Freddie, Fannie, and Lender Shifts in Appraisal and Inspection Policies
What does $980k buy in the SF suburb of Vallejo, CA? A property designed by Julia Morgan (think Hearst Castle) with floating stairways, over-sized eves, massive beams, decks, and the use of exquisite wood wainscoting. The photos are sure impressive.
Freddie and Fannie News, Lender Changes
For wholesale and non-delegated clients, Parkside Lending, LLC, a national wholesale and correspondent lender, is pleased to announce that it has adopted the new Fannie Mae DU enhancement that will allow Property Inspection Waivers (PIW) for purchase transactions. DU will compare the address for the subject property to the property address found in Collateral Underwriter (CU). When a match is found, DU will then use the information to determine if the loan is eligible for a PIW. Effective with loan casefiles submitted or resubmitted on or after August 19, 2017, a PIW offer will be considered for purchase transactions as follows:
DU Approve/Eligible recommendation, 1-unit properties, including condominiums, Principal residence and second home transactions with LTV/CLTV up to 80%, value of the subject property is less than $1,000,000. For more information about any of the above or to inquire about doing business with Parkside Lending, please email sales@parksidelending.com.
Fannie Mae has updated the Allowable Bankruptcy Attorney Fees Exhibit to reflect changes to the maximum fee reimbursement for select services and detail steps to take when a servicer incurs out-of-pocket expenses less than $150 that are governed by Federal Rule of Bankruptcy Procedure 3002.1. It also simplified a related process by no longer requiring law firms to seek excess fee approval for a Chapter 7 Motion for Relief filed more than 60 days after the bankruptcy filing date. The updated fees take effect immediately and apply to all matters referred to counsel for bankruptcy services regardless of referral date, if the matter is still active as of Aug. 16.
Fannie's Servicing Guide has been updated to simplify servicing and improve processes. Changes include: Streamline the Selling and Servicing Guides by removing certain topics from Servicing Guide Part A, including general contract terms, indemnification provisions, and Fannie Mae trade names and trademarks. These topics will be updated and included in the Selling Guide on Aug. 29.
Items include providing Fannie Mae sellers/servicers advance notice of changes to fidelity bond and errors and omissions insurance requirements, effective Oct. 1, 2018, revise how servicers should calculate the pass-through rate when an adjustable-rate mortgage (ARM) adjusts. Servicers will now use the calculation, index plus the net margin, to better align whole loan ARM execution with the market demand in ARM MBS. Read about these updates in Servicing GuideAnnouncement SVC-2017-07. For a summary of key updates in this Servicing Guide Announcement, view the executive overview from Carlos Perez, Chief Credit Officer for Single-Family.
Franklin American Mortgage Company's Conventional Products has some overlay removals, changes are effective immediately. Non-Permanent Resident Aliens for Delegated Underwriting: Removed the requirement for two years of employment, credit and residency. Non-Delegated Underwriting: Relaxed the guidelines by removing the requirements for 2 years of employment and credit. The 2-year residency policy will remain a requirement. Also, Employment-Related Assets/Assets as a Basis for Mortgage Qualification has aligned the property and LTV/CLTV/HCLTV requirements with the agencies when utilizing an income stream calculated from eligible assets. Lenders may follow Fannie Mae and Freddie Mac Selling Guide policies for this guideline in accordance with the AUS used in the transaction.
The Uniform Closing Dataset (UCD) implementation date is fast approaching. For loans with a Note Date on or after September 25, 2017, both Fannie and Freddie will require a successful UCD response before any loan may be delivered to them. In alignment with this requirement, Franklin American Mortgage Company will not purchase any loan for final delivery to either GSE until the FAMC conditions are met.
PennyMac is aligning with the updates announced in Fannie Mae Announcement 2017-06. This announcement includes various topics such as employment offers or contracts, student loan updates, alimony treatment, mortgages paid by others and Arm 5/5 plan.
