May 23: Playing catch up on state-level changes, and lender & investor news; rates seem “happy” where they are – for now

I remember when I first entered the working world, after a few months my HR person asked, “I see that you’re not signed up for the company’s 401k. Why not?” I replied, “I’d never be able to run that far.” A full understanding is important regardless of what you’re doing. Yesterday I mentioned that, “Warehouse lenders everywhere are hungry for business, and cutting their rates below the Prime Rate (3.25%) into the 2% range if certain conditions are met.” One warehouse vet wrote and reminded me that, “While I agree there are definitely lenders out there doing that, I think you should clarify for what type of companies. Small to mid-size companies aren’t going to be able to get that type of pricing. There are companies paying above 5% still. To get the pricing you discussed, lower than 3.25%, you have to be an established company with probably over a $5 million net worth. And you probably have to be able to use the facility a good amount.”


Let’s catch up on some state-level news in recent weeks, a big concern to any lender operating in more than one state.


Arizona has made a few modifications to its lending regulations to include updating provisions regarding: purchase money mortgages, loan originators, and escrow agent protection letters. For purchase money mortgages, the new law (HB 2018) states that originations after December 31, 2014, “real property owned by a person engaged in the business of building and selling homes is not exempt from any foreclosure. If real property has a home that was not completed or has a building intended to be used as a home but was not, the property can be used to satisfy the judgment.” Under House Bill 2098, a loan originator must be granted a license by the superintendent after completing a twenty-hour education course during the three-year period before the time of application (previously two-year period of time). Also, the new provision states that the applicant must have completed late continuing education for the purposes of satisfying education for the last year that the loan originator was in a renewable status.


Texas’ Department of Savings and Mortgage Lending adopted provisions regarding loan status forms. When conditional qualification is given to a mortgage applicant by an originator, the form must resemble Form A under 7 TAC s.80.201(a). Most importantly, written confirmation is needed from the applicant to the originator. Form A is a conditional qualification letter and includes the originators license number, contact information for the applicant, loan information and terms, credit and income review and states at the bottom that the form is not an approval. These provisions went effective on May 1st.


Virginia has clarified its policy on unallowable origination fees. The purpose is to clarify the Department of Veterans Affairs’ policy on the treatment of unallowable fees when lenders charge a loan origination fee that is less than one percent of the loan amount on purchase and cash-out transactions, and less than one percent of the payoff amount on interest rate reduction refinance loans.


Kentucky recently amended KRS 426.530 which describes the right of redemption of real property that has been sold in pursuance of a judgment or court order. The revisions are effective on July 14, 2014, or 90 days after legislative adjournment.


Georgia has recently updated its mortgage lender and broker licensing requirements. The peach state has exempted employees of certain nonprofit corporations, which promote affordable housing, from mortgage loan originator licensing requirements. The provisional changes state that “employees of bona fide nonprofit corporations, who act as loan originators only for such corporations, and who only offer mortgage loans with terms that are favorable to borrowers, are not required to obtain a mortgage loan originator license.” House Bill 750went into effect April 21st.


Kansas’ House and Senate have passed HB 2643, and in it a provision which changes the way counties can collect mortgage fees. The fee provision, which was lobbied by realtors and bankers, was substituted into House Bill 2643 after the House had rejected earlier versions that would have exempted private-sector health clubs from property taxes. The bill also clarifies provisions for classifying business property for tax purposes and for exempting vehicle taxes on active-duty National Guard and reserve military personnel.


On April 28, the U.S. Supreme Court granted certiorari (which is the legal equivalent of a “do-over” when you were a kid and the ball went into the neighbors backyard) in Jesinoski v. Countrywide Home Loans, Inc., No. 13-684, an appeal of the U.S. Court of Appeals for the Eighth Circuit’s September 2013 holding that a borrower seeking to rescind a loan transaction under TILA must file suit within three years of consummating the loan, and that written notice within the three-year rescission period is insufficient to preserve a borrower’s right of rescission. TILA Section 1635 grants borrowers the right to rescind a transaction “by notifying the creditor” and provides that a borrower’s “right of rescission shall expire three years after the date of consummation of the transaction” even if the “disclosures required . . . have not been delivered.”


As a reminder, Freddie Mac is profitable. However, I wouldn’t exactly define it as a success story just yet, as I consider FHLMC as the equivalent of the mid-30’s guy who drives a nice car, and wears trendy clothes…but still lives with his parents. The GSE   posted a net income of $4 billion for the January-through-March period, has repaid its debt to the American tax payer ($71.3B), and will pay a dividend to the US Treasury next month of $4.5B.


Also as a reminder, on April 30th the CFPB proposed minor adjustments to its mortgage rules, thus continuing to work within their regulatory mission statement of ‘ensuring access to credit‘. The recent proposal includes two changes that would help certain nonprofit organizations continue to provide mortgage credit and servicing to underserved populations; the first rule change offers a secondary definition of a “small servicer” which would apply to certain nonprofit organizations. The proposal would also create an amendment so that certain nonprofit groups can continue to extend certain interest-free, forgivable loans, also known as “soft seconds,” without regard to the 200-mortgage loan limit. The proposal also outlines limited circumstances where lenders that exceed the points and fees cap can refund the excess amount to consumers and still have the loan be considered a Qualified Mortgage. For the official CFPB proposal and press release, click here.


Turning to some relatively recent vender and lender news…


VirPack press release announced a partnership to offer e-signature technology. VirPack has teamed up with DocuSign to offer customers the fastest, easiest, most secure way to send, sign, track and store documents in the cloud.


