Monday, December 11, 2017


One-Time Close Construction Loans for builders

Global Home Finance Inc. has recently launched its Single Close Construction Program for FHA, VA, and USDA construction lending. Since its launch, GHF has approved more than 15 builders to offer its products in Texas. This low down-payment construction option is a great alternative in markets that are strapped for inventory like DFW. GHF Mortgage is one of the few lenders in the country offering new construction lending for the 100% LTV USDA product. If you are a branch manager, loan originator or processor with construction lending experience or would like to offer construction lending products please, reach out to Brad Cahoone at 972-724-3222 ext. 227. Don’t get left behind your competition!


Flood Insurance And The Government
On Dec. 8, the National Flood Insurance Program (NFIP) was set to expire. Late last week Congress passed, and the President signed, a two-week spending bill to avoid a government shutdown, allowing an extension on the NFIP to 12/22. In the simplest terms, if the NFIP expires, virtually no homes in any floodplain could be bought or sold if that deal involves a mortgage company because anyone buying a home with a federally-backed loan is required to carry flood insurance if that house sits in a flood plain. Any way to run a country? We need a long term solution and need to stop "kicking the can down the road."
ARMCO announced new loan data validation tools. ACESRisk Management (ARMCO), the leading provider of financial quality control and compliance software has announced the release of a new technology for mortgage lenders and servicers that improves data validation in the QC process. ARMCO's new datavalidation tool is available through the most recent ACESAudit Technology upgrade, which was released on December 9, 2017. This upgrade's principal enhancement is advanced process automation functionality that enables ACES to automatically identify missing data within the loan file. Data integrity issues are one of the top causes of critical defects, according to research released in the most recent ARMCOMortgage QC Industry Trends Report. With the system's new advanced automation functionality, ACES now fulfills an essential function for avoiding data validation errors.
FHA/VA/Ginnie program changes
Iberiabank Corp and two subsidiaries agreed to pay $11.69 million to resolve allegations they submitted false claims for federal loan guarantees on mortgages, the U.S. Justice Department said on Friday. Between Jan. 1, 2005, and Dec. 31, 2014, the Lafayette, Louisiana-based bank and its Iberiabank and Iberiabank Mortgage Co. units admitted to certifying mortgage loans that did not meet Federal Housing Administration standards and paid incentives to underwriters, which is prohibited, the department said in a statement.
Millennials have "discovered" the FHA 203(k) product, allowing for additional funds to improve/rehab the home and the total loan amount is the home value after the improvements, according to an appraisal that considers the plans submitted as part of the loan application. The Day, focusing on Eastern Connecticut, profiled the product and several millennial homebuyers.
FHA published Mortgagee Letter 2017-16, 2018 Nationwide Forward Mortgage Limits, which provides the maximum mortgage limits for FHA-insured Title II forward mortgages. Mortgagees may view this list, along with a list of areas at the ceiling and a list of areas between the floor and ceiling, on the Maximum Mortgage Limits web page. FHA forward mortgage limits are available by Metropolitan Statistical Area (MSA) and county, or bydownloading a complete listing
FHA announced it is reversing a short-lived policy announced in July of 2016 and will no longer insure new mortgages on properties that include Property Assessed Clean Energy (PACE) assessments.
FHA has set the agency's new schedule of loan limits for 2018. Click here to read FHA's Mortgagee Letter on 2018 Forward Mortgage Limits. Also available, FHA's Mortgagee Letter on 2018 Home Equity Conversion Mortgage (HECM) Limits.
Effective Thursday, November 30, 2017, GHF implemented changes from the Department of Veterans Affairs' (VA) via Circular 26-17-11 regarding the requirements for itemizing seller credits on the CD. Seller credits on VA loans will now be shown itemized in the seller paid column on the Closing Disclosure. 