Freddie Mac has announced a new critical edit on the MI Certificate Identifier, effective September 18, 2017, and reminding you about the upcoming Uniform Closing Dataset implementation mandate.
Freddie Mac is introducing an automated appraisal alternative for some purchases and refis. "Freddie Mac's automated collateral evaluation (ACE) assesses the need for a traditional appraisal by leveraging proprietary models and using data from multiple listing services and public records as well as a wealth of historical home values to determine collateral risks." ACE has been available for some refis since June, but will also be available for some purchases starting in September. So starting this fall borrowers looking to buy a new home could forego a traditional appraisal as Freddie Mac expands its big data valuation alternative. ACE uses more than 40 years of historical data and public records to model and vet home values. ACE mostly applies to low-risk mortgages. The program became available for qualified refinancings in June but the roll out for new home purchases is Sept 1 for primary residences. Borrower savings of about $500 expected when using appraisal alternative, closing times on new loans to narrow by seven to 10 days.
Fannie Mae is updating Desktop Underwriter® (DU®) effective Saturday, August 19, to offer Property Inspection Waivers (PIWs) on some purchase transactions (view DU Release Notes). "This update responds to market changes, and allows our lenders to offer your borrowers a choice for efficiency and cost savings by foregoing an appraisal on some lower-LTV loans. Eligibility is limited to one-unit principal residences and second homes up to a maximum 80 percent loan-to-value ratio. It is estimated that PIW offers will be issued on less than 5 percent of purchase transactions. Offer rates will vary by lender and fluctuate over time.
"Lenders have the option to exercise a PIW offer, and may not accept it if they have any reason to believe that a full appraisal should be provided (for example, if there was a hurricane or other natural disaster in the area of the property), or if the borrower wants an appraisal. View more information about PIWs. Borrowers always have the choice to obtain an appraisal...we expect the acceptance rate on appraisal waivers for home purchases to be low. Many home buyers want an appraisal to support the price they pay for a home, and most of purchase contracts include a contingency clause for an appraisal. Fannie Mae continues to require full appraisals on the vast majority of purchase money mortgages to establish market value of homes and provide valuable input to our appraisal database to support CU analytics and future innovations."
Yes, both Freddie and Fannie are tweaking their lending policies. For example, recall the FNMA announcement stating guidelines had changed to allow for the option of either reducing income or itemizing alimony as debt on the loan application.
FNMA has pardoned all those people that have decided to stop paying their timeshare loans. "Timeshare accounts may be identified in a borrower's credit report as being installment debt or mortgage-related debt, depending on the individual timeshare. With this update of the Selling Guide, we are clarifying that timeshares are to be treated as installment loans rather than mortgage debt, even if they are identified as mortgage debt on the credit report (or other documentation)."
Fannie also wrote that, "We are introducing simpler, more certain underwriting guidelines by allowing more loans with debt-to-income (DTI) ratios between 45 and 50% to receive an Approve/Eligible recommendation through DU based on the comprehensive risk assessment of the loan. We will no longer require specific, additional compensating factors outside of DU's standard risk assessment to support a DTI ratio above 45%. We will continue to monitor loans with high DTI ratios and may adjust pricing in the future, as appropriate."
Capital Markets
Last week rates didn't move much, a good thing from a capital markets perspective, although we saw a little bit of volatility as the North Korea/U.S. issued simmered down. On Friday, the market climbed in morning action, hitting highs just ahead of the release of a better than expected preliminary Michigan Sentiment Index for August. The selling that developed in the data's wake accelerated after it was reported that Steve Bannon will be leaving the administration since his departure will make it easier for President Trump to find common ground with Congress. It could, however, also be argued that the headline simply provided a good excuse for some selling after two days of solid gains. Overall, however, the 5-year, 10-year, and agency MBS were about the same as Thursday's close.
