs in on reverse mortgage debt. “Regarding recent comments on increasing mortgage debt for seniors, the entire reverse mortgage industry is a rounding error in the big picture of the mortgage business with only approximately 60,000 reverse units for fiscal year 2013. The real numbers on income and assets for the bottom 34% of our senior citizens would shock most mortgage professionals. Reverse mortgages didn’t create the problem for seniors, but instead are an answer for many.”

I received this note regarding the unfairness of VA fees. “As to VA loans, the lender can only charge either a 1% origination fee or a total of 1% in ‘unallowable’ fees. Our company quotes the rate using a 1% origination fee most of the time.  We normally charge additional bank fees for underwriting, processing, courier, etc. on other loan types.  None of those fees can be included in a VA loan.  We order an Undisclosed Debt Monitoring Report (UDM) to track any debt that a borrower may incur after origination through closing. Arkansas requires a Closing Protection Letter ($25) from the title company as well. If the borrower is employed by a company that utilizes a third party verification company (i.e. The Work Number, uConfirm, etc.), then we must incur a fee ($31.50 for income, and $21.50 for employment only are the charges through the Work Number, now Equifax) to verify through them as well. None of the aforementioned fees can be charged to the borrower if we have already charged the 1% origination. In the past, we had a situation where the subject property that the borrower was purchasing was a VA REO. In the sales contract, they did not agree to pay for a termite contract.  In Arkansas, VA requires the borrower to obtain a termite inspection (the termite company will not just provide an inspection; they must purchase a 1 year contract). VA will NOT allow the borrower to pay for a termite contract. VA would not pay for the contract.  Who is left to pay for the contact? The termite company will not provide it for free.  VA does not allow the closing company to charge a settlement/closing fee. Do they expect them to close the loan out of good will?  VA needs to have the same allowable fees as FHA and USDA loans.”

And on the industry’s products, I received this note from an industry vet in Nevada. “Often, I notice comments on your page regarding loan products.  I think some of the newbies (those with less than 15 years) would benefit from a mortgage lending history class.  All the products that were abused during the subprime heyday had been around for many years. The old Beneficial Finance, HFC finance, and others had the 2/28 product back into the 1980s. The option arm started in 1992 with World Savings. Those loans had 25% minimum equity position, we had to verify income, and the borrower had to have some cash reserves. But the programs allowed difficult credit decisions. If a borrower had a BK for a reasonable reason, for example, they could obtain a loan with only 1-2 years’ seasoning on the BK. The loans served a purpose: buy a house and get yourself back on track.  And those loans were held in lender’s portfolios, which worked well since no one wanted to be stuck with a bunch of nonperforming loans. Back then, underwriting rules were stringent, although no bank would ever do those loans.”

The history lesson continued. “Then all of a sudden the big banks became investment banks and decided subprime was a HUGE money maker.  Those programs, which had worked well for many years with a select borrower clientele, were now available for everyone that was breathing.  No income, no cash, no credit, and 100% financing. Lenders and investors simply cannot give everything away. If you have low credit standards, then you must have something that will balance the situation. But to cap things off, marginal loans were no longer kept in portfolios; they were purchased and then sold by Wall Street whiz kids who had no clue about real estate or mortgage loans. The programs themselves were not bad, but it is dependent on how they are structured and used: reality and common sense are required. Big government regulating and controlling everything is not the answer, nor the basis of free markets and capitalism. How does the industry find a common ground and a happy medium?

“I am not a subprime lender, and have always have been AAA. If I did a stated loan, it was an Alt-A jumbo loan and I did it to avoid looking at 10 pounds of tax returns. I think the lowering of standards that is appearing on the scene now may be okay as long as there are reasonable requirements. For example, lower FICOs with proof of payment history through alternative credit are okay. There are good people out there that don’t use credit. With current standards they cannot obtain a loan. They should be able to get a loan. But someone that never makes payments on time to anything is not a good candidate for a loan – especially with a low down payment (3.5% – 5%) loan.  There has to be something of value to make a loan work.

We don’t need a repeat of 2007.”

And this note on Millennials, which many in the industry hope will boost the housing market. “The Millennials have a totally different attitude about housing. They are not that interested in being tied down to a house – they want mobility. And many are bogged down with student loans that they have to pay at some point in time.  But owning a house is just not that important compared to having a good life, enjoying what they have rather than being upset at what they don’t have – Millennials’ attitudes seem more in tune with attitude of the Europeans. They aren’t so interested in keeping up with the neighbors.”