GHF's policy on 2018 loan limits are summarized as follows: Conventional Conforming - eligible now and may fund immediately. VA - eligible for loans closing on or after January 1, 2018. The new limits may be used now if the loan is closed on or after January 1, 2018. FHA - eligible for case numbers assigned on or after January 1, 2018. The new limits may be used now if the case number is assigned on or after January 1, 2018.  USDA - GHF's maximum loan amount for USDA loans will increase to the new single family conforming limit of $453,100 for USDA Conditional Commitments issued on or after January 1, 2018.  The new limits may be used now if the Conditional Commitment is issued on or after January 1, 2018. The minimum loan amount for non-conforming loan programs must exceed the FHFA loan limits. The new minimum loan amount for non-conforming programs will go into effect for all non-conforming loans locked or re-locked on or after January 2, 2018.
GHF is now accepting VA loans using VA's 2018 loan limits for loans that will close on or after January 1, 2018. VA's 2018 Loan Limits are the same as the Federal Housing Finance Agency's limits. For purposes of determining the VA guaranty, the One-Unit Limit column in the FHFA Table applies.  If a loan is submitted now and closes on or after January 1, 2018, the new limits apply.
FormFree has expanded its partnership with Envestnet | Yodlee, a data aggregation and data analytics platform, to include new data insights from Yodlee's Risk Insight Solutions. The data allows FormFree to enhance its AccountChek™ reports with bank statement copies that meet FHA requirements and fine-tune its analysis of borrower ability-to-pay.
Capital markets
Resitrader announced it has officially completed its full integration with Fannie Mae's Pricing & Execution - Whole Loan (PE-Whole Loan) application for pricing and committing whole loans. "The integration provides Resitrader clients with the ability to obtain pricing across all 'specified pay-up' options, and then commit and manage commitments for Fannie Mae loans through Resitrader's digital trading platform."
In terms of interest rates, despite the possible volatility-causing employment data Friday morning, not much happened. U.S. Treasuries and agency MBS prices ended the week on a mostly flat note (the 10-year's range was only 3 basis points), showing a limited reaction to the November Employment Situation report. The report exceeded headline expectations, but revealed disappointing average hourly earnings growth (+0.2%). The employment data stayed true to a longstanding trend and did not alter the market's expectations for near-term policy changes. The December FOMC meeting will take place this week and the market remains certain that a 25-basis point rate hike will be announced on Wednesday.
So yes, the unemployment data and other stats were on target, but wage growth remains subdued. That isn't likely to keep the Fed from raising rates at this month's meeting, yet it could give the Fed a data-based reason to move more slowly on the next rate hike in 2018. Over the last 12 months, average hourly earnings have risen 2.5%. If the housing market in your area is going up 5-10% a year, and you want to buy, it's hard to do...
It's a new Fed week, and let's see what's going on after the 10-year note closed yielding 2.38% Friday. Yes, the U.S. central bank, via the FOMC, is practically guaranteed to hike the range of fed funds by 25bp to 1.25% to 1.50%, with the ECB, BoE and SNB due with their latest decisions on Thursday. In addition, Treasury will conduct their mini-Refunding over today and Tuesday with the 3- and 10-year auctions both today.
This morning we have October JOLTS job openings and the November Employment Trends Index, as well as a $24 billion 3-year note auction and a $20 billion reopened 10-year note auctions. Tuesday is November NFIB Small Business Optimism, November's Producer Price Index for a read on inflation, and a $12 billion 30-yr auction. Wednesday are the MBA's application data from last week, November Consumer Price Index, and the December FOMC rate decision. Thursday is November Retail Sales, Retail Sales, weekly Initial Claims, November Import Prices ex-oil and November Export Prices ex-agriculture. We wrap things up Friday with Empire Manufacturing, Industrial Production and Capacity Utilization. The 10-year is currently at 2.36% and agency MBS prices have improved nearly .125 from Friday's close.
A guy bought his wife a beautiful diamond ring for Christmas.
A friend of his said, "I thought she wanted one of those pretty 4-wheel drive vehicles?"
"She did," he replied, "But where in the world was I going to find a fake Jeep!"

