Non-QM Jumbo, POS, Processing, AI U/W Tools; HUD/Rocket Suit, CFPB Unleashes; Curinos Volume Stats
“Today’s three-year-olds can switch on laptops and open their favorite apps. When I was three, I ate mud.” Times change. Remember when homeowner’s insurance was an after-thought? In some counties and states, being approved for insurance has become as big a concern as being approved for a loan. “Nonadmitted” insurance is becoming the new norm in many places that face untenable economics when it comes to insuring houses, like coastal Florida or wildfire-prone California. Essentially, insurance tends to be a heavily regulated field, with governments ensuring that insurers have enough money to compensate those they insure, that they’re maintaining high-quality business practices, and that price hikes are limited year to year. When those insurers won’t touch an owner, perhaps they can go to a state-backed insurer, but when even those go out of reach, nonadmitted insurance is there. They have none of the protections or backing of the government and existed at first to insure the comically uninsurable, like nuclear waste projects or fireworks factories. Nonadmitted premiums rose 27.5 percent from 2022 to 2023, compared to 13.8 percent among the admitted market. The number of nonadmitted policies in Florida rose 73 percent to hit 92,000 over the past 14 years. (Today’s podcast can be found here and Richey May is sponsoring this week’s. Richey May’s consulting, cybersecurity, business intelligence, and automation services are designed by mortgage experts to help you continue to drive growth and increase profitability. Hear an Interview with Richey May’s Michael Nouguier on cybersecurity to thwart holiday attacks and best practices as we enter 2025.)
Lender and Broker Software, Services, and Products
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How much extra time does your team have? How much does it cost you to ask borrowers to resubmit incomplete documents? Can you afford to allow document collection and underwriting mistakes to create a bottleneck in your pipeline? It’s time to think differently. Verifying assets and income can waste valuable resources and frustrate loan officers and underwriters. Borrowers asked to locate, scan, or photograph bank statements may submit (and resubmit) distorted documents that are hard to read. For lenders, this means extra work and increased potential for error and fraud. Utilizing LoanCraft's Bank Data Express solution, lenders can simplify underwriting, elevate customer experience, and enhance decision-making for financial institutions. Beyond the convenience for borrowers and enhanced accuracy, the innovative override feature also allows underwriters to apply documented, transparent judgment when needed. Today’s mortgage lender knows that efficiency and accuracy are paramount. LoanCraft’s powerful tool can help turbocharge your pipeline and give you confidence in underwriting. Get started today!
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HomeLend, the direct investment platform and liquidity hub of the mortgage industry, has launched Prime and Non-QM Jumbo Loan programs with loan amounts of up to $5mm. Its programs allow for both Full and Alternative (bank statement, 1099) documentation options, available with 15- & 30-year FRM and 5/7/10 year ARM products. With loan amounts up to $5mm, LTV's up to 80%, and FICO as low as 620, HomeLend’s Jumbo loan program is one of the most expansive in the industry. HomeLend is an innovative technology and operational platform for the purchase and sale of mortgage loans. Investors and securitizers of Jumbo loans may utilize HomeLend to help ramp production and increase volumes in a timely manner. Lenders and investors may sell and purchase jumbo loans on a flow basis and engage in real-time pricing via the HomeLend technology platform. To learn more about HomeLend, please visit here.
The CFPB and Legal Maneuvers
Of course, anyone can sue anyone else. But when a large company pits itself against a government agency, well, that is different than suing a neighbor when their tree root cracks your sidewalk.
“Rocket Mortgage, the nation’s largest mortgage lender and a part of Rocket Companies, filed suit in Federal District Court against the United States Department of Housing and Urban Development (HUD) to correct conflicts between the government’s regulations requiring appraiser independence and its enforcement actions seeking to hold lenders liable for the conduct of independent licensed appraisers. Rocket Mortgage also filed a motion to dismiss the claim the DOJ brought against the company based on the same regulatory conflicts and misapplication of applicable law.”
“Yes, but will ‘teams’ operating as unlicensed brokers be addressed?” The Consumer Finance Protection Bureau continues to cram, for lack of a better term, announcements ahead of a change in presidential administration. This “joke” is circulating. “How do you know when someone wants to run for public office (after they get fired from their CFPB job)? They get their picture in an announcement where the government is handing out checks. He’s as shameless as the guy who is going to fire him.”
Yes, be careful if you refer a client to a credit repair company. The CFPB will begin distributing refund checks to more than 4 million consumers harmed by a ring of corporate entities operating some of the largest credit repair brands in the country, including Lexington Law and CreditRepair.com. “The companies violated federal telemarketing laws by illegally collecting upfront fees for telemarketed credit repair services. The CFPB also alleged that the companies violated Federal consumer protection law by engaging in bait-and-switch advertising.”
