APOR Safe Harbor Site; Thoughts on LO Comp; It's Raining Servicing Packages
How 'bout that Chinese housing market? New home sales last year exceeded $1 trillion for the first time as property prices in cities the government considers "first tier" surged in the absence of more nationwide property curbs. (With my luck, I'd own property in the fourth or fifth tier.) The value of new homes sold in 2013 rose 27 percent from 2012. "Premier Li Keqiang hasn't imposed additional nationwide measures to cool the market since his predecessor Wen Jiabao stepped up a three-year campaign in March, ordering higher down payments and interest rates for second-home loans in cities with 'excessive fast' price gains. Instead, Li has left it up to individual cities to impose their own curbs, with at least 10, many of them provincial capitals, tightening local property policies since November. Shenzhen, Shanghai, and Guangzhou have all raised minimum down payments for second homes to 70 percent since November. China's existing-homes market is about one-third of new homes by sales because the nation only allowed private home ownership in 1998. The government doesn't release data on existing-home sales. (New and existing home sales in the U.S. were about $1.1 trillion last year.)
Let's see an appraiser tackle this one. Speaking of appraisals, I received this note from Molly Dowdy, EVP at the Mercury Network. "I'm sure you've watched Fannie Mae's recent announcements about the Appraiser Quality Monitoring program. They launched the site on the 7th. On that same day, a few of our lender customers started receiving notification letters about specific appraisers identified by Fannie Mae as needing 100% review of all reports submitted. We have redacted copies of those letters and I thought they would be very informative to your readers, as they highlight the issues Fannie Mae identified specifically and they give a very good idea of the GSE's pre-funding appraisal QC expectations. I haven't seen these available anywhere else yet, so I put everything together in a packet of information available for download at the link below. The packet also contains information about our Appraisal Quality Management solution as a good option for automating these QC reviews. Here's the link to download the packet."
Switching gears, Ken Sonner writes, "Here's an APOR reference site for Safe Harbor." Thanks Ken! And the latest CFPB revised consumer publications.
Last week the CFPB charged that Fidelity, a St. Louis-based non-depository mortgage lender, entered into an agreement with a bank in which the bank referred potential borrowers to Fidelity in exchange for kickbacks. The kickbacks were disguised as inflated lease payments for renting office space within the bank. The Real Estate Settlement Procedures Act (RESPA) prohibits giving and receiving kickbacks for referrals of settlement-service business involving federally-related mortgages. When companies pay kickbacks in exchange for referrals, it can hurt competition and inflate real estate settlement costs for consumers, while creating an uneven playing field that puts law-abiding businesses at a disadvantage.
Shutting down kickbacks is worthwhile but could be quite a challenge. It didn't take too much digging to find this credit union press release out in California. And there is this from the DOJ website: "Real estate agent or broker commission rebates to borrowers do not violate Section 8 of RESPA as long as no part of the commission rebate is tied to a referral of business." May a real estate agent rebate a portion of the agent's commission to the borrower? If so, how should the rebate be listed on the HUD-1? According to HUD, yes, real estate agents may rebate a portion of the agent's commission to the borrower in a real estate transaction. The rebate must be listed as a credit on page 1 of the HUD-1 in Lines 204-209 and the name of the party giving the credit must be identified. Real estate agent or broker commission rebates to borrowers do not violate Section 8 of RESPA as long as no part of the commission rebate is tied to a referral of business. (Remember that RESPA is now administered by the CFPB).
I am not a compliance officer, but it would seem Redwood Credit Union's rebate program seems to fly in the face of the DOJ, although I'm sure their lawyers have fully explored and done their due diligence on this. Or the policy has changed in the last 18 months. ("Focus on the rebate. In exchange for a referral pipeline of quality home buyers and sellers in their market, participating realtors provide a percentage of their commission back to members at closing. 'Promote the rebate as a tremendous member benefit,' said Friedman. 'It is the single, largest benefit a member can receive from a credit union. What else pays a member $1,000 or $2,000 at no cost to the credit union? There's no other benefit you can offer that provides that level of return to the member at one time.'")
