Productivity and Marketing Products; Changes to ATR and QM? Not so fast...

I'm a capital markets guy, so, by some people’s definition, don’t know much about numbers. But I know that .250 (a quarter point) on a $100,000 loan is $250. Independent mortgage banks and mortgage subsidiaries of chartered banks reported a net gain of $237 on each loan they originated in the fourth quarter of 2017, down from a reported gain of $929 per loan in the third quarter of 2017, per the Mortgage Bankers Association (MBA). I hope those hedge funds and money managers who thought they’d “get rich quick” in residential lending are happy with that income.

Ops and Process Changes

The lead story in STRATMOR Group’s Insights Report this month reports the results of the March survey that Dr. Matt Lind and I conducted on the Ability to Repay (ATR) and Qualified Mortgage (QM) rules. Our goal in conducting this survey was to capture information on lenders’ experiences with ATR/QM implementation, the impact of ATR/QM on ongoing loan origination costs, and lender attitudes toward changing – lessening - ATR/QM regulations. This article is chock full of charts, tables and analysis of the survey data, including data that shows that 62 percent of responding lenders favored little or no change to ATR regulations, with 54 percent favoring little or no change to QM regulations. But, lenders investing more than $750,000 in ATR/QM implementation were 25 to 50 percent more likely to want a significant scale back or elimination of regulations than were lenders investing less than $250,000. Clearly, however, most lenders want to leave well-enough alone or favor only minor regulatory tweaks. Read our article, “Regulatory Outlook 2018 Report: Ability to Repay (ATR) and Qualified Mortgage (QM”) Regulations” in the new issue of STRATMOR’s Insights Report.

Wells Fargo Funding has removed the requirement to provide a rate sheet or rate Lock summary with pricing when bona fide discount points are excluded from the total points and fees for purposes of Home Ownership and Equity Protection Act (HOEPA) High Cost/Qualified Mortgage (QM) threshold testing. A completed Sample Discount Point Fee Disclosure (Exhibit 10) or similar form remains required when bona fide discount points are excluded from the points and fees totals. In addition, the bona fide discount points must be reflected on the fee details form or compliance report.

Effective immediately, in the states of Ohio and South Carolina, Fifth Third no longer requires delivery of written documentation signed by the borrower stating the reasonable net tangible benefits on a Conventional refinance transaction.  Such documentation is still required in the states specified in Section 1.06 of the Correspondent Seller Guide. Additionally, the correspondent seller must ensure all other state net tangible benefit requirements are met.

The Escrow Account Policy has been updated to clarify that FAMC does not accept escrows for any elective insurance. Elective insurance is any coverage not required by state law or Agency guidelines which includes escrows for flood insurance policies on properties which are not designated to be in a Special Flood Hazard Area (SFHA). The policy has also been updated to include an example of a Payment Shock Letter required when a borrower chooses not to escrow on the improved property value for the first year on new construction loans.

Due to upcoming Fannie Mae and Freddie Mac enforcement of UCD requirements, AmeriHome will no longer be able to provide flexibility for warning messages related to the embedded CD after 5/15/2018.

Currently, a lender receives a “warning” if the UCD XML file is not provided with loans delivered. Previously it was communicated that this warning would switch to critical/fatal severity as of April 1, 2018. The GSE’s have announced an update deferring the mandatory submission of the UCD XML file to an effective date of June 25, 2018. To comply with this requirement, M&T Bank will require a successful UCD XML file submission with an embedded PDF of the borrowers’ CD in the UCD data file, evidence by a successful UCD submission on response.

Beginning Monday, April 16th, 2018, all ResMac B2B Non-Owner-Occupied properties need to meet full QM compliance.

AmeriHome’s Seller Guide Section 10.6. Trust Eligibility has been extensively updated to clarify its requirements when title is held in an inter vivos trust. Updates include removal of Trust Signature Block Examples and Trust Execution Requirements sections and refers to the applicable trust agreement requirements, and the Agency, local, state, and regulatory compliance requirements in effect.

Capital Markets

Many secondary marketing folks would rather this just went away entirely, but Financial Industry Regulatory Authority, Inc. (“FINRA”) is filing with the Securities and Exchange Commission (SEC) a proposed rule change to extend, to March 25, 2019, the implementation date of the amendments to FINRA Rule 4210 (Margin Requirements) pursuant to SR-FINRA-2015-036, other than the amendments pursuant to SR-FINRA-2015-036 that were implemented on December 15, 2016.

