May 27: Freddie & Fannie on ratings watch; vendor news; high bal loan question; compliance & QC trends; bank robbery humor

“Rob, what does it mean for my borrowers when Freddie Mac and Fannie Mae were put on ‘credit watch’ by Fitch Ratings?” It’s not good, but not catastrophic. Policies and implications for business partners specific to certain companies should be addressed to the reps at that particular company. “Rob, are you hearing what is going on with small companies and Encompass refusing to renegotiate contracts?” Changes in volume have impacted everyone. Policies specific to certain companies should be addressed to your rep at that particular company. “Rob, what do you know about publicly held companies who own mortgage servicing rights over-valuing those MSRs?” Publicly held companies publish their financials quarterly, and certainly yearly. You can see the valuations for yourself. Policies specific to certain companies should be addressed to the investor relations department at that particular company. “Rob, with all of these banks either reducing their residential lending footprint to match their branch footprint, have you heard anything about Citi or US Bank doing that?” I have not. But policies or future plans specific to certain companies should be addressed to your rep or investor relations department at that particular company. And life goes on…

Compliance morsels

___________________________________________________

 

What would residential lending be without adhering to the myriad of rules, regulations, and laws that impact how our business is done, and how borrowers are treated. Let’s see what’s going on out there.

Jonathan Foxx, Ph.D., MBA, Chairman & Managing Director of Lenders Compliance Group, recently opined on required appraisal management procedures for an appraisal management policy. Many state banking departments and the GSEs expect companies to conduct self-assessments and any Appraisal Management policy and its references to Appraiser Independence Requirements should contain a checklist to support your self-assessment. There are many required self-assessment criteria relating to appraisal compliance, including: qualified appraisers and appraisal management companies (AMC) should be selected according to GSE guidelines, and sales and loan production employees should be restricted from the appraisal process (i.e., ordering appraisals and communicating with the appraiser).

There are state privacy laws going into effect in 2023 in Colorado, Connecticut, Utah, and Virginia. For mortgage lenders operating in these states, each state’s privacy statute exempts financial institutions subject to the Gramm-Leach-Bliley Act (GLBA). As such, since mortgage lenders are subject to the GLBA, they are exempt. Each applicable statutory exemption can be found in a recent MQMR Compliance Hot Topic. Colorado Consumer Privacy Act (CPA) – SB 190 § 6-1-1304(2)(j)(II) part 13 does not apply to: Collected, processed, sold, or disclosed pursuant to the federal “Gramm-Leach-Bliley Act” U.S.C. SEC. 6801 et seq., as amended and implanting regulations, if the collection, processing, sale or disclosure is in compliance with that law. Connecticut Data Privacy Act (CTDPA) – SB 6 § 3(a) provisions of sections 1 to 178 11, inclusive, of this act do not apply to any: financial institution or data subject to Title V of 184 the Gramm-Leach-Bliley Act, 15 USC 6801 et seq. Utah Consumer Privacy Act (UCPA) – SB 227 § 13-61-102(2)(k) chapter does not apply to a financial institution or an affiliate of a financial institution governed by, or personal data collected, processed, sold, or disclosed in accordance with, Title V of the Gramm-Leach-Bliley Act, 15 U.S.C. Sec. 6801 et seq., and related regulations. Virginia Consumer Data Protection Act (VCDPA) – § 59.1-576 chapter shall not apply to any financial institution or data subject to Title V of the federal Gramm-Leach-Bliley Act (15 U.S.C. § 6801 et seq.).

MQMR recently wrote a Compliance Hot Topic on a mortgage lender’s responsibilities with regard to detecting and preventing appraisal discrimination. Appraiser discrimination is a significant concern for mortgage lenders today. In recent months, various agencies, including the CFPB and HUD, issued guidance and/or encouraged consumers to come forward to report incidents of suspected appraisal discrimination. Further, alongside appraisers, mortgage lenders have been named as defendants in lawsuits alleging appraisal discrimination. Although appraisers, and the appraisals they produce, must be independent, there are steps mortgage lenders can take to help detect and prevent appraisal discrimination and the risks associated therewith. Some best practices include training employees to identify concerns and/or complaints surrounding appraisal discrimination, logging all appraisal complaints and requests for reconsideration of value, ensuring underwriters thoroughly review appraisal reports for discriminatory pictures and/or comments, following all agency guidelines with regard to appraisals and appraisal assessments, performing quality control or internal audits of appraisals, developing and implementing written policies and procedures surrounding appraisals, and including appraisal issues, including discrimination, as a topic of discussion at Board, Risk Management, and/or Compliance committee meetings.

