Non-QM, Marketing, Digital Products; Shifts in Non-Conforming and ATR, QM Patch

In 1988, there was only one city in America where the average home price was over six times the annual median income. Today there are more than twenty. Experts think that hat number will only increase as home values continue upward in the nation's largest 100 cities. Thirty years ago, you could buy a home in 72 of the largest 100 cities in America with less than 18 months of that city's median salary. A year or two ago that was only possible in 25 cities. In many places home sales have been slow to grow since there are so few homes for sale and not many new listings hitting the market, especially affordable ones. It’s a seller’s market for moderately priced homes, but a buyer’s market for pricier homes. Certainly in late 2019 applications for new home purchases had increased dramatically from the same period in 2018. Home builder sentiment remains solid. Is it the best of times?

Lender Services and Products

Many lenders continue to ride the wave of amazing volume and low rates. Although times are good for many, it's not too late or too busy to continue to improve your business for higher margins and a more efficient LO organization. Maxwell continues to stand out from the digital mortgage platform competition with their software designed for the true end user, the loan officer, and a customer success team design to speed up time-to-value, launching over 88% of clients within 4 weeks or less. Speed matters, and with home buying season around the corner, investing now will reap large benefits in the future. To learn more about Maxwell and their mortgage dedicated digital platform, click here or request a demo.

A 30-minute conversation with Planet Home Lending, LLC at the Texas Mortgage Bankers Association’s Southern Secondary Market Conference can increase your product menu and decrease your margins. Reach out to Planet Home Lending today for competitive products and pricing, flexible delivery and superior service. Contact Regional Sales Manager Stuart Blend (469-939-9055).

“A proven direct lender, Visio Lending is the nation’s leader in Non-QM loans for buy and hold investors of single-family rental and small balance commercial properties. With direct access to Wall Street, having just completed our fifth securitization, we offer the most attractive terms and the fastest, simplest and most dependable process in the country. Learn why thousands of satisfied customers and successful brokers are choosing Visio for all of their SFR rental, vacation rental and small balance commercial needs today!”

Explore cutting-edge innovation and network with mortgage and consumer banking executives at Blend’s inaugural lender conference. Beyond will be held May 27–29 in San Francisco. For more info including a complete agenda, click here.

Is your brand a top-performer? Or, is it getting shoved aside by more powerful and compelling brands? Consumers have an abundance of choice when selecting a mortgage lender. If you feel it’s time for a brand checkup, update or even a reinvention, contact Seroka Brand Development. For more than thirty years, Seroka has been assisting lenders, financial institutions and B2B companies in the mortgage and financial industry with all aspects of branding, including brand development, strategy, promotion and culture. Make it easy on yourself by working with financial and mortgage industry experts. Contact Seroka today.

“It's time for lower Non-QM Rates. LoanStream’s new NanQ (Non-QM) pricing improvements help load your pipeline with pricing improvements up to 1.25bps, rate reductions and less overlays on our most popular Non-QM programs: DSCR, Bank Statement Loans, Foreign National, Investor and more that create differentiation for brokers and their loan officers. Check out our pricing and matrix. Get free training just for your team from our Non-QM experts: click here. Not sure where to go with your Business Purpose Commercial Loan? LoanStream can help. Just launched and catching fire is our Business Purpose lending. Check out more at www.loanstreamcommercial.com.”

Jumbo, Non-Conforming, Non-QM, High Balance Tidbits

When someone asks an independent mortgage banker about jumbo, they will usually respond with either Chase or Wells Fargo. Or First Republic in some areas. Of course there are nuances, often dealing with appraisals. The “Big Banks” often give great pricing to potential borrowers in order to capture the family’s overall wealth relationship. Banks can also offer non-QM products centered around interest only products, or “asset dissipation” loans where someone has $10 million in the bank and wants a $1 million loan and is only on social security. And the banks are perfectly happy to sit on the lion’s share of the loans rather than pay for the cost of securitizing them.

