Stonegate's New Channel; CFPB's Consent Order Against a Title Insurer

When I was young, my parents taught me that my income was my own business, and talking about wages and bonuses with others never did anyone any good. But per the Small Business Administration, that has all changed, at least for anyone dealing with the Federal Government. "On September 17, the Office of Federal Contract Compliance Programs (OFCCP) of the Department of Labor released a proposed rule that would prohibit federal contractors from maintaining pay secrecy policies. The rule, which implements Executive Order 13655, would require most contractors and subcontractors to change the nondiscrimination provisions in their contracts to state that they will not discharge or discriminate against their employees and job applicants for disclosing or inquiring about their pay. Contractors would also be required to disseminate this new provision to employees and job applicants. Comments are due on December 16. Here is a link to the Executive Order, a link to the Proposed Rule from the DOL Website, a Fact Sheet & Press Release from DOL Website, and a place to submit comments to the DOL.

Stonegate Mortgage Corporation announced today that it has formed a new division called Stonegate Direct which will provide consumers across the United States with direct access to mortgage advisors to facilitate 24 hour, seven day a week, access to the company's mortgage products and services. "The creation of this new division greatly enhances and simplifies the customer experience and home loan application process for qualified customers by providing quick, secure online access for homebuyers and those looking to refinance. Stonegate Direct is being formed through the integration of the call center operations of Crossline Capital, which it acquired in December 2013. The division will be run by Tim Elkins, Executive Vice President, Stonegate Direct who will report to Lisa Rogers, Executive Vice President, Loan Origination.  As part of the division's operating plan, the company will have offices in southern California and open a call center in Dallas, TX that will provide service and capabilities to customer across the country."

On the other end of the spectrum, the legal news impacting lenders just doesn't let up.

UBS is facing inquiries from federal regulators about its residential mortgage-backed securities business and participation in the Troubled Asset Relief Program. UBS is cooperating with the investigations, noting that "numerous other banks reportedly are responding to similar inquiries from these authorities:" Bloomberg Businessweek

Any time you see a story involving the Fed, Goldman Sachs, and tape recordings, it has to be juicy! In this case, government employees look like amateurs compared to Goldman's bankers. Maybe that explains why some of Goldman's personnel make 100x what a U.S. Government employee makes every year.

"A U.S. federal judge threw out two suits from investors in Fannie Mae and Freddie Mac that aimed to stop the transfer of their profits to the U.S. Treasury, in what may set a decisive precedent for over a dozen similar actions. Judge Royce Lamberth ruled that the government is entitled under the terms of a 2012 amendment to the two mortgage giants' bail-out deals, to 'sweep' the vast majority of their profits into the Treasury." Few are surprised that the government won the Perry/Fairholme case, but many had thought that this case made a stronger legal argument than the theory in the Fairholme Federal Claims Court case. It is not good news for the Fairholme case. The Perry/Fairholme decision effectively kicks the issue back to Congress, but do not expect Congress to pass a GSE bill until at least 2017.

Bank of America said Monday that it will settle Securities and Exchange Commission allegations that it miscalculated its regulatory capital for years. The lender will pay $7.65 million to resolve the matter: Reuters.

A federal judge said JPMorgan Chase & Co must face a class action lawsuit by investors who claimed it misled them about the safety of $10 billion of mortgage-backed securities it sold before the financial crisis. "U.S. District Judge Paul Oetken in Manhattan certified a class action as to JPMorgan's liability but not as to damages, saying it was unclear how investors could value the certificates they bought, given how the market was 'not particularly liquid.' He said the plaintiffs could try again to certify a class on damages. Oetken ruled 10 months after JPMorgan reached a $13 billion settlement to resolve U.S. and state probes into the New York-based bank's sale of mortgage securities. The class consists of investors before March 23, 2009 in certificates issued from nine of 11 trusts created by JPMorgan for the April 2007 offering. The other two trusts attracted only a handful of investors, and are the subject of other lawsuits."

The CFPB filed a Consent Order on Tuesday against Lighthouse Title, a title insurer based in Holland, Michigan.  The order was, the Bureau said, sending "a clear and simple message" that it intends to pursue legal action against financial institutions that pay in any manner for referrals.  The administrative proceeding carried a civil money penalty of $200,000.

(Read More: CFPB Targets Title Company Over MSAs)

The Bureau said that Lighthouse Title had violated the Section 8(a) of the Real Estate Settlement Procedures Act, (RESPA) and its implementing regulation, Regulation X.  The relevant section of RESPA states, "No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement 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."

George Manolis of FormFree Holdings, Inc. commented on Fannie Mae's announcement SEL 2014-12 that direct third party asset verification is now permitted, B3-4.2-01, allowing lenders to electronically and instantly collect borrower's asset documentation direct from the source. "Fannie Mae appreciated the innovation we provided which mitigates risk while simultaneously improving the customer experience."  He adds that forward thinking investors such as PennyMac were the first to recognize the advantage of leveraging FormFree's asset verification solution to improve quality and funding time. (To learn more email george@formfree. com.)

Speaking of PennyMac, it issued Announcement 14-54 titled "Clarification Regarding Acceptable Sources for Verification of Assets". PennyMac clarified the acceptable sources for verification of assets when documentation is needed to verify a borrower has sufficient funds per program requirements. Effective immediately, a verification of assets obtained from a third-party verification vendor is acceptable, if the following requirements are met: acceptable for Conventional loans only, borrower must provide authorization for the lender to use the third-party vendor for purposes of asset verification, complete copy of the verification document must be included in the loan file delivered to PennyMac, information must be requested directly from the third-party verification vendor, and the complete and dated document must be received directly by the lender, and so on - read the bulletin for full details.

