June 6: Input on curing IRS tax transcript problems, union programs, the benefits of bond programs

“Rob, why do you think that the CFPB hasn’t gone after big banks for offering certain programs only to union members? Do you think their 1,000+ employees know that this is happening, and that other borrowers are paying more in rates and/or fees than those in unions?” Good question and a few folks have raised it over the years. Why not special programs for Walmart or Costco minimum wage employees, right? I don’t know the specifics of union programs offered by banks, and you’ll have to shoot an e-mail to the CFPB asking its staff about potential disparate impact on non-union borrowers – especially since I don’t believe that correspondent bank lenders offer all of their retail programs to independent mortgage banks.

“Rob, I saw a recent article titled ‘Nonbank Mortgage Lenders Livid Over FHFA Watchdog Report’ that said 47% of FNMA current originations comes from non-banks. Here’s an excerpt – it was printed in National Mortgage News: ‘The report highlights an astonishing statistic: since the financial crisis, Fannie and Freddie have recovered nearly $100 billion from mortgage lenders for repurchase claims on soured home loans. Yet, the inspector general’s report essentially laments the ebbing participation of deep-pocketed banks.’ Let’s say that FNMA has 60% market share (not sure about that, but it feels right…). Let’s do some rudimentary math on potential losses. If the same loss were to occur today, that’s $28.2 billion from ‘non-banks’ to FNMA.

“Someone like the MBA or STRATMOR might have publicly available information, but that financial strength has to come from somewhere, and I doubt that there is $28.2 billion of non-bank equity out there in the FNMA approved Seller total aggregate equity. Heck, let’s cut the loss in half, because the industry is less stupid now from a guideline perspective (right?). Is there $14 billion in counterparty financial strength in the collective net worth of FNMA sellers? I think there’s a new phrase when dealing with the Agencies: ‘Too little to Fail’….. (or hmmm…is it ‘Too little to perform’)?”

Attorney Brian Levy writes, “I’m not quite sure what to make of the CFPB’s ‘click through’ ad campaign saying ‘YOU HAVE THE RIGHT to less financial runaround and aggravation’ (see e.g., http://money.cnn.com/ ).  While it’s nice that the CFPB is promoting the assistance it can offer to consumers, I’m certain there is no provision of Dodd Frank or any other law which provides such a ‘right.’ In fact, in light of the numerous new regulations such as QM/ATR and the upcoming TRID implementation, I believe that Dodd Frank and CFPB actually created a lot more financial runaround and aggravation for mortgage consumers.  Ironically, that kind of overselling might raise UDAAP issues for the companies CFPB regulates. In addition, the CFPB’s TRID announcement that they would be ‘sensitive’ in early TRID enforcement actions was not particularly comforting to me. Shouldn’t enforcement officials always be ‘sensitive’ to institutions that make sincere good faith efforts to comply?”

Speaking of which, “in response to signals from Director Richard Cordray that the CFPB would be sensitive with respect to enforcement of impending August 1 TRID RESPA/TILA changes for companies making a good faith effort to comply, Scott Olson, Executive Director of the Community Home Lenders Association (CHLA) today issued the following statement. ‘The Community Home Lenders Association appreciates CFPB’s sensitivity to companies that are making a good faith effort to comply with August 1 RESPA/TILA TRID changes.  However, we call on CFPB to provide more specific protections for market participants, including a reasonable hold harmless grace period, to ensure that they are not penalized for unintentional errors and so that borrowers can close on their loans in a smooth and timely manner.’”

David A. Flohr, the Director, Homeownership Division of the North Dakota Housing Finance Agency, writes, “Since the Bond/LO comp issue has appeared again I figured I could give you my insight from North Dakota.  Our participating lenders are mostly community banks and credit unions.  There are two lenders that would be considered mortgage banks but they are very small and we have a couple of brokers.  The only national banks that participate with us are Wells and US Bank and they are not major players. All of them would probably tell us that in today’s market they can likely get “paid” better going through outlets other than NDHFA.  Although, the ones I have talked to about this say it is not a primary factor in their decision making.  The comment made in your commentary about the lender making a decision that our programs are important to their business plan is very true (CRA is a factor).

“There are other factors that drive business to our programs, in my opinion, with interest rates being equal between us and the market. Our DPA programs are a big selling point. The local loan servicing that we provide is important. All but one of our lenders release servicing to us and that is a selling point to customers knowing that their loan will stay in North Dakota, especially for first time buyers.  Many of our counterparts in other states do not service loans themselves. Our delinquency and default rates, while currently the best in the country due to our strong economy, have always been very good to excellent going back twenty years before the oil boom.  We do our best to work with homeowners on keeping them in their home if that is truly what they want and I think lenders and realtors both appreciate that and is partly why they recommend our programs.

