CFPB Disclosure Form News; Create Your Freddie User Profile; How is April Looking for Lenders?
Tommy LaSorda supposedly said, "I found out that it's not good to talk about my troubles: 80% of the people who hear them don't care and the other 20% are glad you're having trouble." Many mortgage banking analysts are concerned about percentages - and everyone is doing their best to not end up being a carcass by the side of the road. The smartest guys in the room are saying, "Estimate that 1Q14 mortgage volume will come in at roughly $225 billion...While the MBA mortgage applications index is down an average of roughly 5% in 1Q, it was down by closer to 25% for the period from mid-November 2013 to mid-February 2014, which should drive 1Q14 closings....decreasing earnings estimates for title insurers...modeling in a roughly 25% decline in industry mortgage volume...modeling in more modest declines for most companies in this sector and the decline in industry volumes has disproportionately hurt the larger lenders that have a higher percentage of refinance activity. Smaller mortgage originators also continue to grow share... modest reductions in gain-on-sale margins consistent with market commentary on pricing and the relatively stable spread between primary and secondary mortgage rates during the quarter.
In the last few weeks I have had the good fortune to spend time with mortgage folks in Tennessee, Wisconsin, Washington, Arizona, and Colorado. Almost without exception the cost of compliance, warranted or unwarranted, has skyrocketed. For the most part these costs are passed onto new borrowers, of course, helping to increase the cost of obtaining financing and impacting volumes. The increase in non-revenue producing overhead, and the cost of reconciling vague or overlapping regulations, is one of the key reasons companies are either entirely exiting the business, or joining forces with more cost efficient companies or entities that are better able to afford the per-unit costs. A lender with a bank owner, with a publicly traded parent, originating vanilla agency loans in several states, has so many regulators, audits, exams, and reporting requirements that it boggles the imagination. The industry quip about, "I work for a compliance company that occasionally does mortgages" has long since lost its humor.
The CFPB may very well take much of the heat for residential volumes coming down in 2014. After all, the cost of dedicating a good chunk of personnel to assisting the CFPB with an exam, or in answering its findings, take resources away from other activities, and in turn decreases revenues. And decreasing revenues leads to decreasing numbers of lenders in the business, leading to less competition, and is the borrower better off for it? But falling volumes cannot be entirely pinned on the CFPB's overzealous, as some would say, activities. First of all, in the industry needed at least some of it. But rates have crept higher, many who could refinance did refinance, and the inventory of homes available for sale is at historical lows in many areas.
But lenders everywhere are raving about April. I was recently asked about agency issuance, specifically, "How are we doing in April so far compared to last month?" Nothing a couple emails, followed up by three phone calls, followed up by a well-placed Shari's Berries order can't fill. As of April 15th, MTD issuance totals $33.7B, which compares to $22B for the same period in March (total March issuance was $51.4B). It breaks down by agency as such: FNMA $14B MTD v $9.4B in March for the same period (total March issuance was $21.8B), FHLMC $10.6B MTD v $5.9B in March (total March issuance was $21.8B), GNMA $9.6B v $6.8B in March (total March issuance was $15.8B). So far, April looks promising. It appears to be the highest month year-to-date, however, keep in mind that monthly issuance is what MBS traders refer to as "front loaded," so this recent streak of strong daily issuance may come off as we head towards the second half of the month. According to a number of broker/dealer desks, issuance for April should book in somewhere close to $70B, which is much higher than March's approximate $51B, but not too much higher than Jan and Feb.
The latest Fed data finds consumer borrowing increased by $16.5B in Feb, as consumers borrowed more to buy cars and pay for college education. Inside Mortgage Finance, however, reports new single family mortgage backed securities from FNMA and FHLMC have declined to a 14Y low in Q1, as originations continued to decline.
But returning to the CFPB, Richard Cordray has, more than once, verified mortgage goals of the CFPB to focus on RESPA and pick-a-pay LO comp plans this year. (Most folks tell me that point banks have diminished, but one can still walk into an office of a lender and find 10 LOs with 10 different plans.) Along the RESPA lines, the CFPB announced the release of a "Guide to Completing TILA-RESPA Integrated Disclosure Forms", a companion to the Small Entity Compliance Guide released recently. Check out the guide to Loan Estimate and Closing Document forms. The guide provides instructions for completing the Loan Estimate and Closing Disclosure and also highlights common situations that may arise when completing the forms. It may also be helpful to settlement service providers, software providers, and other firms that serve as business partners to creditors. You can see all the resources available for the TILA-RESPA Integrated Disclosure rule.
Delaware's Real Estate Appraiser Council adopted last month the amended regulations that had been published back in November. The new regulations, directed at the regulation of licensed or certified real estate appraiser, and mainly amend pre-existing administrative requirements, become effective 10 days from the Council's March 2014 publication in the Register of Regulations. The rule changes effect applications, appraiser licensing and certification, license and certification renewal, and continuing education.
