FHA, VA, Ginnie, USDA Changes; CFPB's Tongue-Lashing From Hensarling

By: Rob Chrisman • Fri, Apr 7 2017, 9:55 AM

If you think mortgage regulations are running amok, as part of the Affordable Care Act, restaurants with 20 or more locations will soon have to post signs indicating calorie counts for every item and every variation of an item on the menu. If you are Domino’s Pizza, or CPK, or any chain, how do you comply with this? And really, will anyone read it? If I want a slice of bacon cheese supreme, I want a bacon cheese supreme.

FHA published Mortgagee Letter 2017-08, which announces the following related to its implementation of the Loan Review System (LRS): May 15, 2017, implementation date for LRS and the associated changes to the Single Family Housing Policy Handbook 4000.1 (SF Handbook) published in Mortgagee Letter 2017-03; and A change in the effective date to May 15, 2017, for Direct Endorsement (DE) program timeframe changes published in Mortgagee Letter 2016-21.

FHA published its quarterly Lender Insight newsletter. Issue #15 contains detailed information on the Loan Review System (LRS) to help lenders prepare for implementation, including an overview of LRS features and functions, important steps lenders must take to access and use LRS, and links to additional LRS resources and information. This issue of Lender Insight also contains annual certification reminders for lenders with December fiscal year end dates and the quarterly loan review update.

Sun West's 203k Rehabilitation training guide is available for viewing or download.

PRMG is now offering CalHFA products to be originated via the Wholesale origination channel. Products offered include CalPlus Conventional, CalPlus FHA, ZIP, and MyHome Assistance.

Effective April 6, 2017, Peoples Bank will offer a 3/1 ARM on VA products.

The Veteran's Statement Regarding Loan Refinance and Lender's Certification (previously titled the Interest Rate Reduction Refinance Disclosure) has been updated to include a recoupment period calculation example and details regarding when the recoupment period calculation is not required. The borrower(s) must certify that he/she understands the proposed interest rate, repayment amount and recoupment period associated with refinance transaction. In addition, if the monthly payment (PITI) increases by 20% or more, the Underwriter must certify that the borrower(s) qualify for the new monthly payment. The revised Pacific Union certification is located on AllRegs in the Forms > Government > VA library. A signed certification is required on all VA IRRRL transactions. The Correspondent may use this or a similar form with the same content.

VA defines any refinance transaction that pays off a non-VA lien as a cash-out. Pacific Union Financial will purchase VA Cash-Out transactions on Texas homestead properties provided the loan is NOT Texas 50(a)(6).

Mortgage Solutions Financial updated its VA IRRRL seasoning requirement.

Ginnie Mae has added Inclusion of HECM MBS REMIC Pass-Through Securities ("HREMICs") as Trust Assets in the Ginnie Mae Multiclass Securities Program.

USDA has made a change to their definition of net tangible benefit that must be met to refinance under the Streamlined Assist Refinance option. Ditech clients be advised that effective immediately, a tangible benefit is defined as a $50 or greater reduction in the principal & interest and annual fee monthly payment as compared to the existing principal & interest and annual fee monthly payment. The amount paid for taxes and insurance is no longer included in the net tangible benefit calculation.

FHA published a notice (Docket No. FR-6025-N-01) in the Federal Register of all completed administrative actions taken by the Department of Housing and Urban Development's (HUD) Mortgagee Review Board during the period from October 1, 2015 through September 30, 2016. The notice provides a description of, and the cause for, the Mortgagee Review Board's administrative actions against HUD mortgagees in 25 fact-based cases and 253 annual recertification violations.

California wholesaler Mountain West Financial posted: effective immediately, the maximum hazard insurance and flood insurance deductibles for the USDA loan program is the greater of 1% or $1,000 of the policy coverage.

CFPB News

On March 24, 2017, the Consumer Finance Protection Bureau released a proposal (56 pages?!) to amend Regulation B to provide additional flexibility for mortgage lenders concerning the collection of consumer ethnicity and race information for purposes of Regulation B. Comments on the proposal are due 30 days after it is published in the Federal Register. Under the proposal, mortgage lenders would not be required to maintain different practices depending on their loan volume or other characteristics, allowing more lenders to adopt application forms that include expanded requests for information regarding a consumer's ethnicity and race, including the revised Uniform Residential Loan Application.

