Agency and Investor Conference Conventional Changes

By rchrisman@robchrisman.com

Time flies. A year since TRID hit the industry? You bet. And we have less than a month until the presidential election. Will the election have any impact on lending in the near future? Many argue that it won't, or that it will depend on the makeup of Congress. Remember Gary Johnson? He averaged just 7 percentage points in 11 national polls released recently, continuing a string of bad results for the Libertarian Party nominee. At the same time, the number of undecided voters appears to be falling. Those two trends are combining to remove some of the uncertainty in forecasts. Markets don't like uncertainty, and when uncertainty is reduced, that's a good thing.

Given that an overwhelmingly large percentage of current residential production is bound for Freddie Mac and Fannie Mae, let's see what changes Agencies, lenders, and investors are making.

 

Agency security issuance has hit its highest level since 2012, with Ginnie over $1 trillion so far in 2016.A 20% increase from August in fixed-rate issuance at the Federal National Mortgage Association left last month's issuance at $63.286 billion. The Federal Home Loan Mortgage Corp. saw a 16% month-over-month improvement, putting August 2016's fixed-rate issuance at $43.028 billion. Last month's fixed-rate MBS issuances on behalf of the Government National Mortgage Association increased 16% from August to $51.342 billion -- the highest level on record.

 

Recently Freddie Mac spread the word of its "Loan Product Advisor Updates to FHAs TOTAL Mortgage Scorecard, Home Possible Mortgages and to the Total Funds to Be Verified Calculation."

 

In reviewing Fannie MORA and Freddie CORE reviews it's clear that seller/servicers continue to struggle with establishing and implementing an internal audit program. MortgageQuality Management and Research, LLC (MQMR) works with lenders to develop and maintain an internal audit program that is structured, sustainable and provides value to their business. A thorough audit program is difficult to manage internally without having to hire a cadre of individuals with a broad and deep subject matter expertise in areas such as compliance, originations, operations, quality control, vendor management, servicing, IT, HR, and many more. MQMR's internal audit division has been assisting seller/servicers in meeting their internal audit requirements whether fully outsourced, or supplementing the existing program that is in place. For more information on internal audit programs, or to meet with our team in person at the upcoming MBA Annual Conference in Boston, contact Britt Haven (818.940.1200, ext. 104).

 

NYCB Mortgage posted the following information regarding ARM loans: for all standard conventional ARMs and NYCB Portfolio ARMS, the "Limits on Interest Rate Changes" provision of Fannie Mae's adjustable rate mortgage (ARM) notes and riders to security instruments will be updated to reflect a lifetime interest rate floor equal to the ARM's margin. For Clients using Gemstone Closing Documents, this change became effective for all 'Request Docs' submissions on or 10/1. All other Clients must ensure that ARM notes and riders used for closings after 10/3 include this updated margin verbiage. Loans that fail to include the required verbiage will not be eligible for purchase.

 

ditech will increase the funding fee from $195 to $250 on all Conforming, Conventional and Jumbo loans effective on November 1. The funding fee for Home Equity products will remain at $499.

 

Flagstar updated its Conventional Underwriting Guidelines with changes effective immediately. Updates include Fannie Mae employment offer and contracts, multiple financed properties, and Fannie project requirements. Updates to Freddie Mac include ineligible projects and conversions.

 

Fifth Third Correspondent posted that regarding Fannie Mae products, the Verbal Verification of Employment for a self-employed borrower is now valid for 120 calendar days instead of 30 days. Reminder:  Freddie Mac's requirement remains at 30 days. Also noted on a Non-Delegated transaction, for all products, upon underwriting of the appraisal by Fifth Third Mortgage, it may be determined a Field Review Report is required.  Fifth Third will communicate the requirement for the Field Review to the Correspondent Seller; and the Correspondent Seller will be responsible for obtaining the Field Review and delivery to Fifth Third for underwriting. Reminder, a second appraisal cannot be ordered in lieu of a Field Review.

 

Mountain West Financial issued a bulletin to address origination and loan processing requirements when a property is subject to PACE obligations and to include updated information on this product. Fannie Mae and Freddie Mac will allow a PACE/HERO loan to be paid through a regular cash out refinance or a HomeStyle Energy rate and term refinance, without including the assessment in the DTI, or in the impound account. However, F&F will NOT allow the PACE/HERO loan to be subordinated on a purchase, or any type of refinance. Both FHA and VA have put out guidance for allowing PACE/HERO financing. Based on further research and risk assessment, MWF will require the PACE/HERO Lien to subordinate on a purchase or a refinance.

 

Banc Home Loans posted policy and guideline updates regarding changes included in the release ofDU version 10.0: Updated DU Risk Assessment, Underwriting Borrowers without Traditional Credit, Policy Changes for Borrowers with Multiple Financed Properties, HomeReady Mortgages (delegated underwriting only. Current Underwriting turn times are: 2 days for Purchases and 4 days for Conventional and FHA Refi's and 15 days for VA Refi's. 

