Oct. 20: Mortgage products & jobs; non-QM & expanded products; if Agencies go to 97% will lenders & MI companies follow?

I brought a set of workout clothes to the MBA conference, which turned out to be a waste because we’re all burning lots of calories dashing to meetings in this immense hotel-conference center. I decided to venture into the Business Center at the Mandalay Bay Hotel and Casino. It’s a small, windowless room equipped with a PC, a Mac, a LaserJet printer and a tray filled with pads, pens, Post-it notes, paper clips, rubber bands, a stapler, a tape dispenser, and a ruler. It is a perfect place to do business if your business is writing episodes of MacGyver.


Under the “innovative products & positions available” banner, this autumn the Norcom Mortgage Marketing team won the New England Financial Marketing Award by completing a television program about the FHA 203K. The television show not only profiles the 203k product, it actually takes a property through the 203k process to show what you can do with this amazing product. And if you are a loan officer or a branch manager looking to join a team with an award winning and innovative marketing group, please visit the Norcom website or contact Tyler@norcom-USA.com.


In the “job sector”, 3,000 miles away in Wine Country First Priority Financial is seeking an Underwriting Manager to direct its team of 11 DE underwriters and 5 junior underwriters. The position may work from either its Fairfield corporate office or its Santa Rosa, CA mortgage banking center. The successful candidate will have a minimum of five years underwriting experience, plus five years’ management experience. The key attributes FPF is seeking are proven leadership and communication skills, plus detailed knowledge of investor guidelines. This highly-visible position reports to the Operations Manager and, combined with the CEO and EVP, completes the FPF Loan Committee. First Priority is a retail mortgage banker with 230 loan officers in CA, WA, OR, ID, IA and OH. Its low HUD Compare Ratio speaks to a commitment to quality originations.  FPF pays a competitive salary with full benefits including dental, vision and 401-K.  For confidential consideration please write to Pam Geiss.


Many companies use the MBA’s conferences to make major announcements. This one is no exception, and news broke late last week that Fannie & Freddie will introduce 3% down payment loan programs. Of course, aggregators such as Wells & Chase will take time to think out their policies and procedures, as will the mortgage insurance companies. And any servicing investor will bid these back. But the move is certainly a nod toward the government wanting to boost mortgage lending, Dow Jones reports. Not only that, but they are also close to agreement that could reduce lender penalties.


Mel Watt is expected to discuss F&F heading up the LTV curve and more into other credit buckets (my words, not his). Clea Benson with Bloomberg writes, “A U.S. housing regulator plans new steps to encourage banks to lend to buyers with less than- perfect credit scores…Melvin L. Watt, the director of the Federal Housing Finance Agency, will clarify in a speech when banks are required to buy back failing loans from Fannie Mae and Freddie Mac…Lenders have complained they’re hesitant to offer mortgages to riskier buyers, because it’s unclear what triggers requirements that they repurchase loans that go bad…Watt will also discuss an effort that would allow borrowers to put down as little as 3 percent of the purchase price on loans backed by Fannie Mae and Freddie Mac. Under current rules, lenders are permanently exempted from buybacks on loans with a three-year clean payment history…Watt’s announcement is part of an effort to encourage banks to ease credit and follows a series of steps he first described in May.”


The latest Fannie Mae Lender Sentiment Survey discusses compliance costs and how much it costs. Most lenders (72%) reported that recent regulations have had a “significant” effect on their business. Critics ask what the Agencies are doing about that. Mid-sized lenders reported a 50% increase in compliance spending. Note that most lenders are worried more about compliance risk than volume decrease risk.


