Non-QM, HELOC Products; Specified Pool Primer; LO Comp and Licensing Update
Remember NINA loans from 10-15 years ago where the lender would purposely discard anything in the file dealing with income because underwriters didn’t want documentation? Several lenders are now promoting no income, no asset non-owner loans. For example, 360 Mortgage is now promoting its NINA investor loans. We’re at the point where borrowers must prove that they won’t live there. (Speaking of rent, Quicken Loans has its new VRBO income program.) What if you don’t anyone to know where you are, physically? Sorry, “they” know where you are all the time. Authorities have obtained search “geofence” warrants that require Google to turn over data from a database known as Sensorvault. The warrants “specify an area and a time period, and Google gathers information from Sensorvault about the devices that were there.”
Lender Services and Products
Plaza Home Mortgage has a new Solution for correspondent lenders looking to serve the more non-traditional borrower segment. The Plaza Solutions Non-QM program is now available on a delegated or non-delegated basis and offers more flexible features, including loan amounts up to $2,500,000, flexible income documentation, DTI ratios up to 50%, interest-only options, expanded eligibility on all document types and lower reserve requirements. Plaza is here for you to equip you with the tools you need to grow your non-QM business. For more information, contact hereforyou@plazahomemortgage.com
“What would you do with an extra $1,500? Make your Range Rover Payment? Plan a Vegas getaway? Take your family to Disneyland? This month TCF Bank®’s Relationship Lending Unit (RLU) announced a change to the broker compensation on our Stand-Alone HELOC to 1% of the line amount subject to a $750 minimum and $1,500 maximum. ‘Our brokers and partners are excited about this new income opportunity and we are pleased to be their partner of choice,’ said Mark Zierott, SVP, National Sales Director. TCF has been a trusted partner of brokers since 2006 and has significant experience originating TPO HELOCs coast to coast. Please contact your Business Development Manager for more details. If you are currently not an approved partner, please email us at RLUCorporate@tcfbank.com. You can also visit tcfbank.com/brokerloans for more details.”
Will 2019 be the year of change for LO compensation? Join LBA Ware at NAMMBA Connect 2019 this Thursday, April 25, at 2:30 pm for a must-see panel on the future of LO comp. LBA Ware CEO and 2019 MBA Tech All-Star Lori Brewer will join a distinguished panel of experts in discussing the CFPB’s response to proposed LO Comp rule changes and the potential impact of those changes on LOs and lenders of all types. LBA Ware is a proud supporter of NAMMBA’s mission and is a corporate sponsor of this year’s conference. LBA Ware’s CompenSafe™ platform helps lenders nationwide automate incentive compensation and harness the power of their sales performance data. To request a meeting with the LBA Ware team during NAMMBA Connect 2019 in Atlanta, email Finn Klemann.
Home Point Financial is pleased to announce that it has just introduced its new proprietary technology solution xMI™ that gives borrowers some of the lowest mortgage insurance rates available – and has no eligibility overlays. Now more borrowers can qualify with lower monthly premium payments. xMI™ even handles the approval, so there’s no need for a time-consuming second underwrite. xMI™ rates are available now as Home Point builds its portal integration. Approved customers can email bpmiquote@hpfc.com for a custom quote today.
Unlock opportunity in a growing market with Loan Product Advisor® asset and income modeler (AIM) for self-employed borrowers. AIM for self-employed is Freddie Mac’s solution to automate the manual lender process of assessing borrower income using tax return data. It’s also the industry’s only AUS-integrated self-employed borrower income calculation solution. AIM for self-employed makes it easier to do more business, close loans faster and get immediate income rep and warranty relief related to certain borrower employment income. Freddie Mac has teamed up with third-party service provider, LoanBeam®, in leveraging their expertise and powerful optical character recognition (OCR) technology to supply qualifying income for any applicant. Freddie Mac’s broad release of AIM for self-employed on March 6 is the next step in their journey to provide AIM for self-employed borrowers … and get YOUR edge.
