A Deep Dive

By rchrisman@robchrisman.com

(I flipped a coin and the characters turned out in these roles. Obviously one can reverse them to suit purposes.)

"Donald and Hillary go into A Bakery"

Donald and Hillary go into a bakery on the campaign trail. As soon as they enter the bakery, Hillary steals three pastries and puts them in her pocket.

She says to Donald, "See how clever I am? The owner didn't see anything and I don't even need to lie. I will definitely win the election."

Donald says to Hillary, "That's the typical dishonesty you have displayed throughout your entire life, trickery and deceit. I am going to show you an honest way to get the same result."

Donald goes to the owner of the bakery and says, "Give me a pastry and I will show you a magic trick."

Intrigued, the owner accepts and gives him a pastry.

Trump swallows it and asks for another one.

The owner gives him another one.

Then Donald asks for a third pastry and eats that, too.

The owner is starting to wonder where the magic trick is and asks, "What did you do with the pastries?"

Trump replies, "Look in Hillary's pocket"...

 

What does $24 million buy you in Oregon? Just find 24 people to pony up a million each.

 Some economists love to look at the FHFA's housing statistics. Newly minted math and statistics majors, and summer interns, employed by the FHFA to put them together, also love them. These numbers, of course, only reside in the world of Freddie Mac and Fannie Mae, nut are useful to a limited degree, especially when viewed in context and taken over several months. Things look pretty good, and we certainly see a different picture than a few short years ago when the trend was negative.

 As a reminder, the Federal Housing Finance Agency (FHFA) sends out its House Price Index (HPI), and one can take a gander at it monthly or quarterly - to smooth out those fluctuations. The HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. Not only that, but it measures average price changes in repeat sales or refinancings on the same properties since 1975.

 Going back to last summer, the FHFA Home Price Index rose 0.6% in July, and year over year house prices were up 5.8 percent. For the nine census divisions, seasonally adjusted monthly price changes from June 2015 to July 2015 ranged from -1.2 percent in the New England division to +1.6 percent in the Mountain Division. The 12-month changes were all positive, ranging from +2.1 percent in the New England division to +9.4 percent in the Mountain Division.

Last September the House Price Purchase Index was +1.3% 3Q15 and +0.8% in September.  U.S. house prices rose 1.3 percent in the third quarter of 2015 according to the Federal Housing Finance Agency (FHFA) House Price Index (HPI). This was the 17th consecutive quarterly price increase in the purchase-only, seasonally adjusted index. FHFA's seasonally adjusted monthly index for September was up 0.8 percent from August. House prices rose 5.7 percent from the third quarter of 2014 to the third quarter of 2015.

At that point almost a year ago home prices rose in every state (except West Virginia) and in DC between the third quarter of 2014 and the third quarter of 2015. The top five areas in annual appreciation: 1) District of Columbia - 15.4 percent, 2) Colorado - 12.7 percent, 3) Nevada - 12.4 percent, 4) Oregon - 10.0 percent, and 5) Florida - 10.0 percent.

Heading into Halloween of 2015, the FHFA House Price Index was +0.5% in Oct.  The FHFA House Price Index (HPI) reported a 0.5 percent increase in U.S. house prices in October from the previous month. From October 2014 to October 2015, house prices were up 6.1 percent. For the nine census divisions, seasonally adjusted monthly price changes from September 2015 to October 2015 ranged from -0.5 percent in the New England division to +1.2 percent in the East South Central division. The 12-month changes were all positive, ranging from +2.9 percent in the New England division to +8.9 percent in the Mountain division.

Thanksgiving? The FHFA HPI reported a .5% increase in U.S. house prices in November from the previous month.  From November 2014 to November 2015, house prices were up 5.9 percent.  For the nine census divisions, seasonally adjusted monthly price changes from October 2015 to November 2015 ranged from -0.4 percent in the West South Central division to +1.8 percent in the Mountain Division. The 12-month changes were all positive, ranging from +2.6 percent in the Middle Atlantic division to +10.0 percent in the Mountain Division.

Valentine's Day? FHFA House Price Index 0.4% in Feb.  Home prices were thought to have stalled. The FHFA House Price Index showed not much of a lift at all in February, rising just 0.4% compared with the prior month. January was revised down to 0.4% from 0.5%. February's numbers were about what economists expected. The year-on-year gain was 5.6%, which is not spectacular but not overly weak given low inflation. This suggested that the slowdown in the housing market that began two years ago continued, which proved not to be the case. There's not much evidence of further weakening, however. Year-over-year gains have been steadily hanging on to around 6% for nearly a year.

 Home prices rose 0.7% in March of 2016, later revised to +.8%, according to the FHFA House Price Index. "While the overall appreciation rate was robust in the first quarter, home price appreciation was somewhat less widespread than in recent quarters," said FHFA Supervisory Economist Andrew Leventis. "Twelve states and the District of Columbia saw price declines in the quarter-the most areas to see price depreciation since the fourth quarter of 2013. Although most declines were modest, such declines are notable given the pervasive and extraordinary appreciation we have been observing for many years." Interesting to see prices begin to decline in some states.