Utah has been busy. The state's General Session and Senate have passed House Bill's 316 & 323, and Senate Bill's 79 & 130 which effect mortgage lending in the state. These bills include changes to laws regarding yearly fee adjustments, licensing schemes of originators, as well as appraisers and real estate professionals, placed restrictions on state mandated foreclosure practices, and have created a new commission to oversee electronic record processes.
Virginia has enacted amendments to the VA Code relating to notary advertising prohibitions. With the passage of Senate Bill 503 which clearly states that "A notary public shall not offer or provide [legal] advice on immigration [or other legal] matters, or represent any person in immigration proceedings, unless such notary public is authorized or licensed to practice law in the Commonwealth or is accredited pursuant to practice immigration law or represent persons in immigration proceedings." UH? "A notary public shall not assume, use, or advertise the title of "notario," "notario publico," or "licenciado," [ or a term in a language other than English that indicates in such language that the notary is authorized to provide legal advice or practice law, ] unless such notary public is authorized or licensed to practice law in Virginia."
Let's keep going with a smattering of some relatively recent lender and investor news...
In an e-mail that some may view with suspicion, but it is "really for real," Freddie Mac alerted clients that, "We've implemented an online password reset capability for Single-Family business applications that require a user ID and password. Set up your user profile today! Four Simple Steps to Create Your User Profile: Click here to log in. Enter your user ID and password. Provide or validate basic contact information, including your name, email address, and phone number. Establish three security questions and corresponding answers for user verification. If you have multiple user IDs, then you must complete this process for each of them. Please note that you can use the same password and security questions/answers for each of the IDs. All Single-Family business customers must create their user profile by June 16, 2014. After that date, you'll be unable to log in to any Single-Family business application until you create a profile.
Impac has launched its new Down Payment Assistance program, which is available for FHA and Conventional 30-year loans on owner-occupied single-family residences and condos for borrowers with FICOs of at least 620. Borrowers must contribute a minimum of $1,000 regardless of the DPA second amount and are required to complete a Home Buyer Education course approved by the funding entity. DPAs where the governmental entity requires the lender to fund and/or service the entity's second trust deed or requires an MCC as a condition are not being accepted at the present time.
For the FNMA LIBOR ARM product, Impac has clarified that Florida condos are eligible per Agency guidelines, effective for conforming loan amounts, high balance transactions, and/or multiple financed properties when the subject is a second home or investment. The cap structure for 5/1s has been updated to 2/2/5, while 7/1 and 10/1s are subject to a cap structure of 5/2/5. In addition, Impac will waive the property tax and insurance escrows requirement for loans with LTVs of 80% or less per individual state laws, and escrow accounts are now required on all refinances where the real estate taxes are financed into the loan.
Impac is accepting ARMs under its Freddie Mac Conforming program; 7/10 and 10/1 transactions are now available with for 30-year terms with a 5/2/5 cap structure. The Freddie Mac Conforming guidelines have also been updated to waive property tax and insurance escrows for LTVs of 80% or below, add National MI as an approved MI company, and allow manufactured homes and condos as eligible property types.
Envoy Mortgage CLD has implemented the following changes to their conventional overlays: Maximum DTI ratio has been increased to the more restrictive of the AUS or 50%, the maximum LTV/CLTV/HCLTV for 2 unit primary residence purchase and limited cash-out transactions has been increased to 85%, subordinate financing is now allowed on the MyCommunity product and "refundable" Mortgage Insurance is now allowed on all conventional products.
Titan Capital is now offering overnight rate protection on up to $5m in loans per seller, including weekends.
Axia Home Loans LLC and Coldwell Banker Bain | Seal (CB Bain | Seal) announced they have entered a preferred lender strategic alliance that allows CB Bain | Seal's Washington and Oregon home buyers to access the lending services of Axia Home Loans. The employees of Landover Mortgage, CB Bain | Seal's previous preferred lender, will be joining the Axia lending team. Axia Home Loans is a locally owned agency direct lender headquartered in Bellevue, Washington with over thirty-five retail branches across thirteen Western states. Achieving status as one of the top Coldwell Banker affiliates in the world, CB Bain | Seal serves the Western Washington and Portland/Vancouver metropolitan area.
The bond markets are closed today, and not only will locks be rare (many companies aren't even taking them) but they will also be priced conservatively - especially after yesterday's selloff. Yesterday we learned that the number of Americans filling for unemployment insurance payments last week hovered near the lowest level in almost seven years, showing the job market is making progress. (Jobless claims increased by 2,000 to 304,000 in the week ended April 12 from a revised 302,000 the prior period that was the lowest since September 2007.) We also learned that the Fed purchased $9.825bn of agency MBS over the past week. But fingers pointed at a normally 2nd tier number, the Philly Fed Index, as coming out much stronger than expected and sending bond prices lower & rates higher. Agency MBS prices worsened about .375 while the 10-yr T-note fell .625 to close at a yield of 2.71%.