Lender Loosens Underwriting Regs; Early Check Eligibility Tool; Loan Production Conduit Breakdown
Tonight, or more specifically early tomorrow morning, the first day of northern winter, a full moon passes almost dead-center through Earth's shadow. For 72 minutes across North America, we will have a lunar eclipse to greet the winter, beginning tomorrow morning at 1:33 am EST (Monday at 10:33 pm PST). If you're planning to dash out for only one quick look - it is December, after all - choose this moment: 03:17 am EST (17 minutes past midnight PST). This is when the moon will be in deepest shadow, displaying the most fantastic shades of coppery red. And for more good news, today is the "shortest" day of the year, with the sunlight only lengthening after this.
Anyone looking, or knowing of someone looking, for originator jobs in Colorado should check into Colorado State Bank & Trust. Its Mortgage Group is hiring loan originators and sales managers for various offices throughout Colorado. (CSBT itself is a subsidiary of publicly traded BOK Financial Corporation, a $24 billion financial holding company that never took any TARP funds.) CSBT offers a solid range of products; including 100% LTV's with no MI, along with local processing, underwriting and closing. Interest applicants should contact Regional Manager Gary Tackett at gtackett@csbt.com or visit http://www.csbt.com/employment/ .
Flagstar unleashed a spate of changes for its clients which, in my opinion, are unusual since they represent a definite loosening of guidelines. The changes are several pages long, so reproducing all of them here is impractical. But here are some highlights. "We are pleased to announce we are relaxing or removing the following current FHA and/or VA loan overlays. Loans previously denied that now meet the guidelines published below may be resubmitted to underwriting. Unless otherwise noted, the revisions apply to all brokers and correspondents, including DE Delegated and VA Automatic Correspondents." Areas impacted include appraisal requirements, credit scores, Fannie's form 1004D, purchases of 3-4 unit properties, FHA rate and term refinances & VA cash-out transactions that do not provide cash-back to the borrower or consolidate non-mortgage debt - 2 unit property & 3-4 unit properties, borrowers without credit scores, VA Cash-Outs, repair escrow holdbacks for REO properties, maximum ratios for FHA loans, converting existing homes to rental properties, purchase of a two-unit property, etc.
For example, soon Flagstar will approve FHA loans for borrowers with credit scores between 620 and 639, subject to some overlays (including the property must be a single-family residence, condominium or PUD for loans less than $417k and the borrower have clean credit with no 30-day lates in the last 12 months). Properties located in declining markets will no longer require an appraisal from a Flagstar-approved Appraisal Management Company and purchases of FSBO properties no longer require an appraisal from a Flagstar-approved AMC unless the seller has owned the property less than 24 months - "Removal of these overlays applies to all VA IRRRL transactions and FHA loans requiring an appraisal, provided the correspondent is approved by Flagstar for FHA Appraisal Independence Compliance." And the 90-day property flipping requirement has been reduced to 30 days. Anyway, check the bulletin for all the specifics!
Bank of America correspondent clients were reminded that the subject property address on the Note must match the: Deed of Trust/Mortgage, Appraisal, Preliminary Title Report, and Property address entered into the AUS. (What did I miss in operations school - what company would not have the addresses match?) This requirement also applies to Condominiums, PUDs and Multi-family properties where a unit number is part of the address. "Failure to meet this requirement could result in the need for a correction to any or all of the documents listed above." In addition, BofA recognized the recent HUD condo recertification timelines and processes, saying "clients are encouraged to begin the re-approval or recertification process as early as possible as HUD does not anticipate that it will issue any further extensions of project approvals. If the case number was issued before the New Expiration Date, the condo does NOT have to be recertified and offices may proceed in fulfilling and closing the loan. Certification that the project meets the FHA minimum of 50% (correction to previous Correspondent Lending announcement) owner occupancy is still required on all loans."
Chase educated its correspondent clients that "'EarlyCheck' is a tool available to Fannie Mae approved sellers to identify potential delivery issues in advance of delivering pools to Fannie Mae. This tool includes both a loan eligibility check and a DU Comparison check to ensure that the terms of the closed loan match the terms of the final DU submission or fall within the tolerances listed in section B3-2-10 of the Fannie Mae Selling Guide. So in accordance with Fannie LQI initiatives, Chase will be performing an EarlyCheck review on Fannie Mae Fixed and ARM transactions. This review is intended to assist both Correspondents and Chase in ensuring the highest quality of loan data at time of loan delivery." Chase also clarified its LTV/CLTV calculations. "Under the new LTV/CLTV calculation method, the result of the LTV/CLTV ratio calculation will be truncated to two decimal places. The truncated results will then be rounded to the next whole percent."
GMAC Bank Correspondent Funding (GMACB) told its non-delegated clients that GMACB is "now accepting and reviewing recertification and re-approval requests for condominium projects whose FHA approval are set to expire or have already expired. Condominium recertification will renew the project's FHA approval status for a two-year period. FHA has recently announced the following schedule of approval expiration dates for projects listed on the FHA Approved Condominium List."
CitiMortgage released its set of overlays to correspondents. It is good to have these in a standard format, and by this time practically everyone in the business realizes that investor overlays are a sign of the times.
While we wait for the Fed to respond to the MBA's letter on compensation, here's a question for folks: "Brokers use many lenders, but originators working for brokers must not be able to derive a larger benefit from one lender over another, right? That would mean that all broker-lender agreements would have to be the same, effectively ending competition. Or can the mortgage company make a higher profit from one lender vs. another, it just cannot pass additional compensation to the loan officer?"
One executive reminded us, "Lenders should remember that monies received by the broker directly from the borrower or from the proceeds of a higher loan amount, 72% LTV versus 70% LTV, are excluded from the LO Comp rules, therefore are not subject to a consistent payment. The concern here with varying comp in this situation is not with the LO Comp rules, it's with fair lending rules."
The latest volume figures for loan brokers are not much to cheer about - if you're a broker. "According to exclusive survey figures compiled by National Mortgage News and the Quarterly Data Report, the wholesale/broker loan channel accounted for 11.6% of originations in 3Q, compared to 10.5% in the second quarter, a period in which broker-sourced loans fell to an all-time low in terms of market share. In 3Q all mortgage bankers funded $444 billion of product, the industry's best quarter since the second quarter of 2009." The top three wholesale purchasers were Wells, Provident (CA), and US Bank. Of course, here we get into the odd statistical world of counting mortgages: the survey showed that retail production was about 47% of volume, and correspondent production was 41% - but of course correspondent production includes TPO business... Regardless of counting, the National Association of Mortgage Brokers has roughly 5,000 members compared to 25,000 four years ago. READ MORE ABOUT THE DOUBLE COUNTING
This week we will see some economic news ahead of Christmas Eve on Friday. Economic data highlights include existing and new home sales for November, plus personal income and spending data and durable goods orders for November. Also due is the final estimate of third quarter's GDP. One trader wrote, "Expect the fireworks to continue this week with many market participants out as the holiday season approaches, which should further hamper liquidity." For now, however, the yield on the 10-yr is back down to 3.27% and MBS prices are better by about .375.
FULL CALENDAR FOR THE WEEK AHEAD
An elderly man is stopped by the police around 1 a.m. and is asked where he is going at this time of night.
The man replies: "I am going to a lecture about alcohol abuse, the effects it has on the human body, and its consequences."
The officer then asks: "Really? Who is giving that lecture at this time of night?"
The man replies: "My wife."