I
remember when I first entered the working world, after a few months my HR
person asked, "I see that you're not signed up for the company's 401k. Why
not?" I replied, "I'd never be able to run that far." A full
understanding is important regardless of what you're doing. Yesterday I
mentioned that, "Warehouse lenders everywhere are hungry for business, and
cutting their rates below the Prime Rate (3.25%) into the 2% range if certain
conditions are met." One warehouse vet wrote and reminded me that,
"While I agree there are definitely lenders out there doing that, I think
you should clarify for what type of companies. Small to mid-size companies aren't
going to be able to get that type of pricing. There are companies paying above
5% still. To get the pricing you discussed, lower than 3.25%, you have to be an
established company with probably over a $5 million net worth. And you probably
have to be able to use the facility a good amount."
Let's
catch up on some state-level news in recent weeks, a big concern to any lender
operating in more than one state.
Arizona has made a few
modifications to its lending regulations to include updating provisions
regarding: purchase money mortgages,
loan originators, and escrow agent protection letters.
For purchase money mortgages, the new law (HB 2018) states that originations
after December 31, 2014, "real property owned by a person engaged in the
business of building and selling homes is not exempt from any foreclosure. If
real property has a home that was not completed or has a building intended to
be used as a home but was not, the property can be used to satisfy the
judgment." Under House Bill 2098, a loan originator must be granted a
license by the superintendent after completing a twenty-hour education course
during the three-year period before the time of application (previously
two-year period of time). Also, the new provision states that the applicant
must have completed late continuing education for the purposes of satisfying
education for the last year that the loan originator was in a renewable status.
Texas' Department of Savings
and Mortgage Lending adopted provisions regarding loan status forms. When
conditional qualification is given to a mortgage applicant by an originator,
the form must resemble Form A under 7 TAC s.80.201(a). Most importantly,
written confirmation is needed from the applicant to the originator. Form A is
a conditional qualification letter and includes the originators license number,
contact information for the applicant, loan information and terms, credit and
income review and states at the bottom that the form is not an approval. These provisions
went effective on May 1st.
Virginia has clarified its
policy on unallowable origination fees.
The purpose is to clarify the Department of Veterans Affairs' policy on the
treatment of unallowable fees when lenders charge a loan origination fee that
is less than one percent of the loan amount on purchase and cash-out
transactions, and less than one percent of the payoff amount on interest rate
reduction refinance loans.
Kentucky recently amended KRS 426.530 which
describes the right of redemption of real property that has been sold in
pursuance of a judgment or court order. The revisions are effective on July 14,
2014, or 90 days after legislative adjournment.
Georgia
has
recently updated its mortgage lender and broker licensing requirements. The
peach state has exempted employees of certain nonprofit corporations,
which promote affordable housing, from mortgage loan originator licensing
requirements. The provisional changes state that "employees of bona
fide nonprofit corporations, who act as loan originators only for such
corporations, and who only offer mortgage loans with terms that are favorable
to borrowers, are not required to obtain a mortgage loan originator
license." House Bill 750went into
effect April 21st.
Kansas' House and Senate have
passed HB 2643, and in it a provision which changes the way counties can
collect mortgage fees. The fee provision, which was lobbied by realtors and bankers,
was substituted into House Bill 2643 after
the House had rejected earlier versions that would have exempted private-sector
health clubs from property taxes. The bill also clarifies provisions for
classifying business property for tax purposes and for exempting vehicle taxes
on active-duty National Guard and reserve military personnel.
On
April 28, the U.S. Supreme Court granted certiorari (which is the legal
equivalent of a "do-over" when you were a kid and the ball went into
the neighbors backyard) in Jesinoski v. Countrywide Home Loans,
Inc., No. 13-684, an appeal of the U.S. Court of Appeals for the
Eighth Circuit's September 2013 holding
that a borrower seeking to rescind a loan transaction under TILA must file
suit within three years of consummating the loan, and that written notice
within the three-year rescission period is insufficient to preserve a
borrower's right of rescission. TILA Section 1635 grants borrowers the
right to rescind a transaction "by notifying the creditor" and
provides that a borrower's "right of rescission shall expire three years
after the date of consummation of the transaction" even if the
"disclosures required . . . have not been delivered."
As
a reminder, Freddie Mac is profitable.
However, I wouldn't exactly define it as a success story just yet, as I
consider FHLMC as the equivalent of the mid-30's guy who drives a nice car, and
wears trendy clothes...but still lives with his parents. The GSE
posted a net income of $4 billion for the January-through-March period, has
repaid its debt to the American tax payer ($71.3B), and will pay a dividend to
the US Treasury next month of $4.5B.
Also
as a reminder, on April 30th the CFPB proposed minor adjustments to its mortgage
rules, thus continuing to work within their regulatory mission statement of
'ensuring access to credit'. The recent proposal includes two changes that
would help certain nonprofit organizations continue to provide mortgage credit
and servicing to underserved populations; the first rule change offers a
secondary definition of a "small servicer" which would apply to
certain nonprofit organizations. The proposal would also create an amendment so
that certain nonprofit groups can continue to extend certain interest-free,
forgivable loans, also known as "soft seconds," without regard to the
200-mortgage loan limit. The proposal also outlines limited circumstances where
lenders that exceed the points and fees cap can refund the excess amount to
consumers and still have the loan be considered a Qualified Mortgage. For the
official CFPB proposal and press release, click here.
Last
month U.S. Bank Home Mortgage eliminated the restrictions on First lien
transactions in the states of Arizona, California, Michigan, New Jersey and New
York. The states of Florida and Nevada will remain restricted markets until
further notice.