Monday, July 3, 2017

July 3: Residential legal news; disaster area updates; FHA, VA, and Ginnie news from agencies & lenders

We've sailed through half of 2017 already. ("Life is like a roll of toilet paper. The closer you get to the end, the faster it goes." Since many folks have today off, very few people are reading this, so I can get away with remarks like that.) Turning up the intellectual level a little, who is William Stanley Jevons? He was an English economist and logician, and while living in Australia wrote a book titled, "A General Mathematical Theory of Political Economy." I bring this up because in it he developed a theory about value. Should prices be based on the cost of making goods, or should the price reflect the degree to which a consumer values a product? Should mortgage prices to the borrower be based on the cost of originating a mortgage, or should the price reflect the degree to which a borrower values the mortgage? A good discussion to have at your next sales event.
 Ginnie Mae has provided disclosure information for its MBS Multifamily New Issuance Loan Level data. Ginnie is also restoring access to the legacy REMIC search page and adding a link from its existing data search page to access the legacy page as well.
 Lenders react to disaster news
 Most investors and lenders rely on FEMA to define a disaster and the area impacted. Of course, any monies about to be lent, and recently lent, in a disaster area are questionable from an investor's perspective. Is the borrower safe, will they make their payments, is the collateral sound? Typically a correspondent investor will have verbiage in their contract referring the seller to it in the event an area is declared an investor and requiring additional appraisals.
 Certain Counties in Arkansas have been declared by FEMA as Major Disaster Areas for the Incident Period Date:From April 26, 2017 to May 19, 2017.
 In response to the Federal Disaster declaration for Arkansas counties of Boone, Carroll, Clay, Faulkner, Fulton, Lawrence, Randolph, Saline, Washington and Yell County and Missouri counties of Bollinger, Butler, Carter, Douglas, Dunklin, Franklin, Gasconade, Howell, Jasper, Jefferson, Madison, Maries, McDonald, Newton, Oregon, Osage, Ozark, Pemiscot, Phelps, Pulaski, Reynolds, Ripley, St. Louis, Shannon, Stone, Taney and Texas;
 Residential legal tidbits
 Hard money lenders provide financing for borrowers who are left out of the conventional lending process, and offer supplemental loans to help complete real estate deals. These kinds of lenders typically take a second position to the lender of the primary loan, which is typically a bank.
 When a borrower recently defaulted on two loans secured by a four-unit residential property in Berkeley, the hard money lender in second position faced the possibility of being wiped out by the foreclosure initiated by the institutional lender in first position. Attorney Henry Chuang of The Law Offices of Peter N. Brewer stepped in to help protect the client. First by reinstating the first loan, and then by defending claims of predatory lending and fraud lodged by the borrower.

The strategy utilized by attorney Henry Chuang not only won the case but also resulted in 100% of the attorney fees paid. If you would like to read more about this case, download the Case Study.
 Have you ever heard, "get it in writing"? Of course, you have but do you heed the advice? One broker learned this rule of thumb the hard way in a recent California case between Westside Estate Agency Inc. and James Randall.
 The broker agreed to assist a "friend" in purchasing a $40+ million home in Bel Air but didn't get anything in writing as to the terms of his assistance. The broker prepared 2 offers for purchase which were rejected. But, the seller remained interested. A couple months later, the "buyer" hired an attorney to prepare a new slightly higher offer which was accepted. The attorney received $925,000 commission. The broker filed suit against the buyer claiming he was owed the commission under a breach of an implied contract theory. The brokers suit did not meet the statute of frauds according to both the Trial Court and Appellate Court, here's why.
 The Appellate Court held that even though the two unsuccessful offers contained language that stated that the broker would collect a commission, since the broker was not the procuring cause of the eventual purchase, he had no right to a commission.
 California statute of frauds declares invalid any "agreement authorizing or employing an agent, broker, or any other person to purchase or sell real estate" unless that agreement is in writing and signed by the brokers client (Civ. Code 1624, subd, (a)(4).) Merely putting a prospective purchase on the track of a property which is on the market will not suffice to entitle the broker to the commission contracted for, and even though a broker open negotiations for the sale of the property, he will not be entitled to a commission if he finally fails in his efforts.
 Capital markets
 FHFA Director Watt, before the American Mortgage Conference of the North Carolina Bankers Association indicated that the GSE are looking to expand credit risk transfer programs to include 15-year and ARMs while Treasury Secretary Mnuchin, before the Senate Committee on Banking, Housing, & Urban Affairs, indicated stressed the importance of housing finance reform and the need to resolve the GSEs. Of course, there is a lot of talk about what to do with the very profitable Fannie Mae and Freddie Mac. But what happens if they have a losing quarter?
 Casting a quick look at interest rates (yes, the bond market is open today), on Friday the 5- and 10-year U.S. Treasury were the highest they've been in over a month. Fixed-income securities here and in Europe continued their sell-off that began on Tuesday (prices move inversely to yields). Despite Mario Draghi's hawkish remarks earlier in the week supposedly being "misinterpreted" by the market, investors & traders have continued to sell. Granted, the economic news here in The States (personal income & consumption/spending, Core PCE Prices, the Chicago PMI, and the Michigan Sentiment Index of consumer confidence) either met or exceeded expectations.
 For Friday's session, the 10-year note price worsened nearly .375 to close yielding 2.30% while the 5-year, which is a little closer in price movement to the typical mortgage-backed security, worsened about .125. Mortgage rates experienced one of their worst weeks in 2017 as originators were posting rates 0.125% to 0.25% higher compared to the same time a week ago. The 10-year treasury finished the day at 2.30% and for the month of June the 10-year increased by approximately 10bps.
 There's an early close today in the bond market, and most companies are only partially staffed, but we do have some news coming out: Markit Manufacturing PMI, Construction Spending for May, and the ISM PMI. Wednesday we'll have the MBA's application data for last week, May Factory Orders, and the June 13-14 FOMC Minutes. Thursday are June Challenger Job Cuts, June ADP Employment Change, Initial Jobless Claims, May Trade Balance, and June ISM Services Index. And then on Friday is all the employment data. We start the day and week with rates a shade higher than Friday afternoon: the risk-free 10-year T-note is yielding 2.31% and agency MBS prices are worse a few ticks.

