Down Payment and Recruiting Programs; Conforming Changes
“Rob, in past decades, near the end of every credit cycle, lenders seem to head back down the credit score scale and seem to be more aggressive with underwriting guidelines. Are you seeing that out there?” Yup – same story, different year. There are investors out there hungry for more yield, so are willing to buy that product – which is fine. The issue becomes when risk and price are de-coupled, or LOs don’t realize that the two are linked. One thing that’s different this time ‘round is that some newer investors are working off models that weren’t “steeled” during the downturn, and therefore paint a rosier picture of risk, and servicing, than investors who suffered real losses.
Investor and Lender Conventional Conforming Changes
For conventional Conforming manually underwritten Loans, Wells Fargo Funding has expanded its policy on annuity income to allow income from all annuity sources. Also, Wells is eliminating its requirement for tax return transcripts when all income information used to decision a Guaranteed Rural Housing (GRH) Loan is made up exclusively of wage earner income reported on a W-2 and/or fixed income reported on a 1099, unless required by the AUS.
Starting 6/25/2018, UCD warning messages will become “fatal,” and Fannie Mae and Freddie Mac will require a PDF of the final CD to be embedded in loan files. AmeriHome will enforce requirements effective for loans delivered starting 3/1/2018.
Mountain West Financial Wholesale posted the following information regarding MI underwriting changes. Genworth, Essent Guaranty and MGIC have released documentation with new underwriting requirements for conforming loans with DTIs exceeding 45%. For loans with mortgage insurance that have not closed on or after March 1, 2018, any DTI exceeding 45% will require a 700 or greater FICO score. This change applies to loans with an Agency automated underwriting system (AUS) response. Radian will only require this on Single Premium MI coverage.
A while back MGIC adopted the new 2018 Agency conforming loan limits for loans with a valid DU Approve or Loan Product Advisor® Accept response. For all other loans, it will increase certain maximum loan amounts, effective with MI applications received on or after Dec. 27, 2017: In all states (except Alaska and Hawaii) where the maximum is currently $450,000, it’ll be $475,000. In Alaska and Hawaii, where the maximum is $650,000, it’ll be $700,000.
Effective as of February 22nd, Conforming Loans with a DTI greater than 45% with a credit score <700 are no longer eligible for MI (Mortgage Insurance) through Weslend Financial regardless of the AUS decision.
As of February 28th, M&T’s Co-op Project Review Questionnaire will be updated and required for use on all Cooperative project submissions. M&T has removed all overlays to Fannie guides. Note that M&T has a variance with Fannie that permits CLTV/HCLTVs up to 90%. These loans will receive an Approve/Ineligible response from DU. This is acceptable if the presence of subordinate financing is the sole reason for the ineligible response. Use of the variance requires review and approval from M&T.
In alignment with Freddie Mac and FHFA, Fannie Mae is replacing the current Imminent Default Indicator model with a rules-based evaluation of borrowers for imminent default for conventional mortgage loan modifications. The new Imminent Default Evaluation FAQs provide additional details on the new evaluation rules. Servicers may begin using the new Imminent Default Evaluation, available now in Servicing Management Default Underwriter™ (SMDU™), and must implement no later than July 1.
The Freddie Mac Single-Family Seller/Servicer Guide (Guide) Bulletin 2018-3, features important updates on the following topics: Mortgages in eligible disaster areas impacted by recent disasters, cash payups for mortgages with low loan balances, Condominium unit mortgages, and guide form 442.
If you haven’t seen the 16 major updates to Fannie Mae’s HomeStyle Renovation Program, you can read about it on the Land Gorilla blog.
Last week was in interesting week for economic data as survey data remained strong while US factory sector data has cooled. In sum, durable goods orders reported a 3.7 percent decline, primarily due to a pullback in non-defense aircraft orders, although the ex-transportation reading dipped 0.3 percent, capital goods also reported weakness, with core orders down 0.2 percent in January. (This comes on the heels of a 0.6 percent decline in December’s core orders.)
But survey data however, told a different story. The ISM manufacturing index reached its highest since 2004, affirming continued business confidence. Consumer confidence also touched a high not seen since late 2000, with the Conference Board’s Consumer Confidence Index climbing to 130.8 in February. This, combined with a report from the Department of Commerce showing disposable income growth because of the tax cuts, should bode well for consumption growth as the year continues.
