Wholesale News; TRID's Impact on Lenders and Consumers--Not Good News

What is this? Fear of a bubble in commercial real estate? Apparently the Fed is increasingly concerned about asset pricing and lending practices in commercial real estate markets but lacks the tools to appropriately address the excesses. But in other countries those crafty multi-family architects not only don't care, but have some interesting ideas about combining skiing and apartment living.

Upcoming webinars? You bet - this week!

NMP is offering up another webinar: "Does Your 2016 Business Plan Contain Fatal Flaws That Will All But Ensure Failure?" It will be held this Thursday, December 17, at 2PM EST. "We're changing the way we absorb information but more importantly we're better at filtering information. Real estate agents and consumers now have a different process by which they let people into their personal decision making space. In this clinic you'll learn how agents and buyers will absorb information in 2016, why overcoming objections no longer builds trust, and no & low cost ways to connect with Real Estate Agents and Buyers in a meaningful way. Register here for this free webinar provided by National Mortgage Professional Magazine.

There is a Lenders Compliance Group webinar today on "TRID Challenges: Guidance for Real Estate Professionals". "Major changes under the TRID Rule, New Disclosures, TILA/RESPA - Boot Camp Basics, Timeframes: No Changed Circumstance, Timeframes: Changed Circumstance, and Actions to improve timely closings."

And the MBA is hosting a webinar on Wednesday with Mike Fratantoni and Steve O'Connor. The session is geared toward the global/institutional investor community, but the discussion and content would certainly be applicable to anyone looking for an update on the state of housing finance.

Today Fannie Mae's trading desk is offering up an upcoming "Best Efforts Execution" webinar to help lenders manage their pipeline and interest rate risk and eliminate fall out risk in a best efforts whole loan commitment. "Join us for a webinar at 2PM EST on Tuesday, December 15. To register click here or contact the Capital Markets Sales Desk at 1-800-752-0257 for more information.

Are the "Know Before You Owe", TILA-RESPA reform changes impacting consumers? It certainly appears so. One broker wrote to me saying, "TRID just cost my client $345. My lender used to give me a 30 day rate lock and that didn't have to include the recession. Now it's a 30 day lock but I need 6 days for the CD to be sent and acknowledged. In reality I went from a 34 day rate lock to a 24 day rate lock. To put it in raw numbers based off of this loan, every 5 days costs the consumer .125. So if I'm burning 10 days that's .25 - does the consumer really win?"

And from Oregon, Pete wrote, "The delays from TRID are evident. I am now into my third TRID closing, and as a broker close loans with different creditors. There are myriad of unforeseen reasons that are causing delays. And there are more restraints in place, limiting our flexibility for the consumer."

Let's go back a month or two and see how things got to where they are today, which is that most lenders are "dealing" with it but the Realtors and title companies seem befuddled, and the industries are searching for guidance.

Remember when Existing Home Sales fell to 5.36 million in October, according to the NAR? The median home price increased to $219,600. "It doesn't appear that TRID had much of an effect on home sales, at least so far" said the NAR.

Genworth Mortgage Insurance published results from a survey of mortgage professionals conducted at the MBA's annual conference. Findings show that 38 percent of survey respondents are concerned about complying with the new TRID rules, which has been the biggest hurdle in implementing the regulation. Additionally, 35 percent said that having the right technology was their biggest TRID challenge and then 22 percent believed that communication with borrowers discussing the new rules was another challenge. These findings do not come as a surprise, as most of the industry has been struggling with implementing the new regulation and has resulted in a large learning curve for most.

Zelman and Associates published its Mortgage Originator Survey implying that the industry has been focused on TRID, trying to implement the new disclosures. Back then respondents reported that YoY purchase application growth has accelerated to 18 percent in September from 15 percent in August, which is partly due to the push for applications prior to TRID's effective date of October 3^rd. Lenders marked the impact of TRID as moderately disruptive and expressed that most of the disruptions will be on the back end, at the time of loan closing, due to the strict timing requirements. For more information, contact Ivy at ivy@zelmanassociates. com.

Zelman & Associates returned with its November Mortgage Survey and a report on TRID. The feedback from contacts has been that TRID is creating more disruptions than anticipated and expected last month, particularly in the broker channel, which we expect to be a drag on existing home sales in November.

Zelman noted, "November marked the second month that the TILA-RESPA Integrated Disclosure (TRID) rule was effective for mortgage applications. Despite challenges associated with the implementation of the new disclosure forms, purchase mortgage applications increased 17% year over year in November, accelerating roughly 400 basis points from October's growth rate as applications rebounded from the initial slowdown, which we attributed to cautiousness around TRID last month. However, the impact of the rule is expected to be more evident in closings in November and December given that closing timelines for the first round of TRID applications were extended by five to seven days, on average. According to contacts, implementation has varied significantly between origination channels, with retail (~55% of originations) performing strongest given in-house control of the application process and wholesale broker (~10%) faring the worst. For our financials coverage, we are cautious in the near-term given the potential for volume shortfalls caused by TRID delays, and reduced 4Q15 EPS estimates for the title insurers and NIW estimates for the mortgage insurers, as discussed in greater detail in our TRID report."

