Nov. 10: Notes on the new 1003, the gov’t’s role in the credit crisis; state lending law changes coast to coast

My cat Myrtle seems particularly disinterested in things since Tuesday. Do we all have post-election news doldrums? What is the mainstream press going to talk about now? I’m joshing, of course, as there is always something. In this industry, how about the continued efforts by the industry on behalf of borrowers and lenders despite issues of affordability, rates grinding higher, some lenders possibly heading down the credit curve to capture business, and the approaching winter? No, there’s never a lack of topics.

Certainly the Mortgage Bankers Association is hitting the airwaves. President Bob Broeksmit wired, “I want to share MBA’s analysis of the 2018 mid-term elections and make you aware of my new blog, To the Point, which this week provides a perspective on what the election results may mean for our industry in 2019. I will be posting often about issues affecting MBA and its members…” Between this new publication, Bill K. and Steve O. sending out the MBA Advocacy Update piece once a week, Bill sending out the Mortgage Action Alliance newsletter with its sporadic “Call to Action”, the MBA Education pieces every few days, the Chart of the Week, the daily MBA Newslinks, and several pieces every week about various topics, one is not at a loss for things to read from just the MBA!

Will lenders be crying the “1003 Blues”? I am fielding notes of dismay about the length and complexity. (“In a world where things are becoming faster, easier, and more accurate, we have this for lenders?” But it could have been worse, had it not been for the MBA’s work.) John Haring, Director of Product Management at Ellie Mae, shot over, “While the new URLA and ULAD are fifteen months away, that’s not a lot of time to get prepared for the impact of the changes. At Ellie Mae, we are planning to deliver functionality in the July 2019 timeframe to coincide with the early release date of the URLA and allow customers and partners ample time to test and transition. Ellie Mae’s goal is to always minimize any regulation or industry change so that it becomes a ‘non-event’ for customers and partners.

“Nearly every mortgage application is collected on Form 1003 or Form 65 and the format has not changed significantly in the last 20 years. Fannie Mae and Freddie Mac, under direction of the Federal Housing Finance Agency (FHFA), have significantly redesigned the form. With this, lenders may choose to use the new URLA starting July 1, 2019, although the GSEs will not require it until on or after February 1, 2020 for new loan applications.

“The redesigned URLA takes a design thinking approach, with dynamic field collecting and a presentation of data tailored to the individual borrower and loan scenario. The goal is to provide greater efficiency, transparency and certainty for future homebuyers applying for mortgage loans and greater consistency for lenders who sell to both Fannie Mae and Freddie Mac.

“While the new URLA and ULAD are fifteen months away, that’s not a lot of time to get prepared for the impact of the changes. At Ellie Mae, we are planning to deliver functionality in the July 2019 timeframe to coincide with the early release date of the URLA and allow customers and partners ample time to test and transition. Ellie Mae’s goal is to always minimize any regulation or industry change so that it becomes a ‘nonevent’ for customers and partners. “In terms of what’s happening now, Ellie Mae continues to educate and keep customers and partners updated on the latest with URLA / ULAD with a series of webinars, FAQs and resources for training. Your readers can find them all on Ellie Mae’s Compliance Central.

Credit standard trends

Are we, from a residential loan quality perspective, heading down a slippery slope? There is plenty of blame to go around for the last ten years. In the capital markets we had HUD’s mandate to FNMA/FHLMC to buy poor quality loans, and a faulty securitization model, care of investment banks and the rating agencies, which enabled subprime mortgages to be packaged with enough good mortgages so as to make people believe they were investment grade.

As an industry we’ve hit the 10-year anniversary of a heckuva lot. And we’ve all seen various write ups. For example, RPM Mortgage’s Dick Lepre produced, “Lessons from Lehman Brothers 10 Years Later: Watch for these signs to guard against a repeat of the financial crisis.”

The article prompted California’s Tom Carney to pen, “The ‘Lessons from Lehman’ was a good break down. But no one should gloss over the real impact of Fanny and Freddie’s pressure on lenders to lower their standards! They encouraged lenders to make loans to borrowers that in the past would not have gotten a loan!! I feel that this was the basic impedes for what then happened. This does not relieve fault/greed for many large investors and lenders, but without the pressure by our very misguided government I feel the 2008 Financial Crises would not have happened!”

Speaking of government…

State lending law news

Think its tough, and expensive, to comply with all the lending rules and regulations at the Federal level? Try being a multi-state small lender trying to keep up with, and adhere to, state-level rules on a variety of topics.

The Colorado Department of Regulatory Agencies, Division of Real Estate, has adopted a provision regarding pre-licensing education requirements. This provision is effective as of November 14, 2018. Starting then applicants for licensure as a Colorado mortgage loan originator must successfully complete twenty hours of pre-licensing education within three years of the date of application for licensure. The previous provision did not include this time requirement.

Out in California, the source of 20-25% of residential loans, the defeat this week of a ballot measure that would have allowed for the expansion of rent control across California has buoyed landlords and left tenants pinning their hopes on the state’s new governor for relief. Proposition 10 failed resoundingly with nearly 62% of voters rejecting the initiative as of results tallied Wednesday. The initiative would have repealed the Costa-Hawkins Rental Housing Act, which bans cities and counties from implementing more aggressive forms of rent control. The result means those prohibitions remain in place.