 So when all was said and done for the first quarter, this index showed that U.S. house prices rose 1.3 percent in the first quarter of 2016. This is the nineteenth consecutive quarterly price increase in the purchase-only, seasonally adjusted index. As noted in the paragraph above, the FHFA's seasonally adjusted monthly index for March was up 0.7 percent from February.  

Moving into the second quarter, the FHFA House Price index rose 0.2% in April of this year, and is up 5.9% year-over-year. Interestingly, New England went from cellar-dweller to the leader in monthly price appreciation. The region is still lagging the most on a YOY basis however. The FHFA index is the only housing price index that has regained all of the losses from the crisis. This is because it concentrates only on houses with a conforming mortgage, so it ignores the all-cash distressed sales and the jumbo space.

Memorial Day? The FHFA Housing Price Index rose 0.2% m/m in May (5.6% y/y) after increasing by an upwardly revised 0.3% in April.

 The index went on to show that U.S. house prices rose 1.2 percent in the second quarter of 2016. House prices rose 5.6 percent from the second quarter of 2015 to the second quarter of 2016. FHFA's seasonally adjusted monthly index for June was up 0.2 percent from May.

 A while back the PGA tour and Quicken Loans partnered up to bring a sweepstakes in which every time a PGA tour player makes a hole-in-one, Quicken Loans pays a person's mortgage for a year. Quicken Loans just came out with a study on home values and it seems people living in the West get a hole-in-one every time they get their home appraised! The study shows that "Appraised values were higher than homeowners estimated in Western cities including Denver, San Jose and San Francisco - by as much as 3.10 percent, 2.52 percent and 2.36 percent respectively."

 The gist of the study is that National HPPI (home price perception index) shows appraised values were 1.69% lower than homeowners expected in July. What's important to note in this is how regionalized housing is. While the west was surprised by the home values being higher than they believed, the northeast and Midwest were shocked at their low values vs their expectations. Quicken Loans also found that the only measure of home value changes based on appraisals, HVI (home value index) rose 1.43% in July and rose 6.24% year-over-year. If you would like to read more about this and see the values for major cities around the country click here.

 According to Sun Tzu, all warfare is based upon deception....and sneaking out of work early to enjoy the few remaining afternoons of summer is too. Life is filled with imperfect situations, mainly driven by participants having imperfect information at the time. Some may argue that even the most liquid markets are based upon imperfect information. Really there's no finer example of investors positioning themselves into a market with complete lack of transparency than the Fed Funds Rate. Wells Fargo's Economics Group writes in Investing with Imperfect Information regarding decisions by investors which may be speculating on FOMC interest rate decisions. "For investors, the challenge is to make decisions under conditions of imperfect information. The volatility of expectations on FOMC actions is an excellent representation of the imperfect information the market has on inflation, inflation expectations and the FOMC's reaction function to that inflation."

 Are trends in the monthly or quarterly FHFA's HPPI more exciting than the bond market? Perhaps. Tuesday we had another non-volatile day with very little news from overseas, and very little news from this country. I won't waste anyone's time talking about what little intra-day price movement there was between coupons and types of mortgage-backed securities, although traders did see a little pick-up in volume.

 For Tuesday's session, agency MBS prices, the 5-year T-note, and the 10-year note (1.57%) were all pretty much unchanged from Monday's close, which was pretty close to last Thursday's close.

 It's a new day, and we've already had the MBA's application numbers for last week. Overall apps were up nearly 3%, most of it from refis which were +4% versus purchases which were +1%. We've also had ADP's private sector employment number for August: +177k, as expected. Coming up are the Chicago PMI, at 9:45am, expected to decline to 53.0 vs. 55.8, and the Pending Home Sales Index for July, at 10:00am, expected at -0.5% vs. +0.2% previously. In the early going we're at 1.58% on the 10-year and down a smidge on agency MBS prices.

HARP Extended, and Continued Conventional Conforming Changes

By rchrisman@robchrisman.com

(From Florida thanks to Stephen G. who sent this one.)

There were four churches and a synagogue in a small town: a Presbyterian church, a Baptist church, a Methodist church, a Catholic church, and a synagogue. Each church and the synagogue had a problem with squirrels.

The Presbyterian church called a meeting to decide what to do about their squirrels. After much prayer and consideration, they concluded the squirrels were predestined to be there and they shouldn't interfere with God's divine will.

At the Baptist church the squirrels had taken an interest in the baptistery. The deacons met and decided to put a water slide on the baptistery and let the squirrels drown themselves. The squirrels liked the slide and, unfortunately, knew instinctively how to swim so twice as many squirrels showed up the following week.