Let me know when all of this starts reminding folks of 2004, or even 2001 when Cuomo encouraged increasing home ownership. Of course it will take a while for aggregators to go along for the ride, although many depository banks have been at 97% for portfolio products for quite some time. And the big guys have already removed dozens of credit overlays. And why not – Fannie and Freddie have gained immense market share with small and mid-size lenders already, and the Wells and Chases of the world have to compete. LOs, when thinking about making a move, will tend toward the companies that will close these loans. So good mortgage companies lose originators – a wonderful spiral. On the other side of the fence are lenders grappling with buybacks from the Agencies – they will be much less inclined to increase LTVs or accept lower credit scores based on a “flawed GSE academic theory of increasing home ownership rates” (as one CEO who wrote to me observed). And lenders just want buyback criteria better spelled out!


Congress, of course, has been unable to do anything by itself in terms of GSE reform. So the MBA, FHFA, and others are taking matters into their own hands. Eliminating F&F without an effective replacement would devastate the market, so let’s change them to suit the marketplace. Those in the trenches – LOs – know that Freddie & Fannie have policies, procedures, intellectual capital, and so on – there is little use in trashing them. Probably better to change their structures of governance and combining private shareholding with politically-determined operating targets. In the primary markets, F&F have DU and LP – is someone going to step in and replace those? F&F have not gone directly to the borrower as feared by many years ago. They are not geared for it, and I am sure realizing that their clients would not like the competition.


But let’s play some catch-up on relatively recent Agency changes…


Bulletin 2014-17 announced the following Freddie Mac servicing updates: Updated eligibility requirements for Freddie Mac Streamlined Modifications including the removal of the 720-day delinquency cap so more eligible borrowers have the opportunity to modify their loans and stay in their homes, effective April 1, 2015. Modification eligibility has been opened to borrowers with mortgages under non-routine litigation, applies to Freddie Mac Standard Modifications, Streamlined Modifications, and Capitalization and Extension Modifications for Disaster Relief, Effective April 1, 2015.


This Announcement updates the eligibility guidelines for Fannie Mae Streamlined Modifications, revises the modification eligibility of mortgages subject to active non-routine litigation, and addresses foreclosure proceedings conducted in Fannie Mae’s name. In addition, the Delinquency Status Code Hierarchy and Definitions has been updated and is available on the Business Portal. Fannie Mae Announcement includes adding a new policy allowing third-party vendor verifications of asset and depository information; Changes and clarifications to the rental income policy along with the publication of three rental income worksheets with step-by-step guidance to assist lenders in calculating rental income, and so on.


Statistics show that the fastest growing group of homebuyers in the United States is Hispanics. Freddie Mac has tools and resources available published as trends and valuable information. September is Hispanic Heritage Month – a great time to focus on this growing market. Help your customers achieve their homeownership goals with its CreditSmart® Consumer Online Training, available in English and Spanish. Feedback helped develop the Freddie Mac Default Fee Appeal System, which will eliminate the manual appeals process. Available October 27, this new online tool will allow submission of appeals for foreclosure timeline compensatory fees online. In order to make loan modifications easier to process, the Freddie Mac Reimbursement System has been updated to include the ability to be reimbursed for recordation fees, title costs, notary fees, and Home Value Explorer® expenses on all loan modifications and the Trial Period Plan timelines has been extended up to 12 months total for borrowers in bankruptcy.


Fannie Mae plans to implement Desktop Underwriter® (DU®) Version 9.2 the weekend of Dec. 13. The updates will include LTV, CLTV, and HCLTV ratio updates for cash-out refinance transactions, a new multiple financed properties message, a new pending sale property message, a change to the DU treatment of life insurance assets, removal of retired ARM plans, HFA message updates, changes to the DU Underwriting Findings report, excessive value message modifications, updates to align with the Selling Guide, and the retirement of DU Version 9.0. Review the DU Version 9.2 Release Notes for additional information. EarlyCheck™ Version 2.5 will be implemented the weekend of Dec. 13. The EarlyCheck release will include new and modified edits and a few edit deactivations. The majority of new edits in this release will provide lenders with access to acquisition edits that occur after a loan is submitted via Loan Delivery (post-submission acquisition edits) or a preview of Uniform Loan Delivery Dataset (ULDD) Phase 2 edits in advance of their implementation in Loan Delivery. View the EarlyCheck Release Notes for more information.