MQMR recently wrote a Compliance Hot Topic on how a mortgage lender can ensure it maintains an effective, independent oversight process for mortgage origination Quality Control (QC) in compliance with Fannie Mae requirements? There is importance of maintaining clear QC independence and an effective internal audit process to ensure a robust QC program. Lenders that fail to maintain an effective QC program will be in breach of their contractual obligations with Fannie Mae. Fannie Mae notes that during audits of approved seller/servicer QC programs, it commonly finds that lenders do not have a compliant process in place to audit their post-closing QC process. For Fannie Mae’s observations on what a lender’s QC program is lacking, and minimum Fannie Mae internal audit and management control procedures to evaluate and monitor the overall quality of loan production, read on. Fannie Mae indicates that lenders should conduct an annual independent audit review of the QC process to maintain a robust risk management program and clearly define the scope of the audit process as well as the proposed schedule.

High balance loan warning?

___________________________________________________

I received this note from a capital markets vet. “I’d be curious if you have heard anything in regard to High Balance loans? As we know High Balance loans can be placed into a Standard pool and receive Standard base pricing as long as the percentage of High Balance loans doesn’t exceed 10% (the “de minimus” rule). The benefit of this is obviously a pretty big difference in the price.

“The caveat to that rule is that loans with Specified Payups do not “count” in the de minimus calculation. As the Agencies have now been adding additional Specified Payups (loan amount buckets up to $275k, Second Home, Investment, New York, etc.…) it seems we would see less High Balance loans ‘fitting’ into the de minimus calculation, which would lead to higher pricing across the High Balance landscape.

“One can ponder if the release of additional specified pools is by design to push more of the High Balance product away from the agencies and into the private/portfolio market. As we see values continue to increase, I wonder where this leads.” Good question.

Vendor/third-party provider news

___________________________________________________

These companies do much more than capitalize random letters in their names. Let’s take a random look at who’s doing what in the primary and secondary markets to help lenders.

Simplify Your Home Equity Lending with CoreLogic’s Total Home ValueX AVM. Leveraging advanced technology and datasets, using geospatial data and actual property condition information to provide more usable hits, you get the most accurate information to make smart lending decisions. Check out a recent HousingWire Demo: How Does Total Home ValueX Help Identify Property Characteristics? Visit the CoreLogic website to learn more.

Xactus, the leading verification innovator for the mortgage industry, announced it is offering real-time IRS data feeds through TaxStatus, a top provider of official tax data and IRS account monitoring. Shelley Leonard, President of Xactus said, “our integration with TaxStatus will enable us to offer our lender customers a faster, more accurate way to receive comprehensive IRS tax information. TaxStatus provides automated, real-time IRS data feeds, wherein lenders can have up-to-the-minute information on their customers once they opt in, reducing 70-90 percent of the time it takes to access and utilize IRS data. Its proprietary platform collects data from the IRS and delivers it in a secure, common data format. Through Xactus’ agreement with TaxStatus, lenders can receive up to 10 years of historical IRS data on any SSN or EIN, as well as automatic updates when a customer’s profile has changed.

Two lending technology developers with small footprints are making big strides to help lenders win the battle for mortgage, consumer and commercial borrowers, by making loan origination more cost-effective and future-ready. PowerLender LOS users are now leveraging the ultimate loan application point-of-sale (POS) experience with LoanPilot™, a cloud-based, borrower-facing POS system that also supports all loan types including mortgage, equity, consumer, HELOC, commercial or any specialty loan products. Developed by NH-based PerfectLO.com, LoanPilot™ provides a branded, engaging consumer-facing web presence that offers borrowers an intuitive, customizable application process with just a PC, tablet, smartphone or other mobile device. Unlike other POSs, its flexibility lets lenders create the borrower’s true profile, quickly and readily.

ACES Quality Management® (ACES), the leading provider of enterprise quality management and control software for the financial services industry, announced the release of its quarterly ACES Mortgage QC Industry Trends Report covering the third quarter (Q3) of 2022. The latest report analyzes post-closing quality control data derived from ACES Quality Management & Control® software. Notable findings from the Q3 2022 report include the following: The overall critical defect rate increased 20.5% over Q2 2022, ending the quarter at 2.47% – a report high. Of the four major underwriting categories (Assets, Credit, Income/Employment and Liabilities), three saw moderate to significant increases in Q2 2022.

