Adios Home Savings of America; An Issue of MI and Investor Documentation and Underwriting Changes
Up in Georgia, Central Bank of Georgia was closed by the Georgia Department of Banking and Finance, which appointed the FDIC as receiver, which in turn entered into a purchase and assumption agreement with Ameris Bank to assume all of the deposits of Central Bank.
But that wasn't the big news Friday - one financial institution was not so fortunate. Home Savings of America, which was established during the depths of the Great Depression and headquartered in Minnesota, was closed by regulators. It was a relatively small bank with under $100 million in assets until 2004, but, as with some other lenders, became addicted to production and "ramped up it's lending at an incredible pace starting in 2005 and by 2008 (the peak of the real estate bubble), the Bank's assets had exploded to almost $450 million." The OCC noted that the Bank "had experienced substantial dissipation of assets and earnings due to unsafe or unsound practices." The OCC had issued a Cease and Desist Order to Home Savings in July 2010 citing "unsafe and unsound practices" but the Bank was unable to cure the operational and financial deficiencies cited by the OCC.
There are other investor/lender items to note over the past couple of weeks. This is meant to give you a flavor of changes; for specifics one should always read the bulletin. In no particular order:
Upon
seeing an increase in rejections, Wells
Fargo reminds their wholesale clients to be diligent with their IRS Form
4506 T requests. There are a number of reasons for this rise in
rejections: the borrower's address must match the one on their IRS records for
the filing year, there have been problems with handwritten forms being
ineligible, and Wells encourages you to use type font or bold print, make
certain that the borrower has filed tax returns with the correct name, Social
Security number and filing status so that they are readily available, Box 8
(W-2 authorization) must be checked, and the address and phone number should
not be included in line 5, which should only include the words "rapid
reporting." Wells has a new search tool on its Broker's First website to access
information about condo projects.
Wells also reminds Texan clients that agricultural loans are ineligible for
financing without affirmative title coverage over the tax rollback risk. Brokers
are also reminded that refinance transactions with existing subordinate
financing remaining require a subordination, which goes for all properties
everywhere-even (Wells emphasizes this) in Texas.
There are a few modifications to the new MERS guidelines Wells provided earlier that will go into effect tomorrow. Lenders will need to enter assignment information for non-MOM loans and Security Instrument information for MOM loans upon registering, and non-MOM loans must be registered within 7 days of the effective transfer date. Check the bulletin for details.
Another Wells Fargo reminder: sellers must include proof of Hazard insurance policy must be submitted within the Closed Loan Package in the form of a declarations page, a certificate of coverage, evidence of property insurance, and an insurance binder. For FHA loans, copies of documentation regarding termite/pest inspections must also be included.
While Guaranteed Rural Refinance Pilot loans are not currently eligible for purchase by Wells funding, plans for a Single Family Housing Guaranteed Loan Program Rural Refinance Pilot as outlined in a Rural Development Administrative Notice are currently under review. Watch this space, but hold off on delivering RRP loans for now.
A few weeks back Pinnacle Capital reminded clients that 2011 W2's are now required, and that 2011 tax returns or a copy of a tax extension will be required after April 17 (the tax filing deadline). Lastly, 2106 expenses are deducted from income. If borrower has a history of 2106 expenses and files 2011 with NO 2106 expenses, a DOCUMENTED reason for the change is required and subject to underwriter discretion. The lender has updated LTV and CLTV caps for Enhanced DU Refi Plus loans to 120%; those loans whose LTV and CLTV ratios exceed the cap must fund by February 29th. Borrower benefits have been expanded on standard DU Refi Plus loans as well. For VA loans, 2-4 housing units are now eligible for high balance transactions.
On February 10th Kinecta began charging for appraisals at the beginning of transactions (three days after their initial disclosures, to be precise) rather than the end, as they had previously done. Borrowers can pay with their personal credit cards and must submit the Appraisal Fee Authorization form. In an effort to speed up the process of closing loans in the western states, Kinecta is implementing a new loan condition approval process whereby the majority of Prior to Funding (PTF) conditions will become Prior to Document (PTD) conditions. From now on the only acceptable PTF conditions will be paid receipts for Hazard insurance, Hazard insurance that includes Kinecta FCU as the first mortgagee, final estimated HUD 1, verification of taxes paid, 442 inspections and photos, minor internal appraisal corrections, signed 1003s or FHA 92900s, pest report clearance, proof of receipt of funds by escrow or title, and conditions that are more instructional.
United Guaranty consolidated their reference guide as of February 13th, eliminating the need to determine the market in which your loan is using the Geographic Quality Index. Guidelines for Max LTVs, Minimum FICOs, Max DTIs, Max Loan Amounts and Occupancy will be the same regardless of GQX ranking. New pricing also comes into effect on the 13th, and clients are urged to secure their quotes. The MI company has announced that loans originated and closed using the CoverEdge underwriting process are now eligible for sale to Fannie and Freddie. CoverEdge, which is designed to limit mortgage insurance rescissions, involves a credit and documentation analysis upon the loan's origination and closing and addresses loan attributes changing before closing, underwriting issues, fraud and misrepresentation, and lack of proper documentation, all of which can result in denials and payment delays upon filing.