What do these headlines say about our economy? “Ford Plans $11.5 Billion in Extra Cuts, Kills Most U.S. Cars.” “Subway planning on closing 500 restaurants this year.” (44,000 locations globally.) “Facebook blows through Wall Street’s ad revenue expectations.” Certainly is a new economy.

The implications of rising U.S. bond yields, the dollar rallying to its highest level in three months, and disappointing earnings, especially in tech, dominated investors thinking yesterday. The question confronting investors now is at what level are rates too high for the economy? The 3% level on the 10-year does not have any magical properties per se, but market participants are trying to navigate global markets in a sea of mostly unstable correlations.

Today’s calendar kicked off with the latest decision from the ECB, they kept the interest rates on the main refinancing operations, marginal lending facility and the deposit facility unchanged at 0.00%, 0.25% and -0.40% with monthly asset purchases steady at €30bn. Potentially of more interest will be ECB President’s Draghi press conference, where he has historically spun things dovishly.

The US calendar also gets under way at the same time as his press conference, with updates on durable goods, jobless claims and advanced indicators. March durable goods, expected to increase 1.1% MoM, came in at +2.6%. Initial jobless claims for last week, seen rising 3k to 235k, dropped 24k to 209k. The March advanced goods trades deficit, forecast at $75.0 billion, narrowed to $68 billion with some retail and wholesale inventory gyrations. Thursday commences with the 10-year 3.00% at and agency MBS prices better .125 versus last night’s close.

Employment and Personnel Changes

Arch MI is searching for a Director, Product Development to work with VP of Product Development to lead the process of defining, developing and implementing new mortgage insurance products. “The person builds the business justification for new product ideas and provides recommendations for implementation to senior management. Conducts research and outreach to existing customers and internal sales employees to identify new solutions and features that address customer needs in the mortgage insurance industry. Performs complex market research projects or participate in cross-functional projects as a team member. Provides information to internal and/or external customers based on research and analysis. The ideal candidate will have a bachelor’s degree (advanced degree or MBA preferred), 8-10 years of overall experience in banking, insurance, financial services industry with at least 5 years in the mortgage industry.

Congrats to Alex Elezaj whom United Wholesale Mortgage announced is its new chief strategy officer. His focus will be to help United’s mortgage broker partners grow. Mat Ishbia, UWM’s president and CEO, said, “He is in total lockstep with our company from a leadership vision and culture standpoint, as he believes mortgage brokers are the best place for loan originators to work and for borrowers to get a mortgage.”

Lender Products and Events

The California Mortgage Bankers Association and its President’s Council member Alight, invite mortgage banking CFOs and senior finance executives to a CFO Peer Group event - a hosted lunch and discussion on Managing Liquidity in Today’s Market, Thursday, May 17 at The Pacific Club in Newport Beach, California. The Cal MBA’s CFO Peer Group provides a forum for senior mortgage banking finance executives to connect and discuss the challenges faced in mortgage banking finance. Mike McFadden of Alight and Art Shafer, Comerica Bank, will moderate discussion topics that will include: warehouse line capacity & utilization, natural hedge of servicing & production, operational capacity & shrinking margins, among others. Check in begins at 11:30 am, hosted lunch and discussion from 12:00 to 1:30 pm. Guests are welcome to stay and network after lunch. This hosted event is by reservation only. For more details and to reserve your seat, contact Susan Milazzo (916.446.7100).

“Improve productivity by 70% or more using eRAMP MERS batch processing. eRAMP has been the leader working with all LOS systems to batch process MERS transactions for nearly 15 years. eRAMP lowers costs and improves data integrity while capping MERS processing expense. Provide evidence of registration for warehouse lenders and investors with eRAMP’s exclusive registration confirmation report, no more screen shots! It’s all about more loans, less work. If you are interested in learning more about eRAMP or would like a demo, contact Greg Uttal (818.917.2265) or visit www.oncyberlink.com.”

“A recent commentary by Andrew Hong of the Tobe Agency highlighted some of the problems and challenges that LOs face in their jobs – 54% of the LOs who participated in his survey consistently indicated the need to improve and grow their referral relationships. Enter HomeScout®, a National MLS for lenders by HBM and powerful contact conversion system that provides LOs with a technology platform to close more transactions by leveraging their referral base of Realtors®. Capture and cultivate buyer leads with our latest, mobile real estate search app and buyer reporting interface to convert more contacts to customers. Whether you’re an office of 2 or 200, we have an affordable solution for you that creates an immediate ROI. For more information or to schedule a demo, reach out HERE or give us a call at 952-831-0623.”