The Methodist church decided that they were not in a position to harm any of God's creatures. So, they humanely trapped their squirrels and set them free near the Baptist Church. Two weeks later the squirrels were back when the Baptists took down the water slide.

But the Catholic Church came up with a very creative strategy. They baptized all the squirrels and consecrated them as members of the church. Now they only see them on Christmas and Easter.

Not much was heard from the Jewish synagogue; they took the first squirrel and circumcised him. They haven't seen a squirrel since.

There's been a lot of chatter in the industry to the effect that TRID has significantly increased appraisal turn-times and cost. To get at the truth, our friends over at STRATMOR have recently launched their August Spotlight Survey: Lender Appraisal Processes and Turn-Times, that examines when in the origination process lenders order appraisals; how they obtain them, i.e., via an Appraisal Management Company, an internal Appraisal Panel, or both; when and how they collect appraisal fees; and the impact of all this on appraisal turn times and costs and how these metrics may vary with loan purpose, method of obtaining an appraisal and other factors. Launched on August 10th, the survey will remain open until September 16th with results available for purchase on or about October 7th. As with all Spotlight Surveys, there is no up-front charge for taking the survey, which should not take more than 15-20 minutes. Instead, you can purchase results when they come available. If you are interested in taking this survey or finding out more, you can click here.

 For you CFPB watchers, it has ordered First National Bank of Omaha to provide $108 per head, or $27.75 million, in relief to roughly 257,000 consumers harmed by illegal practices with credit card add-on products. See? Mortgages aren't the only industry in its crosshairs. BuckleySandler partners Andrew L. Sandler and Valerie Hletko led the team that advised First National Bank of Omaha in relation to the CFPB's most recent Order. (CFPB Press Release: http://bit.ly/2bK0h74). 

 Yesterday a little uncertainty was removed from the conventional conforming arena. The Federal Housing Finance Agency (FHFA), which runs Freddie & Fannie for the U.S. Government, has announced that the Home Affordable Refinance Program (HARP) will be extended nine months to September 30, 2017, continuing to provide liquidity to support eligible borrowers.

After that, apparently, Fannie Mae and Freddie Mac will introduce new high loan-to-value (LTV) ratio same-investor refinance options, scheduled to be available in October 2017 - yet to be named. The new options will be for existing loans with LTV ratios exceeding the maximum otherwise allowed, supporting borrowers who are making their payments but are constrained by a high LTV from refinancing. Under the new options, as with HARP, the refinance must provide a borrower benefit, such as a lower interest rate. Unlike HARP, the new options will not have an effective date or an expiration date. Full details will be available in the coming months through the Enterprises, but the offering will make use of the lessons learned from the Home Affordable Refinance Program (HARP) and its streamlined approach to refinancing.

Refer to the Selling Notice for more information on the extension of DU Refi Plus™ and Refi Plus™. To preview Fannie Mae's new high LTV refinance option, read the fact sheet; detailed requirements will be provided in a future lender communication although it is believed that the program is more targeted than HARP and, unlike HARP, can be used more than once by eligible borrowers. Existing HARP loans, however, will not be eligible for the new program.

 The Fannie Mae Post-Purchase Adjustment (PPA) Data Change Rules Matrix was recently enhanced featuring easier navigation and a simpler look and feel. In this update, documentation requirements were streamlined for certain data attributes and Special Feature Codes (SFCs).

 This Exhibit provides the new Fannie Mae Standard Modification Interest Rate required for all Fannie Mae conventional mortgage loan modifications, excluding Fannie Mae HAMP Modifications.

 DU Version 10.0 is coming to town the weekend of September 24. DU Version 10.0 The integration testing environment has opened for testing of DU 10.0 and integration customers have been notified. Find more information about DU 10.0 on the DU web page.

 Flagstar Bank announced updates to Fannie Mae HomeReady which include: Occupant borrowers are no longer restricted from having an ownership interest in other residential properties. Requirement for homeownership education has been removed for rate/term refinance transactions.  Education is still required for purchase transactions. Requirement for landlord education has been removed for loans secured by 2- to 4-unit properties.

 LHFS Wholesale posted information to align with DU's HomeReady loans with a Note Date on or after July 26, 2016. The occupant borrower may now own other residential properties and be eligible for a HomeReady transaction. The property ownership restriction has been removed. Homeownership education is now required for purchase transactions only. DU messaging that conflicts with these changes may be disregarded until the DU future update is released reflecting the changes.

 Income from future employment will be acceptable for Desktop Underwriter Approve transactions in the Fannie Mae Eligible products for ditech clients if specified criteria has been met.

 M&T Bank, August 10^th, for new registrations and existing pipeline loans, issuing a clarification for Agency, Treasury and FHA loans. Wedding gifts may be an acceptable explanation for a large deposit as long as acceptable documentation is provided. Underwriting and UES guides will be updated for each product type to reflect acceptable documentation.

