CFPB Openings & Salaries; LO Comp Splits & Referral Fees; Why do people move?

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This week is a busy travel week for me (Minneapolis, Kansas City, and Atlanta), but people are also busy permanently moving; that's a good thing, and according to the U.S. Census Bureau, who tracks population movements (and probably phone conversations too..."who said that?"), there are a few common reasons people toss their good china in the box their microwave came in, and drive to another city to live. According the Bureau, of the 35.9 million people who moved between 2012 and 2013, 17.2 million, or 48%, gave a "housing-related" reason for moving - meaning they moved to a better dwelling. Males are more inclined to move for job-related reasons than females; the higher the level of education you have, the more likely you are to move (employment mobility, transferable skills, etc.). Married couples were the least likely to move for family-related reasons...unless there's a divorce. Intra-county moves were typically for housing-related reasons, while inter-county moves and moves from abroad were more for job-related reasons. I believe a more interesting study, however, would be on the excuses your friends give you when you ask them if they'd be able to help you move - Reasons for Moving: 2012 to 2013.

Finishing off the personnel topics, people are always amazed at the CFPB salaries and job postings. But hey, who wouldn't want to be an examination supervisor and make nearly a quarter million a year.

Here some questions:1.  “I know that non-QM loans are not the same as subprime loans from years ago. But with all this talk about non-QM lending, could you remind me about what the ATR (Ability to Repay) criteria are?" Sure - that's easy. At a minimum, creditors generally must consider eight underwriting factors: (1) current or reasonably expected income or assets; (2) current employment status; (3) the monthly payment on the covered transaction; (4) the monthly payment on any simultaneous loan; (5) the monthly payment for mortgage-related obligations; (6) current debt obligations, alimony, and child support; (7) the monthly debt-to-income ratio or residual income; and (8) credit history. Creditors must generally use reasonably reliable third-party records to verify the information they use to evaluate the factors.

2. “what do you hear about loan officer partners splitting compensation?" Well, as always, it is best to consult with your in-house compliance department, in-house council, or attorney on retainer. I won't pry, but this sounds a question from an LO who doesn't like the answer you are hearing from your compliance department. It could be that the problem at your shop has more to do with administration and management than compliance. As best I can tell from hearing attorneys discuss this, the LO Comp Rule is skeptical of splitting arrangements because there is a concern that originators at different commission rates might pass loans back and forth to get around the Rule. That said, the Rule doesn't prohibit a situation where two loan officers form a team to originate loans and agree to split commissions on those loans in some fixed formula such as 50/50 or 80/20. For that to work, however, the company must ensure that the split formula applies to all loans originated by either member of the team and the team only has one commission rate for all loans. In essence, the team is treated as if it was one loan officer with two commission checks. Once again, the basic tests are fairness to the borrowers, transparency, and consistency. 

Along those lines, "one of the toughest hurdles in recruiting today is the fact that most LO's cannot begin building a new pipeline under the new employer's name due to the NMLS licensing system. However, I wondered if there is any flexibility if the new LO begins referring new deals to the new employer and receives a legitimate referral fee? I'd be interested in hearing how others might are dealing with this issue as it sure makes it hard to move knowing you have to start from scratch." As you know, referral fees are prohibited under RESPA to non-employees, and commission splitting is suspect and problematic under the LO Comp Rule.  State and federal NMLS licensing can pose another problem for timing.  Nevertheless, there are ideas to address the issues you raise, but any attorney (not me) would want to understand your unique situation and needs before offering anything. I don't think there is a "one-size-fits-all" solution. This issue may be timely in light of the recent CFPB consent order against Stonebridge title. 

As I mentioned, it is best to consult your attorney on referral issues, especially as there are exceptions. For example, are processors allowed to get a spiff for referrals? RESPA prohibits paid referrals, not all referrals. Some say that the exception is to allow LOs to refer loans to their employer and permits the employer to pay its LOs however it pleases. Through the exception, RESPA only prevents payments to third parties.  Differing commissions to an LO based on source does not provide a thing of value to a third party for a referral so there is no RESPA issue. If the MSA is compliant, RESPA is agnostic about how the LO is paid, right? Does the commission structure pass any LO comp proxy tests? Seek legal council and don't rely on your friendly neighborhood commentary writer!

Investor & vendor news and updates, in no particular order:

 

First off, in Friday's commentary I noted CMG Financial's offering an Asset Based Jumbo Program for self-employed borrowers. (Self-employed income is not verified, and is for primary & second Homes. This is a "No Income verified program" for self-employed borrowers, and liquid assets, including business, are verified for qualifying purposes, and it is not an asset depletion program. There are specific minimum asset requirements for each loan tier.) Lenders should know that CMG Financial offers this product through its wholesale and retail lending divisions currently and plans to make it available through its correspondent lending division in the future.

