CFPB and Vendor Management Webinars; FHA/VA News; Brexit Primer
To start off the week, besides the first full moon on a summer solstice since 1967, here’s an interesting Bloomberg chart about the Federal government's percent of ownership of consumer debt, the money that we owe Uncle Sam. Ever since Obama nationalized the student loan sector, at $1.3 trillion they have taken their percentage of consumer debt from 5% to 28%. Many expect some sort of write-down of student loan debt in the future, and a study by the National Association of Realtors and SALT finds 71% of people with debts from student loans say the load from paying that debt is keeping them from buying a home and adding to it. More than 50% expected it would take 5 years until they felt comfortable buying a home given their current debt load.
In news that certainly caught everyone's attention Friday, the Justice Department's pursuit of 77-year old Angelo Mozilo is over. After earlier dropping a criminal investigation of Countrywide's Mozilo, federal prosecutors recently decided against filing a civil fraud case against him. Prosecutors in Los Angeles, in coordination with those at the Justice Department in Washington, spent more than two years reviewing the merits of pursuing a civil fraud case against Mozilo.
Mozilo and several other former Countrywide executives supposedly recently received letters from federal prosecutors notifying them that they had officially ended an investigation. In May, prosecutors suffered a blow when an appellate court in Manhattan overturned a jury's verdict that had found Rebecca Mairone, a former Countrywide executive, liable under FIRREA. The panel said although Countrywide may have sold flawed mortgages to two government-sponsored mortgage finance firms, there was insufficient evidence that the firm and Mairone had engaged in any deliberate deception.
The possibility of the Justice Department filing a so-called FIRREA lawsuit against Mozilo first came to light when Bank of America reached a $16.65 billion settlement of its own FIRREA case in August 2014. The inquiry by the Justice Department of Mozilo was seen by some legal critics as a way for prosecutors to address complaints that little had been done to hold individuals to account for the financial crisis. But lawyers for Mozilo argued a civil fraud case would be duplicative of the efforts of the Securities and Exchange Commission, which sued Mozilo and two other former Countrywide executives in 2009. On the eve of the trial in 2010, Mozilo and the other defendants reached a settlement that required the mortgage financier to pay $67.5 million in fines and restitution.
FHA & VA news? You can't ignore those programs, and in fact Ginnie Mae, where the lion's share of FHA & VA loans wind up, guarantees $1.6 trillion of mortgage securities. (Of course lenders don't "sell" loans to Ginnie Mae, like they do to Freddie and Fannie.) Ginnie Mae broke its own volume record by guaranteeing $464 billion in 2015 - and this year may be even better.
Few expected another refinancing boom after the Fed started lifting short-term borrowing costs in December. Lenders are reporting VA IRRL biz is great. Longer-term yields in the bond market have been plunging this year as money managers seek shelter from sinking stock markets and from slowing growth in China, underscoring the limits of the central bank's power as it tries to normalize lending costs.
If you are a mortgagee who has not yet transitioned your operations to the FHA Electronic Appraisal Delivery (EAD) portal for all of your FHA appraisal submissions, FHA is reminding all mortgagees thatall appraisals must be submitted through the EAD portal for all originations with case numbers assigned on and after June 27, 2016. On and after the June 27 mandatory use date, mortgagees will no longer be able to: Use both the EAD portal and other appraisal submission methods concurrently for originations; Submit appraisals for originations with case numbers assigned on and after June 27 to FHA through any method other than the EAD portal; nor Access the Appraisal Logging Screen in FHA Connection (FHAC) for case numbers that require an appraisal to be submitted through the EAD portal.
Valuation Management Group is already prepared for FHA's June 27th EAD portal mandatory usage. It announced its integration with the Federal Housing Administration's (FHA) Electronic Appraisal Delivery (EAD) portal and has begun successfully submitting FHA appraisal files for its lender customers prior to loan endorsement.
It's the final countdown to be on board with FHA's Electronic Appraisal Delivery (EAD) portal's June 27 mandatory use date. On this date, all mortgagees must begin submitting all appraisals through the EAD portal for all originations with case numbers assigned on or after June 27. To avoid potential disruption in case processing, mortgagees who have not yet done so should finalize the transition to full use of the EAD portal for appraisal submissions to FHA.
U.S. Bank Home Mortgage provided VA and FHA updates in a recent bulletin. Effective with all case numbers assigned on or after June 1, VA Circular 26-16-10 addressed unreimbursed expenses when commission income is equal to or exceeds 25% of the borrower's total income. IRS Form 2106 expenses must be deducted from gross commission income with the exception of an automobile lease or loan payment. Also updated is FHA reduction to the requirement of 2% loan balance calculation to 1%; however, FHA will no longer allow the use of a payment less than 1% unless it is the fully amortized payment according to the original terms of the note. Income Based Repayments-IBR less than 1% may not be used The guidance is effective for all case numbers assigned on or after June 30, 2016; however, Lenders may begin using the policy immediately. Please refer to Mortgagee Letter 2016-08 for guidance as revisions will be incorporated into FHA's Single Family Housing Policy Handbook 4000.1(Handbook 4000.1) on June 30, 2016.
The M&T FHA 203(k) product pages have been updated to reflect a correction to the maximum allowable LTV on refinances to 110% LTV. Reminder: FHA requires a separate calculation of the LTV for the application of MIP (which appears on the 203k Maximum Mortgage worksheet), versus the calculation of LTV for the actual loan (which must appear on the HUD-92900-LT Loan Transmittal).
VA's VALERI Special Announcement for May 17, 2016 contained information regarding the VA Home Loan Program's Real Estate Owned Portfolio Servicing Contract.