The Department of Justice, with the consent of PHH and the CFPB, has filed an unopposed motion with the D.C. Circuit requesting ten minutes of argument time in the oral argument to be held on May 24, 2017 in the rehearing en banc in the PHH case. The DOJ filed an amicus brief in which it agreed with PHH's position that the CFPB's structure is unconstitutional but advocated a more limited remedial measure than PHH is seeking. In contrast to PHH which has argued that the CFPB should be dismantled in its entirety, the DOJ supports keeping the CFPB intact with a director removable at will by the President.

But that isn't what is grabbing the headlines out there. The CFPB certainly has its proponents and fans. On the other side of the spectrum, this week House Financial Services Committee Chairman Jeb Hensarling (R-TX) delivered an opening statement at a hearing with Director Richard Cordray. Among other tidbits... "Mr. Cordray, I know that you are here at our committee's invitation for a statutory appearance, but I'm otherwise surprised to see you here in that, as you well know, there have been many press reports saying that you would have otherwise returned to Ohio to pursue a gubernatorial bid. Perhaps the rumors of your political aspirations are greatly exaggerated.

"On the other hand, I am also surprised that you are here because, as you are well aware, the President under the PHH case can dismiss you at will. Under Dodd-Frank, you can be removed for cause. Either way, I believe the President is clearly justified in dismissing you and I call upon the President - yet again - to do just that, and to do it immediately.

"There is no greater form of consumer protection than fostering competitive, innovative and transparent markets and then vigorously policing them for fraud, theft and deception. In policing our markets, under Mr. Cordray's leadership, CFPB's success record is anything but clear. What is clear, though, is that under Mr. Cordray's leadership the CFPB has shown an utter disregard for protecting markets and has made credit more expensive and less available in many instances; this is particularly true for low and moderate income Americans. What is also clear is that under Mr. Cordray's leadership, the CFPB has acted unlawfully, routinely denied market participants due process and abused its powers."

"According to researchers at the University of Maryland, because of Dodd-Frank and the CFPB, middle-income borrowers not only 'didn't obtain cheaper mortgages, but were cut out of the mortgage market altogether.' For all the harm inflicted upon consumers, Richard Cordray should be dismissed by the President.

"Next, in CFPB's short six-year history, the record is replete with instances where it has abused or exceeded its statutory authority. In the PHH case where the CFPB's structure was ruled unconstitutional, the facts show that Mr. Cordray unilaterally reversed accepted law with regards to Section 8(c) of RESPA, and did so not with formal rulemaking - that is, with notice, comment and due process - but with an ad hoc enforcement action instead. Then, to make matters worse, Mr. Cordray attempted to apply this new, rogue standard retroactively. The D.C. Circuit Court ruled against him in both instances.

"American consumers need competitive markets and a "cop on the beat" to protect them from fraud and deception. They don't need Washington elites trampling on their freedom of choice and picking their financial products for them. Today, Mr. Cordray and his CFPB don't just act as a cop on the beat, they act as legislator, prosecutor, judge and jury all rolled into one.

The CFPB represents the summit of unelected, unaccountable and unconstitutional agency government..."

Capital Markets

As pointed out several times by this commentary, a drop in mortgage refinancing has halved the number of mortgage bonds the Federal Reserve expects to buy this month compared to the month following the presidential election. The trend is helping the Fed reduce its $4.5 trillion in assets naturally, potentially affecting its decision to sell securities in order to tighten monetary policy later this year. In other words, if fewer borrowers are refinancing, fewer loans are paying off, giving the Fed less money to reinvest. Simple! San Francisco Fed President Williams, who does not vote again until 2018, told reporters in Germany that he agrees that the Fed should begin to unwind its balance sheet towards the end of this year

Up until the attack on Syria last night it was "Same ol' same ol'" in terms of rates lately - just not much moving the market. It is nearly impossible to argue that the U.S. economy is on much more solid ground than it was a year ago, which would tend to result in more borrowers qualifying to buy properties - if only there were properties to buy. The 10-year yield dropped to 2.33% before selling off and hitting a high of 2.37%, and closed at 2.34%.

The missile attacks last night caused the 10-year UST to rally, sending the yield briefly to 2.28%, a level not seen since November 2016. For scheduled news, this morning we've already had the March employment situation numbers. Nonfarm payrolls, expected +200k, were +98k, very weak. The unemployment rate, expected to hold steady at 4.7%, was 4.5%. And Average Hourly Earnings, expected to increase slightly, were indeed +.2%. After the weak nonfarm payroll number, we find long-term rates lower versus last night's close with the 10-year at 2.28% and agency MBS prices better by .250-.375

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