Wells Fargo Funding announced to its correspondent clients, loan qualification data will be available to Sellers on all loans approved using its Prior Approval Underwriting option. Sellers will receive a faxed copy of the Wells Fargo Funding Income and Ratio Calculation once all prior-to-close conditions are clear and the loan is cleared for funding. Updated mortgage credit certificate documentation requirements, effective May 5, if the borrower needed the monthly subsidy to qualify, loan must contain all available MCC documents: copy of MCC or Commitment Letter, copy of W4 and worksheet, MCC worksheet. If the MCC is not included in the loan package prior to purchase, it must follow as a trailing document. Updated Co-op blanket mortgage requirements for conforming and non-conforming loans have been updated for loans on or after June 2.

Equifax Inc., a global information solutions company, announced the availability of Prescreen Direct™ with Property, which "helps to improve the accuracy of targeted marketing campaigns for lenders, enabling them to better match and offer mortgage and home equity products to consumers who are most likely to make a purchase." 

Turning to the markets, rates are pretty steady. Chaos in Iraq is driving oil and gold prices up, and the "flight to quality" is supposedly helping our rates. But in terms of economic releases last week, U.S. data for the week were consistent with views of a moderate Q2 GDP rebound following a dismal Q1: business inventories were up, motor vehicle sales are doing well, and retail sales increased by 0.3 percent in May, but jobless claims rose. Some are wondering if the U.S economy has hit a speed bump. Consumer spending rose at a 3.1 percent annualized pace in the first quarter, but the gain was concentrated in health care spending and utilities, which are temporary.

This week we have a lot on the menu - all of which may be trumped by whatever happens in Iraq, Russia, China, and so on... Today is Empire Manufacturing and the Industrial Production and Capacity Utilization duo. Tomorrow will be the Consumer Price Index (every month people seem worried about inflation, when inflation hasn't been a problem in many year years), and the Housing Starts and Building Permits couplet. On Wednesday, June 18th, the Federal Open Market Committee (FOMC) will announce its policy decisions and brief comments on the economy. The FOMC announcement tends to be the most influential event for the markets so pay attention! Thursday is weekly Jobless Claims, and on Friday the 19^th is the Philadelphia Fed Survey and Leading Economic Indicators. For numbers, "thanks" to Iraq, rates are a little better today, with the 10-yr at 2.59% (versus Friday's close of 2.60%) and agency MBS prices better by "a hair". 

Earlier this morning at 8:30 the June NY Empire State manufacturing index was better than expected at 19.28 with forecast of 15.0 and better than May’s 19.0 read; the index is the highest in 4 yrs. At 9:15 May industrial production was expected at+0.5% as reported +0.6%, April production was revised from -0.6% to -0.3%, another good report. May capacity utilization, also at 9:15 was better than forecasts at 79.1% compared to 78.9% expected and 78.6% in April. At 10:00, another good report; the June NAHB housing market index was thought to be at 47 from 45 in May, as reported the index jumped to 49 but builders said they still faced headwinds; Like the ISM reports, any reading under 50 is considered contraction).

AM Tracking Quote:
FNMA 4.0% 105.22 now +2 bps

09:31 +2
Open 105.20

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This Week’s Calendar:
       Monday,
          8:30 June NY Empire Stat index as reported 19.28
          9:15 May industrial production as reported +0.6%; May capacity utilization as reported 79.1%
          10:00 am NAHB June housing market index as reported
      Tuesday,
          8:30 am May housing start (-3.4% at 1.036 mil)
                       May building permits (-2.7% at 1.062 mil)
                       May CPI (overall and core both +0.2%)
      Wednesday,
          7:00 am weekly MBA mortgage applications
          8:30 Q1 current account balance (-$99.8B)
          2:00 pm FOMC Policy statement
          2:30 pm Janet Yellen press conference
      Thursday,
          8:30 weekly jobless claims (-4K to 313K)
          10:00 am June Philly Fed business index (13.0 from 15.4 in May)
                         May leading economic indicators (+0.6%)

With the FOMC meeting and the Fed’s GDP forecast on Wednesday we don’t look for much overall change between now and then. Iraq will continue to trouble investors as it is likely the situation will get more tenuous before it might calm down. The US is considering use of military force but no troops on the ground according to the President. Obama has ordered an aircraft carrier into the gulf for likely air support of the Shiites. If you sit back and review the various situations in the mid-east and Eastern Europe it isn’t a nice picture; Syria, Israel, Ukraine, Iraq and to a lesser extent Thailand, China and Vietnam---all in various troubling situations; the world is presently facing a lot of global issues that do in one way or the other have a direct impact on investor thinking.

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