All Cash Purchases Increase; VA's Final Rule for Vets to Avoid Foreclosure; HUD's Settlement with FNF Provides a RESPA Lesson

The U.S. Census Bureau projected the Jan. 1, 2012, total United States population at 312,780,968. This would represent an increase of 2,250,129, or 0.7 percent, from New Year's Day 2011. In January 2012, one birth is expected to occur every eight seconds in the United States and one death every 12 seconds. Meanwhile, net international migration is expected to add one person to the U.S. population every 46 seconds in January 2012. The combination of births, deaths, and net international migration result in an increase in the total U.S. population of one person every 17 seconds - something that originators and Realtors like to hear.

Some people think CNBC's Jim Cramer is smart while others seem him as an over-energetic entertainer (at best). Regardless, he certainly seems to like Wells Fargo's mortgage channel. While we're on Wells, its economic team notes that "Most of the economic reports dealing with housing have shown a little more strength recently. New home sales rose, sales of existing homes climbed, and new home construction has also improved lately. Low mortgage rates, an improving job market, and some reported easing in mortgage underwriting standards has raised hopes that the momentum will carry over into 2012. The news has not been universally positive. The latest S&P/Case-Shiller data shows price declines accelerating in October. The 20-city index fell 0.6 percent in October and has tumbled at a 6.4 percent pace over the past three months. Home prices are down 3.4 percent over the past year. Moreover, price declines have been fairly widespread, with 16 of the 20 markets surveyed reporting price declines in October. The sharp drop in home prices over the past three months should raise some caution flags for those expecting dramatic gains in 2012. That said, 2012 will be a better year. We have slightly increased our forecast for the next two years, which marks the first time we have raised our expectations for housing in any significant way in well over a year."

But what's good for housing isn't always good for those in the mortgage business. Despite record low mortgage rates, 2011 has seen a surprisingly high level of cash home purchases, according to the real estate research firm Hanley Wood Market Intelligence. Analysts say tight lending standards and a search for yield by investors (NOO purchases) has driven all cash purchases of homes higher. Per the report, 38% of homes purchased in 2011 were bought with all cash, up from 34% in 2010, and double the 19% rate in 2006.

A better housing market would certainly help the housing agencies. "So where ultimately do Fannie and Freddie rank amid the confluence of ridiculous subsidies, private-sector opportunism and ungovernable global capital flows that contributed to the crisis? Who knows exactly, but the exaggerated ferocity of the debate lately is a reliable Washington hallmark of an argument fading into irrelevancy. The financial crisis isn't over, and around the world the problem is not housing but governments whose commitments far exceed their resources." So noted this editorial in the Wall Street Journal.

Another agency, HUD, recently entered into a settlement agreement with Fidelity National Financial, Inc. (FNF) based on allegations that FNF failed to comply with Federal Real Estate Settlement Procedures Act (RESPA). Specifically, HUD alleged that FNF, through its subsidiaries, paid fees for the referral of settlement service business in violation of RESPA. Real estate brokerages entered into Application Service Provider Agreements which provided the real estate brokerages with access to TransactionPoint, a web-based platform that automates the real estate transaction from listing to closing, and allows the real estate brokers to select real estate settlement providers for a particular real estate transaction. The real estate brokerages, in turn, entered into Sub-License Agreements with subsidiaries of FNF to enable FNF's subsidiaries to be listed in TransactionPoint as a provider of the settlement services. As part of the Sub-License Agreement, HUD alleged that FNF's subsidiaries paid the real estate brokers a fee for each referral of real estate settlement services. While FNF did not admit wrong-doing in the case, it agreed to make a payment to HUD for $4.5 million to resolve the matter.