Time is running out to take advantage of NewRez Wholesale’s appraisal promotion! Now through April 30th, NewRez Wholesale will reimburse your borrower’s appraisal fee if one of NewRez’s Smart products or a NewRez FHA loan is chosen. Contact your AE today to learn more about how you can get an appraisal fee credit for your borrower’s loan closing. Exclusions and restrictions apply. Max appraisal value reimbursement for Smart Series is up to $650 and FHA up to $550. This offer is available for all new locks through April 30th.
Compensation and Transitional Licensing
Let’s turn to a compliance hot topic. When does MLO Transitional Licensing Authority Implementation go into effect and how will it work? S.2155 of the federal Economic Growth, Regulatory Relief, and Consumer Protection Act, MLO transitional licensing authority goes into effect on November 24, 2019. This will allow qualified MLOs who are changing employment from a depository institution to a state-licensed mortgage company and qualified state-licensed MLOs seeking licensure in another state to potentially be granted temporary authority to act as an MLO while completing state-specific requirements for licensure, such as education or testing.
An MLO will not have to submit a separate application for temporary authority, but rather apply for an MLO license through NMLS and, if eligible, will automatically receive temporary authority as the applicable state processes the license application. NMLS will be programmed to check certain eligibility requirements, such as criminal history and whether an applicant has had an MLO license application denied, revoked, or suspended. Before a licensing decision is made by the applicable state, an individual with temporary authority will show as being “authorized to conduct business” in the state – the actual license status will not be updated until the state makes a decision with regard to the license application.
An individual with temporary authority may originate loans as if he/she possesses a license in that state. The individual and the loans originated by that individual will be subject to the same rules and regulations as applicable to a licensed MLO. Mortgage lenders must monitor the status of an individual’s license application and temporary authority to act as an MLO. If the MLO’s application is ultimately denied, the mortgage lender must reassign any active loans in the pipeline originated by that MLO to a licensed MLO in that state. Further, if a mortgage lender knew of or should have known of a disqualifying event that would cause a license application to be denied, the mortgage lender could face enforcement action by the state for failing to disclose such event.
The CHLA has weighed in with a letter to the CFPB, offering “a common sense approach to the issue of LO Compensation flexibility. Commonly an LO makes a loan offer, in conjunction with working with a potential borrower, sometimes for an extended period of time. Then, at the last minute the borrower solicits a competing offer at the last minute, at a lower rate. Unfortunately, under CFPB rules, the loan originator can't reduce their compensation, in order to make it possible for the lender to match the offer. Result: the lender and LO lose the loan - and the client relationship. The CHLA letter offers a targeted solution to address these circumstances - without opening up the LO Comp rule to loopholes that allow steering or other anti-consumer practices.
Capital Markets
Some investors may pay a higher price for loans that will refinance quickly, hopefully through their own portfolio protection group, whereas others may pay up for loans that may never refinance. One way lenders improve their price on rate sheets is through slightly better execution when selling loans by slicing and dicing pools of loans into specified pools. Mortgage investors have shown greater appetite for “specified pools” amid concerns that new production MBS are at greater risk from surges in prepayment speeds.
“Specified pools” are bonds created using borrower characteristics, such as credit scores or loan size, and are designed to provide more certainty on when the underlying mortgages will be paid off. Any company servicing loans wants them on their books for a long time. As an easy example, if 30-year mortgage rates drop .250%, the impact on the monthly payment on an existing $600,000 loan is much greater than on a $100,000 loan. The $600,000 is more likely to prepay, so servicing values on lower loan amount loans, or pools of those loans, everything else being equal, would be more. Or pools made up of low credit score loans, where borrowers would have a tougher time refinancing.
This has led to refinancing red flags for current 30-year conventional mortgage production coupons (the premium priced 4.0 and 4.5 percents) with high credit scores and large loan sizes. Investors have been looking for new ways to mitigate prepayment risk, such as by purchasing a specified pool created with loans issued in New York state, as those historically exhibit relatively slower speeds. New York specified pools for 30-year 3.5, 4 and 4.5 percent coupons have rallied by 6, 5 and 15 ticks YTD, respectively, per Bloomberg.