 Franklin American Mortgage has updated its guides to include: The 2016 HomeReady income limits, including the change to 100% AMI (or no limit in certain census tracts) which became available in DU during the month of July. The removal of the previous restructured refinance requirements for DU loans as announced by Fannie Mae. In addition, Lenders may now follow Fannie Mae's guidance regarding sufficient business liquidity.

 Plaza'sHomeReady Program Guidelines have been updated per Fannie Mae announcement SEL-2016-06. Updates include: Removed the restriction against occupant borrowers owning other residential property. Homeownership education is no longer required for rate/term refinance transactions. Landlord education is no longer required for borrowers financing 2-4 unit properties. Updated the Maximum Financed Properties to match standard Fannie Mae Guidelines as the restriction against owning other properties has been eliminated.

 Click here for First Community Mortgage underwriting guideline updates as of August 1^st.

 Flagstar's Conventional Underwriting Guidelines have been updated, effective immediately. Updates include changes to social security income, properties with resale restrictions, restricted mortgage, and student loans.

 U.S. Bank Home Mortgage has updated its underwriting guidelines for work completion escrows. Updates include clarification in transactions and property types. Applicable to FHA (excluding HUD REO), VA and Conventional Purchase Transactions and Refinance of a New Construction Loan for one unit primary residences only. USBHM will not allow escrow for items that impact the immediate habitability of the property. Those items must be repaired prior to closing (i.e. well/septic, other health/safety issues, non-functioning utilities electric/heat/water, kitchen, bathroom etc.) Escrows for well/septic, other health/safety issues or interior work will be considered on an exception basis only (except for Rural Housing where it is not allowed).

 M&T Bank has clarified and enhanced FNMA HomeStyle property type guidelines to be inclusive of multiple scenarios: Eligible and Ineligible Properties and Programs. 

In addition, as of August 1st, its tax service fee has increased to $82.50.

 NYCB Mortgage Table Funding Clients, effective for loans with an Initial AU Submission on or after August 20^th, HomeReady Mortgage underwriting guideline updates designed to simplify and expand options. See HomeReady Mortgage product page and Seller's Guide section 4.8 Homeownership Education and Housing Counseling for complete details.

 One important note from yesterday on the appraisal front. Pacific Union Financial, LLC had announced a change for the required appraisal, if applicable to the transaction, to be submitted at loan submission for all refinances...the appraisal to be submitted with the credit package. Pacific Union revoked this change. "While appraisals may be submitted with the credit package to initiate review of the collateral earlier in the process, the appraisal will no longer be required at time of initial loan submission. Appraisals can continue to be submitted as a condition."

 Interest rates? There isn't much to move them - things are pretty quiet overseas - and they've been steady at these levels for nearly two weeks with little to report. Current coupon agency MBS prices have traded in a .250 range for the last week or so, up a little, down a little. Thursday, for example, the 10-year note price worsened about .125 and wound up yielding 1.58% but mortgage-backed securities were pretty much unchanged.

 Today, in Wyoming, one could either fish, do some mining, or attend the first full day of the KC Fed's 2016 Economic Policy Symposium ("Designing Resilient Monetary Policy Frameworks for the Future") which is being held in Jackson Hole, WY. Why Jackson Hole? Paul Volker likes to fish. Currently, futures are implying a 32% chance of a rate hike at the next FOMC meeting on 9/21. This probability has increased significantly over the past few weeks, but as we've found out, Fed Fund targets don't directly correlate to 30-year mortgage rates.

 We've already had the 2nd release of Q2 GDP. Expected to show a little pick up, it showed GDP is +1.1%. Also we've seen the advanced readings for July on goods trade, wholesale and retail inventories (the deficit narrowed sharply). And then at 10:00am the University of Michigan Sentiment Index. As noted above the 10-year closed at 1.58% and this morning, after these numbers and ahead of Janet Yellen's speech, it is at 1.56% with agency MBS prices a shade better. 

eMortgage Status at Lenders and Agencies - Catch the Wave!

By rchrisman@robchrisman.com

 

(Thanks to Stephen S. for this one.)

An artist asked the gallery owner if there had been any interest in her paintings that were on display.

"Well, I have good news and bad news," the owner responded. "The good news is that a gentleman noticed your work and wondered if it would appreciate in value after your death. I told him it would and he bought all 10 of your paintings."

"That's wonderful," the artist exclaimed. "What's the bad news?"

"The gentleman was your doctor."

 

Plenty of celebrities lose all their money, and then some, in various schemes. But here's one Brady Bunch member that did pretty well in California residential real estate.

So you're thinking about starting a bank, huh? The Wall Street Journal reports that from 2000 to 2008 the FDIC received 1,637 applications for new banks and approved about 75% of them. Since 2009, however, the FDIC has received 50 applications and only approved 6%. My calculator says that is...3.