Those “in the know” regarding compliance and capital markets often discuss just how specific QM versus non-QM underwriting is, and what “safe harbor” is, if the proposal to remove DTI and Appendix Q moves forward.  For many investors clarity equals GSE guides or Appendix Q. 

The QM Patch will not become permanent given the feedback from FHFA and CFPB. And Appendix Q is detailed to the level of being paralyzing. Inefficiency and brutal for consumers especially self-employed consumers because of the documentation requirements. FHA handbook standards frozen in time from over 15 years ago.

One compliance expert wrote to me suggesting, “The industry is wondering, if ATR is ‘consider and verify’ in the 8 categories, how is QM standard different, if at all? 

“Some suggest that ATR underwriting and QM being the same with a bit more regulatory language to point to standards. So QM safe harbor would basically be “use a consistent, written underwriting model” in addition from the product features and APOR pricing requirements. But complaints are ‘consider and verify’ is not objective. 

It’s almost as if people have forgotten the rules outside the Patch and want the Patch-feeling even while demanding its expiration. The industry is hoping that no judge in the future will be able to find ‘a lack of good faith’ in a documented, credit standard applied to the particular loan product. The question for industry and the lawyers is whether an articulated standard from CFPB is needed or sign off on the regulations that safe harbor underwriting can’t be challenged on the underwriting method alone is a way forward.”

Of course investors in securities backed by mortgages have many options. There are different maturities, different geographic breakdowns, different guarantees, or no guarantees/insurance at all! Lately investors have turned their eye on non-Agency MBS for various reasons spelled out in this article.

That said, at $3.6 billion issued United Wholesale Mortgage was the top contributor to prime non-agency mortgage-backed securities in 2019, according to a new ranking and analysis by Inside Nonconforming Markets. That was almost 25 percent of the dollar volume of deals in 2019. Wells Fargo ranked second among originators of securitized prime non-agency mortgages, with $2.42 billion.

In the primary markets, yesterday Caliber updated its Caliber Jumbo product. “Business debts must be included in the monthly debt-to-income calculations if the debt is in the borrower’s name and is reflected on the borrower’s credit report. Monthly obligations paid with business funds must be included in the monthly debt-to-income calculations, regardless if the business pays the debt.”

Wells Fargo Funding expanded its adverse credit requirements for all Non-Conforming Loans by removing the reestablished credit requirements that were announced in Newsflash C19-053, dated December 17, 2019.

Wells Fargo Funding removed the 36% maximum front-end ratio for Non-Conforming Loans with LTVs less than or equal to 80%. However, the monthly housing expense continues to be one of the primary indicators of determining the borrower’s ability to repay a Loan and must be evaluated and documented as part of the overall risk review of the borrower’s capacity to repay. Refer to the Seller Guide as it has been updated accordingly.

Wells Fargo Funding has updated it Non-Conforming policy to allow consideration of condominium (condo), planned unit development (PUD), and cooperative (co-op) projects with mitigated environmental hazards. The following policy will be added to Wells Fargo Funding Seller Guide (Seller Guide) Section 825.12(a): Specific Property Types, under the new heading, Projects with mitigated environmental hazards: Loans where the Mortgaged Property is a condo, PUD, or co-op with environmental hazards that have been mitigated may be considered, additional review by Wells Fargo Funding is required to determine eligibility. To support this expansion, additional updates include representation, warranty, and covenant 300.02, 49 to allow projects that have been exposed to environmental hazards, when mitigated and inspected by a professional qualified to verify that the environmental hazard has been satisfactorily corrected, prior to Wells Fargo Funding purchasing the Loan.

Plaza’s Elite Jumbo program guidelines now require that all loans must be submitted to DU® and receive an Approve/Ineligible finding for loan amount only. However, the DU is not used for underwriting; all loans will continue to be manually underwritten and fully documented per the program guidelines.