“We provide credit underwriting, on loans using our programs, that helps the lender manage their workflow and ensures that we will purchase the loan with a small likelihood of any repurchase risk since we did the credit underwriting.  This is mostly used by small shops with limited capacity. We do in-person training for lenders and realtors on our programs on a regular basis – which makes a difference on them understanding our programs and how they can be used. We pride ourselves on quick turnarounds on file reviews/purchases and excellent customer service. You can call staff directly and talk with someone that can answer your questions and make a decision on the spot.

“We make a simple request of lenders when meeting with their customers – is someone eligible for our programs (income limits, first time buyer) and is one of the programs their best option.  If the answers are yes, great, if not, also great and they can move on.  We know we are a niche product and don’t aspire to be greater than what we are – meet the public purpose we have by using the revenues generated through our loan programs to provide other programs for households that need assistance with housing issues (rehab, accessibility issues, etc.). It may help that we are a small state where we all know each other!  The personal relationships we have built are vital and I don’t think that can be discounted.” Thank you David!

“Rob, I spent quite a bit of time at closings this month. The title companies are under staffed, under managed, lack basic knowledge of how to close loans efficiently, are very troubled and uncoordinated with the recent changes and high volume of regulations currently that they have to manage. I will make a little prediction for you. If TRID actually goes thru, it will cause catastrophic events beginning in late August. These title companies are NOT equipped to run now. It rates remain low and. Volume remains high, Catastrophic Failure will occur and I am sure the blame will fall on us and not Cordray and his band of buffoons, DOJ, and Obama.” So contributed Bruce Calabrese with Equitable Mortgage.

IRS tax transcripts are an issue, and Scott Rieke with First State Bank pens, “You may want to point out a fun new issue with IRS Transcripts. Transcript requests submitted via Data Verify are being REJECTED due to ‘Limitations’ – i.e. the IRS itself. We switched to Data Verify because they moved quicker. That is obviously not the case any longer, but not because of their services. So you go and instruct the client to pull their transcripts themselves via the IRS.gov website. NOPE… the IRS closed that one down just recently. Can’t do that. All you can do now, as a consumer, is request them via mail with a 5-10 calendar day turn time. Note… the lender doesn’t have any other option. Have to rely on the client now, who still needs to rely on the IRS.

“Fast forward one week… those turn times of 5-10 days is likely 30. Who quickly will investors/Fannie/Freddie update their own underwriting standards to address this issue? How long did it take during the shutdown? Always something new. By the way, and this is important, should a client request their transcripts be mailed to them or attempts to pick them up in person… it’s probably best they have a copy of their 2012 and 2013 taxes with them. They are likely to be grilled on specific info so as to prove they are who they say they are. Not all transcripts are halted. Only those for customers that have been flagged by the IRS as potentially open to fraud. That’s good news. The bad news… the IRS is spreading a wide net. It still takes 10 days to determine if the request is REJECTED or not. If it is rejected, then the below applies. The cascade effect is what scares me… particularly since I pride myself on doing 30-45 day closes.

“How are we addressing the issue? We are advising clients who have received an IRS letter indicating potential fraud, to take that letter to the IRS and see if they can get their transcripts from them in person. Transcripts will not be issues to third parties going forward… until this is resolved. The only other recourses are to have them mailed to the property on record, or hopefully get them in person. Recently Chase has confirmed to our processors they will accept borrower obtained transcripts, in lieu of those obtained by the lender via the IRS, as long as the transcripts are accompanied by a rejection notice. I smell big trouble brewing.”

And this from a wholesale AE from a well-known West Coast wholesaler: “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 the instances above, 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 the lender. Previously, the Borrowers used the IRS ‘Get Transcript’ application to obtain their tax transcripts. However, the IRS ‘Get Transcript’ application has been shut down temporarily due to unauthorized access to tax payer information through this application. The IRS ‘Get Transcript’ ordering page may be accessed by clicking here.

“Interim Steps: Follow the following temporary action while the IRS ‘Get Transcript’ application is shut down.  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.”

Amazing, simple home remedies:

1. Avoid cutting yourself when slicing vegetables by getting someone else to hold the vegetables while you chop.
2. Avoid arguments with the females about lifting the toilet seat by using the sink.
3. For high blood pressure sufferers – simply cut yourself and bleed for a few minutes, thus reducing the pressure on your veins. Remember to set a timer.
4. A mouse trap placed on top of your alarm clock will prevent you from rolling over and going back to sleep after you hit the snooze button.
5. If you have a bad cough, take a large dose of laxatives; then you’ll be afraid to cough.
6. You need only two tools in life – WD-40- and duct tape. If it doesn’t move and should, the WD-40. If it shouldn’t move and does, use the duct tape.
7. If you can’t fix it with a hammer, you’ve got an electrical problem.

Rob

(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.)