 A survey by the RMA of community banks finds 56% of respondents say they expect to participate in M&A in the next 2 years. Interestingly, of those expecting to do M&A, 86% said they plan to acquire another bank while only 14% expect to sell. S&P Global Market Intelligence reports that as of Aug 8 there had been about 6% fewer deal announcements in the banking sector compared to the same period last year (157 vs. 167). Of interest to lenders, West Virginia's United Bankshares, Inc. and Cardinal Financial Corporation announced a merger agreement in a $912 million deal. For those playing along at home, Cardinal Bank owns George Mason Mortgage, LLC. We'll see if they keep it and fold it in, or sell it off - as has been rumored.

 Banking has been quiet for a couple weeks on the M&A front. During that time, it has been announced that six-bank holding company Industry Bancshares ($3.5B, TX) will acquire First National Bank ($54mm, TX). Vintage Bank Kansas ($59mm, KS) will acquire The Peabody State Bank ($41mm, KS). Sandy Spring Bank ($4.7B, MD) will acquire insurance company The Advantage Group Inc. (MD), and in Delaware Wilmington Savings Fund Society, FSB ($5.8B) will acquire Powdermill Financial Solutions LLC - Powdermill specializes in providing estate and business succession solutions to high-net-worth individuals and families.

 And something else that has been very quiet is the FDIC shutting down banks. There haven't been many this year but in Georgia, on Friday, the Woodbury Banking Company and folded into United Bank, Zebulon, Georgia.

 Among other business lines, banks are in the business of extending credit - making loans. The Fed's latest Senior Loan Officer Opinion Survey showed that banks continued to tighten lending standards across a number of different types of loans. Banks have now tightened standards for commercial and industrial (C&I) loans for four straight quarters, although the tightening in the latest survey was more modest than in the previous one. A relaxation of standards for mortgages eligible for purchase by government-sponsored enterprises and a tightening of standards for subprime mortgages were exceptions to stable lending standards.

 The price of servicing can impact the rates borrowers see just as much as the bond market can. Certainly the fluctuations in servicing values, the lack of natural buyers for servicing, and the issues with FHA & VA servicing is a hot topic at conferences. Someone emailed me the other day asking why I haven't included mortgage servicing rights (MSRs) in the commentary recently, so here ya go!

 The trend towards large blocks of MSRs continue with MIAC's $1.5 Billion FNMA and FHLMC mortgage servicing portfolio with an optional co-issue opportunity totaling $50 to $100 million per month. The portfolio is being offered by a mortgage company that originates loans with a national geographic concentration. The total package looks like: $172,926 average loan size, 98.1% FRM, 77.3% FNMA MBS, 2.4% FNMA A/A and 20.3% FHLMC ARC, 4.22% WAC, 728 WaFICO, 17 mos WALA, 99% retail originations, with a national geographic spread. Bids on this package will be due August 28^th....

 MountainView Servicing Group's $3 Billion GNMA servicing portfolio is being made available to the national market. The package is 100% fixed 1^st lien, $220k average loan size, 3.94% WAC, 688 WaFICO, 94% WaLTV, top states: California (19.9 percent), New York (10.3 percent), Florida (7.4 percent), and Texas (4.9 percent). Bids are due Thursday August 18^th. MountainView's second deal I have seen is a light snack of a $139 Million GNMA servicing portfolio that is being made available to the national market. The package is 41% fixed rate and 100 percent 1^st lien product, with an average loan size of $213k, 2.50% WAC (3.49% 30 yr.), 644 WaFICO, 97% WaLTV, with top states: Texas (15.6 percent), California (14.5 percent), Florida (8.7 percent), and Georgia (7.5 percent). Bids on this package are due Tuesday August 23^rd.

 And if size matters for you, MountainView is out there with a portfolio of mortgage servicing rights on nearly $2 billion in first-lien GSE home loans. There are over 10,200 residential loans that are behind the MSR pool, with over 25% from California and Texas. Based on weighted-average calculations, the service fee is 0.251 percent, the interest rate is 3.96% and the remaining term is 295 months. The weighted-average FICO score is 738, and the weighted-average original loan-to-value ratio is 76 percent. Freddie ARC loans account for $1.116 billion of the offering, and $0.803 billion are FNMA A/A mortgages. Bids due Wednesday.

  Last week Phoenix Capital, Inc. clocked in offering up $150-$200 million per month Fannie Mae and $150-$200 million per month Ginnie Mae flow servicing, bids due later this week. "Seller is a well-capitalized mortgage bank founded in 2001, interested in entering into a forward commitment to sell a portion of their production." On the conventional side of things 91% of the volume is fixed, average balance around $270k, very little HARP refinance loans, mostly refinances & owner occupied, average LTV around 75%, 36% retail, 44% from California. Phoenix's government offering is 85% FHA, average loan amount $245k, 79% purchase, 46% retail, all owner-occupied, 37% from Florida, weighted average FICO at 679, LTV 93%.