"In recent weeks, mortgage lenders have begun the process of attempting to close an increasingly large percentage of their originations on newly-mandated TRID forms, required for mortgage applications submitted on or after October 3rd. Overall, TRID appears to be causing worse-than-expected delays in closings, particularly in the wholesale channel, as well as increases in expenses, resulting in lower 4Q15 earnings estimates for certain volume-driven companies. In addition, we believe that existing home closings in November are set to severely disappoint consensus expectations. However, we expect the industry to better-manage the disruption as December progresses, resulting in little spillover to 2016."

Lenders and investors continue to react, and paying attention to the calendar is critical. For example Freedom Mortgage has presented some helpful tips on loan closings in the month of December. "For all Non-TRID loans, the last day to close is 12/23/15. Final conditions submitted to underwriting 12/16/15 and final approval no later than 12/18/15. For all TRID loans, the last day to close is 12/23/15. CD sent electronically or by mail and acknowledged by applicant: Final conditions submitted to underwriting by 12/11/15; Final approval no later than 12/15/15. CD acknowledged by applicant no later than 12/19/15*. *All applicants who have the right to rescind must acknowledge the CD. CD sent electronically or by mail and NOT acknowledged by applicant: Final conditions submitted to underwriting by 12/09/15; Final approval no later than 12/11/15, CD out to applicant no later than 12/16/15."

But Dodd-Frank's impact doesn't stop with the primary markets. It has severely curtailed market-making operations at investment banks, and right now there are very few buyers of distressed credit as hedge funds face redemptions and investment banks cannot step in because of capital requirements. In fact, the regulators are considering additional steps to ensure a bank failure doesn't bring down the entire financial system, which means that investment banks will probably de-risk further, making them even less likely to act as market-makers. This will be an interesting first test of a financial crisis in the new Dodd-Frank world.

Keeping on with the capital markets U.S. Treasuries took sharp losses (-.75 in price) Monday as oil prices rallied as much as $2.17/barrel from its morning low. (Fortunately agency MBS prices didn't take as much of a hit only dropping about .375.) Regardless of the news and what oil may do or not do, investors have positioned themselves ahead of the Fed news tomorrow, widely expected to include an increase in short-term rates.

Today we've already had the November CPI and Core CPI (expected unchanged it was indeed unchanged, core +.2%) and the December Empire Manufacturing (expected to improve it was down 4.6, which is indeed an improvement). Coming up is the December NAHB Housing Market Index (10:00 EST). We closed the 10-year at 2.22% Monday and this morning we're at 2.25% with agency MBS prices worse about .125.

Jobs and Announcements

In wholesale news, congratulations to Brooks Bosley, hired by Ethos Lending to introduce brokers in the Mid-Atlantic market "to a refreshing new way to do business". "The technology is vibrant and transparent; taking the guess work out of submitting and closing a file".  Ethos offers Fannie Mae, Freddie Mac, and Jumbo products solely through its proprietary platform that leaves users in control of the process while letting the logic of new automation ease much of the burden from the broker's shoulders. Soon to follow will be an Interest Only loan. Responsibilities for the LE and CD handled by Ethos after brokers add information about the transaction into the system. President Adam Carmel noted, "Brooks' extensive product and market knowledge, teamed with Ethos, will be a big boost for the Mid-Atlantic. Ethos is rolling out new products to help broker's help their clients, including interest only and 40 year amortization programs. Process, pricing, technology, and Brooks bring new opportunity in the Mid Atlantic." Brokers should contact Brooks (410.440.7714) for more information on a wholesale relationship.

A few states away, in Tennessee, Carrington Mortgage Services is searching for loan officers. "At Carrington Mortgage Services you'll discover an open door to opportunity. Exceptional financial strength, products and geographic scope - combined with comprehensive training programs, diversity initiatives, competitive benefits and a commitment to work/life balance we can open up a world of possibilities. The Loan Officer position is an inside sales position working in our call center in Nashville TN an Inside Direct to consumer Mortgage Team. The loan officer is responsible for both in-bound and out-bound calls through marketing campaigns, and portfolio leads MSR transfers; and conducts the initial pre-qualification phone screen, prepares the loan application and necessary documentation. Competitive base salary and uncapped commission structure with six figure income potential, and the security of working for a firm with 19 different companies- including a multi-billion dollar servicing division. Questions can be directed to HR Specialist Beatriz Hernandez.

In the mortgage insurance biz United Guaranty has a job opening for a Senior Account Executive in Orange County, CA. United Guaranty Residential Insurance Company (United Guaranty), the number one mortgage insurer in terms of New Insurance Written for four consecutive years, is "looking for a highly motivated individual to write and successfully execute a business plan to achieve United Guaranty's objectives. The ideal candidate will have experience in direct sales and extensive knowledge and experience in mortgage origination, particularly mortgage insurance. The candidate we select will deliver exceptional customer service, build strong relationships with clients at all levels, work closely with lenders to provide training on our industry-leading products, and provide expertise to help our clients in meeting their goals. For more information or to apply, please visit the United Guaranty Job Openings Web page.

Congrats to Eric Kaplan who has joined Ranieri Strategies from Shellpoint Partners LLC, a residential mortgage finance company of which Mr. Ranieri serves as Board Chair. Mr. Kaplan joined Shellpoint as Head of Mortgage Finance shortly after Shellpoint's 2011 acquisition of mortgage lender New Penn Financial, LLC. "Mr. Kaplan will work closely with Mr. Ranieri on housing, mortgage and RMBS reform endeavors with regulators and industry colleagues and continue his efforts on these matters within various industry groups. Mr. Kaplan will serve as Managing Partner - Structured Finance for Ranieri Strategies."