FHA, VA, IRS, and Renegotiation Policy Changes; Upcoming Training and Events

By: Rob Chrisman •

The capital markets are always changing, and the latest news to turn some heads is that JPMorgan Chase is streamlining its operations and will no longer settle Treasury trades for most dealers by the end of 2017. SIFMA data show that more than $500 billion of Treasury securities were traded on average daily in the first half of this year. To keep things in perspective, since that is always a good thing, foreign exchange clocks in at over $5 trillion a day. The New York Stock Exchange, on the other hand, although it garners more press and publicity only weighs in at about $50 billion a day. And as we know, the biggest buyer of agency MBS is the NY Federal Reserve at $2-3 billion a day.

Jumbo, FHA, VA, and USDA updates from the government and lenders? Of course there are!

FHA published Issue #12 of its quarterly Lender Insight (dated June 2016) newsletter. Because there has been no measurable improvement to the initial material defect rate over the past eight quarters, this issue of Lender Insight primarily focuses on the causes of the high initial unacceptable ratings for the top five mitigated findings. The objective of Lender Insight is to provide lenders with information on what FHA is seeing in its quarterly loan review updates, status summaries, and other topics of interest in the lending community. Each issue also contains core information designed to help lenders better understand the trends and policies that affect their business.

Ditech issued a reminder that USDA will no longer require that the interest rate on the refinance loan be at least 1% below the interest rate of the original loan. The new rate must now be less than or equal to the rate of the loan being refinanced. Refer to its product summary for all product restrictions.

Flagstar clients are being reminded that all FHA loans with case numbers assigned on or after June 27, 2016, mortgagees are required to deliver appraisal data to the EAD before loan endorsement. Also noted, for Freddie Mac mortgages secured by a detached (site) condo project located in the State of Michigan, it is not required to obtain a condo questionnaire if specified requirements have been met.

Effective August 15th, Wells Fargo is updating its student loan payment requirements for Non-Conforming Loans as described below to mitigate the risk of unusually low student loan payments and ensure accurate payment calculations. Also noted, in order to mitigate risk due to employment volatility in areas that rely heavily on the oil industry for employment, Wells Fargo Funding will restrict CLTVs for Non-Conforming Loans where the property is located within an energy market, as identified by Wells Fargo Funding. For details, view the Wells Fargo Funding Energy Markets (Exhibit 24) list to support this change.  Additionally, Wells is removing it overlay requiring an exception from Wells Fargo Funding for High Balance VA Loans with total Loan amounts greater than $700,000 and less than or equal to $1,500,000 with debt-to-income ratios greater than 41%.

And there are IRS, tax-related, and renegotiation investor changes of note.

The deadline for submission of your certification documentation to either your vendor or the IRS for obtaining IRS tax transcripts was July 15. If you are unable to obtain a tax transcript for a Closed Loan Package due to the short window to comply, please contact a member of your Wells Fargo regional sales team to discuss delivery options.  While Loan-level exceptions may be granted for Closed Loan Packages not containing IRS transcripts, they may only be permitted for a limited time. Closed Loan Packages without IRS transcripts will require additional review, which may delay Loan funding. According to the IRS, vendors will be required to suspend access to the transcript service for any lender that fails to complete the required certification as of Friday, July 15th.

Sun West requires the following documentation when business income is reported on Schedule K1 and used for qualification: Income documents must include the most recent two-year individual tax returns (Form 1040) with all schedules, most recent two-year business tax returns - with Schedule K-1, Form 1065 for Partnerships/LLCs, and form 1120S for S-Corporations/LLCs. For Use of Self-employment income from Partnership or S Corporation business: Ordinary income, net rental real estate income, and other net rental income reported on Schedule K-1 may be included in the borrower's cash flow provided: the borrower can document ownership share (using Schedule K-1); and the borrower can document access to the income (such as a partnership agreement or corporate resolution); and the business has adequate liquidity to support the withdrawal of earnings.

Plaza will allow the re-use of a prior appraisal report for a subsequent transaction when an appraisal update is obtained and specific requirements are met. This will save time and money for borrowers who have already determined they wish to refinance.

NYCB Mortgage's rate-lock renegotiation policy has a few key features. One Rate/Price Renegotiation is Permitted per Loan Number to current market price. The renegotiation must result in either a rate reduction of at least 1/8 of 1% or an increase of the borrower credit. A one-time renegotiation Fee of .625% price adjustment applies to the rate/price renegotiation request. There is no restriction on the price the applicant receives. The price paid is the current base price for the original lock term after the applicable rate and price adjustments minus the one-time renegotiation fee.

Franklin American Mortgage Company has made specific changes regarding its rate renegotiation policy. These changes are in effect as of Monday June 27th with changes available in the chapter online.

PennyMac posted a reminder of its trailing document policy as well as to share best practices for managing trailing documents with PennyMac. Click here to view.


Trainings and events:

California Mortgage Bankers Association's Mortgage Quality and Compliance Committee (MQAC) is providing a free webinar on fraud issues, July 28th

The Colorado Mortgage Lenders Association is hosting its Annual Convention on August 3rd, 4th, and 5th in Vail, Colorado.  The conference will be held at the Vail Marriott Mountain Resort, and features a variety of networking events, a line-up of nationally renowned speakers, and opportunities to learn about important topics and trends affecting the mortgage industry. You can view a YouTube video all about this event.