Let’s keep playing catch up on relatively recent agency and lender updates!

Freddie Mac posted a couple of important reminders. Regarding Good Delivery Standards for Cash Executions, Freddie Mac states: To ensure the mortgages you deliver to Freddie Mac are funded in a timely manner, the following must be completed by 12:30 p.m. ET on the last business day before either the purchase contract expires or the requested settlement date, whichever occurs first: Deliver the applicable mortgage data and applicable documentation to Freddie Mac. Deliver the Notes for all mortgages in a cash contract to the document custodian.

Clear all of the purchase edits and allocation errors identified by the selling system with respect to the mortgages. Ensure that the wire instructions in the selling system account for the unpaid principal balance for all mortgages associated with the specified contract.

In reference to Mortgages with Application Received Dates before January 10, 2014; Freddie’s

Single-Family Seller/Servicer Guide Bulletin 2013-16 announced it would no longer purchase the following mortgages with Application Received Dates on or after January 10, 2014:

Home Possible® Mortgages with an original maturity in excess of 30 years and Pre-payment penalty mortgages. In order to allow time to clear pipelines, as announced in Bulletin 2013-16, you have until July 31, 2014, to deliver these mortgages with Application Received Dates before January 10, 2014.

Mountain West Financial Wholesale recently clarified its FHA Max CLTV with Non-Profit Down Payment Assistance. There are two types of approved HUD nonprofits which offer secondary financing: Nonprofits classified as an Instrumentality of Government and Nonprofits not classified as an Instrumentality of Government. Currently all of the MWF approved down payment assistance programs offered by nonprofits are not considered Instrumentalities of Government. Contact your Account Executive today for guidance on maximum CLTV for both types of non-profit.

Impac Mortgage Corp. Wholesale has increased LTVs for lower FICO scores on FHA programs, and now accepts FHA FICO Scores Down to 580. LTVs for (580-619) score are now: purchase – max LTV 96.5%, rate/term refinance to 97.75% LTV, cash out to 85% LTV, high balance loans (base loan amount > $417,000) down to 600. The products available for this program are the 3/1, 5/1 ARMs, Fixed Rate, FHA purchase, FHA standard refinance (rate reduction), FHA standard refinance (cash out), and FHA Streamline.

Plaza Home Mortgage Wholesale weekly update include Introduction to its Community Enrichment Program (CEP) developed to offer affordable loan programs to underserved communities nationally through its wholesale lending channel (does not apply to Correspondent, Mini-Correspondent or Reverse). Plaza has announced the addition of the Freddie Mac Retained Conforming Fixed Rate Program; the Freddie Mac Retained program is a complementary program to Plaza’s existing Conforming Fixed program and allows for some additional flexibility. National Mortgage Insurance is now an eligible Mortgage Insurer for Plaza Home Mortgage, Inc. Contact your Account Executive for all the updated information.

WesLend Financial Wholesale announced an increase in fees from some of its Vendors/AMCs; hence it has made the decision to increase its fees slightly. Fee sheet updated information is posted on its website.

AMX Loans offers Negative Credit Guidelines for FNMA and FHLMC Products. Options for borrowers with bankruptcy, foreclosure, deed-in-lieu of foreclosure or pre-foreclosure sale scenarios.

Envoy Correspondent Lending is continuing to expand its product offerings. Financed MI is allowed on specific products offered by Envoy. Also, FHA and VA Fixed Rate Products allowing Manual Underwrites for Refer/Eligible findings are available.

New Penn Correspondent publishedguideline updates include; VA IRRRL, LPOA and General FNMA/FHLMC, Homepath, DU Refi Plus, and LP Open Access Product Profiles. As a reminder, in order to be eligible under the LP Open Access loan program, loans must meet FHLMC’s Net Tangible Benefit requirements.

(Rated R?)

A young married couple is trying to get pregnant decides to maintain a strict sexual schedule. Every day, the husband and wife get home from work at 5 p.m. and have sex at 5:15 p.m.

One day, the wife comes down with the flu and goes on antibiotics.

The medicine kills all the germs, except for three, who huddle together inside her body to talk over survival tactics.

One germ decides to hide from the antibiotics between two toes on her left foot. The second germ decides to hide behind her right ear.

The last germ says, “You guys do what you want, but when the 5:15 pulls out tonight, I’m gonna be on it.”

Rob

(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.)