Thanks
to Adrienne R. for these!
I used to
think the brain was the most important organ. Then I thought, look what's
telling me that.
Why
can't you hear a pterodactyl go to the bathroom? Because the "P" is
silent.
What
time is it when you have to go to the dentist? Tooth-hurtie.
What's
the best part about living in Switzerland? Not sure, but the flag is a big
plus.
Atheism
is a non-prophet organization
Just
went to an emotional wedding. Even the cake was in tiers.
I wrote
a song about a tortilla. Well actually, it's more of a wrap.
I
started a band called 999 Megabytes - we haven't gotten a gig yet.
"If
a Republican wins, I am leaving the country. If a Democrat wins, I am leaving
the country. This has nothing to do with politics - I just like to
travel."
Regulators
don't like the unregulated, and in what some would term, "the CFPB
inviting more into its boat to be bashed with oars," it announced it is
accepting complaints from consumers encountering problems with loans from
online marketplace lenders. "The Bureau is also releasing a consumer
bulletin that provides an overview of marketplace lending and outlines tips for
consumers who are considering taking out loans from these types of
lenders.
"Millions
of consumers take out personal loans online. Marketplace lending-often referred
to as 'peer-to-peer' or 'platform' lending-is a relatively new kind of online
lending. A marketplace lender uses an online interface to connect consumers or
businesses seeking to borrow money with investors willing to buy or invest in
the loan. Generally, the marketplace lending platform handles all underwriting
and customer service interactions with the borrower. Once a loan is originated,
the company generally makes arrangements to transfer ownership to the investors
while it continues to service the loan."
The CFPB's bulletin offered information for consumers who
are considering a loan from a marketplace lender, including reminding borrowers
that marketplace lenders are required to follow federal and state consumer
financial protection laws, a reminder to be careful about refinancing certain
types of debt, and tips about applying for loans in general.
And
what is lending, or life in general for that matter, without complaints? The
CFPB began accepting complaints about consumer financial products as soon as it
opened its doors nearly five years ago in July 2011. "Because marketplace
lenders offer several types of consumer loans, a consumer submitting a
complaint should select among the different complaint categories for products
and services that best apply to their situation. For example, a consumer can
select products such as 'mortgage,' 'consumer loan,' or 'student loan.' The
CFPB forwards complaints to the marketplace lender and works to get a response
- generally within 15 days. Consumers are given a tracking number after
submitting a complaint and can check the status of their complaint by logging
on to the CFPB website. The CFPB expects companies to close all but the most
complicated complaints within 60 days."
Observers
were quick to point out that the CFPB's objectives in taking these actions
are questionable since consumers already could complain about marketplace loans
using the CFPB's existing loan categories. A Ballard Spahr publication
notes that, "Rather than seeking to provide additional protection to
consumers, perhaps the CFPB's primary objective is to warn marketplace lenders
that they are clearly on the CFPB's radar screen. Indeed, the CFPB's advice to
consumers appears to signal the type of scrutiny marketplace lenders can expect
from the CFPB. The CFPB tells consumers to 'keep in mind that marketplace
lending is a young industry and does not have the same history of government
supervision and oversight as banks or credit unions. However, marketplace
lenders are required to follow the same state and federal laws as other
lenders.' (While the CFPB is not currently taking complaints about
business loans, including business loans made by marketplace lenders, it
recently indicated that, subject to an assessment of feasibility, it plans to build an infrastructure to intake and
analyze small business lending complaints.)"
TRID
implementation is still a challenge for some lenders and many LOS systems are
not supporting lender expectations. Additionally, some systems are ceasing
to make any additional upgrades, no longer supporting self-hosted options, or
construction loans, and the list goes on. For these reasons more lenders
are looking to make changes to their loan origination software than ever
before. This taxing and overwhelming process is time consuming and
stressful for any institution; the biggest fear is jumping out of the frying pan and into the fire.
I
recently spoke with Lionel Urban, CEO of PCLender and he stated that
after confirming that the Loan Origination Software you are considering does in
fact meet all of your needs to comply with TRID, there are six questions that
every lender should pose during the LOS/Technology due diligence process:
1. Can I test drive the system in a Lender Lab? 2. What does the
implementation, pilot and training program consist of? Does it include
setting up required work flow and vendor integrations? 3. What customer,
training and ongoing configuration support is included and what are the
costs? 4. What responsibility does the vendor have to reduce operating
and maintenance costs? 5. Are the above clearly identified in the
licensing agreement? 6. Does the vendor have a product road map and do
they collaborate with you to ensure it will meet your future needs?
David
Tandy, CEO of Gracy Title in Austin, sees some improvement and writes,
"I recently spoke to a closer who noted that 'I'm getting loan docs at
least 48 hours in advance on most files, the CD is easier for us (the title
company) to work up (as a draft for the lender to get their fees right), the
final CD I get from the lender is correct most of the time, buyers are coming
to the closing having already studied the CD and do not have as many questions
about the CD as they would have about the HUD. The CD is easier to explain to
them. The closings are going more smoothly.'
