ALTA Offers Advice to CFPB and Points out Major Problem with Disclosure Forms
Nothing ruins your Friday like realizing it is only Wednesday! I lose track of what we're celebrating this month: I was all geared up for the Irish, but the Census Bureau reminds us that it is Women's History Month. A good thing, too, as there are 161 million women living in the U.S. (compared to 156 million men) and by age 85 women outnumber men 2 to 1 (4 million to 2 million). The median annual earning for women 15 or older who worked full-time in 2013 was $39,157 compared to $50,033 for men and female workers earned 78 cents for every dollar their male counterparts earned. More women are graduating from college than men, with women accounting for 56% of all college students. In 2014, there were 5.2 million stay-at-home mothers compared to 211,000 stay-at-home fathers.
What is going on around the nation? You can't go to a conference without someone discussing urban price appreciation, rents skyrocketing, and every Realtor licking their chops waiting for a bunch of 24 year olds to buy a house.
The U.S. Census Bureau published 2014 fourth quarter residential vacancy and homeownership rates, with the national vacancy rate at 7 percent for rental housing and 1.9 percent for homeowner housing. The national homeownership rate of 64 percent was 1.2 percentage points lower than a year before. The rental vacancy rate was highest in the South at 9%, then the Midwest at 7.5%, followed by the Northeast at 5.8% and the West at 4.8%. The homeowner vacancy rate in the South was 2.2%, the Northeast was 2%, the Midwest was 1.7% and the West was 1.4%. Approximately 87% of housing units were occupied in the Q4 of 2014, with owner-occupied housing units making up 56% of total housing units and renter-occupied units making up 32% of the inventory in the fourth quarter of 2014. Homeownership rates were highest in the Midwest at 68.3 percent and lowest in the West at 58.5 percent. In regards to homeownership demographics, homeownership rates were highest among householders 65 years old and older (79.5 percent) and lowest for those under 35 years old (35.3 percent). Homeownership rates among non-Hispanic White householders was 73.2 percent, All Other Races householders was 55.4 percent and African American householders was 42.1 percent. For a more in depth look at the U.S. Census Bureau's report, click here.
For those who have given up on the dating life, a recent article published by the Collingwood Group suggests that half of U.S. adults are single. The share of singles have also impacted the homeownership rate, which declined in Q4 of 2014 to 63.9%, the lowest level over the past two decades and is expected to drop even further this year. The percentage of renters who want to become homeowners has also declined to 75%, which is lower than the 80% confidence rate seen five years ago. In order to attract this sector of potential homeowners, it's necessary to market to single adults, explaining how owning a home is more beneficial and often more affordable than renting.
Speaking of the Collingwood Group, those folks have been busy, and taking a look at their recent survey results is a useful exercise. "In the March survey, mortgage industry professionals say Fannie Mae and Freddie Mac should be initiating more risk sharing transactions to spur the private securitization market, and they are worried that keeping Fannie and Freddie in conservatorship is causing private capital to abandon the mortgage lending space. But, they say it is highly unlikely that GSE reform will occur during the Obama administration. 94% of survey respondents indicate that housing finance reform is not a priority for the White House and as long as Fannie Mae and Freddie Mac are returning steady profits to the Treasury, there will be no incentive to reform them. As a result, Collingwood does not expect GSE reform to occur until well after 2017. The biggest risk associated with keeping Fannie Mae and Freddie Mac as-is, according to survey respondents, is private capital abandoning the space. In contrast, others indicated that the biggest risk is the government using the GSEs as a political instrument or as a piggy bank used to fund budget shortfalls.
Respondents say it is important to have sufficient reserve capital and/or private mortgage insurance in place to protect taxpayers from the next business cycle downturn. Some suggested combining Fannie Mae and Freddie Mac into a single entity or moving to a single security. The vast majority (85%) of survey respondents agree that Fannie Mae and Freddie Mac should be doing more risk sharing transactions. These transactions allow private market participants to invest in the credit performance of Fannie Mae and Freddie Mac's single-family book of business. Most survey respondents indicated that they support these transactions because they help fuel the private securitization market and limit taxpayer risk while the GSEs are in conservatorship.
I often remind folks that while the huge majority of banks in this country are exempt from direct examination by the CFPB, they are subject to the rules and regulations of the CFPB. And regarding decisions and enforcement actions, attorneys have always looked to agency decisions (to the extent they are available) to discern what possible enforcement posture would be taken by regulators. Attorney J. Steven Lovejoy reminded me that, for example, HUD used to publish Consent Orders on its RESPA page. Those were very helpful in interpreting a rather opaque statute and regulations. It's the same as looking up cases with precedential value. But there is less predictability with a new agency like CFPB and its approach to enforcement is a bit different. Acknowledging that they are both prosecutor and judge, for purposes of settlement, there is precious little negotiation. Instead they ask "tell us what you want us to know about the violation and the violator and we will determine an appropriate penalty.
Last month many in the industry began to believe that reverse mortgages will be the next target on the CFPB's list, as the bureau has recently released a report that is a snapshot of reverse mortgage complaints from December 2011 to December 2014, which encompasses 1200 reverse mortgage complaints that the agency received during that time period. The top reverse mortgage complaints include problems when unable to pay (38%), making payments (32%), applying for the loan (18%), signing the agreement (10%) and receiving a credit offer (3%). The CFPB cited that many consumers were frustrated over the requirements of reverse mortgages and did not fully comprehend the loan product or how the amount of available equity will decrease due to accrued interest on the loan. Other complaints include challenges paying off the loan once it became due, difficulty obtaining information from servicers and unresponsiveness from servicers when trying to avoid a foreclosure. These findings will more than likely lead the CFPB to enact new requirements for reverse mortgages and the bureau has already posted a consumer advisory on their website to address concerns that arose from the complaints.
