May 18: State law changes, thoughts on non-QM, borrower credit scores, URLA; the origin of CNBC’s rates

I mentioned to my cat Myrtle that a) I was heading to New York for the secondary conference, which garnered no reaction, and b) that Grumpy Cat was “no longer with us,” which caused her to sniff and stare into the distance. Speaking of the conference, folks will be watching the LTV ratio (lender to vendor) as this has been dropping in recent years. But, as the guys going to the conference wonder whether to pack their suit or wear it on the plane, it should be a fine time, and hopefully plenty of lenders will have some exposure to ideas and products to help their companies.

Rates is rates

Regarding the minute-by-minute mortgage rate quotes on CNBC, I received this elucidating note from Matt Graham at Mortgage News Daily. “Your readers should know that CNBC receives its mortgage rate information from me/MND. CNBC came to me for the express purpose of having something that was more accurate than Freddie’s weekly rate survey and less misleading than Zillow’s insanely low rate ticker. CNBC should be applauded for caring to be honest in an arena that only seems to care about sensationalism. Finally, it’s good to remember (and it’s been interesting to learn over the years) that individual reporters vary greatly from one another, and while CNBC has its share of sensationalist reporters, Diana Olick is accurate and cares deeply about ‘getting it right’ without sensational spin. Your readers should know that CNBC’s rates are not a commitment to lend, nor an advertisement of a rate they are offering.

“If LOs feel that it’s harming their biz in some way because the listed rate is lower than their offering, I guarantee the CNBC rate ticker won’t be the first or only place their clients get the idea to rate shop them. Accuracy is important at Mortgage News Daily which is why I enter in 10-15 rate sheets a day from the highest volume lenders’ raw rate sheets and calculate the most middle-of-the-road top tier (75LTV, 760 FICO, O/O Purchase) conventional 30yr fixed rate. My rate is the best single indication out there. If LOs can’t competently explain to their clients LLPAs, lender-to-lender variability, and APR, that’s on them. There will always be single 30-yr fixed rate indications out there, and MND offers one of the very best of them.” Thanks Matt!

URLA fun

Yes, eight pages, eight sections. Call it the 1003 or the URLA, starting July 1, 2019, both Fannie Mae and Freddie Mac will begin the optional use period of the redesigned Uniform Residential Loan Application (“URLA”) published jointly by the Government-Sponsored (“GSEs”). Starting February 1, 2020, all loans with an application date on or after February 1, 2020 and purchased by Fannie or Freddie must contain the redesigned URLA.

Companies have, and are, reacting. docutech put out a write up. Caliber told clients that it will “improve efficiency, transparency, and certainty for both lenders and borrowers.”

“The most obvious change is that there’s defined separation between individual borrower applications. Each borrower will complete their own application. The new form includes fields for email addresses and mobile phone numbers… Additionally, the form lists the total number of borrowers applying for the loan – including full names – allowing for quick reference when there are multiple borrowers on the loan.

“Employment and Income will no longer be in separate sections. Employment entries include the income with source breakdown, making it easier to verify the income for each employer. The new form will support multiple current and past employers, as well as other income. The new form surveys borrowers on their language preferences. This survey is for information gathering purposes only. Applications won’t be available in languages other than English.”

What kind of borrowers are MLOs seeing?

Most lenders and MLOs admit that many of the easy deals are gone, and that borrowers now are “tougher.” I received this note from an industry vet. “I’m getting stuck doing credit repair or credit supplements on the majority of my files. Spending $150-$300 per file is no longer uncommon, and I’m often losing money per file because some items are more expensive that projected.

“I think that the three bureaus need to establish a manner for lenders to assist clients in directly repairing a consumers credit errors or rescores on a relatively rapid and cost effective manner. Do I think we will ever see that? No. One large lender out of Detroit has set up a free internal credit repair for its elite brokers. In my humble opinion I’m not sure how this is not a violation since it actually has value and is only offered to a select group vs. across the board.”

Another writes, “I am seeing more and more educated professionals drowning in debt, which creates low scores. Many of my borrowers have perfect credit, no lates, no collections, no foreclosures, no short sales. They have equity but cannot obtain a decent loan due to their credit scores. I had a borrower this week that pulled funds from their 401k and paid off enough debt to move their scores up to 680. We’re going to do a cash out refi for cash to pay off the rest of their debt and pay back the 401k!

“A while back one late on Kohl’s dropped one client’s scores by 100 points. It is absurd when a $60.00 debt does that. I went with portfolio lender that has no hit at 680, same rate as Fannie and Freddie but no YSP available. So I lowered the fee to 1% origination, borrower paid. That $4,500 should have been covered by YSP with an F & F lender.

“I am seeing scores much lower than in the past. I am told the new matrix, that ‘predicts’ what will happen next, is causing the lower scores. Some long-time clients typically have credit scores around 710. Both are self-employed and use credit for business. For them, the Spring is very busy so they have high use of credit. So here’s an example of perfect credit but high use. A year ago their credit scores were around 710 but this year they are 625. I constantly tell clients that the scores provided by Credit Karma and their credit card companies are examples and NOT what a mortgage credit report will show. I feel we are dragging the bottom of the barrel.”