"This
type of advance delivery of loan docs and instructions rarely happened in the
past. Those lenders that do not step up to have as smooth of process as their
competitors will no longer get referrals from Realtors. Realtors are beginning
to track the lenders that have put good processes in place. Realtors do not
want to write a 45 day contract. They want to write 30 day contracts or
less. Particularly in a Hot market like Austin where there are multiple
offers and the best offer (shorter closing date with fewer contingencies)
wins." (More from David Saturday!)
We
all know that banks are more than happy to sit on their jumbo loans. Why pay
someone to securitize them if they're flush with assets? And why put loans
through more TRID scrutiny? But this news from Brandon Ivey caught the eye of
several readers. "Two Harbors Investment Invest Corp. plans to issue a
$331.95 million jumbo mortgage-backed security, So far this year, just two
jumbo deals have been issued, both priced in January. Agate Bay Mortgage Trust
2016-2...Some 37 lenders contributed to the MBS, led by New York Community Bank
with a 13.0 percent share and Parkside Lending with a 10.7 percent share. The
slowdown in jumbo MBS issuance has been blamed on broad economic factors and
the TRID disclosure rule. Execution for the deal remains to be seen, but the
jumbo MBS appears to be the first to include mortgages subject to TRID. Fitch
Ratings said 43 mortgages in the deal, accounting for 9 percent of the loan
count, were subject to TRID. Clayton Services completed due diligence on the
loans and found initial compliance exceptions involving TRID on 32 of the
mortgages." So we have a residential MBS where 32 of 43 mortgages reviewed
had TRID errors? That's 75%.
Matt
Scully with Bloomberg did a fine job of digging in deeper. "Several
compliance discrepancies were found in the prime jumbo mortgage pool
backing this week's Agate Bay
Mortgage
Trust RMBS from Two Harbors Investment Corp, including issues of TRID
compliance, though rating agencies say the risks have been remedied or are now
'remote,' according to a preliminary offering memorandum and presale
reports." [Editor's note: and we can all trust the rating agencies,
right? I am sure they will stand by lenders in a class action lawsuit 4 years
from now.]
Matt
went on. "In 24 cases, representing 4.86% of the mortgage loans by cut-off
date aggregate balance, compliance discrepancies were found as a result of a
review of the mortgage loans...Compliance with TILA-RESPA Integrated Disclosure
Rule (TRID) was an issue in several cases. Examples of issues relating to
compliance with TRID include formatting issues with respect to closing
disclosure form, inaccurate disclosures in this form, and a form provided via
e-mail where there was no prior e-sign consent in originator's loan files.
There
are 43 loans (9% of mortgage pool) that are subject to TRID, Fitch said.
"Despite a high initial compliance exception rate for the 43 loans
reviewed, Fitch feels the TRID noncompliance risk to investors for this
transaction is immaterial due to the low percentage of loans subject to the
rule, the low limit on statutory damages and the good-faith efforts to resolve
the issues identified."
"Fitch
assumes RMBS investors will only be exposed to statutory damages of $4,000 plus
attorney's fees for claims arising in defense of foreclosure in judicial states
when a borrower is already working with an attorney...Borrowers will be
unlikely to proactively hire attorneys to seek damages under the rule; thus,
the risk of defensive claims in nonjudicial states or affirmative claims in any
state is viewed by Fitch as remote...Fitch does not consider actual damages as
a potential risk as actual damages are "difficult to prove...Class action
lawsuits, due to a relatively low limit on rewards, are also viewed as
unlikely."
Wait!
Moody's weighed in. "We are comfortable with the loans which contained
(TRID) exceptions as we did not find them to be material."
The
offering memo noted that, "Clayton determined that the TRID rule
compliance issues were cured in accordance with the TRID rule prior to the time
the sponsor purchased the mortgage loan. All of these mortgage loans were
included in the mortgage pool...non-TRID compliance
discrepancies
included: * Using an H8 form in lieu of an H9 rescission form, missing Maryland
counseling notice, exceeding fee tolerance threshold on the HUD-1, finance
charges on the final Truth in Lending (TIL) form understated by more than $100
or not providing settlement charge estimates for 10 business days, missing
initial TIL form by lender, and Good Faith Estimate summary of terms determined
to be inaccurate." Great job Matt listing these out.
As if
capital markets people didn't have enough to worry about analyzing this new
security, rates have continued their volatility. Treasuries rallied sharply
Tuesday following the lead from Japanese government bonds, which soared to record
highs overnight although agency MBS prices lagged. The buying continued all
morning with most coupon securities at one point recovering all of their losses
from Friday's post-February nonfarm payroll report sell-off. Few cared about
the poor demand for the $24 billion 3-year Treasury auction.
This
morning we've already had the MBA's application numbers from last week. They
barely moved, coming in +.2% and 20% higher than a year ago; refis dropped and purchases
rose. Coming up are the January figures for Wholesale Inventories - hardly a
market mover, and a $20 billion 10-year T-note auction. We closed Tuesday with
the 10-year yielding 1.83% and in the early going today we're at 1.88% with
agency MBS prices worse about .125.
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