The CFPB on QM and Auto Financing; ALTA on Risk Policy and Closing Policies
Remember when pictures of your home weren't on the internet for everyone
to see? Those days are gone, and in fact now our residences are in snow globes
for the holidays.
(Thanks Mike H.)
Say what you want about Trulia, it just issued the results of a survey that has
Realtors and LO's cheering: 93% of renters between the ages of 18 and 34
plan to purchase a home someday.
So yes, 2013 is shaping up to another good year for the industry, and companies are staffing up. New England based Norcom Mortgage is seeking to expand its branch operations in all states in the Eastern time zone. Norcom (norcommortgage.com), is "one of the fastest growing lenders on the East Coast," and is seeking branch managers and talented loan officers that would benefit from working with Connecticut's # 2 purchase money lender. Norcom Mortgage was voted a "Top Work Place" by Fox Television and The Hartford Courant. The company is a direct Freddie Mac Seller Servicer and Ginnie Mae Issuer. Interested parties should contact: Joinnorcom@norcom-usa .com.
And on the other side of the nation, Ontario CA's 40-yr old mortgage
banker First Mortgage Corporation is looking for two key managers to aid
in its growth plans for 2013. It is on the search for an experienced individual
to head up production. The ideal candidate has a vast understanding
of FHA purchase business, is an excellent recruiter, and is local to the
corporate office. In addition, FMC is seeking an operations manager. This
individual must have well rounded business experience and understanding of
processing, underwriting, docs, funding, shipping and insuring. "Both
managers must be take charge personality types with the willingness to get
their hands dirty. FMC is an exceptionally well capitalized company and
provides excellent long-term stability to its employees." Please contact
Clem Ziroli, Jr. for a confidential interview, at czirolijr@firstmortgage .com.
"Rob, is anything going on in California with foreclosure law
changes on January 1?" Yes there will be changes, and what happens in
that state often happens elsewhere. Here is a quick little summary.
"What is going on with the CFPB and QM? Are we all supposed to jump to attention on January 21?" Scuttlebutt says that the industry can expect QM information some time in the 2nd week in January, along with LO comp changes (that may actually be for the better), and that these will occur during the 1st or 2nd quarter of 2013.
"Yo, when is the CFPB going to go after car dealer financing? Misery loves company!" Well, you could ask them. But as I understand it, as with any piece of major legislation, there was lots of wheeling and dealing before Dodd-Frank was passed. Because of the financial crisis, the focus was on the mortgage and banking industry. Sen. Brownback of Kansas and a few others insisted that auto dealers be exempted from Dodd-Frank and they got their way (see Sec. 1029 below). Yes, it is not fair, but "inequitable" is something that often happens when politics are involved. "Dodd Frank Act Section 1029: SEC. 1029. EXCLUSION FOR AUTO DEALERS. (a) SALE, SERVICING, AND LEASING OF MOTOR VEHICLES EXCLUDED.-Except as permitted in subsection (b), the Bureau may not exercise any rulemaking, supervisory, enforcement or any other authority, including any authority to order assessments, over a motor vehicle dealer that is predominantly engaged in the sale and servicing of motor vehicles, the leasing and servicing of motor vehicles, or both. (b) CERTAIN FUNCTIONS EXCEPTED.-Subsection (a) shall not apply to any person, to the extent that such person- (1) provides consumers with any services related to residential or commercial mortgages or self-financing transactions involving real property; (2) operates a line of business that involves the extension of retail credit or retail leases involving motor vehicles; and in which- (i) the extension of retail credit or retail leases are provided directly to consumers; and (ii) the contract governing such extension of retail credit or retail leases is not routinely assigned to an unaffiliated third party finance or leasing source; or (3) offers or provides a consumer financial product or service not involving or related to the sale, financing, leasing, rental, repair, refurbishment, maintenance, or other servicing of motor vehicles, motor vehicle parts, or any related or ancillary product or service." Read it and weep.
Regarding 2013, rating agencies Moody's Investor Service and Fitch Ratings offered up their opinions about what is ahead. "Private-label securitization activity will rise as investor demand increases and delinquency trends continue to develop. The residential mortgage backed securities market is expected to continue on its positive trajectory going into 2013, and private-label securitization activity will increase as investor demand rises and delinquency trends continue to improve in all credit sectors. Watch for continued securitizations from Redwood Trust and Barclays Capital. Origination activity was more than $1.5 trillion this year, with the majority of activity consisting of refinancings, though that is set to drop. The increase in RMBS volume is projected to help balance the magnitude of improvement in macroeconomic conditions and a continued increase of guarantees fees charged by Fannie Mae and Freddie Mac. Over the past year, the GSEs raised g-fees by 20 to 25 basis points through outright increases, loan-level risk-based fees and the removal of special pricing for many originators. G-fees are expected to rise by at least an additional 30 to 50 basis points to match recent private label execution in 2013, according to Bank of America Merrill Lynch - triple what the levels were a few years ago. Many expect origination volume to drop between 15% and 20% from this year levels, Fitch stated. The lower volume will be driven by a decline in refinancing activity, a reverse from this year, but purchases are supposed to make up at least one-half of all originations by the fourth quarter of 2013, compared to 25% in 2012.
