Small Balance Commercial Webinar; Cost of TRID and Impact on Appraisers
Lenders across the nation are switching to potlucks at the end of the month instead of catered lunches. Why? A new survey of mortgage lenders by the MBA finds loan production expenses have climbed 9.4% to $7,747 per loan vs. $7,080 before the TRID requirement went into effect. I just made up the tidbit about the lunches, and everyone knows that these costs are passed on to borrowers, but still... It certainly helps explain why there is less refinancing in a similar rate environment. But STRATMOR has a different take on the increase in cost - see below.
STRATMOR released select findings from its TRID - Impact and Experience Spotlight Survey. It has impacted not only the mortgage lender but also the borrowers it was created to assist. Dr. Matt Lind writes, "Based on the results of STRATMOR's Spotlight Survey, TRID implementation seems to be largely complete, with the vast majority (87 percent) of survey respondents reporting implementation either fully or mostly accomplished; only 1 percent said their efforts were 'way behind.' Independent lenders were generally ahead of banks, with TRID implementation fully accomplished at 72 percent of small and 80 percent of mid-sized independents, as compared to just 33 and 44 percent respectively for small and mid-sized banks. In fact, banks seemed to have a harder time with implementation all around, with 31 percent characterizing their experience under TRID as either 'difficult' or 'terrible' versus only 16 percent of independents reporting similar results.
"Implementing TRID has obviously not been easy for lenders. It's been costly as well. On average, since October 2015, TRID has increased lender back office fulfillment and post-closing costs by an average of $209 per loan, and lenders are estimating that only about 17 percent of those costs can be recovered through additional charges," said Dr. Matt. "However, TRID seems to be associated with a significant pickup in borrower satisfaction, despite somewhat slower application-to-closing times. At the end of the day, improving the borrower's experience is a main objective of TRID, and in an increasingly competitive origination market, it is also a primary goal of lenders as well."
"The increase in satisfaction is borne out by STRATMOR's MortgageSAT Borrower Satisfaction Program survey data, which pulls in thousands of data points every month. The MortgageSAT data shows that the time to process a mortgage from application to closing, after initially increasing, is moving back towards pre-TRID levels. There has also been a steady and substantial increase - from 85 to 91 percent - in the proportion of borrowers being contacted by their lender prior to closing. Increasing such contact was a key goal of TRID and has previously been shown by MortgageSAT to be an important factor affecting overall borrower satisfaction. As a result, overall borrower satisfaction with the origination process now stands at 91 percent, a record high since MortgageSAT was launched in 2013. (Full results of the TRID - Impact and Experience Survey are available for purchase from STRATMOR online at http://www.cvent. com/d/pfqxkh.)"
Regarding the recent MBA figures on the cost per loan heading higher, it seems that, "Over $425 per loan in the MBA's roughly $650 per loan increase can be attributable to a 12.5% decline in volume from the 3rd to 4th quarter. Assuming that $3,000 of the roughly $7,000 origination expense per loan cited by the MBA for the 3rd quarter are fixed costs, a 12.5% decline in volume results in a 14.2% increase the cost per loan or an increase of about $426. Add our estimate of $209 in TRID costs and you get $635 per loan, just about what the MBA estimated for the total increase from the 3rd to the 4th quarter."
Speaking of TRID I received this note. "Appraisers always will have many questions as they continue traveling down the road to compliance. Am I doing what is right? Am I going about my business that meets with regulation guidelines? Some of those rules have changed since October, when the TILA-RESPA Integrated Disclosure (TRID) rule took effect. "Mistakes made by the appraiser regarding the report will result in hyper-diligence, meaning the remedy time to fix those mistakes will be hours and not the usual 24- to 48-hour time frames," Jan Buchele, SVP of The William Fall Group & Valuation Partners said.
"In my opinion, there will be more pressure on the appraiser to be accurate. Consumers losing earnest money deposits due to falling outside contractual closing dates may come back and claim the appraiser caused these problems in the first place costing them real money. Lenders will not deal with appraisers who make mistakes that can delay closings." Of course, everything starts with a quality report, where accuracy should be reflected to achieve compliance. Buchele said a quality report convinces the reader that the appraiser believes in its conclusion. "I believe that reconciled data is what gets lost in reports," she said. "It is the responsibility of the appraiser to provide results and explain the data used to arrive at that determination of value. There's no such thing as too much or too little information within a report. Each report has to contain the sufficient data for that individual assignment and has to be detailed and explained to the reader as to why this is the appropriate and necessary data."
There are some definite thoughts on the appraisal side of the biz. From the Sierra Nevada Foothills in California Sharon Nixon penned, "Here's a good article addressing the shortage of appraisers. Where the use of trainees is concerned, the few lenders who will accept trainee signatures most require the Supervisory Appraiser to sign also. The Supervisory Appraiser takes full responsibility for the appraisal just as he/she would if the signing appraiser. Most appraisers carry E & O Insurance. There really is no shortage of appraisers. The lenders and AMCs want to go cheap then they complain about lousy appraisals and long turn times. They do not want to pay a reasonable and customary fee and many appraisers are refusing to do lender or AMC work. Seasoned appraisers are changing their client focus on non-lender work, retiring or changing their profession."
