CFPB went and changed that with
its announcement yesterday regarding telling consumers how to own a home, uh,
actually how to partially shop for mortgages from large lenders. Before we get
to CFPB possibly overreaching its purpose, how about some good news? The Mortgage Bankers
Association, echoing what lock desks already knew, said its seasonally adjusted
index of mortgage application activity jumped 49% last week - its
largest weekly percentage gain in over 6 years. Rates have helped: refis were
up over 66%, and purchases were no slouch being up 24%.
Of course, given that around
30% of home purchases are all cash and then, when one actually owns a home, the
focus is on utility bills, property taxes, HOA issues, and buying the right
linen, one wonders why "Owning a Home" is focused on rate shopping.
But more on that soon...
An originator from New Jersey
wrote, "I am getting hammered with this all of a sudden. Is it the end
goal of the CFPB to move into the primary market by merging with FHFA? I
found this to be the most deceptive information ever produced: 'Getting quotes
from multiple lenders puts you in a better bargaining position. If you prefer
one lender, but another lender offers you a better rate, show the first lender
the lower quote and ask them if they can match it.' This violates the MLO comp
Rule. Further, it would establish violations of the Disparate Treatment for
many lenders. You need to read through this through everything. In some
places it uses Brokers and Lender and in other its uses only Lender. There is
no APR. Imagine if I advertised a rate without an APR."
And this note: "If we ever
said to a regulator that we had the Best Deal on rates and fee, they would
write us up every time. No one can claim to have the best deal. How do you
gauge that? We're almost back to shopping using the TIL and APR calculation.
And look what that got us."
From Washington came, "The
CFPB's initiative is a noble effort, especially their rate shopper tool. I guess
the scariest factor will be whether or not it will include lender fee
adjustments that substantially affect the rate we offer the client? And, where
will the consumer get their credit score that reflects a mortgage credit
scoring model? Surely not from Credit Karma. I don't really know how that
website generates a score for the consumer, but it is notoriously inaccurate
for estimating a consumer's mortgage credit score (either good or bad, I've
seen it go both directions)."
It
went on. "And most surprisingly missing from Mr. Cordray's presentation
was recommending to the public to check the CFPB's and state regulators'
enforcement history and stay away from lenders who have had enforcement actions
against them. Honestly, part of the reason that consumers probably doesn't
shop many lenders, is the simple fact that many consumers don't have the time
to sit through an hour to hour and half interview with multiple lenders who do
explain all of the loan options and accurately gauged the consumer's income and
credit, etc. If a lender says they can do this initial process in 5-10 minutes
on the phone that is your first sign to keep shopping. All the CFPB did by
announcing their initiatives to 'protect' the consumer is show us how little
they understand the down and dirty actions we loan officers have to do each and
every time we meet with a consumer and try to help them with their home
financing in today's lending world."
Ken
Perry, President and CEO of the Knowledge Coop writes, "This is so
strange - the CFPB is becoming Lending Tree without the funding! The
CFPB has created a way borrowers can get a rate quote based on their
circumstances! This is insane! Its site is in beta and you can see it HERE. I am not sure what
regulators are thinking with this but it is out there so we need to plan on how
to deal with it. Here are my initial thoughts: 1. It is not quoting APR.
The fine print shows that the rates are based on -.5 in rebate or .5 in fee...
but it is REALLY small print. I am pretty sure the CFPB would take action
against somebody using that small of font on a disclosure. I had to get my
readers out just to see what it said! 2. I priced it out with my favorite
loan officer who is on the lowest comp plan her company provides (yes, she has
a 'pick your rate sheet' comp plan) and she was right in line with the lowest
rate quoted today. The interesting thing is that if borrowers see this then she
is the only one who will get that loan, because borrowers often want the lowest
rate. For her this is awesome because she can send the link to every borrower
without being concerned with the borrower leaving her. If she was on the
highest rate plan her company offers then she would be off the charts on this
site. So, I can totally foresee LO's with low comp plans using this to seal the
deal and show the consumer that they are the lowest the CFPB has been able to
find. Does this then drop rates all over the US? If low cost LO's figure out
how to use it then it just might.
Ken's
note finishes with, "3. I think the CFPB has clearly crossed a line here.
The government posting expected rates while not knowing the exact circumstances
of every borrower is crazy. You know that 534 FICO borrower who saw they were a
765 on freecreditscore.com and
has a foreclosure less than a year ago is going to cry foul when you don't drop
him/her right into the CFPB rate range. This is crazy!"
Another
note commented, "Is this for real or is he still not getting it? The FRB
said that SRPs and YSPs are the same form of compensation. So, what are the
differences? How many banks, in the current mortgage environment retain
all their loans in a portfolio? 'Consumers should realize that their business
is selling mortgages and that lenders and brokers have different business
models and make money in different ways.' If the loan doesn't close they don't
get paid, why would a borrower ever want the opposite, where the institution
got paid whether the loan closes or not? Heck, some banks have been running
90-120 days in underwriting, denying HARP loans that should be approved,
and they now want someone to originate loans with no incentive? This is the
disconnect between government and private business. And why doesn't the CFPB
suggest a person shop for a Realtor the same way?"
John
Hudson opined, "The CFPB has launched a website to quote mortgage rates in
order to encourage consumer shopping. I think we can all agree that consumer
shopping is good. However, the CFPB's website apparently only pulls data
from 'a mix of large banks, regional banks, and credit unions'. ...Why not
mortgage brokers? Their data is pulled from a private firm from CA which
does market research and offer 'mystery shopper' services. In statements today,
the CFPB Director Cordray seemed disappointed that half of consumers only talk
with one mortgage firm before they buy....as if he doesn't believe that
consumers can find a mortgage professional they can trust the first time. Will
the CFPB launch a site posting auto financing rates soon? How about credit
cards? What about what gas stations are charging at various areas around town?