A rule proposed by HUD banning discrimination against borrowers based on sexual orientation, gender, or marital status has been finalized and is scheduled to go into effect on March 5, 2012. HUD is also concerned that agencies who are currently implementing their chosen client management systems (CMS) are providing full Social Security numbers to the online Housing Counseling System (HCS) when this is not necessary. A partial SSN is perfectly sufficient.
DO/DU customers were recently notified by Fannie Mae that the Social Security Numbers used in their test cases have been changed and that they should now start using the new SSNs posted on the website. Test files should be updated, as using the previous SSNs provided will result in loans failing AUS as of the second quarter of 2012. For anyone lending in Puerto Rico, there are no high-cost areas on the island as of 2012, which is now indicated on Fannie's high-cost table.
Freddie Mac has set down new requirements for non-assumable Guaranteed Rural Housing mortgages. All non-assumable Rural Housing Service Section 502 GRH mortgages with post-June 1, 2012 settlement dates must be sold back to Freddie. Selling these mortgages will require written approval from Freddie, but this will eliminate the need to have an Indicator Score of at least 620. Freddie has also tweaked some terminology in The Single-Family Seller/Servicer Guide due to the alignment of the age of documentation requirements. The terms "Mortgages for Newly Constructed Homes" or "Newly Built Home Mortgage" will no longer be featured, so Chapter K33 is now Construction and Renovation Mortgages.
The Uniform Collateral Data Portal requirement for universal use is just around the corner, and Freddie reminds lenders that appraisal report forms must be submitted to the UCDP for all conventional mortgages whose applications were made after December 1, 2011. To familiarize yourself with UCDP, you can do one of the self-paced training courses on the Freddie Mac website.
Under the SEC's 15Ga-1, both Fannie and Freddie have been required to publicly disclose data about mortgages with repurchase activity from January 1, 2009 to December 31, 2011, which may have included information about sellers' organizations. The rule, which is part of Dodd-Frank, mandates that all securitizers release information regarding ABS loan repurchase requests, which the identity of the originator. Starting in autumn of 2012, mortgages with applications received after August 1, 2012 will be subject to the use of Uniform Loan Delivery Dataset (ULDD) data points as well. The ULDD data points will be used by Freddie to identify who is funding the mortgage and the information will be included in future reporting to the SEC.
Chicagoans, this one is for you: Freddie has published the necessary requirements for payment and expenses related to the Vacant Property Ordinance. You are now required to submit expense reimbursement requests for registration fees, taxes, fines, penalties and maintenance obligations to the Freddie Mac Reimbursement System. The full list of expenses that must be submitted as well as loss mitigation requirements can be found in Freddie's February 15th bulletin.
Clients of Flagstar are reminded that all Original Mortgagee (MOM) loans must be originated by a MERS member and that the system is undergoing some changes. The system registry will require the ORG ID as of June 4, 2012 and will begin accepting them on February 27th (next Monday). For the California-based lenders, Flagstar has issued a notice that the VA requires you to comply with state law when charging daily interest on Guaranteed loans before disbursement of the mortgage funds. Lastly, the maximum loan calculations for all FHA Streamlines are now the same whether or not they have appraisals. Flagstar borrowers should know that they won't be able to convert FHA appraisals to Conventional; in fact, they shouldn't be ordering FHA appraisals to determine value to determine whether the file will go FHA or Conventional in the first place.
MGIC has expanded a number of underwriting requirements that have gone into effect in the past couple of weeks. A DU or LP Accept/Eligible response will now be for the purposes of calculating reserve requirements, income and asset requirements, and credit analysis, while Construction loans still follow purchase or rate-and-terms guidelines. For "Non-restricted Markets," an eligible credit score will require a 45% DTI ratio; for both Restricted and Nonrestricted Markets, the second home loan requirements have been modified and the LTV limit on rate-and-term refinances has been increased.
At US Bank, new locks taken on HASP/HARP loans after February 13 are eligible for the new Delivery Fee Cap reductions. For amortization of 20 years of less, the fee is waived completely; for amortization of more than 20 years, the cap has been reduced to .75%. Be aware that the reductions are only in effect for loans with LTVs of greater than 80% on Owner-Occupied and Second Home properties. Freddie & Fannie fixed & adjustable rate loans that were locked before January 3rd and were not received by US Bank by February 17th are subject to fees for failing to meet good delivery requirements. The fees are calculated based on how many days or weeks late the loans are.
Fifth Third reminds lenders that it doesn't accept broker-ordered appraisals apart from those placed by brokers using a lending platform. As per AIR requirements, mortgage brokers may facilitate the mortgage application, but they cannot order the appraisal themselves.
The local news station was interviewing an 80-year-old lady because she had just gotten married -- for the fourth time. The interviewer asked her questions about her life, about what it felt like to be marrying again at 80, and then about her new husband's occupation.
"He's a funeral director," she answered.
"Interesting," the newsman thought. He then asked her if she wouldn't mind telling him a little about her first three husbands and what they did for a living.
She paused for a few moments, needing time to reflect on all those years. After a short time, a smile came to her face and she answered proudly, explaining that she'd first married a banker when she was in her early 20's, then a circus ringmaster when in her 40's, later on a preacher when in her 60's, and now in her 80's, a funeral director.
The interviewer, quite astonished, asked why she had married four men with such diverse careers.
She smiled and explained, "I married one for the money, two for the show, three to get ready, and four to go."
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 role of rating agencies in the current environment. 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.