I wonder what I would think if my daughter came to me and said, "I didn't do anything wrong, but I will pay for the auto body work to repair the big dent." This case should serve as an educational tool and reminder for real estate licensees. Licensees must be careful when entering into arrangements with settlement providers or their affiliates that result in compensation back to the licensee. Great care is needed when engaging in transactions with settlement service providers that result in payments for orders placed with those providers. If a real estate licensee is offered some type of benefit or payment to steer business to a settlement provider, a licensee should not take the word of the entity or person who makes the offer that the activity is RESPA compliant. Every licensee must do his or her own research to ensure any offer from a settlement service provider is RESPA-compliant. A simple start is to ask the service provider if a legal analysis that their activity is RESPA-compliant has been done and, if so, get a copy of the analysis. Every licensee should also follow up with his or her own counsel and HUD before entering into any agreement with a settlement service provider that will provide any type of benefit to the licensee. If a real estate licensee is found by HUD to have violated RESPA, the finding of a violation may be used by the Department of Real Estate as a basis for disciplinary action.

Remember your RESPA lessons: Section 8(a) (12 U.S.C. Section 2607(a)) provides that: "No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement to or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person." And 8(b) says, ""No person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed."

Right before Christmas the OCC, the Federal Reserve Board, and the FDIC amended their Community Reinvestment Act (CRA) regulations to adjust the asset-size thresholds used to define "small" and "intermediate" banks and savings associations. (I know - you were lying awake at night worrying about this.) Going forward, banks and savings associations that, in either of the prior two calendar years, had assets of less than $1.16 billion are considered ''small banks'' or ''small savings associations''; small banks or savings associations with assets between $290 million and $1.16 billion as of December 31 of either of the prior two calendar years are considered ''intermediate." As required by the CRA regulations, the annual adjustments to the threshold amounts were based on the annual percentage change in the Consumer Price Index.  For a copy of the amended regulations, please see http://www.gpo.gov/fdsys/pkg/FR-2011-12-22/pdf/2011-32727.pdf.

Also right before Christmas the VA published a final rule designed to loosen loan modification requirements and broaden options for helping veterans avoid foreclosure. The final rule follows and modifies an interim final rule published in February 2011. "Under the final rule, the maximum interest rate allowable on a modified loan is determined as of the date the modification is approved, as opposed to the date the modification is executed. The final rule also (i) authorizes actually incurred foreclosure costs to be capitalized into a modified loan balance, and (ii) provides clarification as to when the holder of a loan may seek VA approval for a modification." For a copy of the VA's final rule, please see http://www.gpo.gov/fdsys/pkg/FR-2011-12-20/pdf/2011-32528.pdf.

Hopefully the markets behave themselves this week, since many folks are still out on vacation. Looking back to Friday, a short trading day, the 10-yr improved again down to a yield of 1.87%. In fact, its yield dropped practically every day leading up to the New Year's weekend. One can attribute it to continued demand (much of it from the Fed), a lack of mortgage banker supply, or half-staffed companies - but mortgage banks and Realtors are not complaining.

This morning, however, we find the 10-yr higher by 7 basis points to yield 1.94% and MBS prices worse by .125-.250. Most of this is attributable to overseas markets, with perhaps some risk "coming out" of the market.  For U.S. economic news today we have Construction Spending, ISM Manufacturing, and the minutes of the last FOMC meeting, tomorrow is Factory Orders, Thursday is ADP Employment, Initial Jobless Claims, and ISM Non-Manf., and then on Friday is Nonfarm Payrolls & the Unemployment Rate.

Sherlock Holmes and Dr. Watson go on a camping trip.  After a good dinner and a bottle of wine, they retire for the night, and go to sleep.
Some hours later, Holmes wakes up and nudges his faithful friend. "Watson, look up at the sky and tell me what you see."
"I see millions and millions of stars, Holmes" replies Watson.
"And what do you deduce from that?"
Watson ponders for a minute.
"Well, astronomically, it tells me that there are millions of galaxies and potentially billions of planets.  Astrologically, I observe that Saturn is in Leo.  Horologically, I deduce that the time is approximately a quarter past three.  Meteorologically, I suspect that we will have a beautiful day tomorrow.  Theologically, I can see that God is all powerful, and that we are a small and insignificant part of the universe...  What does it tell you, Holmes?"
Holmes is silent for a moment. "Watson, you idiot!" he says.  "Someone has stolen our tent!"

If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog discusses the time frames for borrowers returning to A-paper status after a short sale or foreclosure. 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.