PRMG updated the Resource Center with changes to its Policies, Procedures including updated Tax Transcript / Tax Return requirements. TPO Connect Disclosure Tracking (Wholesale) and updated Completing a COC CD was added to its Training/Instructional Material. The Jumbo, Niche and Second Mortgage Product Forms and Information now has updated Expanded Access Asset Depletion and Borrower Ability to Repay Certification has been added.

Capital Markets

After rallying to close last week, U.S. Treasuries padded their recent advance in an otherwise-quiet Monday session. The 10-year yield closed the day down at 1.55 percent, the U.S. yield curve now flirting with another broad-based inversion again, reigniting fears that a downturn may be coming after all. Here’s some food for thought: maybe the shape of the yield curve currently says more about the state of the world than America.

China will cut tariffs on $75 billion in United States goods on February 14 (how sweet). The announcement shows that while Beijing intends to fulfill its end of the agreement, the coronavirus outbreak may complicate matters. The death toll has now exceeded 1,000, surpassing the death toll from the SARS epidemic. The pathogen’s estimated mortality rate is roughly 1 percent, though health experts say that deaths and infections are probably being undercounted because testing facilities are under severe strain.

The phase one deal requires China to make big purchases of American products, but its economy is now reeling from the fallout of the illness, which has infected tens of thousands of people in the past few weeks and caused a widespread lockdown within the country. Since travel to and within China has been restricted (and in some cases, banned), fewer goods are being imported, and its population is staying home and shopping less. Some companies, including Apple and Tesla, resumed manufacturing yesterday. Much of the country still remains closed, however, to contain the spread of the virus. And many Chinese factories announced that they will remain closed for longer than originally planned, putting additional pressure on already-strained supply chains.

The highlight of today’s calendar should be Fed Chair Powell testifying this morning before the House Financial Services Committee on the semiannual Monetary Policy Report that was released last week. His prepared testimony was just released by the Federal Reserve. Other Fed speakers during the session include Vice Chair of Supervision Quarles, St. Louis Fed President Bullard, and Minneapolis Fed President Kashkari.

Kicking off today’s data was NFIB small business activity for January (“104.3”). Later this morning brings Redbook same-store sales for the week ending February 8 and job openings from JOLTS. The day is also busy with Treasury supply, headlined by the Desk conducting a GNII FedTrade operation. The U.S. Treasury will conduct the first leg of this week’s Refunding when it auctions $38 billion 3-year notes. We begin the day with Agency MBS prices worse .125 and the 10-year yielding 1.59 percent.

Employment

“Are you looking for ‘the one’ this Valentine’s Day? Someone who supports your dreams, encourages your growth and gives you the opportunities you need to turn leads into customers for life? Meet Motto Mortgage. We believe our network deserves the very best which is why we empower each and every Motto Mortgage loan originator with the right tools and training to stay ahead of the competition. Still unsure? With over 100 offices open in more than 30 states, our network’s growth makes it easy to cast those first-date jitters aside. The Motto Mortgage network is recruiting for loan originators in the following states: AL, AZ, HI, IN, LA. MD, NC, NV, NM, OR, PA, SC and TN. Where have we been all your life? Here, at Motto Mortgage. Contact us (866.668.8649) to learn why we might just be a match made in heaven for your career.”

“Guaranteed Rate is seeking acquisition opportunities with mortgage companies looking to maximize profitability. Guaranteed Rate, the 3rd largest retail lender in the country, experienced record growth in 2019 and creating a great opportunity to partner with like-minded leaders looking to take advantage of our expertise and economies of scale. If you are an owner or CEO of a mortgage company that is looking for better pricing, increased profitability, lower risk and much less stress and hassle, we urge you to e-mail Mark Filler to learn more about integrating your business into our platform.”

Impac Mortgage Corp., a subsidiary of Impac Mortgage Holdings, Inc., announced that Brian Robinett has joined the company as Chief Production Officer overseeing the performance of all of the company’s lending channels. Congratulations to Brian!