Home sale data released last week failed to meet market expectations, with new home sales falling 7.8 percent versus an expected 3.5 percent gain. January’s weakness, however, was offset somewhat by upward revisions to previous months. The Pending Home Sales Index echoed the New Home Sales Index, declining by 4.7 percent in January. Once again, a tight supply of existing homes, rising prices and increasing mortgage rates could be keeping some buyers on the sidelines.
Republican lawmakers are reportedly looking at ways to prevent President Trump from imposing tariffs on steel and aluminum imports, which he seems focused on delivering unless NAFTA renegotiations progress to his liking. This caused the Fannie Mae 30-year MBS basis (the difference between agency MBS prices and Treasury securities) to widen versus both treasuries and swaps, following the overnight risk off trade that was further aided by the Italian election results. Italy's general election resulted in populist parties receiving 60% of the vote, a significant rebuke of the European Union's immigration policy.
The only news was that the ISM Non-Manufacturing Index slipped to 59.5 in February – but remember that last month’s reading was the highest level for the index since August 2005. On the “demand for MBS” side of the equation, the Fed purchased just $325mn 15-year conventional 3% and 3.5%. (Today will see greater purchase volumes that will include the purchase of 30-year 4.5% for the first time since January 2014.) On the “supply of MBS” side of things, February agency prepayments will also be released after the close today, where speeds are expected to slow for the fourth straight month.
But this morning, we already have RBA out with their latest monetary policy decision. The Redbook Same-Store Sales Index will be released shortly, as will January factory orders. Rates are a tad higher than last night’s close with the 10-year T-note yielding 2.90% and agency MBS prices worse a few ticks.
Jobs and Products
HomeFundMe by CMG Financial is making headlines nationwide. The first and only approved down payment crowdfunding platform allows home buyers to raise money for their down payment from friends, family, and anyone else who wants to contribute. The online platform makes it easy for users to get prequalified, build their campaign, and share on social media. HomeFundMe also functions as an alternative registry for weddings, baby showers, and other special events. The launch of the new Affinity Portal allows employers to add HomeFundMe to corporate benefits packages, with contribution and matching options just like a 401K or other retirement plan.
Focused on residential real estate entrepreneurs, with an obsession for customer service, Center Street Lending has built a reputation as a premier private money lender. Established as a portfolio lender in 2010, Center Street Lending has consistently and profitably grown year over year, with volume doubling in 2017. Headquartered in Irvine, California, Center Street Lending is expanding its team with open positions in sales management, sales, servicing management, underwriting and processing. If you are looking to join this national lending, growth-oriented company, contact them at jobs@centerstreetlending.com.
In advance of this spring’s funding activity, and as you evaluate your warehouse relationships and needs, whether that entails additional capital, reduction/reallocation of capital, or repricing of capital, you should consider BankUnited’s Warehouse Lending programs for competitive market rate terms (margins, advance rates, aging), expanding loan program eligibility, lines of up to $100 million, application to closing 60-90 days, and simple, straightforward, and efficient application and implementation processes. To learn more about what BankUnited Mortgage Warehouse Lending can do for you, call Paul Tirella, Business Development Manager (646-630-0295).
In its ongoing effort to provider broker and correspondent partners with programs and tools best suited to improve the service and product offerings for clients, AFR Wholesale is announcing its participation in a nationwide down payment assistance program, called The Advantage Program (TAP). Offered by an approved governmental entity, TAP is a nationwide down payment assistance program (not yet available in WA or HI), which brokers and correspondents may use with any FHA 203(b) program. Brokers receive their full lender paid compensation and there are no loan level price adjusters, may be used by a wide array of qualified borrowers, and is a completely forgivable grant (equals 2% of purchase price) and may be combined with up to a 6% seller concession for closing costs. There are no resale or borrower repayment restrictions. Borrowers do not need to apply separately, AFR will qualify them during underwriting. AFR Wholesale is also a proud supporter of BRAWL! For more information, contact your AFR representative, or visit The AFR Advantage Program.
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NewDay USA, specializing in VA lending, has hired Garrison Foster as SVP to lead NewDay USA's Purchase home loan division, which offers active-duty service members, veterans, and their families the ability to buy a home with their VA benefits.