Trends in FHA & VA; Agency/Lender Changes; Note on Improving Borrower Profiles
I asked my cat Myrtle for her comments on the proposed TRID changes. (Blank stare.“Myrtle, make up your mind – in or out!”) I did, however, receive this note from a veteran broker regarding the changes. “Every comment I read online basically said this is onerous or worse. I didn't go through all of them but did not see one in favor of TRID. Everyone should express their opinion even if it's only 2-3 lines. (One can read the comments in the right column.) The three-day rule is a joke on refis although for purchases I can understand their reasoning - but not the practicality. If the borrower has been properly educated they should not have any surprises."
Frankly I have a hard time keeping up with all the lender & investor changes in FHA & VA lending. Lenders need to know, however. For example, Ellie Mae tells us that millennials are flocking to FHA loans as credit tightens. Assuming credit is tightening, and I am not quite convinced that it is, loans run through Ellie Mae's system show that folks in their 20s and early 30s show a preference to FHA-backed mortgages. Millennial homeownership continues to be a problem as many are not interested in buying homes, and others are not able to. But as we all know, at some point in the next several years many of them will "bear fruit" and not want to raise Junior in a two-bedroom loft above a cool restaurant in downtown Austin or Denver.
Mortgage News Daily tells us that, "A large contingent of new homes started in 2015 were purchased using non-conventional financing according to a new analysis by the National Association of Home Builders (NAHB). The association's Assistant Vice President for Housing Policy Research, Natalia Siniavskaia writes that more than a third of newly constructed homes started last year did not use conventional financing. This includes purchases using all cash, FHA, VA, and Rural Housing Service (USDA) loans.
Recently, HUD has provided conflicting information regarding the permissibility of down payment assistance programs offered by state and local housing finance agencies (HFAs) that use "premium pricing" as the source of assistance. Currently, there is a dispute between the FHA and the HUD Office of the Inspector General (OIG) regarding permissible sources of single-family down payment assistance offered through HFAs.
The MBA tells us that, "Although the dispute was resolved by HUD's Deputy Secretary in accordance with HUD's internal protocols, the OIG continues to object to the ruling, has indicated it will continue to audit lenders, and is now seeking congressional assistance.
Unless and until HUD provides more definitive guidance on the topic, MBA recommends that FHA lenders consult with legal counsel and consider carefully whether and when to participate in down payment assistance programs from HFAs that rely on premium pricing mechanisms. MBA will continue to press HUD/FHA for clarity on this important issue."
And don't forget last week's Economist article title "Comradely Capitalism: How America Accidentally Nationalized Its Mortgage Market." Nonbank lenders may, in part, be growing thanks to the federal government directly, or indirectly, supporting them. Most of FHA & VA loans go into Ginnie Mae securities, and thanks to Ginnie Mae-backed FHA products (and the conservatorship of Fannie Mae and Freddie Mac under the FHFA, of course) the federal government has guaranteed $6.4 trillion in American home loans.
The U.S. Department of the Treasury issued a Press Release regarding the publication of a joint white paper by Treasury, the U.S. Department of Housing and Urban Development (HUD), and the Federal Housing Finance Agency (FHFA) that is designed to serve as a guide for future loss mitigation programs. "The guidance draws on lessons learned from the implementation of the government's crisis-era housing foreclosure prevention/loss mitigation recovery programs, and outlines five principles the agencies believe were essential to the success of the government's programs and should provide a foundation for any future loss mitigation programs."
In light of the recent Presidentially-Declared Major Disaster Area (PDMDA) in the State of Louisiana due to damage caused by severe storms and flooding, FHA issued a reminder that mortgages secured by properties in a PDMDA are subject to a 90-Day moratorium on foreclosures following the disaster. HUD provides mortgagees an automatic 90-Day extension from the date of the moratorium expiration date to commence or recommence foreclosure action or evaluate the borrower under HUD's Loss Mitigation Program. For details, See policy in the SF Handbook, Section III.A.3.c.ii.
On August 1, HUD announced that FHA updated its lender-level certification statements. Pursuant to the Single Family Housing Policy Handbook 4000.1, all lenders seeking FHA approval must complete the Initial Certification as part of the online application process, and all FHA-approved lenders must complete the Annual Certification at each fiscal year's end thereafter. As outlined in FHA INFO 16-51, use of the revised certifications is mandatory beginning August 1, 2016. After that date, all new LEAP recertification packages will reflect the revised Annual Certification statements, and all lenders applying anew for FHA approval must complete the revised Initial Certification statements. FHA INFO 16-51 further notes that the revised language "may also affect some in-process applications." FHA released separate documents for supervised/non-supervised mortgagees and investing and government mortgagees to outline the changes implemented. The changes included in the certification statements range from rewording, reformatting, and the refining of policy citations to adding instructions, new requirements, and certain exemptions/qualifiers.
Mountain West Financial announced several reminders for FHA loans. Reminders include all Student Loans must be included in the Borrower's liabilities, regardless of the payment type or status of payments. Also, if the payment used for the monthly obligation is less than 1 percent of the outstanding balance reported on the Borrower's credit report, and less than the monthly payment reported on the Borrower's credit report; written documentation must be obtained directly from the creditor of the actual monthly payment, the payment status, and evidence of the outstanding balance and terms from the creditor. A credit report alone is not sufficient.
Effective August 16, 2016, U.S. Bank Home Mortgage will be removing the existing program adjustment of .50 for all VA Jumbo loans with total loan amounts greater than $417,000 from product code #2001. With this change, all VA Jumbo loans with a total loan amount greater than $417,000 will be priced under product code #1105 (FHA Jumbo) temporarily.
ditech is reminding its' clients that FHA mortgage application packages with FHA Case Numbers assigned on or after August 1, 2016 must use the updated HUD 92900-A version for both the Initial and Final file copies of the form contained in the Case Binder. In separate news, ditech discontinued financing manufactured homes in the state of Rhode Island for all products.
