Trends in Documentation Requirements and Credit Scores - What is HR 4211?

Seen recently: "The lottery gives you a one-in-two hundred million chance of not going in to work tomorrow. Alcohol gives you one-in-five." What are the odds that the person sitting next to you in the movies could benefit from refinancing, even after years of low rates and being bombarded with "lower your rate" flyers? According to Black Knight, still pretty good: there are millions of borrowers out there who could still benefit.

Plenty of smart folks in our business think that the "credit box" has to expand. It is probably more like a "credit amoeba" but nonetheless let's take a look at credit score trends and lender's approaches to evaluating credit. Rep. Royce and Rep. Terri Sewell (D-AL), have introduced HR 4211, the Credit Score Competition Act of 2015, which will allow Freddie & Fannie to use other credit scoring models besides Fair Isaac's FICO. Royce and Sewell based their legislation on the problems faced by would-be homebuyers (like low- and middle-income Americans) who can "responsibly" pursue homeownership but don't have a FICO score. The authors also noted that the GSEs maintain a near-monopoly on the secondary market and relying on FICO solely reinforces this dominance.

TransUnion released a new report forecasting the state of the credit and mortgage lending industries in 2016. The report reveals that the consumer lending market will have fully recovered by the end of next year from the mortgage crisis and ensuing Great Recession. TransUnion forecasts that the mortgage delinquency rate will decline from 2.50% at the end of 2015 to 2.06% at the end of 2016. The 2016 projection is in the range of delinquency rates seen before the mortgage crisis. Mortgage debt per borrower has also slowly gained in recent years, which is partly due to a rebound in housing prices. Debt levels are expected to increase to $192,512 at the end of 2016, from a projected $189,917 in Q4 2015. Credit card delinquency rates are expected to be 1.46% at the conclusion of 2016 - the fourth consecutive year with delinquency rates below 1.5% and a nearly 50% decline from the end of 2009. Credit card debt per borrower is expected to remain flat in 2016, moving from an estimated $5,281 in Q4 2015 to $5,262 in Q4 2016.

Recently Ellie Mae published its Origination Insight Report, finding that credit scores on closed loans have dropped to the lowest level since Ellie Mae began tracking the data in August 2011.The average FICO scores on all loans fell to 723, while refinance transactions accounted for 42 percent of overall loan volume in September, up 5 percent from August. The drop in interest rates has contributed to the greater share of refinances. Purchase transactions represented 57 percent of overall loan volume in September, compared to 62 percent in August.  Other findings from the report include, the average 30-year rate for all loans fell to 4.280, the first decline since May and the average time to close all loans dropped to 46 days. 

The average days to close a loan increased by 3 in November, according to Ellie Mae. Blame TRID? Sure, why not. Average FICO slipped a point to 721.

As of December 12^th, United Wholesale Mortgage began offering Fannie Mae's HomeReady product. "The HomeReady mortgage allows us to offer an unbeatable competitive advantage for buyers with a low down payment and decent credit scores," said Anthony Bird, owner of Riverbank Finance, a partner of UWM. "Combining this program with lender paid mortgage insurance blows away the competition with lower payments and lower costs." Click the link to learn more about UWM and HomeReady.

Angel Oaks has jumbo loans available with features such as, interest only, up to 90% LTV/CLTV, no MI, and down to 500 credit scores.

Citi Correspondent has published its most recent credit policy updates and clarifications to be viewed by its clients.

And back in December Ditech spread the word it would no longer require clients to send in a check for principal curtailments. The principal curtailment amount will be netted from the wire when the loan is purchased. As a reminder, the curtailment amount must meet program parameters. Ditech also announced the reinstatement of its Jumbo AA High LTV Fixed Rate Product. Effective immediately it will accept loan registrations and locks on this product. Be aware that there have been changes to the credit score and DTI requirements. The minimum LTV for the Jumbo AA High LTV Products is 80.01%. This minimum LTV has been implemented to ensure that each loan is placed in the correct product and receives the appropriate pricing.

Walter Investment told us about the fate of Ditech's retail group, of course, but prior to that Ditech announced the reinstatement of the Jumbo AA High LTV Fixed Rate Product. Ditech began accepting loan registrations and locks on this product. Be aware that there have been changes to the credit score and DTI requirements.

The National Homebuyer's Fund (NHF) has opened up the Sapphire Grant program to the state of Nevada.  Some highlights include: down payment and closing cost assistance in the form of a forgivable grant, not restricted to 1st Time Homebuyers and Minimum Credit Score of 620 (680 for manufactured housing). View MWF product matrix for full program details.

Sun West has updated its guidelines for VA IRRRLs submitted on or after January 4, 2016. The maximum recoupment period limited to 120 months and income documentation requirement no longer applicable. The borrower must be current at the time of closing with no 30 days past due payments in the past six months. The minimum FICO of 620 remains unchanged.

FAMC's Correspondent National Bulletin 2015-23 includes information on Product and Guideline Updates, Clarifications and Reminders including removal of overlays. Log into the FAMC website to view the bulletin for additional information and all lock, delivery and purchase by dates, if required. 

NYCB Mortgage has posted expanded product information. One such example relates to its non-occupant borrower income/liabilities requirements. Effective for loans with an initial AU submission date on or after 12.13.15, Gemstone AU will be updated to consider the income and liabilities of all borrowers on all principal residence mortgage transactions, including two to four unit properties. Effective for loans with an initial AU submission date on or after 12.13.15, Gemstone AU will be updated to consider the income and liabilities of all borrowers on all principal residence mortgage transactions, including two to four unit properties.