Freddie Mac Loan Prospector® enhancements to be released on October 19 will provide transparency into Loan Prospector liabilities excluded from the debt calculation. This enables you to reconcile to the DTI calculation and ensure its accuracy. Reminder: Changes to the determination of total debt and related new messages apply to all new Loan Prospector submissions on or after implementation. Loan Prospector® will be updated by November 24, 2014, to support the changes to the Home Possible Mortgage requirements. Single-Family Seller/Servicer Guide (Guide) Bulletin 2014-18 has the details on the enhancements, effective for mortgages with settlement dates on or after November 24, 2014.


Turning to lenders…


On Q Financial, Inc., is introducing non-QM loan programs. “On Q’s new non-QM loan products include solutions for self-employed or recently retired borrowers, individuals with a short credit history or flawed credit from a past short sale or foreclosure. On Q will also be offering debt-to-income ratios up to 50% on certain products and introducing a 40 year amortization Jumbo loan with an interest-only option in the weeks to come. In addition, On Q, a FNMA, FHMC and GNMA approved seller/servicer is also relaxing its underwriting credit overlays.”


AMX, A Division of Land Home Financial Services is now Land Home Financial Services Wholesale Division (LHFSW). LHFSWholesale posted Prior Derogatory Credit Event fact sheet summarizing the previous and revised policies of Fannie Mae’s updated policy, and includes borrower scenarios for a previous short sale or deed-in-lieu of foreclosure.


Effective on all loan documents currently being drawn, LHFS Wholesale will require the 1st half 2014-2015 taxes to be paid at closing.


Impac Mortgage Corp. Correspondent has an innovative bank statement program product which serves the self-employed. Unique features for borrowers include: Up to 50% DTI, down to 680 FICO, 5/1, 7/1, 10/1 ARMs, LTVs up to 80%, Cash out up to $350,000 on primary home, Loan amounts up to $2M.


LDWholesale announced a New Jumbo Product. Loan amounts up to $3,000,000, 2-4 unit loans available, cash out refi’s on second homes and investment property permitted to $1,000,000 for purchase and rate term refi’s.


JMAC Lending Inc. recently announced three innovative products: Malibu 5/1 ARM Jumbo with high LTV, Malibu Expanded I and II (30 Year Fixed and 7/1 ARM), and Sonoma Jumbos & Sonoma Investment.


Shifting gears to the markets, this week is light on the economic calendar. We have zip today; tomorrow is Existing Home Sales (measuring the total number of previously constructed homes in which a sales closed in the previous month). Wednesday is the Consumer Price Index – does anyone care about inflation anymore? Thursday is weekly Jobless Claims, Leading Economic Indicators, and the FHFA House Price Index, and on Friday we’ll have New Home Sales. Friday we had a 2.20% close on the 10-yr yield, and in the early going today we’re roughly unchanged.



One Sunday, in counting the money in the weekly offering, the pastor of a small church found a pink envelope containing $1,000. It happened again the next week!

The following Sunday, he watched as the offering was collected and saw an elderly woman put the distinctive pink envelope on the plate. This went on for weeks until the pastor, overcome by curiosity, approached her.

“Ma’am, I couldn’t help but notice that you put $1,000 a week in the collection plate,” he stated.

“Why, yes,” she replied, “every week my son sends me money, and I give some of it to the church.”

The pastor replied, “That’s wonderful. But $1,000 is a lot; are you sure you can afford this? How much does he send you?”

The elderly woman answered, “$10,000 a week.”

The pastor was amazed. “Your son is very successful; what does he do for a living?”

“He is a veterinarian,” she answered.

“That’s an honorable profession, but I had no idea they made that much money,” the pastor said. “Where does he practice?”

The woman answered proudly, “In Nevada. He has two cat houses, one in Las Vegas and one in Reno.”





(Copyright 2014 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.)

Rob Chrisman