New Leaf Wholesale posted a reminder regarding changes to VA appraisal fees in Oregon beginning September 1st. Refer to VA's website for the new Oregon appraisal fee schedule before creating your LE.
FHA published a final rule in the Federal Register, Disposition of HUD-Acquired Single Family Properties; Updating HUD's Single Family Property Disposition Regulations. Specifically, this rule consolidates and reorganizes these regulations to better reflect industry standards, and allows HUD to conduct its Single Family Property Disposition Program more efficiently and effectively. Policy revisions and future effective dates will be incorporated into a future update.
Mortgage Solutions Financial has updated its VA guidelines.
Reminder: FHA's revised HUD/VA Addendum to the Uniform Residential Loan Application (Form 92900-A, Loan-Level Certification) became effective for use by FHA-approved mortgagees for case numbers assigned on or after August 1, 2016. Mortgagees can access the revised Loan-Level Certification on HUD's Client Information Policy Systems (HUDCLIPS) HUD Forms page. The previous version of this form is available on the Single Family Housing Supplemental Documents Archive web page.
Like the sound of no Lender Fee on VA Loans? Click here to see what LHFS Wholesale has to offer.
From Washington Geoff Huetten addresses FHA premiums, echoing the sentiment of many. "FHA, in my opinion, is losing market share of good quality, high credit score buyers. The reason being that FHA premiums, specifically the monthly mortgage insurance, is often times for the life of the loan. Best case scenario it's on for 11 years. A good credit score borrower is more likely to find a way to come up with the additional 1.5% down payment so they could go 5% percent down on a conventional loan so that their monthly MI is less but also, more importantly, so that MI eventually drops off. (I realize they could go 3% down conventional but that is typically a more expensive payment than FHA.) We are seeing that happen quite a bit.
"And even for those strong borrowers that do choose to go FHA, they are very quickly looking to get out of their FHA loan (refinance) to lower their monthly MI. With the improvements we have seen in the housing market, many borrowers have enough equity in their home in a year or so to refinance into a conventional loan and either lower their monthly MI considerably or remove it completely. What is the point of FHA having the monthly mortgage insurance be for the life of the loan if the borrower is never going to see the life of the loan anyway? It is a huge deterrent for strong borrowers and a big reason that many buyers opt for a conventional loan instead of FHA financing.
"I have to believe that very few good credit borrowers are staying in their loan long enough, or will stay in their loan long enough, to see the MI drop off, if it ever does. Why doesn't the FHA modify their MI requirements to have PMI drop off at 78% to match Fannie Mae? If that were the case I can assure you we would see more high quality FHA borrowers and FHA would see the overall strength of their borrowers increase significantly, which should equate to less delinquent and/or default FHA loans. It seems like FHA is losing out on a very large portion of strong borrowers when that is something that they should be focusing on obtaining. Would you rather have less qualified borrowers in your pool of loans because that's really their only option? Or would it make more sense to reduce the timeline restrictions for the mortgage insurance to entice stronger borrowers to use FHA when FHA is never going to see 30 years of mortgage insurance anyway? FHA is still going to get lesser credit borrowers but it seems like attracting stronger borrowers, with very little downside, if any, would be something that FHA would want to do to increase the overall performance of their loans." Thanks Geoff!
Interest rates? Yes, Monday they headed right back down well into the range we've been in for a month or two, and in fact yesterday closed at where we were last Thursday. One MBS trader thought that the trade appeared to be more of a reflexive buy-the-dip reaction to a Treasury market that has offered very few buying opportunities in recent weeks than a flight-to-quality. Both personal income and spending data out yesterday were in line with estimates, so they weren't the reason.
Maybe a short-term rate hike is priced into the market, plain and simple. Not only have we seen Yellen and other Federal Reserve officials continue to talk about it, but over the weekend Cleveland Fed President Loretta Mester (an FOMC voter) said that the case for a further rate hike from the Fed was "compelling." She acknowledged that Q2 GDP growth was soft (1.1% seasonally adjusted annual rate) but noted that the consumer is strong.
Regardless, yesterday the 10-year price improved .625, the U.S. 5-year and agency MBS improved about .250. Today there is little schedule in the way of market-moving news. If you're intrigued with numbers from 2-3 months ago the June Case-Shiller 20-city Index comes out at 9AM ET, and then an hour later something more current with August's Consumer Confidence figure. In the very early going we're unchanged on agency MBS prices and at 1.58% on the 10-year yield versus Monday's close.
Jobs and Announcements
CFO's should be aware that national retail mortgage banker, Supreme Lending, is searching for a candidate to become its Chief Financial Officer and join its Executive Management Team. The ideal candidate should possess roughly 10 years of experience in the retail mortgage banking industry and demonstrated a minimum of 8 years of senior management experience. An advanced degree, or CPA designation is required as well as expert, hands-on knowledge of cash management, secondary markets, and accounting in addition to external and internal financial reporting. The role oversees negotiations of warehouse lines, investor agreements, insurance and risk management and federal and state taxes, and is based at the corporate headquarters in Dallas. Supreme is a FNMA & FHLMC seller/servicer, GNMA I & II issuer, and jumbo and non-QM lender licensed in all 50 states. "The company has a reputation as a fast-growing industry leader ranking annually among the top lenders nationwide in Scotsman Guide and Mortgage Executive Magazine, and has been recognized as among the Best Places to Work by the Dallas Business Journal." Please send inquiries to the attention of Stephen Knebel, Senior Corporate Recruiter.