Some State Residential Regulation Changes; Rural Housing Lender Trends

In case it comes up at Happy Hour tonight, how are things working out in Japan? “The Bank of Japan, already a top-five owner of 81 companies in Japan’s Nikkei 225 Stock Average, is on course to become the No. 1 shareholder in 55 of those firms by the end of next year,” per Cantor Fitzgerald. The country has had zero interest rates for many years, and Japan's population, currently about 128 million, is expected to shrink in half by the year 2082.

Let's see what some states have been up to recently in terms of regulatory changes.

The Illinois Credit Union Act has had various sections amended. For example, previously it was the responsibility of the credit committee (or if no credit committee had been appointed, the board of directors) to appoint a credit manager who was empowered to approve or disapprove loans and lines of credit under conditions prescribed by the board of directors. Now that responsibility belongs to the credit committee, board of directors, or chief management official. Also added is a clause further explaining prepayment penalties. An amendment was made to removes credit manager from the members to which a credit union can make a loan. In addition, a new section was added which governs network credit unions. When two or more credit unions merge pursuant to section 63 of the Illinois Credit Union Act, they can request a designation as a network credit union from the Secretary of Financial and Professional Regulation. The network credit union is the surviving legal entity in the merger.

Illinois didn't stop with credit union changes. It has amended various real estate financing laws. One amendment involves the Uniform Real Property Electronic Recording Act which increased the number of members of the Illinois Electronic Recording Commission from 15 to 17. The provisions are effective on January 1, 2017. The full text amendment can be viewed here. The Residential Real Property Disclosure Act requires the title insurance company to attach to the mortgage a certificate of compliance or exemption with the requirements of the Residential Real Property Disclosure Act.  The amendment to this section requires a lis pendens filed after July 1, 2016 to be filed with the Department of Financial and Professional Regulation electronically whereas before a lis pendens could be filed electronically or by hard copy. This amendment can be viewed here. Additionally, the Making Home Affordable Program section was amended to change the dates in reference to cases pending and filed. Read this text here.

Rhode Island's Homestead Estate Exemption has been amended to expand the nature of the properties that are entitled to homestead protection and to clarify the priority of homestead interests when a mortgage is granted. Section A extends homestead protections that were previously limited to "land and buildings" to include "personal property that the owner uses as a residence." Section C provides that a homestead shall be subordinate to a mortgage which encumbers the property to the extent that each owner of the home signs the mortgage at the time of execution. Section D provides that for the purposes of the Homestead Exemption, a mortgage shall include a security instrument granting an interest in a manufactured home or cooperative housing unit. Further, Section (d) does not require a non-titled spouse to sign the mortgage in order for subordination of the homestead to be effective against the spouse.

In Alaska, where they're losing about 5 minutes of daylight a day due to the changing season, the legislature has recently updated its power of attorney provisions, including an important update to the statutory power of attorney form, with an effective date of January 1, 2017. The power of attorney provisions first outline what constitutes acceptance by, and the liability of, an agent. An agent accepts appointment simply by exercising authority or performing duties as an agent, or by any other conduct that would indicate acceptance. If an agent breaches his or her duty to the principal, he or she is liable for the amount needed to restore the value of their property, as well as attorney's fees and costs. The provisions also discuss the duties of an agent and clarifies power of attorney termination and the POA form itself. 

And effective as of January 1^st, 2017, the Alaska legislature amended provisions regarding mortgage loan lenders' and originators' licensing requirements in addition to the inclusion of a "registered depository institution" in the Act. The following focuses on the inclusion of the latter entity throughout the amended provisions. mortgage loan originator must meet, namely: registering with the registry, working for/as an employee of a designated party and attaining sponsorship. With the recent changes, both of the aforementioned requirements (working for/as an employee and attaining sponsorship) may be attained through a registered depository institution. The exemption list allows the delineated parties to disregard mortgage lender and mortgage broker licensing requirements. Due to the recent changes federal, state and local government agencies - including agencies that arrange or provide finance for mortgage loans - are now exempted from meeting previous licensing requirements. The inclusion of registered depository institutions in the Act has led the entities to acquire new responsibilities as well.

Alaska and many states have some rural areas. Any lender changes regarding USDA & rural lending?

U.S. Bank Home Mortgage has clarified requirements regarding 2106 unreimbursed expenses for portfolio and all agency loans excluding USDA rural housing. Unreimbursed employee business expenses are not required to be analyzed or deducted from the borrower's qualifying income, or added to monthly liabilities when a borrower is qualified using the following: base pay, bonus, overtime, commission income less than 25% of the borrower's annual employment income. This applies regardless of whether unreimbursed employee business expenses are identified on tax returns (IRS Form 2106) or tax transcripts received from the IRS.

As of Wednesday, August 17, Pacific Union updated its FHA and USDA Standard Adjusters for Correspondent Lending. Also noted, HUD updates to fully support sponsored originations are complete. As a result,effective immediately, all Non-Delegated Clients should upload appraisals directly to EAD rather than sending the XML or MISMO version to their Pacific Union Non-Delegated Team for upload. In addition, Non-Delegated Clients must provide Pacific Union a copy of the FHA Submission Summary Report (SSR) with each loan file to confirm upload of the appraisal data to EAD.