I know I am playing some catch up, but the American Bankers Association (ABA) released a response to the CFPB's proposal regarding mortgage relief for some community banks. Bob Davis, the executive vice president of mortgage markets for the ABA, praises the CFPB for listening to community bankers and taking the ABA's recommendations into consideration to expand the definitions of 'rural area'. The proposed changes would ensure certain bankers meet the mortgage credit needs within their communities and the changes could allow many communities to enjoy more choice and expanded competition for mortgage credit. To read the ABA statement regarding the CFPB proposal, click here.
And the American Land Title Association (ALTA), the national trade association of the land title insurance industry, released the following statement in response to CFPB Director Richard Cordray's testimony before the House of Representatives Financial Services Committee. "'In 150 days, new disclosure forms for real estate transactions will completely change the home buying process as it's known today,' said Michelle Korsmo, ALTA's chief executive officer. 'As our member companies work to implement these new forms on Aug. 1, we strongly urge Director Cordray to announce a five-month restrained enforcement period so that new business processes can be adjusted to comply with these regulations. As with previous regulatory reform, only when the new forms are in practice will many issues and defects be discovered. A restrained enforcement period helps our members, and the broader real estate industry, make the changes needed to their business processes and collaborate with industry and regulators to ensure the consumer has a positive experience at the closing table.'
"'Unfortunately, we're already aware of one major problem with the new CFPB forms,' Korsmo stated. 'The Bureau's Closing Disclosure, which replaces the current HUD-1 Settlement Statement, inaccurately discloses the fees associated with title insurance premiums for consumers. State law and regulation in half of the United States dictates that consumers must pay title insurance rates that are different than how the CFPB requires industry to inaccurately disclose these fees to the consumer. Every homebuyer should be well-informed about the accurate costs of homeownership-including what they pay for each service during the real estate closing process. For many consumers, buying a home is the single largest investment they will make in their lifetime. It's critical that Director Cordray and the CFPB staff adjust the disclosure forms prior to Aug. 1 to ensure consumers receive accurate information about their mortgage costs. ALTA and our member companies stand ready to help the Bureau ensure consumers are neither confused nor misled at the closing table.'"
Turning briefly to the markets, since "brief" is all they deserve, as the commentary noted yesterday, if there is peace and quiet overseas then, everything else being equal, rates may be inclined to go up because our economy is doing pretty well. ThomsonReuters noted that, "Supply appeared to have been a bit elevated again, and based on earlier indications was on track to reach $2 billion; the same as Monday and up from an average of $1.7 billion last week. Overall, however, supply is generally trending lower at current mortgage rate levels that are over 3.90%."
This morning, care of the MBA, we've seen what 75% of the retail lenders did last week for application numbers: apps +.1%, refis +.5% and were 62% of apps, and purchases were -.2%. We've also had the February ADP Employment Report. Expected +225k it was +212 - close enough.
Later we will have some non-market moving figures like the Markit Services PMI and February ISM Non-Manufacturing PMI, but also the Fed's Beige Book at 2PM EST. Tuesday we had a 2.12% close on the good ol' 10-yr with agency MBS prices finishing worse by nearly .250 versus Monday afternoon) and in the early going we're at 2.12% and agency MBS prices are roughly unchanged from Tuesday's close.
Jobs and Announcements
Speaking of the workplace, Success Mortgage Partners Inc., a Plymouth Michigan based full residential retail mortgage lender looking to add all mortgage positions including management roles. Success Mortgage Partners double in size in 2014, and has expanded its footprint throughout Michigan, Indiana, Illinois, Florida, Georgia, Texas, South and North Carolina. Vince Lee, one of the owners of Success Mortgage Partners states, "The company's belief is its paramount to tailor the mortgage to the needs of the borrower for all personnel to be personally committed to the success in all steps in the mortgage process and to create a culture of 'Know, Like and Trust' with each client." Please contact Allison Johnston to learn more about working with Success Mortgage Partners.
Impac Mortgage Corp. is pleased to announce that George A. Mangiaracina has joined the firm's senior management team as Executive Vice President and Managing Director. George will report directly to CEO Joe Tomkinson and participate on the Executive, Risk and Capital Markets Committees and will be a member of the CashCall Transition Team. In addition, George will work closely with the Macquarie Group to further the Company's initiative with its AltQM loan programs. George will also assist the Firm in developing and executing on strategic initiatives within capital markets and business development. He will source and interact directly with our capital partners and Wall Street trading and warehouse relationships, and will help drive our corporate finance and capital raise activities. George brings over 25 years of experience to Impac including Managing Director at UBS and Deutsche Bank from 1992 through 2013, managing a proprietary trading desk focused on whole loan jumbo, Alt-A and sub-prime conduit activities, and beginning career at Arthur Anderson.
Hiring new, "rookie" loan officers continues to be a hot topic as the average age of existing LOs has reached 54. Mortgage companies that have struggled with successfully sourcing, training and assimilating new loan officers in the past are looking to take a more strategic approach in 2015. XINNIX, The Mortgage Academy is hosting a webinar on March 19th at 1:30 PM EST to help organizations build a new sales force that ensures their future success. As the premier provider of new loan officer training, XINNIX's insight regarding hiring "rookies" will be invaluable. This live webinar is complimentary but registration is required.