Something else we'll see more of in 2013 are counterparty monitoring measures, especially in industries related to mortgage origination. For example, the National Association of Insurance Agents has established a task force to draft a white paper on title and escrow fraud and to examine the current practice of using the closing insurance letter in many states to offset risk of loss to consumers. Among others, ALTA provided an opinion letter addressing its recent development of best practice rules as a method of self-policing agent activity. The ALTA letter can be found at their website www.alta.org. The NAIC also encouraged commentary from the new independent vetting companies that have received a lot of attention and have spurred a nationwide discussion on agent vetting as a new risk management tool. Secure Settlements submitted a 10 page opinion letter that lays out its perspective on the future of risk management in the title and escrow closing area. It can be found in its entirety. Clearly insurance regulators are the latest government watchdogs to start bearing down on closing practices from a consumer protection standpoint. Together the NAIC and the CFPB are making more than a few title industry folks a little nervous about what lies ahead in 2013.
Here is some recent investor news to give us a flavor for what is going on out there. As always, read the full bulletin for complete details.
Fifth Third has clarified that in order for a second mortgage to be subordinated, the loan terms must be verified through a fully executed copy of the Note and an executed and recorded copy of the subordination agreement. Second liens that have been reduced or modified will require a copy of line reduction addendum or modification agreement as well.
As a reminder, Fifth Third is suspending all loans in the pipeline with incorrectly completed or missing HOEPA/HMDA Required Information forms and screenshots of a populated FFIEC rate spread calculator.
As per Fannie guidance, California's Mountain West Financial is allowing refinancing borrowers to include prepaid real estate taxes in the new loan provided that they're due within 60 days before or 60 days following the new loan's closing date. Any such taxes included in the new loan amount will require the borrower to set up an escrow account. MWF is requiring originators to obtain the borrower's written explanation and document the source of any large deposits reflected on the bank statement, also as per Fannie, unless the source of the deposit is easily identifiable (e.g. direct deposit). Any accounts opened within 90 days of the application date should also be investigated, as should deposits that are substantially larger than the average balance as reflected on the Verification of Deposit. With regards to retirement accounts, MWF has issued a reminder that accounts that allow limited access; have vesting requirements; carry heavy penalties for early withdrawals; or are in the form of stocks, bonds, or mutual funds require extra attention from originators when used for reserves. Accounts in the form of stocks, bonds, or mutual funds must be discounted by 30% for market volatility in order to be considered.
US Bank has updated its large deposit policy to require verification for any transaction that suggests the funds were borrowed or received from "unacceptable or undisclosed sources." The definition of "large deposit" has been clarified to refer to any deposit or aggregate of deposits made over the course of a month that exceeds the borrower's monthly income by 25% or more. Large deposits cannot be removed from the borrower's assets or reserved, must be entered into the relevant AUS, and should be accompanied by a written explanation and documentation of the source. The updated guidelines apply to any asset statement or VOD submitted as part of the underwriting file and affect all products.
Effective for all conventional loans, US Bank is not permitting refinancing of restructured/modified mortgage for delivery to Freddie or Fannie. This includes mortgage where the principal and/or interest has been forgiven, principal curtailment has been applied on behalf of the investor, any portion of the original debt has been fully forgiven over time or upon sale of the property, or the debt has been converted from secured to unsecured. Any loan that meets this definition is considered to be a restructured mortgage, as are mortgages that result from refinancing a restructured mortgage.
Turning to the markets, we ended the week with November's Industrial
Production, which gained +1.1% - the most in two years - mostly attributed to a
recovery in production for industries that had been negatively affected by
Hurricane Sandy. Capacity Utilization moved higher to 78.4% from 77.7% which is
below the long run average of 80.3%. But a lot happened last week. Most
significantly, on Wednesday the Federal Reserve announced that Operation
Twist ends this month but that the Fed will now add T-bonds to
its program of outright bond purchases (QE3). I guess we're okay with a little
inflation in order to try to help the unemployment rate move lower.
There are a lot of scheduled U.S. releases being crammed into the week
before Christmas. Today we have the Empire Manufacturing number. Tomorrow is
another gauge of house prices (from the NAHB) and on Friday more industry news
with the MBA's application numbers along with Housing Starts and Building
Permits. Thursday is Jobless Claims, the third look at 3rd quarter GDP, Existing
Home Sales, the Philly Fed, Leading Economic Indicators, AND another house
price index (FHFA). Lastly on Friday we have Personal Income and Spending, and
a couple PCE and University of Michigan numbers. The 10-yr appears nearly
unchanged from Friday's close, sitting around 1.71-1.72%, and look for MBS
prices and rate sheets to also be roughly unchanged.
Full body scans at the airport: the T.S.A. disclosed the official Airport
Screening Results.
October 2012 Statistics On Airport Screening From The Department Of Homeland
Security:
Terrorists Discovered 0
Transvestites 133
Hernias 1,485
Hemorrhoid Cases 3,172
Enlarged Prostates 8,249
Implants 59,350
Natural Blondes 3
It was also discovered that 335 members of Congress had no balls.