On the vendor side of credit information, a while back Chronos Solutions, a national real estate finance services provider, has agreed to acquire Cogent Road, a San Diego-based mortgage technology company. Cogent Road suite includes LOS, verification and credit/data platforms. The acquisition will allow Chronos to expand its suite of products and services supporting mortgage lenders as well as add a deep bench of mortgage technology talent. According to Chronos Solutions CEO, Matt Martin, Chronos intends to grow the Cogent Road, acquisition into a mortgage and real estate technology lab, based in San Diego.  "We expect to announce multiple new products and services in the coming year with the help of Cogent Road's talented team."

What about document news in the last several weeks?

In order to provide better clarity on document eligibility, Wells Fargo Funding's Seller Guide Section 508.02: Document Eligibility will be updated to include a list of documents that are not eligible for eSignature and/or eDelivery (in addition to the existing list of eligible documents).  

The following documents are ineligible for eSignature and/or eDelivery: Note, Security Instrument, Notarized documents, Final Closing Disclosure and Notice of Right to Cancel. Wells Fargo Funding considers the "final closing disclosure" the closing disclosure signed by the borrower(s) at consummation.  Also, take note of the current Audit Trail requirements in Seller Guide Section 508.03: eSign Technology Standards and Submission Procedures.

Effective with all loan applications dated 01/13/16, M&T will adhere to the updates per Agency Underwriting Eligibility Standards (UES).  (The Agency UES serves all Fannie and Freddie registered loans, but does NOT include M&T Treasury product).  The updated guide will be posted to MEME. A comparison document highlighting the old policy versus the new policy is also being provided.

Mountain West Financial clients are reminded that LendingQB and BOLT performed an additional system security enhancement on November 6^th. All users will be required to change their password at any time after 11/6 to activate the enhancements.  If their password is not updated by 2/12/2016, it will be expired on that date and users will be prompted to update it at next login.

Franklin American Mortgage removed the requirement for the use of the "Age Restricted Property Form" on its conventional products. In addition, the guidelines will be enhanced to allow the use of the Home Energy Score option for existing construction homes on FHA products in order to utilize the EEH stretch ratios for manually underwritten loans.

The markets? There is more attention on stocks, which managed a small rally yesterday, oil prices, which made new multi-year lows, and China's rebalancing act. Aren't you glad you don't have to worry about problems in Europe!? But with Morgan Stanley putting a fresh price target for oil at $20/barrel we could see some real problems - and if oil prices head farther south the Fed won't be raising rates any time soon.

Today there isn't much in the way of scheduled economic news - some job opening figures and a $24 billion 3-year note auction by the Treasury. We saw a 2.16% close on the 10-year and this morning it is at 2.18% with agency MBS prices a shade worse.

Jobs and Announcements

In correspondent channel news, "Does your correspondent investor send you a lead anytime a payoff demand is ordered on your loan? Does it waive the EPO if you sold the loan back to them? If not, maybe it's time to look for the right partner. The Money Source is just that type of lender. With management's unique approach to treating their correspondent lenders as partners, The Money Source has given back 8093 leads to their correspondent lending partners in 2015. To find out more about what a Partnership looks like compared to a 'transactionship,' please email the EVP of Correspondent Lending Jeff Vanderluit.

On the retail side, "Are you a successful Loan Officer or Branch Sales Manager who wants to take your career to the next level but it won't happen unless your branch manager gets promoted? As a well-established, privately held company, Network Funding has the opportunities and the support structure for you to reach your goals. For example, we have a 'plug and play' branch ready for the right candidate in Scottsdale, AZ with processing, underwriting and closing on site. Our growth is focused in the western states (AZ, CA, CO, OR & WA) but we have opportunities all over the country. Learn more about us at join.nflp.com or contact Executive VP Brett Snortland (832.545.4653) or VP of Sales/Branch Ops Richard Jefferson (480.370.3600

In Ops job news, Michigan Mutual, Inc., an agency direct/seller/servicer/issuer based in Port Huron, Michigan, continues to expand its wholesale platform in the West and is excited to announce that management will be opening a fulfillment center in Roseville, California. They're currently looking for an experienced underwriting manager, wholesale underwriters, a processor, and a closer. Our underwriters are key members of our sales support team and are responsible for ensuring timely and accurate responses to our valued customers.  To learn more about our underwriting and company philosophy, visit our underwriting web page at https://michiganmutual.squarespace. com/. And to learn more about joining the team please contact HR Generalist Nicole Francois or Director of Wholesale Lending Al Crisanty or visit our careers page to complete an application."

And sweeping through the Southeast, "Was your New Year's resolution to close more loans this year and increase your loan production? Assurance Financial says it can help you realize both. The company is looking to broaden its footprint, hiring top producing branch managers and MLOs in Colorado, Arizona, New Mexico, Louisiana, Texas, Mississippi, Alabama, Tennessee, Florida, Georgia, Arkansas, North Carolina and South Carolina. Assurance Financial is an established full service retail mortgage banker with a 15-year history of consistently closing loans on time. As an example, Paul Peters, CMB, Sales Recruiting Manager, reports that Assurance is several hundred loans into TRID and has not encountered any significant closing delays. For more information, contact Paul Peters at 225-239-7948 or visit www.LendTheWay. com.