Fifth Third correspondent lending has clarified child support income requirements on all Fannie Mae products. Specifically the payor must have been obligated to make payments for a minimum of six months, in addition to the payment being the full payment amount and consistent for the income to be used for qualifying purposes.


Last month U.S. Bank Home Mortgage eliminated the restrictions on First lien transactions in the states of Arizona, California, Michigan, New Jersey and New York. The states of Florida and Nevada will remain restricted markets until further notice.


An announcement was also issued regarding consideration in using qualified assets of an applicant for purposes of generating monthly qualifying income. The two categories of assets identified are (Non-Retirement Assets and Retirement Assets). For complete information regarding the new policy for Non-Retirement Assets, which will be published in their Seller Guide Manual, view the bulletin. This Bulletin applies to all conventional portfolio loans that are not final approved. These guidelines ARE NOT applicable to any FHLMC, FNMA, FHA, VA or USDA programs.


“All refinance transactions submitted to your U.S. Bank Home Mortgage Underwriting Center for final approval; a payoff statement must be obtained for the following reasons: when U.S. Bank Home Mortgage is refinancing a mortgage that is currently serviced by U.S. Bank, the payoff statement is to determine the existence of a pre-payment penalty on a first or closed end second or an early termination fee on a HELOC if it is required to be closed.  If a penalty or fee exists it must be included in the points and fees test.  Or U.S. Bank Home Mortgage requires a payoff statement on all refinance transactions, regardless of servicer, on all products to avoid exceeding USBHM’s principal curtailment limit of $1,000.00 and compliance issues with regards to curtailments. Or a payoff dated on or after the application date is required at the time a conventional rate/term refinance is submitted to Underwriting. Any subsequent resubmission will not require an additional updated payoff unless the payoff has expired or the borrower has made an additional payment. Current HASP procedures will remain in effect.


According to Angel Oak Funding Wholesale Division unpaid medical, regardless of age, do not need to be paid or calculated in the DTI. Visit their website to view their flexible loan programs at or contact you’re A.E.


WesLend’s Direct VA program offers features and options that the standard VA Program will not accommodate. For example, $417,000 Max Loan Amount, IRRRLs allowed with an AVM in lieu of appraisal for 1 unit properties, 100% maximum LTV for Purchases and 100% Max LTV for Cash-Out Refinances. 600 Min FICO on purchase transactions and 620 minimum FICO for Cash-Out Refinances with LTVs > 90%. 640 minimum FICO is required for IRRRLs using an AVM.  Please contact your Business Development Manager or Account Manager for further information and complete published guidelines.


Impac has updated the matrices for its VA programs. These changes include: Vermont is now an eligible state, Inter Vivos Revocable Trust is allowed, their minimum loan amount removed, and refinance transaction for a new manufactured home added to borrower’s existing financed site is allowed to 100% LTV.


Cole Taylor Mortgage Wholesale division expanded LTVs on some conforming and agency high balance loan products as of May 1st. Conforming guidelines have been updated to provide more clarification.


NationStar Mortgage has updated its correspondent lending guidelines. All products require all borrowers must have a minimum of one credit score to be eligible.  FHA matrix was also updated including guidance related to qualifying ratios for manually underwritten loans with case assignments dated on or after April 21, 2014 with a maximum 31/43% debt ratio and minimum FICO requirements as outlined in the FHA Overlay Matrix (Form 4). Also, effective immediately, the new Bulk Upload Capability is available to all Correspondents.


Is the US economy really doing as well as the stock market thinks it is? Yesterday we learned that HP, the world’s second-biggest personal-computer maker will eliminate 11,000 to 16,000 positions, on top of 34,000 already announced. HP had 317,500 employees at the end of October. And we had higher existing home sales in April, although it was a somewhat mixed report. Sales rose 1.3% in April but this was less than what was expected, and is down by 6.8% from a year ago. Still, the gain was the first for this year and indicated some recovery from the harsh winter. In addition, inventory recorded a meaningful increase, 16.6%, while the median home price increase was a more moderate +5.2% year over year increase versus +8.6% in Q1 from a year ago. Limited inventory and lower affordability has often been cited as inhibiting purchase activity. So the May report may be more meaningful for determining whether home buyers are becoming more responsive to an increased selection and more attractive mortgage rate levels, or whether tight credit conditions continue to weight on activity.


Both long term (think mortgages) and short term (like overnight Fed Funds) are influenced by supply and demand, which is turn is influenced by expectations of what the economy will be doing. And right now the US economy is not doing well enough to suggest higher rates are in the near future. But it is not doing so poorly as to suggest much lower rates are in the near future either – so here we sit.


Now there is the possibility that the Fed will continue to reinvest its paydowns longer than anticipated to past the first rate hike. Thoughts like that certainly help mortgage securities. As Thomson Reuters mentions, “Given the current technical landscape and outlook, investors are continuing to ply the range; selling on strength and adding on price and spread weakness. Supply, meanwhile, was manageable against the demand…” Yesterday both the 10-yr T-note and agency MBS prices were down/worse about .125 and the 10-yr closed at a yield of 2.55%.


We only have April’s New Home Sales (expected +10.7% to 425k) today for scheduled news, and the bond market is closing early. In the very early going we are virtually unchanged from Thursday’s close – and plenty of people are ready for a long weekend.



Instead of the usual joke, let’s take a moment to remember that unlike November’s Veteran’s Day, Memorial Day is a day on which those who died in active military service are remembered. It is now officially observed on the last Monday in May, and is a Federal holiday.



If you’re interested, visit my twice-a-month blog at the STRATMOR Group web site. The current blog is a “Primer on Trends in Holding Mortgage Servicing Rights”. If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers. Rob



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Rob Chrisman