 Servicing is a key touch point between borrowers and lenders/servicers. In theory, digital mortgages, aka "eMortgages," help set up the loan for servicing and make human error less likely. Is that the case? Fannie and Freddie contacted 130 "key industry stakeholders": lenders, technology solution providers, warehouse banks, servicers, and title/settlement providers, to discuss their perceived obstacles/barriers to broader industry adoption of eMortgages.

 Fannie Mae posted The Evaluation Notices exhibit and the solicitation letters for the Streamlined Modification and Streamlined Modification Post Disaster Forbearance have been updated to reflect policy changes from Servicing Guide Announcement SVC-2016-05 in connection with the termination of the Fannie Mae Home Affordable Modification Program (HAMP), including the exclusion of references to HAMP or HAMP-related programs from certain borrower communications beginning September 1.

 On September 12, Fannie Mae will implement enhancements to Technology Manager, its online registration and account management application. For more information review the Technology Manager Version 2.1 Release Notes. Visit the Technology Manager page for more information.

 (Connoisseurs differentiate between eMortgages, which is a mortgage loan where the critical loan documentation, like the promissory note - eNote, are created, executed, registered, transferred and ultimately stored electronically, and eClosing, which refers to electronic closings involving parties applying eSignatures to electronic closing documents. As reporter Ben Lane points out, this is often a hybrid process in which certain key documents (e.g., Note, Security Instrument) are printed to paper and traditionally wet-signed. Therefore, an "eClosing" produces an "eMortgage" only if an electronic promissory note was signed electronically.)

 Survey says!? Unfortunately, the industry still has a long way to go to reach full adoption of the digital mortgage, and although it is picking up some momentum eMortgage adoption has been slow for a variety of reasons. "The survey showed that lenders are willing to spearhead the process while warehouse banks, servicers, and title/settlement partners will adopt when requested by lender partners."

 Sun West accepts initial loan application and applicable disclosures executed prior to closing using electronic signature ("e-signature") if in compliance with the requirements of the Federal E-Sign Act. You must utilize an E-Signature Vendor from Sun West's list of Authorized E-Signature Vendors available in the HELP section of sunsoft.

 FAMC is updating its policy and removing the requirement for upfront authorization of E-Sign third-party service providers. Although FAMC will no longer maintain an approved vendor list, all other FAMC requirements regarding e-signatures remain in place and unchanged. FAMC also provided information regarding Reg. Z's two different model rescission notices that may be provided on owner occupied refinances. The H-8 model rescission notice is typically used for all refinance mortgage transactions. The H-9 model rescission notice is used in a lender to lender refinance.

 What's bothering potential adopters? Acceptance by a limited number of investors, warehouse line availability, lack of key stakeholder readiness (servicers, document providers, custodians, title/settlement agents, etc.), implementation complexity, inadequate return on investment based on industry volumes, lack of uniform adoption of eNotarization and eRecording, resource & financial constraints, and GSE policy alignment all pop up as hurdles.

 Come on, warehouse banks! Lenders told F&F that there is a lack of availability of warehouse funds for eNotes. "Only a few warehouse lenders allow eNotes resulting in an added hurdle...the warehouse lenders will delay as long as possible since this changes their revenue model."

 But Ben Lane with HousingWire reports on the other side of that coin. "Warehouse lenders state there is a lack of customer demand, lack of investor outlets, and technology requirements that are 'too difficult' as major pain points. 'The initial estimate to implement eNotes is a significant six-figure amount,' the warehouse lenders noted. 'No one on our staff is familiar with the concept or IT architecture,' another lender stated."

 Mid America Mortgage, Inc. announced the firm has completed its first eClosing and eNote through its retail origination channel. Mid America intends to expand eClosing to all of its retail business, executing eNotes and utilizing electronic documents where allowed by local jurisdiction. "Mid America's vision for its future is to conduct eClosings with eNotes for all loans across all origination channels," CEO Bode said. "Furthermore, this strategy aligns Mid America with the CFPB's initiatives & position that eClosing should be an option for all borrowers."

 For servicers, the servicing technology requirements of eNote servicing is a major pain point. "As a sub-servicer without a direct relationship with an eVault and MERS reporting vendor, a financial and audit investment needs to be made to facilitate a total eNote servicing solution," one servicer noted.

 

As for what's next, the GSEs state that they will do what they can to help.

 

Turning our gaze lazily upon the bond markets...Up a little, down a little, with some intra-day volatility and some price shifting between coupons and security types (Ginnie, Fannie, Freddie). One interesting note: on Friday the 10-year touched 1.59% but closed at 1.58%, worse in price about .375. The 5-year T-note at MBS prices worsened between .125-.250.

 It's a new week, with a pretty hefty collection of scheduled data. To sum it up we'll see updates on housing, durable goods, GDP, and trade while the economic heavyweights head to Jackson Hole, Wyoming to chat - but to the best of my knowledge no one there has a crystal ball.