Turning to this week, and its scheduled economic events, this morning we've already had the Chicago Fed National Activity Index for July (-.01) - hardly a market mover. Tuesday is the June FHFA Housing Price Index, Wednesday will be the weekly MBA application survey from last week, some Markit survey figures, and July New Home Sales. Thursday is the usual initial jobless claims but also July Existing Home Sales and the start of the Kansas City Fed Economic Policy Symposium in Jackson Hole. Friday, we can look forward to the always volatile Durable Goods Orders (for July). The 10-year is currently yielding 2.18% and agency MBS prices are better a couple ticks versus Friday's close.
Regarding today's eclipse...There are approximately 75 million people who live within a 200-mile drive of the path of totality across the country. About 12 million people live directly in the path of totality; experts estimate they could be joined by about 7.4 million people traveling to watch the eclipse, the largest migration ever to view a natural event. That could make for some serious traffic and clogged cellular networks - but a photo of the sun with your camera is probably not a good idea.
Jobs, New Channels, and Personnel
"One of Utah's fastest growing mortgage bankers, Citywide Home Loans, is seeking a full-time Branch Controller to join our dynamic accounting team. Applicants must have strong analytical skills, as well as outstanding attention to detail. A great attitude and upbeat personality is always a must. Applicants must be extremely organized, with experience in all areas of accounting. AMB software experience is a plus. Send resumes and questions to Fawn Bird."
You spend your time, talent, and expertise getting loan applications and taking care of your borrower. You've earned their trust. What you need now is a company that will back you up; a company who understands what it takes to get where you are now. A company that knows how to get loans closed on time. That's Assurance Financial, a full-service mortgage lender. We're growing, and we're looking for the best and brightest to grow with us. We hire the best, and we compensate well. If that's you, call Sales Recruiting Manager Paul Peters, CMB at 225-239-7948 or visit LendTheWay.com/Careers. It's just a phone call, but Assurance Financial could change the way you think about your career.
With new programs like an Asset Qualifier, Angel Oak Mortgage Solutions, the leader in the non-QM space, is primed for growth this fall. They just announced the addition of 4 more AEs to help brokers grow their business. Sophy Math joined in Seattle and Matt Williams in Portland with California adding Ed Orozco in Palm Desert and Nate Rahmatti in the East Bay area. And Angel Oak Mortgage Solutions is not done, as it continues to hire additional Wholesale Account Executives across the country as well as underwriters and other operations positions in its Atlanta headquarters. Come build your career with the nation's top non-QM lender by visiting JoinAngelOak.com or watch this clip from Mortgage News Network's Top Mortgage Employer's interview for more information.
Northpointe Bank, a Michigan based financial institution, "is excited to announce that they have expanded their product portfolio to include a private label mortgage solution for community banks and credit unions across the United States. This new business unit is called Northpointe Community Lending, signifying Northpointe's commitment to acting as a silent partner to their clients. This channel, led by Neil Armstrong (senior vice president of Community Lending) will provide compliance support, expanded products and delivery solutions, all while working with stakeholders to keep operating costs balanced. When asked about this new adventure Armstrong said, "We've found that many organizations are not fully aware of their cost to do business as it relates to their mortgage book of business. Northpointe Community Lending provides a unique solution that creates variability in their mortgage platform, and reduces their compliance risk." To learn more about Northpointe Community Lending and its full line of services, visit www.nplend.com.
A huge congratulations to The Money Source Inc. for its hire of Barbara Yolles as Chief Marketing Officer. Yolles is departing UWM as Chief Marketing Officer and brings over 25 years of marketing leadership experience to TMS. She will be developing revolutionary initiatives while making a sizable impact on both the TMS brand and its wholesale brand, Endeavor America Loan Services.
Nationstar, the largest non-bank mortgage servicer in the U.S., is officially rebranding to Mr. Cooper today at the NYSE bell ringing. The brand name change is a tangible expression of the company's dedication to making the often confusing and complex mortgage process a more rewarding and less worrisome experience for its more than 3 million customers. "The company has made significant investments, including a credit card: The Mr. Cooper Home Rewards credit card that offers rewards applied to the principal balance of your home loan."