When it rains, it pours. Either I am suddenly on the right e-mail distribution lists, or servicing packages are falling from the skies. Just from the last part of last week: "Phoenix Capital, Inc. (PCI) is pleased to present the following $25 million/month Fannie Mae A/A and $15 million/month Government flow mortgage servicing rights offering for your consideration, with opportunity for future growth. Seller is an independent mortgage banker established in 2003." "Mortgage Industry Advisory Corporation (MIAC), as exclusive representative for the seller, is pleased to offer for your review and consideration a $24.96 Million FNMA and GNMA mortgage servicing portfolio. The portfolio is being offered by a mortgage company that originates loans across a national geographic footprint. The Seller's desire is to execute the transaction without full representations and warranties for the loans included in this offering." "MountainView Servicing Group, LLC ("MountainView"), as exclusive sale advisor, is pleased to enclose for your review and consideration this $1.3 billion FNMA non-recourse servicing portfolio that is being made available to the national market. Loan-level data is available upon request." "Phoenix Capital, Inc. (PCI) is pleased to present the following $257 million Fannie Mae mortgage servicing rights offering for your consideration." "Mortgage Industry Advisory Corporation (MIAC), as exclusive representative for the Seller, is pleased to offer for your review and consideration a $669.22 Million FNMA and GNMA mortgage servicing portfolio. The portfolio is being offered by a mortgage company that originates loans across a North East geographic footprint. The Seller will be providing full representations and warranties for the loans included in this offering." "Phoenix Capital, Inc. (PCI) is pleased to present the following $465 million Fannie Mae and Freddie Mac mortgage servicing rights offering for your consideration. Seller is a well-capitalized bank averaging over $4.5B annual conventional production. Opportunity exists for incremental volume."
Saturday's commentary mentioned the employment status of loan originators ("Statutory Employees"). Steve S. wrote, "It is not allowed by HUD as you have to be an independent contractor and HUD requires you be an employee" - remember the HUD/FHA handbook requirement that an approved mortgagee must use W-2 employees to originate its FHA insured loans, not independent contractors. And Teresa M. contributed, "Regarding your question on Statutory Employees, you can go to IRS publication 15-A. This will give you your answer."
From Nevada, Primary Residential's SVP Burton Embry writes, "It continues to amaze me that companies are having such a hard time with LO compensation. We pay the same across the board regardless of loan type, whether it is a conventional, FHA, VA, or USDA loan which removes any incentive to push a consumer to one loan versus another. We pay the same for retail loans versus broker loans thereby removing any incentive to make a loan one way or another purely on a compensation motive. The basics of LO compensation are not that hard. However, and this is hugely important now, if I am an LO and my company can't figure out what to do on LO compensation or I think my company might be getting it wrong, it is important to know that effective this month, LOs can now be held personally liable for the violations committed by their company. LOs need to seriously think about that."
Let's see what some investors & vendors have been up to lately - it rarely remains constant.
Regarding New Penn's policy on lender paid and broker paid compensation, I received this correction from New Penn: "I noticed that you mentioned below that New Penn LO comp must be the same if either LPC or BPC. This is actually not the case. BPC can be any declaration the broker and the borrower agree to as long as BPC does not exceed the brokers declared LPC. (In addition, a broker may no longer reduce their BPC once the application is taken and the loan is disclosed, as this would be considered a concession.)"
Secure Settlements, Inc., a data intelligence and risk analytics company for the mortgage industry, announced an improvement in its proprietary Closing Agent Search Engine (CASE) tool. "Lenders access SSI's CASE tool, a national database of mortgage settlement agents with real-time risk statuses, to verify an agent's status prior to wiring mortgage proceeds. In 2013 this searchable database was accessed as a quality control measure prior to the closing of more than 122,000 loans nationwide and SSI expects usage to surpass 500,000 transactions by the end of 2014 as more lenders sign up for its risk tools. Starting January 6, 2014, lenders using the CASE tool will have the ability to create their own "My Agent List" unique to their company. This list will maintain basic information as well as risk data relevant to their specific settlement agents. The agent data will be updated in real time and can be exported or printed in the event a lender must demonstrate that they maintain a list for regulatory and government-sponsored enterprise audit and exam purposes. For example, Fannie Mae seller-servicers must be able to demonstrate that they maintain a list of approved and vetted agents as a condition of their FNMA relationship." For more information write to info@securesettlements.com.
Affiliated Mortgage is now requiring lenders to provide the most version of the Authorization for the Social Security Administration to Release Social Security Number Verification form (SSA-89, updated in June 2013).
Mortgage Information Services partnered with Ellie Mae to integrate its full line of products and service into Encompass360. This allows users to directly import title insurance commitments and policies, curative documents, HUD settlement statements, and appraisal reports into the LOS as well as securely upload documents into MIS's ProductionLink from Encompass360.
Yes, the bond markets are open again this morning, although there is no scheduled economic news. A quick look at the numbers shows that the "benchmark" 10-yr closed at a yield of 2.83% and this morning we're up to 2.86%, and agency MBS prices are worse about .250.