Land Home Financial reminded its clients that the USDA announced a reduction in the upfront guarantee fee and monthly/annual fee for fiscal year (FY) 2017 effective with Conditional Commitments issued on or after October 1, 2016 through September 30, 2017. The current and new reduced fees are as follows. USDA Rural Development Reducing Guarantee and Annual Fees in October: Effective October 1, 2016 (the start of fiscal year 2017) program fees for USDA Rural Development's guaranteed home loan program will be significantly reduced.
The upfront guarantee fee will change from 2.75% to 1.0% of the loan amount. The annual fee will change from 0.50% to 0.35% of the average scheduled unpaid principal balance for the life of the loan. (Land Home did a good job of laying out its program.)

Wells Fargo has corrected its Seller Representations, Warranties, and Covenants, item 84 has been revised to reflect that FHA, VA, and Guaranteed Rural Housing Loans are exempt from the residual income evaluation for Qualified Mortgage Loans subject to a rebuttable presumption. Additionally, in order to better align with VA policy, Wells has updated its VA Interest Rate Reduction Refinance Loan (IRRRL) policy to require that the loan paid off has no mortgage late payments greater than 30 days. 

Turning to the capital markets, the Financial Times reports the value of negative yielding bonds has now reached $13.4 trillion worldwide - greater than the entire U.S. MBS market. Never say never, but the odds of negative interest rates in the United States are miniscule. In fact, in recent months the yield in the United States have been very stable, and the world's investors seem content with the current ebb and flow of the supply/demand equation. (Since the Spring the 10-year yield has ranged between 1.36% in early July to 1.98% in mid-March.)  

Yesterday was no exception. Fixed-income securities did pretty well as agency MBS closed the session higher in price and modestly tighter versus the Treasury market. For those numerically inclined, the 10-year rallied .250, and the 5-year T-note and agency MBS prices improved about .125.

No scheduled market-moving news today, and it was pretty quiet overnight aside from the Italian stock market tumbling. We wrapped up Thursday with the 10-year at 1.54% - kind of in the middle of where it has been all week and in the middle of where it's been most of this year, and this morning, in the early going, it is yielding 1.55% with agency MBS prices worse by a few ticks - perhaps a quiet summer Friday?

Jobs and Announcements

Here in the U.S. there are plenty of companies that aren't shrinking. Hamilton Group Funding, an independent mortgage banker in Ft. Lauderdale, FL, is seeking a top caliber VP - Capital Markets. The successful candidate will assume full responsibility for loan pricing, trading, hedging, production liaison, and investor relationships, including GSE's. Strong analytical skills, management experience and a proactive entrepreneurial spirit are essential. The company's culture emphasizes integrity, accountability, commitment to excellence and a sense of urgency. Bachelor's degree required and a masters is a plus. Hamilton is an equal opportunity employer with competitive compensation and benefits.  Relocation support will be provided if needed. Please email resumes to SVP - CFO Mike Clark.

Envoy Mortgage has career opportunities for two Regional Account Managers to work in Texas and the Southwest Region (AZ, CO, NM, NV and UT). The Regional Account Managers will be responsible for working with current clients as well as establishing new relationships along with the management of mortgage bankers, community banks and credit unions who meet the eligibility for Envoy Correspondent Lending Division. Interested candidates should email their resume to Jeff Haar.

Will loan officers become obsolete? The Maxwell team believes the answer is no. In fact, they've worked closely with more than 1,000 mortgage professionals, real estate agents and homebuyers to build a software platform that empowers front-line teams (reducing document collection turnaround time by 45%) while giving borrowers a modern, centralized experience. "Our focus is the loan officer and their team," says John Paasonen, Maxwell's CEO. "We built Maxwell to empower them to be more successful, connected and productive." Since launching a selective pilot in April, Maxwell has facilitated over $250M in mortgages with professionals at some of the largest mortgage companies. As of today, the platform is available for sign-up: anyone reading this commentary benefit from a 25% discount on their first year. Sign up for a demo of Maxwell and download Maxwell's Guide to Winning Customers in the Digital Age.

In personnel news, congratulations are due to Kim Nelson. BankSouth named Kim, its current mortgage subsidiary CEO, as its Atlanta Market President. Nelson will remain CEO for BankSouth Mortgage and is charged with running the bank's Atlanta operations. 

Altavera Mortgage Services, a provider of outsourced residential mortgage origination & fulfillment services, announced it has hired Kimberly Joyce as senior vice president of sales. Kimberly brings 22 years of sales and business development experience to the role, in which she will oversee national sales for Altavera.

Impac Mortgage Corp. Wholesale spread the word of its recent addition to Impac's sales management team. Dee Schultz has accepted the position of Inside Sales Manager and will be responsible for the leadership and expansion of the Inside Sales team's reach throughout the US. Dee brings more than 15 years of wholesale sales, and sales management experience to Impac Mortgage Wholesale and is expected to be a catalyst for Impac's continued growth through its FNMA, FHLMC, FHA, VA, and its four non-QM products. If you are interested in speaking with Dee about a rewarding sales opportunity with Impac's wholesale division click on her name above or give her a shout at 949-475-3732.