Recently homebuilder KB Home missed earnings expectations in a big way to the downside. Perhaps the experts who set the expectations had it wrong, since gross margins continued to improve, and revenues increased 7% driven by a 9% increase in ASPs (21% in the West) and 2% drop in orders. KB's mortgage banking JV with Nationstar began during the quarter. The company noted an "appreciable uptick" in traffic levels which they saw as "strong evidence of the pent-up demand for new housing."

Sun West has removed the Automated Valuation Model (AVM) requirement on VA IRRRLs with qualifying credit score equal to or greater than 580. This requirement elimination is applicable for locks and commitments made on or after September 16, 2014 thus no more AVM and no more LTV hits for VA IRRRLs with qualifying credit score of 580 or greater.

Looking at the markets, mortgage rates are mostly determined by supply and demand. With the Fed's QE demand set to disappear this month, what is the supply like. The figures for September are telling. September gross (fixed + ARMs) issuance shows a total of $90.6 billion, or less than $2 billion a day. Fannie: $38.3bn, Freddie: $25.8bn, Ginnie: $26.5bn. The gross issuance compared to recent months (as of the 29th of the month) of July ($82bn) and August ($90bn)/

Per the Case-Shiller Index, house prices fell .5% month over month, the third consecutive monthly decline although on a year-over-year basis they are still up 6.75%. And consumer confidence dropped markedly in in September, according to the Conference Board. It fell from an upward-revised 93.4 to 86. The present situation index fell from 93.9 to 89.4 and the Expectations index fell from 93.1 to 83.7. This negative economic news helped rates somewhat (anyone wishing for lower rates: be careful what you wish for - what would cause rates to drop?).

For news this morning we've had the MBA's mortgage applications. They fell for the third time in four weeks, although not much: -0.2 percent for the week ending Sept. 26. The Refi Index declined while refinancing share as a percent of total applications was unchanged at 56%. We've also seen the ADP numbers +213k which are of questionable validity when they come to predicting the non-farm payroll numbers Friday. Still up: September ISM manufacturing (59.0 prior) and August Construction Spending (+1.8% last), before September car sales filter in throughout the day. For numbers, the 10-yr closed Tuesday at 2.51% and this morning we're at 2.48% with agency MBS prices better by about .125.

Jobs and Opportunities

On the jobs front, Homeward Residential is recruiting for seven correspondent Account Executives across the country.  Backed by Ocwen Financial, a top ten servicer, AEs will be responsible for building and managing their customer base selling a variety of products including conventional, government, Jumbo, HELOCs, and proprietary products. Homeward is launching an e-Note pilot, participates in Ellie Mae's TQL program, and has plans for a variety of technology processes that improve on today's market. "Come join our team and be a part of changing the industry." Come see Homeward Residential in Las Vegas at the MBA Annual or send your resumes or inquiries to Deanna Linzay.

Speaking of the MBA's conference in less than three weeks, Richey May & Co, the leading public accounting firm specialized in the mortgage industry, is headed to Las Vegas for the MBA's Annual Convention & Expo October 19th - 22nd. Management is looking forward to meeting with as many of their clients and friends in the industry as possible. If you are interested in scheduling a meeting with them, please email Dustin Pfluger.

And "interested in learning more about how offering Reverse Mortgages can benefit your customers and your company? Schedule a one-on-one meeting at the National MBA in Las Vegas with Steven Klein, Director of Institutional Lending, from Reverse Mortgage Solutions (RMS).  Reverse Mortgages (aka Home Equity Conversion Mortgage or HECM's) are gaining traction as a 'must have' as the need for this FHA product continues to grow with baby boomers turning 62 at a clip of roughly 10,000 per day. Steven and RMS can assist your company in adding the Reverse Mortgage product to your retail or TPO product offering on a Correspondent or Wholesale basis. The reverse mortgage program, reverse for purchase and line of credit for long-term financial planning objectives, is highly under-utilized. As one of the largest reverse mortgage originators, aggregators, and servicers in the industry , RMS helps banks, mortgage bankers and credit unions launch this program through their expertise in training, marketing assistance, and ongoing support. Steven is participating on the "Survival Strategies for Declining Margins and Volumes" panel at the MBA on 10/21/14 at 2:15 PM. To schedule a meeting, contact Steven and for more information visit RMS.

And for another upcoming event out West, American Pacific Mortgage is hosting its biannual 2014 Fall Sales Summit - OWN THE DAY, beginning next Wednesday, October 9^th in Seattle, Washington, at the Motif Hotel.  Since the company's inception in 1996 where a small group of Branch Managers collaborated around a conference table, the Summits have grown to an attendance of approximately 750 Branch Managers, Originators and Guests amongst three regional venues. "This year's events are planned to deliver valuable insight and inspiration, with an impressive lineup of guest speakers. The Seattle Summit speakers include industry expert, Dr. Mark Palim, Vice President of Applied Economic and Housing Research at Fannie Mae, best-selling author Kevin Hall, as well as an inspirational message from top athlete, Jim Zorn, former Seattle Seahawk Quarterback! The Summits are an incredible opportunity to hear from APM's staff offer 6 'Game Changing' breakout sessions designed for originators to Own Their Day, and grow their business. See why over 350 Originators have joined American Pacific Mortgage over the last 12 months and register TODAY for APM's OWN THE DAY Summit by simply emailing Mike Haden.