 This morning we've already had the Chicago Fed's non-market moving National Activity Index for July (at .27 the highest in 12 months), whatever that is. Tuesday we have New Home Sales. Wednesday has the MBA's application data for last week, Existing Home Sales, and the FHFA's House Price Index. Thursday the 25^th is Durable Goods, Jobless Claims, and some other tertiary numbers that economists love to say they analyze. Friday closes out with GDP, Personal Consumption, some University of Michigan figures, and International Trade in Goods. To start the week we're at 1.56% on the 10-year and agency MBS prices are better nearly .125 versus Friday's close.

Working With Hispanic Clients

By rchrisman@robchrisman.com

(The NFL season commences soon after Labor Day in three weeks. This is part 3 of football quotes & jokes guaranteed to insult practically every team. Please, no complaints - you can change the team to whoever you like.)

"I could have been a Rhodes Scholar except for my grades."  - Duffy Daugherty / Michigan State

"Always remember Goliath was a 40-point favorite over David."  -  Shug Jordan / Auburn  

"I asked Darrell Royal, the coach of the Texas Longhorns, why he didn't recruit me. He replied, 'Well, Walt, we took a look at you, and you weren't any good.'"  -  Walt Garrison / Oklahoma State

"Son, you've got a good engine, but your hands aren't on the steering wheel."  -  Bobby Bowden / Florida State

"Football is NOT a contact sport, it is a collision sport.  Dancing IS a contact sport."  -  Duffy Daugherty / Michigan State

After USC lost 51-0 to Notre Dame, his post-game message to his team was, "All those who need showers, take them."  -  John McKay / USC

 

Switching gears to legal issues...What's this? Lawyers giving lawyers a bad name relating to mortgages? Only in Chicago!

 The industry took notice of a recent ruling that showed the foreclosure of Nevada HOA "Super Lien" cannot extinguish a mortgage lender's security interest.

 (In other HOA news, Wells Fargo expanded it Homeowners Association Certification Review for condominiums under the Non-Conforming Program. Under the Wells Fargo HOA Certification Review, at least 50% of the units sold must be sold to owner occupants for use as primary residences or second homes.)

 Did PricewaterhouseCoopers fail to spot, for seven years, a multibillion dollar fraud that led to the demise of Taylor Bean & Whitaker Mortgage Corp.? A lawyer for the lender's bankruptcy trustee told a Miami judge that is exactly what happened. TBW went belly up exactly seven years ago, and shows that the industry finds it hard to move forward while focused on the past. And how did poor Mr. Waterhouse wind up with his name un-capitalized?

 And don't forget that the Supreme Court of the State of New York ruled in favor of Barclays Bank PLC in a breach of contract action by granting a motion to dismiss in Federal Housing Finance Agency v. Equifirst Corporation. This is good news for lenders and brokers as a whole who are facing claims against Lehman Brother's Holdings, Inc. ("LBHI") in New York.

 Barclays was alleged to be the successor and alter ego of EquiFirst, both of whom were sued by the Trustee U.S. Bank National Association ("US Bank"). Barclays filed a motion to dismiss based on a New York statute contending that the claims for breach of contract, anticipatory breach, and breach of the implied covenant of good faith and fair dealing were time barred. The Court, basing its decision on Ace Securities as well as some of the Court's previous rulings, found in Barclays' favor that the claims were in fact time barred.

 In its description of what happened the American Mortgage Law Group wrote, "In making its ruling, the Supreme Court rejected U.S. Bank's contention that its claims for breach of representations and warranties were timely under an accrual clause in the applicable Flow Mortgage Loan Purchase Agreement ("Flow LPA"). The loans at issue were sold to Lehman Brother's Bank, FSB ("LBB"). Thus, applying the reasoning in Ace, the Court found that U.S. Bank's claim accrued not when Barclays failed to comply with a repurchase demand, but rather on the securitization closing date in February 2007 as the operative representations and warranties were made on the closing date of the securitization. The Trustee then sought the opportunity to re-plead the matter, which the Court likewise denied.

 "For AMLG clients facing claims against LBHI, this adds further support to the contention that LBHI's claims, which we contend are based on and derivative of breaches of representations and warranties, are time barred."

 There was a HUD settlement/agreement with the City of Richmond, Virginia to resolve 14 discrimination complaints filed against the City by Hispanic residents. The complaints alleged that the City of Richmond selectively enforced its code requirements against residents of the City's mobile home parks, who are predominantly Hispanic. Of course the Fair Housing Act prohibits discrimination in housing because of national origin, including discriminating against persons because of their national origin when enforcing local housing codes.