 

Disaster updates continue. Hurricane Mathew has become a tropical storm, and lenders are reacting to the impact of Hurricane Matthew on the Caribbean, Florida, Georgia, & South Carolina. Visit FEMA for an updated list of FEMA's declared disaster areas. CoreLogic believes that the storm's ultimate cost will range between $4-6 billion.

 

Due to Hurricane Matthew, AmeriHome will be delaying funding loans in the states of Florida, Georgia, North Carolina, and South Carolina. AmeriHome anticipates resuming loan purchases for those states on Tuesday, 10/11.

 

Due to Hurricane Matthew, FHA is reminding mortgagees about its guidance for assisting individuals and families with FHA-insured mortgages secured by single family residential properties in Presidentially-Declared Major Disaster Areas (PDMDAs). Mortgagees are reminded that: Properties in these areas are subject to a 90-day moratorium on foreclosures following the disaster; and HUD provides mortgagees an automatic 90-day extension from the date of the moratorium expiration date to commence or recommence foreclosure action or to evaluate the borrower under HUD's Loss Mitigation Program.

 

Fannie Mae reminded those in the Atlantic coastal areas impacted by Hurricane Matthew of the options available for mortgage assistance. Under Fannie Mae's guidelines for single-family mortgages, servicers have the ability to grant an initial period of forbearance to any borrower they believe has been affected by this natural disaster. Additional forbearance is available with approval from Fannie Mae. In addition, Fannie Mae guidelines authorize servicers to delay foreclosure sales and other legal proceedings in these areas. Under Fannie Mae's disaster relief guidelines, a servicer may temporarily suspend or reduce a homeowner's mortgage payments for up to ninety days if the servicer believes a natural disaster has adversely affected the value or habitability of the property or if the natural disaster has temporarily impacted the homeowner's ability to make payments on their mortgage. Since these events can make it difficult to reach homeowners, Fannie Mae allows servicers to grant this temporary relief even if they cannot contact the impacted homeowner immediately. If a servicer establishes contact with a homeowner, the servicer may offer forbearance for up to six months, which may be extended for an additional six months, for those homeowners that were current or ninety days or less delinquent when the disaster occurred.

 

"In addition, lenders who are originating loans that will be sold to Fannie Mae are reminded that they must verify the condition of the property if it is in the area affected by the hurricane. Additional lender guidelines can be found here. Borrowers should reach out to their servicer as soon as possible for assistance.

 

Mathew is not the first this year. Per FEMA disaster declaration DR-4280 (Florida Hurricane Hermine), Plaza has updated its declared Plaza disaster areas. FEMA has declared the following counties disaster areas and now eligible for individual assistance: Citrus County, Dixie County, Hernando County, Hillsborough County, Leon County, Levy County, Pasco County and Pinellas County.  The incident period is August 31 to September 11. The major disaster declaration was declared on September 28. Properties located in these areas must follow Plaza's Natural Disaster Policy, GD-PO-008. 

 

Pacific Union is monitoring the impact of severe storms and recent disaster declarations throughout several states as published by FEMA.  At this time, and until all impacted areas have been identified by FEMA and other sources, loans secured by properties located in impacted areas are subject to standard Pacific Union protocol. See the FEMA Website and Declarations Summary for detailed information regarding recent declarations.  In addition, Pacific Union is monitoring the impact of recent severe storms, flooding and disaster declarations in additional states for which specific impacted areas have not been identified by FEMA.  This includes, but is not limited to: Mississippi.

 

Pacific Union is also continuing its monitoring regarding the impact of ongoing wildfires and fire management declarations across several states including California, Idaho, Montana, Nevada, Oregon, and Washington.

 

Turning to the bond market, which is closed today, as a proxy for the general interest rate environment, the risk-free 10-year T-note ended the week with a yield of 1.74%. So yes, rates have crept up. There's a lack of overseas turmoil, the job picture in the United States is pretty darned good, and housing is pretty good as well, so perhaps the Fed will raise short-term rates by year end. Those watching the currency markets also saw a plunge in the British pound Friday which pressured global yields.

 

Mortgage rates and long-term Treasury yields are set by supply and demand, of course, and weighing on yields Friday was supply with the U.S. Treasury auctioning off $56 billion in 3s, reopened 10s, and reopened 30s this week. And along those supply thoughts, agency MBS saw a September prepayment report where speeds across coupons and vintages generally "slowed less than was expected."

 

Today the bond markets are closed due to the Columbus Day Holiday. (The equity markets are open.) Any lender sending out a rate sheet does so with a bit of luck, hoping they can read the overseas bond markets well enough to set mortgage rates in the U.S. Or they put a "fudge factor" into things.

 And there really isn't much in the way of scheduled news until Wednesday when we receive the MBA's residential loan application data for last week, the JOLTS Job Opening figures, and the release of the Fed's Open Market Committee meeting minutes from last month's meeting. On Thursday the 13^th we'll have some import price data and Initial Jobless Claims. Friday we have Retail Sales and the Producer Price Index - not that inflation has been a big deal for decades - and some University of Michigan economic gauge figures.