Trends in the Compliance & Regulatory Environment

By rchrisman@robchrisman.com

 There is hope. President Elect Donald Trump named Carl Icahn to be his adviser on regulatory overhaul. "Under President Obama, America's business owners have been crippled by over $1 trillion in new regulations and over 750 billion hours dealing with paperwork," Icahn said in a statement released by the Trump transition team. "It's time to break free of excessive regulation and let our entrepreneurs do what they do best: create jobs and support communities." Of course, Mr. Icahn owns stock in many companies that are affected by government regulation.

 The Community Home Lenders Association (CHLA) sent a letter to President-Elect Trump, outlining a series of bold actions, including some focused on the regulatory environment, the incoming Administration could take in its first 100 days to "help working families, by improving access to mortgage credit and reversing a declining homeownership rate at its lowest level in 51 years "  and noting that the recommendations "would benefit the middle class, including minority families, younger persons saddled with student debt, and other qualified borrowers with lower FICO scores and limited down payment resources."

 Here are its recommendations for a streamlining the mortgage regulatory policies. ("Streamlined Mortgage Regulatory Policies, While Protecting Consumers.") (1)  CFPB - support a change to a Commission, with more transparency and accountability, (2) Streamline regulatory treatment for both community non-banks and banks, and (3) Let mortgage lenders correct compliance problems prior to CFPB enforcement action."

 The letter also has suggestions for the FHA, Fannie Mae & Freddie Mac. It can be found at www.communitylender.org; go to the "Actions" tab at the top and the letter is first item.

 And let's not forget Section 342 of Dodd-Frank. Back in September the Council for Inclusion in Financial Services (CIFS) was formally launched by a coalition of industry leaders with the goal of helping the financial services industry develop and sustain an inclusive workforce while enabling compliance with Section 342 of the Dodd-Frank Act. The CIFS is providing industry resources for both suppliers and financial institutions, including offering the industry's only online Diversity & Inclusion Self-Assessment tool from VRM University. Additionally, the organization has launched what is designed to be the industry's most comprehensive, online-sourcing portal to connect vendors, suppliers, and requisition groups at financial institutions and solution providers.

"The CIFS' new sourcing portal will enable vendor management and sourcing departments to search for vendors and suppliers based on fields including service category and geography, while providing financial institutions the ability to track and report on utilization. Additionally, The CIFS will offer vendors and suppliers the option of becoming a CIFS-certified vendor, which entails a broad industry-standard background check, and basic training covering topics that help organizations build in-house programs to support diversity and inclusion efforts. Moreover, CIFS will provide certification programs for compliance officers on diversity & inclusion and develop VA and college internship programs to attract more women, minorities, and Veterans into the industry. And a tool for self-assessment.

Lenders and regulatory bodies dealing with lenders, of course, must react to compliance changes.

 The following changes will be made to Flagstar's disclosure of credit report fees and are effective with table funded loans registered on or after January 3, 2017: Flagstar will no longer input an amount, i.e. will disclose $0, for the credit report fee prior to disclosing the initial Loan Estimate (LE) provided the originator did not enter in an amount greater than $0 to be disclosed. If any amount is entered by the originator after the initial LE is disclosed at $0, the fee amount will be changed to $0 for any subsequent disclosures. If an amount greater than $0 is input by the originator prior to the initial LE being disclosed to the borrower(s), that amount will be disclosed on the initial LE.  The originator may not subsequently increase the fee amount disclosed on the initial LE, however Flagstar may in their discretion update the fee due to any subsequent credit report fees which are approved as valid changed circumstances.

 The Department of Veterans Affairs requires all VA Authorized Agents to pay an annual recertification fee to each lender with whom they intend to have an ongoing relationship in the coming year. The $100 recertification fee must be paid to Flagstar by December 30, 2016 to prevent delays in submitting VA loans to Flagstar under the VA Authorized Agent program.  Beginning November 1, 2016, the recertification fee may be processed via credit card payment. Please contact us at (866) 945-9872, option #3, and then option #5. A $2 transaction fee will be applied. Have your Flagstar Seller ID and VA Authorized Agent ID available when calling to make your payment.

 Glancing at the capital markets, and interest rates, research by the Treasury finds Japan has moved into the top spot of ownership of US debt at $1.13 trillion as of October, while China has dipped to the second spot at $1.12 trillion. China's holdings as of October were the lowest in 6 years.

 Not much happened in the bond market yesterday, and today includes an early close. Thursday's trading action was quite uneventful as securities across the curve held to narrow trading ranges despite a large batch of economic data hitting the wires. The front end of the yield curve fared better than the back end of the yield curve, which led to a slight steepening in the 2-10 spread. MBS closed mixed in price and mostly tighter on spread, led by lower coupons, as another round of heavy Fed support, tight ranges, declining volatility all contributed to MBS outperformance.

 For those of you who missed the economic news, the numbers continue to point to a U.S. economy that is doing well. Q3 GDP was revised up to 3.5% from 3.2%. The GDP Deflator was left unchanged at 1.4%. But Durable Goods orders declined 4.6% - a 73.5% decline in orders for nondefense aircraft and parts acting as the major drag. Excluding transportation, durable orders were up 0.5%. Initial Jobless Claims for the week ending December 17 increased 21,000 to 275,000 but remained below 300,000 for the 94th consecutive week. The FHFA Housing Price Index for October +0.4%, so house prices for loans done by Fannie & Freddie continue to improve. Personal income was little changed in November and Personal Consumption/spending increased 0.2%. The PCE Price Index and the core PCE Price Index, which excludes food and energy, were both unchanged. And the Conference Board's Leading Economic Index was unchanged in November.

 Hey, just because it is the day before a holiday weekend doesn't mean there isn't more economic news today. We'll have the New Home Sales report for November at 4AM Hawai'i time, as well as the University of Michigan Consumer Sentiment for December. SIFMA is recommending an early close today for the bond market, which means it will happen - and who the heck is going to lock in a loan this afternoon? For anyone guessing where rate sheets will be, we closed last night with the 10-year yielding 2.55% and this morning it is yielding 2.54% with agency MBS prices better by nearly .125.