Fannie Mae has requested enhancements to the HomeTracker Lender Center application effective August 11. Live webinar training sessions will cover updated requirements for P&P submissions; the new related bid process; two new worklists for effective workflow management; and ad hoc reporting updates. Register for any available training throughout the month of August.

Free online FHA training opportunities:

 

Registration is underway for MBA's Risk Management, QA and Fraud Prevention Forum 2016 in Los Angeles September 28th - 30th.  Identify risk versus reward, analyze mortgage fraud threats and evaluate quality assurance practices by providing targeted, practical solutions to your unique business challenges. Topics include guidance on loan quality assurance, fraud prevention strategies, underwriting and compliance updates and other risk management topics.

 

Turning to the bond markets, Monday continued last week's lack of volatility. Short-dated U.S. Treasuries ticked down, but everything else traded in a very narrow range and didn't move much. The 10-year yield did hit a high of 1.59%, but closed at 1.57%. The NY Fed was in doing its usual purchase of agency MBS - in Monday's case about $2.5 billion.

Yesterday there was no scheduled news to move things around. This morning we have some actual news, but the kind of stuff that rarely move rates but gives economists something to talk about regardless. We'll have the May Case-Shiller 20-city Index at 9:00AM EDT, July Consumer Confidence at 10AM EDT, as well as New Home Sales. For those wanting to put some cash to work the Treasury will auction $45 billion of 1-month bills and $34 billion of 5-year notes. In the afternoon the FOMC two-day meeting will commence.  ahead of Wednesday's decision on monetary policy.

In terms of rate sheets this morning the 10-year note yield is back down to 1.55%, and both the 5-year T-note and agency MBS prices are better by nearly .125.


Jobs and Announcements

In retail job news Homestar Financial, a Georgia-based mortgage banking firm, continues its rapid expansion throughout the Southeast, Mid-Atlantic and Mid-West. Homestar is especially seeking qualified Retail Branch Managers and Loan Officers in Florida "who will enjoy extraordinary commissions and manager compensation." With over 80 offices, Homestar is a leader in the Southeast in Conventional, USDA, FHA, VA, Construction Perm and Jumbo loans. Homestar recently received the "Excellence Award" from USDA along with being the #1 FHA Purchase lender in Georgia for the third straight year. Homestar is a company that is focused on closing loans for originators and compensating them for what they accomplish. If you would like to join a company that you will never leave, contact John Berry, Division Manager, for a confidential conversation." NMLS #1095018 Branch NMLS #70864 Georgia Residential Mortgage Licensee #17368 Branch #39354 MLO FL# LO21222

In wholesale news Plaza Home Mortgage, Inc. is expanding and increasing its sales force once again in Colorado and Northern California. "We are excited to announce new career opportunities for multiple Inside and Outside AE positions in the Colorado and Northern California markets. We have 2 Northern CA operations centers and a Denver operations center. AEs will benefit from local market experts and local underwriting. Plaza is a FNMA/FHLMC and GNMA seller servicer with a diverse product offering including Reverse and Renovation. There is plenty of opportunity for growth along with a highly competitive compensation plan. If you're interested in additional information, please contact Sarah Pratt, Regional Manager (303-597-0440), for opportunities in the Colorado market or Jeanine Thomas, Regional Manager (916-955-4211) for our open Northern California opportunities, or PHM's Human Resources department. Plaza is an EEOC employer and follows all federal, state, and local laws relating to fair employment."

What's the number one reason mortgage loan originators and branch managers want to leave their current lender? "It isn't compensation, says Assurance Financial. It's lack of support from the home office. Assurance has a simple but important value proposition for all producers - we have a solid reputation for closing loans on time. Our operations staff supports you and your team so you can focus on originating new loans rather than worrying about closing your pipeline."Assurance is expanding throughout the Southeast and Southwest and looking to hire branch managers and MLOs in Arizona, Colorado, New Mexico, Texas, Arkansas, Louisiana, Mississippi, Tennessee, Alabama, Ohio, Virginia, North Carolina, South Carolina, Georgia, and Florida. For more information, contact Paul Peters, CMB at 225-239-7948 or visit www.LendTheWay. com/Careers.

In other retail news Norcom Mortgage would like to congratulate Business Development Manager, Tyler Rhea, for being honored as one of MPA's Young Guns for 2016. Tyler's success has helped Norcom achieve a record breaking year in retail. Norcom is licensed in 28 states and is rapidly expanding its footprint throughout the US. If you are looking to join a winning team, please reach out to "Young Gun" Tyler Rhea.

At wholesaler Plaza Home Mortgage Julie Manson is the company's new EVP of Operations. "She will provide leadership and support in the areas of lending operations, credit/corporate underwriting, and post-closing operations, in addition to her current risk management responsibilities. Since joining Plaza in 2009, Julie has overseen Compliance, Licensing, Quality Control, Broker Approvals, Policies and Procedures, and she also manages Plaza's third party relationships."

Congrats to Patrick Sinks. U.S. Mortgage Insurers (USMI) announced that he will serve as the organization's new chairman. Sinks is MGIC Investment Corporation's Chief Executive Officer (CEO) and succeeds USMI Chairman Rohit Gupta, President and CEO of Genworth Mortgage Insurance (MI).