How monitoring the price of color copies? I'm curious to hear what other Mortgage
Professionals have to say. Will this help the consumer shop? FHA, VA, and
USDA rates are not options on the site. Is the CFPB overreaching on their
mission here? And why not get rate quotes from mortgage brokers?"
Turning
briefly to the markets, yes, Chase's earnings fell short of estimates ($1.19
versus $1.31) - so are the results poor or were the people who created the
estimates misguided? Wells Fargo, however, was right on the money ($1.02) for
the fourth quarter. (And once again folks are asking, "If these big,
complicated banks can produce their earnings only two weeks after the end of
the quarter, why do I have to wait a month for my accounting group to do the
same thing?")
Executive
Rate Market Report:
Dec retail sales this morning shook markets. Sales were generally
expected to be down 0.1%; as reported sales plunged 0.9%, ex auto sales -1.0%.
Adding to the soft retail Nov. originally reported up 0.7% was revised to +0.4%.
We have been warning the economy is weaker than the financial world was trying
to push down our throats. Toward the end of Dec all chatter was positive that
Holiday shopping would be a blow-out strong season for retailers; obviously not
the case based on the data this morning.
Prior to 8:30 when sales were reported the stock indexes were looking OK,
immediately after the report indexes dropped like that stone and the 10 yr
prior to 8:30 at 1.89% -1 bp declined to 1.80%. 30 yr MBSs up +53 bps in price
from yesterday’s close. Also at 8:30 Dec import prices were thought to be -2.7%
as reported down 2.5%. Export prices thought to be down 0.5% fell to -1.2%.
Yr/yr import prices -5.5%, export prices -3.2%.
At 9:30 the DJIA opened -182, NASDAQ -45, S&P -17. The 10 at 1.80%
-10 bps and MBS prices +47 bps from yesterday’s close.
Markets were shocked on the weak retail data this morning. Last year investors
were generally ignoring soft data points as anomalies, with no other place to
invest global investors and domestic investors were piling into equity markets,
the sector of the economy that didn’t jump into the pool, consumers, were
verbally rebuked by analysts that the retail investor was not joining the
party. Looks like the little person id the correct thing and stayed away. The
is no way the financial markets can paint over the sales report, retail sales
haven’t been close to the forecasts from economists and analysts.
Here we go once again with forecasts being lowered on the global
outlooks.
The World Bank cut its outlook for global growth Tuesday, saying a
strengthening U.S. economy and plummeting oil prices won’t be enough to offset
deepening trouble in the Eurozone and emerging markets. The Bank expects the
global economy to expand 3% this year, up from 2.6% in 2014, but still slower
than its earlier 2015 forecast of 3.4%. The Bank said the US is the only bright
spot in the world; continuing the question whether the US can hold up as the
rest of the world slips?
The data and economic forecasts continue to be revised downward each time the World
Bank, the IMF, the US Fed and the ECB as well as China and Japan going back to
a year ago have consistently been lowered from the previous forecasts. Those
lower revisions last year didn’t get traction with investors, this year will be
different with any weak data not likely to be pushed under the rug. The US and
Global economies continue to refute all those positive outlooks that call for
increased growth. Central banks are not able to get any traction on moving
inflation up; deflation fears are increasing. Two weeks ago and through much of
last year market participants were completely convinced the Fed would be4gin
increasing rates by mid-year; now many are beginning to think the Fed won’t
(can’t) increase rates this year as global economies and the US outlook
softens.
Nov business inventories were up 0.2%, in line with 0.3% expected.
Not much direct interest in it but will play into Q4 GDP.
This afternoon Treasury will sell $13B of 30 yr bonds re-opening
the 30 issued in Nov. Yesterday’s 10 auction based on comparing demand to previous 10
ye auctions was a weak auction. By the end of the day yesterday those that
bought the 10 were already in the black. The 10 auction had a yield of 1.93%,
now at 1.82%.
MBA reported mortgage applications the week ending Jan 9th
increased 49.1% from the previous week. The refinance index up 66% while purchase
up 24%. The refinance share of mortgage activity increased to 71% of total
applications from 65 percent the previous week. I have nothing to say on that;
reads like that should be taken with that grain of salt.
Market volatility remains in both stocks and bonds and MBSs. Intraday trading has
increased; yesterday the DJIA had a 425 trading range, up 282 in the morning,
then declining to -143 before ending about unchanged (-27 points). All
technicals remain bullish but with the swift decline the 10 yr is approaching
overbought levels on the momentum oscillators. There will be no relief in
volatility through the rest of Jan. On Jan 22nd the ECB meeting and on Jan 25th
the Geek election.
PRICES @ 10:15 AM
- 10 yr note: +21/32 (66 bp) 1.83% -7 bp
- 5 yr note: +14/32 (44 bp) 1.28% -8 bp
- 2 Yr note: +4/32 (12 bp) 0.48% -7 bp
- 30 yr bond: +50/32 (162 bp) 2.43% -7 bp
- Libor Rates: 1 mo 0.166%; 3 mo 0.252%; 6 mo 0.359%; 1 yr 0.620%
- 30 yr FNMA 3.0 Feb: @9:30 102.94 +47 bp (+52 bp from 9:30 yesterday)
- 15 yr FNMA 3.0: @9:30 104.81 +6 bp
- 30 yr GNMA 3.0: @9:30 103.98 +53 bp
- Dollar/Yen: 116.72 -1 21 yen
- Dollar/Euro: $1.1784 +$0.0011
- Gold: $1238.80 +$4.40
- Crude Oil: $46.49 +$0.60
- DJIA: 17,459.23 -154.45
- NASDAQ: 4642.86 -18.64
- S&P 500: 2009.44 -13.59
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