An
announcement was also issued regarding consideration in using qualified assets
of an applicant for purposes of generating monthly qualifying income. The two
categories of assets identified are (Non-Retirement Assets and Retirement
Assets). For complete information regarding the new policy for Non-Retirement
Assets, which will be published in their Seller Guide Manual, view the
bulletin. This Bulletin applies to all conventional portfolio loans that are
not final approved. These guidelines ARE NOT applicable to any FHLMC, FNMA,
FHA, VA or USDA programs.
"All
refinance transactions submitted to your U.S. Bank Home Mortgage Underwriting
Center for final approval; a payoff statement must be obtained for the
following reasons: when U.S. Bank Home Mortgage is refinancing a mortgage that
is currently serviced by U.S. Bank, the payoff statement is to determine the
existence of a pre-payment penalty on a first or closed end second or an early
termination fee on a HELOC if it is required to be closed. If a penalty
or fee exists it must be included in the points and fees test. Or U.S.
Bank Home Mortgage requires a payoff statement on all refinance transactions,
regardless of servicer, on all products to avoid exceeding USBHM's principal
curtailment limit of $1,000.00 and compliance issues with regards to
curtailments. Or a payoff dated on or after the application date is required at
the time a conventional rate/term refinance is submitted to Underwriting. Any
subsequent resubmission will not require an additional updated payoff unless
the payoff has expired or the borrower has made an additional payment. Current
HASP procedures will remain in effect.
According
to Angel Oak Funding Wholesale Division unpaid medical, regardless of
age, do not need to be paid or calculated in the DTI. Visit their website to
view their flexible loan programs at www.angeloakwholesale.com or contact you're A.E.
Is the US economy really doing as well as the stock market
thinks it is? Yesterday we learned that HP, the world's second-biggest
personal-computer maker will eliminate 11,000 to 16,000 positions, on top of
34,000 already announced. HP had 317,500 employees at the end of October. And
we had higher existing home sales in April, although it was a somewhat mixed
report. Sales rose 1.3% in April but this was less than what was expected, and
is down by 6.8% from a year ago. Still, the gain was the first for this year
and indicated some recovery from the harsh winter. In addition, inventory
recorded a meaningful increase, 16.6%, while the median home price increase was
a more moderate +5.2% year over year increase versus +8.6% in Q1 from a year
ago. Limited inventory and lower affordability has often been cited as
inhibiting purchase activity. So the May report may be more meaningful for
determining whether home buyers are becoming more responsive to an increased
selection and more attractive mortgage rate levels, or whether tight credit
conditions continue to weight on activity.
Both
long term (think mortgages) and short term (like overnight Fed Funds) are
influenced by supply and demand, which is turn is influenced by expectations of
what the economy will be doing. And right now the US economy is not doing well
enough to suggest higher rates are in the near future. But it is not doing so
poorly as to suggest much lower rates are in the near future either - so here
we sit.
Now
there is the possibility that the Fed will continue to reinvest its paydowns
longer than anticipated to past the first rate hike. Thoughts like that
certainly help mortgage securities. As Thomson Reuters mentions, "Given
the current technical landscape and outlook, investors are continuing to ply
the range; selling on strength and adding on price and spread weakness. Supply,
meanwhile, was manageable against the demand..." Yesterday both the 10-yr
T-note and agency MBS prices were down/worse about .125 and the 10-yr closed at
a yield of 2.55%.
We
only have April's New Home Sales (expected +10.7% to 425k) today for scheduled
news, and the bond market is closing early. In the very early going we are
virtually unchanged from Thursday's close - and plenty of people are ready
for a long weekend.
Now Executive Rate Market Report:
A
slightly better start this morning ahead of April new home sales; at 9:00 the
10 2.53% -2 bp and 30 yr MBS price +8 bp after being down 5 bps yesterday. The
long weekend is at hand, many have already shut down and by 11:00 this morning
more will be headed to the beach at the Hamptons. The bond and MBS markets will
close at 2:00 this afternoon, stock markets will go the distance at regular
hours. At 9:30 the DJIA opened +13, NASDAQ +5, S&P +2; 10 yr note at 9:30
2.53% and 30 yr MBS price +10 bps from yesterday’s close.
Some
improvement in the Ukraine/Russian situation? Looks as if the tensions are
easing based on Putin’s comments today. Putin on TV in St. Petersburg taking
questions from reporters saying; "What we want for Ukraine is peace and
calm,"…. "After their election, of course we will cooperate with the
newly elected head of state." Putin said Friday he will respect "the
will of the Ukrainian people" in presidential elections this weekend and
would work with whoever is elected. He said the crisis has affected the level
of trust with the West, saying the overthrow of former President Viktor
Yanukovych was a coup supported by the U.S. and EU. "What next? Chaos and
a full-scale civil war," Mr. Putin said.
Six
weeks ago when the turmoil began with Crimea and Russian troops stationed on
the border of Ukraine, the run to safety into treasuries and German bunds
dropped interest rates to present levels. As we noted yesterday, the situation
has eased a bit taking away one of the props keeping rates low. The
presidential election on Sunday will define the next steps in what may develop
into a real civil war. It depends on how the separatists react. Putin has
played the card well, standing back and indicating he would co-operate with whomever
is elected. That however depends on the separatists’ next move; the election
won’t go the separatists’ way.
April
new home sales were expected to be up 8.6% to 420K units from 384K units in
March, but March revised now to 407K units. April sales were better than
expected, at 433K units. With the upward revision in March the percentage
increase in April is +6.0%. A much better report than was expected but still
leaves the outlook murky. A week ago the NAHB housing market index fell to 45
the lowest since August 2013. There was no initial reaction to the better
headline in either MBSs, treasuries or the stock indexes.
The
bond and mortgage markets close at 2:00
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