Mountain West Financial will now allow W-2 transcripts for borrowers who ONLY use W-2 income to qualify for a loan approved by Desktop Underwriter (DU) or Loan Prospector (LP) on VA loans. For borrowers with income that is supported exclusively by W-2 transcripts, the originator must follow DU/LP guidance when requesting documentation from the borrower to include in the loan file. Additionally, the loan must be approved by DU/LP and the DU/LP cert must substantiate use of W-2 income only.
If you're interested in rates and world economic affairs, this is a big week. Britons will vote on whether to remain a member of the 28-nation European Union or leave the bloc - which will take many months if not years. The EU's fundamental philosophy, meant to stimulate competition and efficiency but show unity, is "one territory without any internal borders or other regulatory obstacles to the free movement of goods and services." If you look at Britain's performance with GDP and employment, however, it tracks closer to the US and Germany than it does with the rest of the EU that's severely underperforming. Those arguing for an exit highlight the expense to the United Kingdom, and the increased regulation. When the UK joined the EU in 1973, the EU's GDP made up 37% of the world's GDP. The IMF estimates that number will drop to 22% by 2025.
Many Britons are fed up and unlike Greece, they actually have the financial firepower to follow through. Polls as of Friday show 48% are in favor of Brexit. The European Central Bank stands ready to work with the Bank of England in the event the U.K. votes to leave the European Union. But markets don't like uncertainty...
So the focus will be on England since there is very little in the way of scheduled economic news this week in the United States. In fact, there is nothing scheduled for today or tomorrow. Wednesday we have the MBA's application data, and also Existing Home Sales, the FHFA House Price Index, and Federal Reserve Chair Janet Yellen semi-annual testimony before the House Financial Services Committee (aka Humphrey Hawkins). Thursday has Jobless Claims and New Home Sales. Friday closes out with Durable Goods Orders and some statistics from grad school students at the University of Michigan. We closed last week with the 10-year at 1.62% and this morning it is at 1.68% with agency MBS prices worse about .125.
Events
ATS Secured is offering a free webinar on vendor management presented by Moorari Shah of Buckley Sandler. Tomorrow (the 21st) lenders and title agents can find out exactly what they need to do to manage vendors, reduce their 3rd party risk and satisfy regulatory requirements.
California MBA is providing a free webinar on June 23rd to help you prepare for the CFPB Exam. Are you ready?
On June 22nd, join California MBA Tech and Marketing Committee to find out how the traditional buyer path model is out-of-date. Do you know about "The Loop"? Register now and hear from top industry experts how you can adapt to the new reality and drive more business.
Jobs and Announcements
Don't let this opportunity pass you by! Stonegate Mortgage Corporation and Stonegate Direct are seeking TPO Account Executives, Mortgage Advisors, Operations pros; come learn more at Stonegate's Job Fair, June 22 from 4-7 PM at its Lake Forest, CA location - 25520 Commercentre Drive, 2nd floor. "Get all you need to know from informational sessions with the Stonegate Mortgage and Stonegate Direct teams. Great careers start here!"
With an 18+ year track record of consumer direct lending, American Interbanc Mortgage is "looking to hire licensed Call Center Loan Officers to work out of their beautiful HQ office in Irvine, CA. Candidates should have 1 to 3 years of loan officer experience and an active NMLS license with active state licensing in CA (additional states a plus). Our Loan Officers are provided with the highest quality leads from motivated mortgage shoppers! Many of the leads are from returning customers! Their very aggressively priced mortgage rates can be viewed at www.americaninterbanc.com. Interested loan officers should send their resume to Stephanie Lucio or careers@americaninterbanc.com.
On the wholesale & correspondent side, "Reunited and it feels great! Florida Capital Bank Mortgage is searching for AEs nationwide. FCB is now a FHLMC/FNMA Seller/Servicer and announces the return of an ensemble cast to promote its boutique mortgage services to brokers and bankers. Andrea Lefebvre, Director of Production (617.899.1428), and Bob Eisendrath, National Account Manager (414.350.3986) present a competitive jumbo product in addition to its government and warehouse products. As an independent national bank, we place our clients in the starring role and script a unique partnership that works exclusively for them. In a return engagement, Mark Bunting, Texas Account Executive and Joe Kaiker, Midwest Account Executive join our cast. If you are a broker or mortgage banker tired of big box lenders, turn the page and collaborate with FCBM to enjoy the role of originating and funding loans again. If you are an Account Executive looking for a diverse stage with a great cast to support you, contact Andrea or Bob above for your close up. Nationwide."
Redwood Trust recently launched an expanded credit jumbo purchase program, branded as Redwood Choice. The Redwood Choice program allows FICO scores down to 661, LTVs up to 90% and reduces minimum post close cash reserves to 3 months. The program allows non-warrantable condos and condotels and has both a QM and non-QM option available. Pricing is competitive and reactions to the program from loan officers and originators thus far has been extremely positive. Redwood believes the Choice program greatly expands loan officers' options for their jumbo customers and will help broaden the loan officers' customer base. Redwood has been buying jumbo loans since 1995 and is excited to offer this new product to currently approved counterparties. The legacy Redwood product has been rebranded as Redwood Select. Please contact your Redwood relationship manager for details on the program.
(Occasionally I am asked about a 1% down payment program from Quicken Loans. If you want to know the complete details contact Quicken, but here is the link from Quicken March 3, 2016.)
Returning to jobs, companies aren't always searching for new staff. In this case, Pacific Investment Management's (PIMCO) 25% drop in assets is prompting the firm to cut its global workforce 3% - 68 workers - and to close six dividend-income strategy funds. "Our current business plans will reduce expenses in some areas while, of course, ensuring investment and hiring in others," PIMCO spokesman Michael Reid said.