QM or non-QM?

Lenders and investors have product, price, and service. And who represents them is very important. I received this note. “Rob, after much consideration, our firm has decided to look into offering products in the newly formed Non-QM/Non-Prime space. We have participated in several training calls in deciding which investor(s) with which to align.

“Please let any broker or correspondent (we are a broker) considering entering Non-QM to speak to several companies and to do a due diligence on each. We found that most could explain their products well, but our questions regarding the technical aspects (i.e., rate, index, margin, adjustments, etc.) often met with answers such as ‘don’t sell rate…sell the interest only payment,’ or ‘you can double your fee income adding these products,’ or ‘non QM is going to have explosive growth and you don’t want to miss the boat.’ I am not going to mention company names or individual AE names, but the proficiency and quality of the rep was all over the place. Some were quite professional and some not. Our industry has suffered greatly over the past several years from a reputation standpoint, and I fear ‘salesmanship’ tactics describes above are not a good direction to go in.”

State law changes

The Oklahoma Department of Consumer Credit has published its annual changes in dollar amounts for 2019.

In the state of Oklahoma, various dollar amounts set forth in the Uniform Consumer Credit Code change, effective July 1st, of each “qualifying year.” A qualifying year is any year in which the percentage of change (calculated according to the nearest whole percentage point) between the Index at the end of the preceding year and the Reference Base Index is ten percent or more. The calculations for dollar amount changes use figures from the Consumer Price Index Indicators, Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), issued each December by the Bureau of Labor Statistics.

In a year when statutory dollar amounts are going to change in July, the Department must mail a chart with the designated statute sections and the corresponding dollar amounts to all licensed supervised lenders, persons who have made a timely written request for notice of changes and to the Secretary of State and be published in the Oklahoma Administrative Code in an appendix to the Department’s rules.

Maryland has passed House Bill 107, the purpose of which is to substitute the “Commissioner of Financial Regulation” wherever the “Department of Labor, Licensing, and Regulation” appears in the Residential Property Foreclosure Procedures and to renumber certain sections relating to the Foreclosed Property Registry.

Kentucky has enacted several provisions pertaining to notaries, effective as of January 1, 2020. Notarial Acts: Section 3 under the new provision sets forth a list of acts that may be performed by a notarial officer and that they may perform these acts with respect to both tangible and electronic records. Online notary publics registered with the Secretary of State may also perform electronic notarizations on any of the notarial acts enumeration in Section 3.

Evidence of Identity requirements: notarial officer has personal knowledge of the identity of the person appearing before him or her if that individual is personally known to the officer through dealings that make it reasonably certain that the person has the identity claimed or has satisfactory evidence of identity of the person appearing before him or her if the officer can identify the person by a non-expired passport, driver’s license, or government issued identification card. Additional sections of the new provision address other notarial issues such as notarial certificates, notarial stamping devices, and online notarizations.

Iowa has adopted provisions relating to its Revised Uniform Law of Notarial Acts, effective July 1, 2020.

These provisions include the addition of definitions to the Act for terms such as “instrument affecting real property,” “identity proofing,” and “remote facilitator”.

An existing subsection regarding requirements of a “personal appearance” by a notary may now be satisfied by a remotely located individual using communication technology to appear before a notary.

Prior to performing a notarial act using communication technology for a remotely located individual, a notary public must first confirm the identity of the remotely located individual. An individual’s identity can be determined by 1) personal knowledge; 2) verification on oath or affirmation of a credible witness appearing before the notary; or 3) verification of at least two different types of identity proofing. The notary must also reasonably confirm that the record before him or her is the same record in which the remotely located individual made a statement or executed a signature.

Finally, the notary public must make an audio-visual recording of the performance of the notarial act and must be retained by the notary or an agent of the notary for at least ten years. The certificate of notarial act must also indicate that the notarial act was performed using communication technology.

Effective as of July 1, 2019, Iowa has modified provisions relating to permissible interest rates and charges for certain loans.

Under the previous provision, the superintendent was permitted to establish the maximum rate of interest or charges on loans with an unpaid principal balance of ten thousand dollars or less. The revised provision changes this amount to thirty thousand dollars or less. Loans with an unpaid balance of over thirty thousand dollars will have a maximum rate of interest or charges the greater of the rate authorized for supervised financial organizations or the rate permitted under Iowa Code chapter 535.

Additionally, a new provision regarding service charges adds that, if a creditor has collected a service charge related to an interest-bearing consumer credit transaction, the creditor may not collect a minimum charge upon prepayment. To access the full text of House File 260,

click here.

Here in New York an old nun who was living in a convent next to a construction site noticed the coarse language of the workers and decided to spend some time with them to correct their ways. She decided she would take her lunch, sit with the workers, and talk with them.
She put her sandwich in a brown bag and walked over to the spot where the men were eating.
She walked up to the group and with a big smile said, “Do any of you men know Jesus Christ?”
They shook their heads and looked at each other very confused.
One of the workers looked up into the steelworks and yelled out, “Anybody up there know Jesus Christ?”
One of the steelworkers yelled down, “Why?”
The worker yelled back, “Cuz his wife’s here with his lunch!”

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Rob Chrisman