Tuesday, June 20, 2017

June 20: Reverse Mortgage Primer - Product Attracting Forward Lenders?

A delightful angelic little boy was waiting for his mother outside the ladies' room of the gas station.
As he stood there, he was approached by a man who asked, "Sonny, can you tell me where the post office is?"
The little boy replied, "Sure! Just go straight down this street two blocks and turn to your right.  It's on the left."
The man thanked the boy kindly, complimented him on how bright he was and said, "I'm the new pastor in town. If you and your mommy come to church on Sunday, I'll show you how to get to Heaven."
The little boy replied with a chuckle; "You're kidding me, right? You can't even find the post office."

"People who don't give up attract other people's attention." As do people whose humor is stuck in 4th grade - like mine usually is. For example.
Reverse mortgage news
Given that 10,000 people a day are turning 62 (the minimum age to take out a reverse mortgage), plenty of "forward" lenders are looking at the channel, or are fostering divisions to capture the business & revenue. Reverse mortgages are a "costly blessing" to older people who have valuable homes, but not a lot of ready money. They allow people to borrow money to spend now, that only must be repaid (plus interest) when they, or their estate, finally sells their home. Real estate agents and financial planners are often offered help by lenders doing reverse mortgages: "We can help your clients navigate the tricky reverse mortgage waters. We know there is a lot of old information out there - let us help your clients learn the truth about what an HECM is and isn't."
A reverse mortgage loan is available to homeowners age 62 or older and allows the homeowner to borrow the equity in their home minus fees and costs. It may only be secured by a primary residence for which all title holders are borrowers and are age 62 or over. To be eligible, borrowers must receive reverse mortgage counseling explaining the fees, costs, and ramifications of getting a reverse mortgage. Reverse mortgage payouts can be in the form of a line of credit or lump sum, with limits on the size of the lump sum payout.
June 15 was World Elder Abuse Awareness Day (WEAAD), and the National Reverse Mortgage Lenders Association and the National Aging in Place Council launched new consumer webpages to "help older adults, and their loved ones, recognize the signs of abuse and report instances of financial fraud and exploitation to the appropriate authorities. Through their combined audience of more than 36,000 monthly website visitors, the organizations hope to provide more seniors with the tools to protect themselves from scams and abuse." Visit Recognize and Report Elder Financial Abuse on NRMLA's consumer education website at
The Las Vegas Sun recently had an article about the pros and cons of reverse mortgages. Even the Huffington Post is telling consumers how to shop for a reverse mortgage.