As a reminder there is a relatively extensive process to first become a Trainee/Apprentice Appraiser, and then a Licensed Appraiser. To become a Trainee one must complete and pass 75 hours of basic appraisal education, which includes three courses (Basic Appraisal Principles 30 hours, Basic Appraisal Procedures 30 hours, and 15-hour Universal Standards of Professional Appraisal Practice (USPAP) 15 hours). Each Trainee Appraiser must be supervised to get the required hours of experience before applying for the Licensed Residential Appraiser level. Locating a certified appraiser is a very important step to becoming an appraiser. The trainee and supervisory appraiser must keep a log of work completed that will be reviewed when the trainee applies for any license to the state regulatory body. All new Trainee (Beginning) Appraisers and Supervisory Appraisers are required to complete an approved Supervisor/Trainee course before they will be able to log experience hours.
Licensed Appraisers can appraise non-complex, one- to four-unit residential properties less than $1,000,000 and complex one- to four-unit residential properties less than $250,000 in market value. They must complete a total of 150 hours of education. The 150 hours includes the 75 hours required for the trainee level and four additional courses: Residential Market Analysis and Highest and Best Use (15 hours), Residential Appraiser Site Valuation and Cost Approach (15 hours), Residential Sales Comparison and Income Approaches (30 hours), and Residential Report Writing and Case Studies (15 hours).
But wait - there's more! New appraisers are required to complete 2,000 hours of experience in no less than 12 months. These hours must be directly supervised by an acceptable supervisory appraiser. Appraisers are required to maintain a log jointly with the supervisory appraiser. And then an Appraisal Qualifications Board (AQB)-approved Licensed Residential Real Property Appraiser examination must be successfully completed. All education, degree, and experience hours must be completed prior to taking the national exam.
And appraisers must complete 30 semester hours of college-level education from an accredited college, junior college, community college, or university. An associate degree or higher satisfies this requirement. Wow!
For anyone relying on a bond market rally to spur business, we had a nice rally in the bond market yesterday after Fed Chair Yellen allayed investor concerns that April's FOMC meeting might harbor the second rate hike in this tightening cycle. She played up the downside risks to the U.S. economy more than investors had expected although she did say that the fallout from 2016's market turmoil is likely to be limited.
Today we've already had the MBA's weekly mortgage indices. Apps dropped 1% with refis down 3%. We've also had the March ADP report. Expected to come in around 190-200k, and down from February's 214k, it was indeed at 200k. Later we have the $28 billion 7-year note auction. We closed the 10-year Tuesday at 1.81% and this morning we're at 1.83% with agency MBS prices worse slightly.
Regarding TRID Jim Hennessy writes, "Do you suppose when coming up with TILA/RESPA Integrated Disclosure that the acronym squad ever considered "Truly Understanding Residential Disclosures"? (I think the industry might have agreed with that one.)"
Jobs and Announcements
On the jobs front Pacific Union Financial continues to expand its Retail Lending presence across the country and is searching for experienced branch managers and loan officers. "In 2015 Retail Lending at Pacific Union realized growth of more than 500% when compared to 2014, and is focused on strategic, profitable growth across numerous markets in 2016. Pacific Union Financial, based in Irving, TX, is a direct seller and servicer to Fannie Mae, Freddie Mac and Ginnie Mae as well as the 7th largest FHA sponsored lender in the country with a servicing portfolio of more than $20 billion. If you are looking for growth opportunities with a strategic and innovative mortgage banking organization, please contact John Hummel, Senior Executive Vice President, Retail Lending, or Tannise Spencer, Recruiting Manager, Retail Lending, to learn more about Pacific Union.
And Sindeo is rebuilding the mortgage experience for clients and their real estate agents from the ground up. "Are you a customer-centric, tech-driven mortgage pro? Join the team creating the future of mortgage! Work with smart, fun, passionate people in an environment that values creativity, innovation, and making an impact. We're looking for a Director of Realtor Advisory as well as mortgage pros in Florida, California, DC, and other locations across the nation. Visit www.sindeo.com/careers to learn more about joining our growing team." Inquiries should be directed to Kyle Russell, Recruiter, Talent, (415) 299-8191.
In personnel news national mortgage lender New Penn Financial, LLC announced the addition of mortgage industry veteran Julie McCall as Operations Manager for the lender's East Coast Third Party Originations (TPO) channel. McCall joins New Penn from a previous employer where she was VP, Wholesale Operations Manager.
Last month National Mortgage Professional Magazine hosted a webinar titled "Diversifying Your Business with Small-Balance Commercial Mortgages". It was such a success that the sponsor, Silver Hill Funding, will be presenting a follow-up FREE webinar on Thursday, March 31, at 2:00 PM EDT titled "Small-Balance Commercial Mortgages: Jump-Start Your Business in 2016". Top originators know their continued success will stem from their ability to adapt to change. In less than 60 minutes you'll see how easy it is for your organization to start originating small-balance commercial loans now. Click here to sign up for this FREE Webinar on Small-Balance Commercial Mortgages!
And the TPO division of Banc Home Loans and Arch MI have a second installment in a series of Tax Return Analysis Seminars. Taking place on April 7 in Irvine, CA, this free hands-on session will provide loan officers, underwriters, and processors with the opportunity to take their self-employed income analysis skill set to the next level. Topics for this intermediate level training session will include deductions & allowable add-backs, partnership & corporate returns, and agency guidelines relating to proper income analysis. Here is the correct link: RSVP today!