Connecticut has modified provisions under its Banking Law concerning consumer credit licenses. The new provisions expand the authority granted to the Banking Commissioner in various circumstances. The effective dates for these provisions range from July 1, 2018 to July 1, 2019.

The authority granted to the Banking Commissioner for investigative purposes has been expanded. The Commissioner may now obtain any records, information, or evidence for investigations relating to any license issued on the system. The Commissioner is granted total control over any evidence obtained and is permitted to hire attorneys, accountants, and any other necessary specialists to assist in the investigation. The new licensing provisions state that if a license expires due to the licensee’s failure to renew, the Commissioner may, within one year, initiate a suspension or revocation proceeding.

Additionally, the Commissioner will collect, from each Connecticut bank and credit union, an annual assessment sufficient to meet the expenses for the Department of Banking. However, if the Commissioner determines that the amount to be collected from an uninsured bank is unreasonably low or high based on the bank’s size and risk profile, the Commissioner may require the bank to pay a fee in lieu of the annual assessment.

Rhode Island has recently modified its provisions regarding mediation conferences prior to mortgage foreclosures. House Bill 7385 extends certain sunset provisions and limits the dollar amounts that a HUD-approved agency may receive for a mediation and filing fee.

The new provisions extend a July 1 sunset provision in a 2013 law that requires mortgage lenders to initiate and participate in mediation efforts with homeowners facing foreclosure. The bill moves the sunset provision to July 1, 2023.  This law provides critical protection for homeowners by requiring their lenders to make a good-faith effort, with the help of an independent mediator, to try to come to an agreement to help save their home from foreclosure.

The provisions set limits on counseling agency fees and establishes options available for communication that is mutually convenient for the parties by an individual employed by a HUD- approved, independent counseling agency selected by the mortgagee to serve as a mediation coordinator provided at no cost to the mortgagor and limits the fees charged for mediation and filing.

Rhode Island has enacted provisions relating to its Uniform Real Property Electronic Recording Act. The new provisions authorize a city or town clerk or recorder of deeds, at his or her option, to accept electronic documents for recording real property and land records and to index and store those documents.

The provisions add that in the case of a document or signature that must be notarized, acknowledged, verified, witnessed, or made under oath, that requirement is satisfied if the electronic signature of the person authorized to perform that act (and all other information required to be included), is attached to or logically associated with the document or signature. A physical or electronic image of a stamp, impression, or seal does not need to accompany an electronic signature. The recorder may also convert paper documents accepted for recording into electronic form, including information recorded before the recorder of deeds began to record electronic documents.  Finally, a recorder of deeds who accepts electronic documents for recording must continue to accept paper documents as authorized by state law and must place entries for both types of documents in the same index.

Through House Bill 7502, Rhode Island has repealed its current provisions regarding notaries and has implemented an adapted version of the “Revised Uniform Law on Notarial Acts.”

The Rhode Island version of the Act defines “notarial act” as including “taking an acknowledgment, administering an oath or affirmation, taking a verification on oath or affirmation, witnessing or attesting a signature, certifying or attesting a copy, noting a protest of a negotiable instrument and transact, do and finish all matters and things relating to protests and protesting bills of exchange and promissory notes, and all other matters within their office required by law, take depositions as prescribed by law, and acknowledgments of deeds and other instruments.” The bill addresses the specific rules the notarial officer is required to verify the afore mentioned forms of verification. Also noted are the situations in which notarial officer may refuse to perform a notarial act.

The Florida Department of Financial Services has recently adopted provisions relating to fee waiver procedures for military personnel, veterans, and spouses seeking a loan originator license or renewal of a loan originator license. The new provisions waive the initial application, assessment, and renewal fees for current and former military members and their spouses or surviving spouses, who apply for or renew or reactivate a mortgage loan originator license or register as an associated person of a securities dealer or investment advisor.

Under the new provisions, military personnel, veterans, and spouses seeking a loan originator license or renewal or reactivation of a loan originator license are entitled to reimbursement of these fees. To obtain a reimbursement of licensure fees, a licensee must submit to the Office of Financial Regulation, via electronic filing through the Registry, a completed Office of Financial Regulation Active Military Member/Veteran/Spouse Fee Waiver and Military Service Verification, Form OFR-MIL-00. This form, available online, must be submitted within one hundred eighty days after payment of licensure fees.

The Captain called the Sergeant in.

“Sarge, I just got a telegram that Private Jones’ mother died yesterday.

Better go tell him and send him in to see me.”

So the Sergeant calls for his morning formation and lines up all the troops.

“Listen up, men!” yells the Sergeant. “Sonner, report to the mess hall for KP. McShea, report to Personnel to sign some papers. The rest of you men report to the Motor Pool for maintenance.

Oh, by the way, Grady, your mother died, report to the commander.”

Grady bursts into tears.

Later that day the Captain called the Sergeant into his office.

“Hey, Sarge, that was a pretty cold way to inform Grady his mother died. Couldn’t you be a bit more tactful next time?”

“Yes, sir,” answered the Sarge.

A few months later, the Captain called the Sergeant in again with, “Sarge, I just got a telegram that Private Gottfried’s mother died. You’d better go tell him and send him in to see me. This time be more tactful.”

So the Sergeant calls for his morning formation.

“Ok, men, fall in and listen up. Everybody with a mother, take two steps forward.”

“NOT SO FAST, Gottfried!”

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. The current blog is, “The Rise of the Credit Unions.” 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

(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2018 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.)