The CFPB took action against student lender Climb Credit and its investors, including 1/0 (“One Zero”), filing a proposed order, which if entered will require the companies to stop making representations in their advertising about the quality of the training programs at their partner schools and graduates’ hiring rates and salaries. “The CFPB sued Climb Credit for offering loans for educational programs that often were not vetted for quality and job placement success or that failed the vetting, despite Climb Credit making representations to the contrary.
If entered, the order will require the defendants to stop making certain representations about their educational offerings in their advertising and pay a $950,000 civil money penalty into the CFPB’s victims relief fund.”
“The Consumer Financial Protection Bureau took another step as part of the federal government’s broader initiative to protect consumers’ personal data by introducing a proposed rule to limit the types of personal identifying information data brokers can sell and to clarify the criteria for qualifying as a "consumer reporting agency" under the Fair Credit Reporting Act.”
It “proposed a rule to rein in data brokers that sell Americans' sensitive personal and financial information. The proposed rule would limit the sale of personal identifiers like Social Security Numbers and phone numbers collected by certain companies and make sure that people’s financial data such as income is only shared for legitimate purposes, like facilitating a mortgage approval, and not sold to scammers targeting those in financial distress. The proposal would make clear that when data brokers sell certain sensitive consumer information they are "consumer reporting agencies" under the Fair Credit Reporting Act (FCRA), requiring them to comply with accuracy requirements, provide consumers access to their information, and maintain safeguards against misuse.”
Garris Horn LLP writes, “The CFPB’s recent report highlights a pressing concern: state data privacy laws, while groundbreaking for many industries, often leave financial institutions operating under outdated privacy frameworks. These gaps result from broad exemptions for entities covered by federal laws such as the Gramm-Leach-Bliley Act (GLBA). The CFPB contends that these exemptions leave consumers' financial data exposed compared to protections offered in other sectors.
Remember that a “notice of proposed rulemaking” is not the rule itself, so there is more process coming before anything becomes effective. “The CFPB issued a Notice of Proposed Rulemaking related to consumer reporting and the requirements of the Fair Credit Reporting Act (FCRA). The proposed rule would amend Regulation V to implement FCRA definitions of consumer report and consumer reporting agency, as well as certain other FCRA provisions, to, among other things, ensure that FCRA protections are applied to sensitive consumer information that the statute was designed to protect, including information sold by data brokers.
The CFPB also released a Fast Facts Summary of the proposed rule.
For non-banks, and there are thousands of them that originate loans, on Wednesday, December 11, and Tuesday, December 17, staff from the CFPB’s Nonbank Registration Team will host virtual RegCast on the Nonbank Registration: Orders Final Rule. It will review frequently asked regulatory questions received thus far in the implementation of the rule, including coverage-related questions. Both dates will be virtual-only presentations and will feature the same content: December 11 from 11:30am to 1:00pm ET and December 17 from , 2024 from 1:00pm to 2:30pm ET.
Curinos Weighs in With Volume
Mortgage prices are derived from supply and demand. According to Curinos’ new proprietary application index, refinances decreased 42% week over week and decreased 26% in November; the purchase index decreased 31% week over week and decreased 9% for November as a whole. November 2024 funded mortgage volume increased 51% YoY and decreased 13% MoM. The average 30-year conforming retail funded rate in November 2024 was 6.19, 6bps lower than October 2024 and 102bps lower than the same month last year. Purchase rates were 29bps higher MoM and 98bps lower YoY, while Refinance rates were 9bps higher MoM and 23bps lower YoY. Curinos sources a statistically significant data set directly from lenders to produce these benchmark figures, and one can drill into this data further here.
Capital Markets
It's a familiar pattern in the bond market. As a key economic report approaches, Treasury yields adjust based on expectations. When the report comes out, there’s often a quick reaction, followed by the market settling into a new range until the next big update. Right now, there’s an extra layer to consider because yields are close to recent lows (e.g., 10-year Treasury yields closed yesterday below the 200-day average of 4.21 percent).
The current economic report in question is today’s release of November payrolls data. That report should help clarify how hurricanes affected the data, and we were expected to see stronger payroll numbers in November than October’s numbers that are less reliable due to the storms, strikes, and survey issues; the market seems ready to overlook them. However, any revisions to October’s data will still be worth watching. Keep in mind that next week’s consumer price figures hold much greater potential to derail a downward adjustment to policy rates at the final Federal Open Market Committee meeting of the year.
Today brought the aforementioned November payrolls report: Headline payrolls were +227k versus 200k expectations. The unemployment rate was 4.2 percent when it was seen holding steady at 4.1 percent, while average hourly earnings were +.4 percent versus forecasts of a +0.3 percent month-over-month and 3.9 percent year-over-year increase compared with 0.4 percent and 4.0 percent previously. Later today brings preliminary December Michigan sentiment, which will offer markets additional insights on the health of the consumer post-election, consumer credit for October, and remarks from several Fed speakers. After the latest salvo of employment data, Agency MBS prices are better than Thursday evening by about .125, the 2-year is yielding 4.10, and the 10-year is yielding 4.15 after closing yesterday at 4.18 percent.