 The complainants, who are current or former residents of mobile home parks in Richmond, alleged that, due to their national origin, the City imposed unreasonable and legally unjustified requirements that they had to meet to avoid condemnation of their homes; intimidated and harassed them by conducting intrusive inspections with armed police escorts and threatening criminal court action and large monetary fines; and failed to provide meaningful access to residents who have limited English proficiency.

 Discrimination is wrong, regardless of the alleged target. The interesting thing, of course, is the large percentage of first-time home buyers who are minorities. In many parts of the nation Hispanic buyers represent an undeniable segment of the buying population, and lenders are hiring originators truly based on the ethnic makeup of the area. L. Maria Zywiciel, president of NAHREP Consulting, came out with a new blog that addresses this topic: "5 Things to Know When Working with Hispanic Clients."

 Hispanic or not, Millennial or not, plenty of lenders are courting first-time home buyers. Where is the most expensive place to buy a starter home? Honolulu, where the income required to buy a starter home is over 6 figures and the median income is somewhere around $75k. Unsurprisingly, the West Coast dominates the unaffordable area. On the other side of the coin, if you make just over minimum wage, you can afford a starter home in Pittsburgh.

 San Francisco aint cheap. Metrostudy has released the results of their 1Q16 survey of the new home market in the San Francisco Bay Area, and the results show continued strong demand even as the market reaches affordability limits. Some of Regional Director Greg Gross' findings include: 1Q16 Annual New Home Starts Up 17% YoY; Quarterly Starts Up 6% over 1Q15, 1Q16 Quarterly New Home Closings Up 6% YoY; Quarterly Closings Up 8% from 1Q16, and start activity increased significantly in the higher price ranges; the average "offer to build" price increased 10% YoY to $856K; 22% of starts priced over $1 million. If you would like to read the full report, click here.

 Baby Boomers like lists, and here are the top 20 hottest real estate markets in July this year, according to Realtor.com. There's everything from the West Coast swath to Rust Belt pockets of note. 

 Whether its title, mortgage, or flood, there are changes and trends in the insurance side of residential lending.

 Genworth Mortgage Insurance today announced an expansion of its Homebuyer Privileges program to include discounts for nearly 300,000 retailers nationwide, including Target, Costco, Sears Commercial and ADT, among others. The program allows homebuyers to save up to $7,500 through a variety of retailer coupons. Loan Officers can extend these savings to homebuyers regardless of whether or not their loan includes private mortgage insurance from Genworth Mortgage Insurance. Homebuyers have up to 12 months to enroll in the program, and up to 12 months after enrolling to utilize the discounts. With a mobile app expected to follow by early next month, this Genworth Mortgage Insurance service has no limits on how many discounts a homebuyer can use during their 12-month eligibility period.

 Effective August 10, FHA's Mortgagee Letter 2016-12 203(k) Rehabilitation Mortgage Insurance Program: 203(k) Consultant Draw Inspection Fee permits 203(k) Consultants to charge a Draw Inspection Fee that is reasonable and customary for work performed in the area where the property is located, provided the fee does not exceed a maximum of $350. The previous fee limit was $100.

 Wells Fargo is updating its flood insurance deductible requirements for conventional Non-Conforming Loans to allow private flood insurance deductible amounts exceeding the National Flood Insurance Program (NFIP) requirement.  For private (non-NFIP) policies, the Cooperative Project Approval Team (CPAT) may accept a higher deductible than that permitted by NFIP, currently $10,000* on any one building when specified conditions are met.

 U.S. Bank posted two enhancements to its flood insurance policies for determining the full insurable value when using the hazard insurance policy. The first is the ability to assume the foundation is included in the insurable value shown on the hazard insurance policy. The second is regarding the actual percentage of the replacement cost value if it is not reflected on the hazard insurance policy. Lenders may assume, unless otherwise stated in the insurance policy, that the insurable value shown on the policy provides coverage at % of the RCV.

 The big event for the markets today will be the release of the Federal Open Market Committee minutes from its last meeting in late July. ("Who was supposed to bring the donuts? Let the minutes reflect that, once again, Ms. Yellen was too busy to stop by Dunkin' Donuts on the way in.") But looking back to yesterday New York Fed President Dudley indicated that the Fed is closer to hiking rates and that the Treasury market's current high valuations are "concerning." We also had some better-than-expected housing starts and industrial production data. The core consumer price index grew slightly slower than expected - inflation hasn't been an issue for decades.

 Besides the Fed meeting we have no other scheduled economic news on tap. We've already had the MBA's application data. It doesn't move rates, but gives MBS investors a sense of supply eventually coming their way. Apps were -4% with both purchase & refis -4 percent.

 While we wait for the 2PM ET Fed minutes, to see if any squabble broke out about who sat in which seat at the table, for those quantitatively inclined, yesterday the 10-year worsened .250 in price and closed at 1.58%, and the 5-year T-note and agency MBS prices sold off .125. This morning the 10-year is pretty much unchanged from Tuesday's close as are agency MBS prices.