Accurate Group, a provider of technology-driven real estate appraisal, title data, analytics and e-closing solutions, announced it is one of six service providers approved after extensive review and client testing by Fannie Mae for the new Value Acceptance + Property Data valuation modernization initiative. Accurate Group’s appraisal modernization and property data collection suite, powered by its proven flagship technology products, ValueNet™ and GroundWorks™, meet the data standards for all industry appraisal modernization initiatives on the market today. Lenders who leverage ValueNet and GroundWorks proven technologies and processes on eligible purchase and refinance origination loans, experience reduced cycle times plus significant cost savings when compared to traditional and residential appraisals, along with greater accuracy and a better borrower experience.

Xactus posted Updated News on FHFA’s proposed implementation timeline for changing credit underwriting standards. Xactus will work with the various agencies to have an active voice during the planning and implementation of changes to mortgage credit underwriting and will communicate information as more clarity on the mechanics and timetable is received. By implementing advanced bi-merge technology and functionality, Xactus will be ready to support the industry seamlessly whenever changes to credit guidelines become effective. If you have thoughts or feedback that you would like to share with Xactus directly, please reach out to your strategic account manager or send an email to IndustryUpdates@Xactus.com. We will aggregate client and industry feedback to share with the FHFA, Fannie Mae, and Freddie Mac.

CMLA issued a “Take Action” notification to CMLA Members and Colorado MAA Members to oppose the implementation of rent control in Colorado proposed in HB23-1115.

A Press Release announced that National MI is now directly integrated with Blend’s Loan Officer (LO) Toolkit, which supports loan officers on all key workflows across the entire loan process in one workspace. The integration allows lenders using LO Toolkit to quickly and seamlessly obtain accurate mortgage insurance quotes through National MI’s Rate GPS® tool, giving prospective borrowers the opportunity to view the latest available rates before starting a full application.

Mortgage lenders can save more than $400 per loan by using eClose technology to digitize and automate the mortgage closing process, according to research performed by Snapdocs, the mortgage industry’s leading digital closing platform. This newly released research validated this savings potential across all digital closing types including hybrid, hybrid with eNote, and full eClose (also known as Remote Online Notarization, or RON). The full findings can be accessed by downloading a copy of Snapdocs’ eBook, “Quantifying the Value of eClose.”

Agile recently launched the mortgage industry’s first fully automated assignment of trade (AOT) transaction, which involves three counterparties: mortgage originator, mortgage investor, and broker dealer transferring loan collateral and hedge positions to a mortgage investor. AOTs are an increasing popular industry practice, Agile’s game-changing technology and platform have impacted how traders communicate and execute for clients, closing the loop by automating the process for trade assignment between mortgage investors and broker dealers. This new AOT functionality is now available to all Agile platform users. Mortgage investors and broker dealers interested in learning more about offering or automating a bid tape AOT channel should contact Agile for more information.

During a robbery in Zimbabwe, the bank robber shouted to everyone in the bank: “Don’t move. The money belongs to the State. Your life belongs to you.” Everyone in the bank lay down quietly. This is called the “Mind Changing Concept”: Changing the conventional way of thinking.

When a lady lay on the table provocatively, the robber shouted at her: “Please be civilized! This is a robbery and not a rape!” This is called “Being Professional.” Focus only on what you are trained to do!

When the bank robbers returned home, the younger robber (MBA-trained) told the older robber (who has only completed Year 6 in primary school): “Big brother, let’s count how much we got.” The older robber rebutted and said: “You are very stupid. There is so much money it will take us a long time to count. Tonight, the TV news will tell us how much we robbed from the bank!” This is called “Experience.” Nowadays, experience is more important than paper qualifications!

After the robbers had left, the bank manager told the bank supervisor to call the police quickly. But the supervisor said to him, “Wait! Let us take out $10 million from the bank for ourselves and add it to the $70 million that we have previously embezzled from the bank”. This is called “Swim with the tide.” Converting an unfavorable situation to your advantage! The supervisor says: “It will be good if there is a robbery every month.” This is called “Killing Boredom.” Personal Happiness is more important than your job.

The next day, the TV news reported that $100 million was taken from the bank. The robbers counted and counted and counted, but they could only count $20 million. The robbers were very angry and complained: “We risked our lives and only took $20 million. The bank manager took $80 million with a snap of his fingers. It looks like it is better to be educated than to be a thief!” This is called “Knowledge is worth as much as gold!” The bank manager was smiling and happy because his losses in the stock market are now covered by this robbery. This is called “Seizing the opportunity.” Daring to take risks!

So, who are the real robbers here?

(Source: Krrish Maheshwari via Quora.)

Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. STRATMOR’s current blog is titled, “Doing Business with the Agencies: The Golden Ticket?” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).

qoɹ

(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. This newsletter is for sophisticated mortgage professionals only. There are no paid endorsements by me. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2023 Chrisman LLC. All rights reserved. Occasional paid job & product 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