Specified pools are also getting an added boost of late due to limited supply, collapsing rolls and end clients competing against CMO creation desks who have a strong bid for this type of collateral. Another near-term tailwind for specified pool performance may have been sparked by the recent FHFA final rule that will cap the gross weighted-average coupon (GWAC) -- the difference between the interest rate on the individual underlying mortgages and the coupon rate on the pool they are placed into -- at 112.5 basis points. Rising GWAC in new production mortgages have been another growing concern for investors, as it is a red flag for potential faster prepayments. While a regulatory fix to that concern may create more demand for prepayment protection, the time gap remaining until the FHFA cap comes into play has left an ambiguous date, keeping originators creating high GWAC pools while they still can. Investors believe that generic TBA convexity quality is likely to deteriorate in the intermediate time period as a result.
Markets open back open today after Friday’s holiday, and we’ve seen the Chicago Fed National Activity Index for March (-.15) and will see Existing Home Sales for March. The remainder of the week includes February FHFA HPI and March new home sales on Tuesday, March durable goods on Thursday, and the first look at Q1 GDP and the final consumer sentiment read for April on Friday. There are no Fed appearances scheduled as they are in their blackout period ahead of the April 30-May 1 FOMC meeting. The Bank of Japan, however, will release its updated monetary policy decision on April 25. We begin the day with rates higher versus Thursday’s close: the 10-year is yielding 2.57% and agency MBS prices are worse .125.
Employment
“IMPAC is growing rapidly and we are HIRING Account Executives in the Pacific Northwest, Utah and Colorado. For more information, contact Louise Woods. We are now offering our Premier Series on all Non-QM programs: Bank Statement, Investor, Asset Qualification and our Full Doc Jumbo Alternative – Agency Plus. With floor rates as low as 4.875% and YSP up to 2.25%, Premier offers yet another level of in-demand loan products. Additionally, IMPAC’s LLPAs are always to the fee and not the rate, and we offer LLPA credits (.50) for loan amounts above $800K and (.75) over $1.5M. By adding the Premier Series to all of our Non-QM programs and offering higher YSP with LLPA credits for larger loan amounts, we continue to improve these already fantastic in-demand loan products. As your broker partner, IMPAC offers extensive Non-QM training, education and white label marketing, all to help you grow your business.”
“The ‘R’ in Thrive stands for ‘Relationships’, both with partners and clients alike” stated Selene Kellam, Thrive Mortgage’s nationally recognized COO. “Last week our Sales and Operations teams came together for an event hosting Originators and their Realtors from over thirty different markets to learn about Consumer Credit strategies and resources. The positive feedback has been amazing to hear.” During the event, testimonies were shared about the Thrive4Home incubation program. One example given illustrated the impact relationship driven LO’s and Realtors can have on their clients. “[Thrive LO Erin Merriman] helped us out like nobody else would. Most loan officers… wouldn’t even call us back,” stated one homeowner testimonial. “Erin coached us on what needed to happen, continually followed up, and then, a few months later, closed the deal.” Click here for information on joining Thrive Mortgage.
The Caliber Home Loans, Inc., Portfolio product is growing and expanding, and Caliber is seeking a Senior Portfolio Credit Risk Manager to join its Enterprise Risk Management team. This position is based at Caliber’s corporate office in Coppell, Texas. The manager will be responsible for portfolio risk analysis and independent oversight of credit quality, along with management of all aspects of portfolio credit quality and compliance with established loan parameters. This position requires familiarity with non- agency guidelines and credit oversight practices. Read more about the position’s requirements and/or apply online at Caliber’s Careers web site. Desired candidates will have a BA in Accounting, Statistics, Business, Information Systems, Finance or Economics and 7-10 years of experience in credit risk management, and at least two years in the non-agency space.