Total new HMBS production issuance dropped from $584MM in April to $543MM in May, but as an industry, we continue to perform about 20% better year over year in total. The $543MM of new prod created in May is roughly 121% of UPB issued in same month 2016. This improvement is down slightly from the 127% improvement YoY we clocked in April. Four of the top five issuers saw a fall in issuance in May. For the 28th consecutive month, AAG leads all industry participants in new production issuance. In May, total new production issuance slipped to $128MM, good for 23.6% market share, down a bit from $159MM and 27% market share in April.
The #2 spot goes to FAR as the only top 5 issuer to show an increase in issuance month over month. Market share increased from 16.2% to 20.5% as issuance levels look consistent and strong across all 3 HECM rate varieties. RMF ranked third in May as total new issuances declined by ~$2MM to $101MM month over month. Ocwen was fourth with $98.7MM in new production pools. Ocwen remains the 2nd largest issuer of fixed-rate paper, finishing just $2MM shy of AAG for the fixed rate crown. In 5th place, LiveWell issued $50MM in May vs $59MM in Apr, as the firm saw market share fall slightly from 10.2% to 9.2%.  As always, fully interactive charts are on our site available here.
George Brooks with IMF reports that lenders originated $4.5 billion of new home equity conversion mortgages in the first quarter in his story, "Reverse Mortgage Lending on the Rise Again, but..." "Compared to the same period a year earlier, production increased by 16.6 percent. Purchase reverse mortgages comprised 83.6 percent of HECMs produced during the period. Borrowers appeared to favor reverse mortgages with adjustable rates over fixed-rate HECMs, which accounted for only 10.7 percent of HECMs in the first quarter. Despite increased originations in the first quarter, FHA data show a gradual decline in HECM endorsements since peaking in FY 2009 with $114.7 billion. For the full story and an exclusive look at the nation's top 100 reverse lenders, see the new edition of Inside FHA/VA Lending, now available online."
How much so you really understand about a HECM Reverse Mortgage? One advantage is that it does not impose a monthly payment burden on the borrower. The disadvantage is that the reverse mortgage will cover only about 50-60% of the house price, depending on the borrower's age, requiring the purchaser to find the remaining needed cash elsewhere. The most common source is asset liquidation. If you know anyone considering or that should consider this program, This HUFFPOST article will help give you some insight.
Recognizing the significant improvements that have been made to the HECM program that reduce risk to the MMI Fund and ensure responsible lending to aging homeowners, President Trump published a proposed Fiscal Year 2018 budget that would permanently remove the cap on the aggregate number of reverse mortgages that FHA can insure. Click here to read the full article.
There is training. For example, Plaza offers a presentation designed to help financial planners and loan professionals to better understand how Plaza's Reverse Mortgage can be used as a vital part of an overall retirement strategy and not just a loan of last resort.
The lending sector certainly receives its share of "bad actors" which the press highlights. For example, recent headlines blared, "Chicago man accused of stealing $10M in reverse mortgage scheme." "The Federal Trade Commission filed a civil suit against him in 2003. The Illinois Department of Financial and Professional Regulation suspended his loan originator registration in 2010. But it took until Mark Steven Diamond - who also went by the name Mark Stevens - was accused of stealing a total of $10 million of equity in the homes of at least 122 elderly victims before he was arrested on Monday and, on Tuesday, upon appearing in federal court, was charged with wire fraud and engaging in a financial scheme, according to FBI Special Agent Garrett Croon, a media coordinator for Chicago." The oldest victim was 98.
"Mark Diamond caused certain elderly homeowners to execute reverse mortgage loan documents, despite the fact that they were disabled or otherwise unable to understand the reverse mortgage loan documents," said Kelly Popovits, a special agent with the United States Department of HUD, Office of Inspector General. Diamond, 60 and of Chicago, is suspected of working with at least five co-conspirators, officials said, defrauding seniors by fraudulently obtaining home loans in their names and keeping the profits..."
Capital markets
On the short end of the yield curve, where do the Fed Funds futures stand after the FOMC meeting last week? For the upcoming July meeting, a 97% chance of no changes to rates. For the Sep meeting, an 87% chance of no changes, and for December a 54% chance of no moves. And who knows what will happen in the next six months. The flattening of the yield curve yesterday means that the 5-year Treasury yield is within two basis points of a three-week high while the 30-year yield is within one basis point of a seven-month low. Be careful what you wish for: a flattening yield curve is often indicative of a slowing economy.
NY Fed President Dudley expects wages and inflation to pick up and for the Fed to continue to remove policy accommodation, especially as he thought halting it would jeopardize the recovery. Given the lack of news, it seems traders and investors latched onto that, and the 10-year note price worsened .250 and its yield closed at 2.19% while agency MBS prices sold off about .125.
Not much news today (some current account trade figure) although oil prices are dropping significantly, and there are three speakers from the Federal Reserve which may make things interesting. We commence Tuesday with the 10-year yielding 2.17% and agency MBS prices are making up the .125 they lost yesterday.