My college son texted me a request for
additional funds. He ended his text with, "PLZ."
I asked him why he used the abbreviation.
He said it was shorter than writing, "please."
I replied with, "No."
He asked why.
I said it was shorter than writing,
"Yes."
Although I am now in Phoenix for several days, where house flipping is ramping up again, I was fortunate earlier
this week to be able to attend the Texas Mortgage Banker's Secondary Market
Conference in Austin. The mood was upbeat, and the attendees were genuinely
interested in learning about helping consumers while making sure loans are done
in compliant manner.
On the education side of things, Sierra Pacific Mortgage's Market Power series is
starting the year off with some heavy hitters from the MBA. On Thursday,
February 9, Pete Mills and Mike Fratantoni will be discussing the
post-election world and how a variety of potential policy shifts are expected
to affect the housing market. They will also be sharing what
the political and regulatory atmosphere is today, as well as the
MBA's goals and focus with the new Trump Administration. You don't want to miss
this, so register today for this free webinar.
In hiring news, Franklin American Mortgage Company
announced the addition of Jennifer Werner as VP, Director of Project Marketing. Ms.
Werner has over 20 years of experience in conceiving, developing, implementing,
and driving B2B and B2C marketing strategies within financial services,
payments, and healthcare industries.
Legal & regulatory news: it doesn't stop...real
estate companies beware
We all know that $3.5 million isn't chump change. The
Consumer Financial Protection Bureau fined Prospect Mortgage, LLC, ReMax Gold Coast, and Keller
Williams Mid-Willamette for illegal kickbacks relating to mortgage
business referrals. Planet Home Lending was also mentioned. We all know
that residential lenders and title companies, among others, have been fined before.
But folks who pay attention to these things say that this is the first time the
CFPB has fined a real estate brokerage for the RESPA violations noting,
"we will hold both sides of these improper arrangements accountable for
breaking the law..."
The RESPA violations arose from the following arrangements
which were framed as payments for advertising or promotional services but were
actually disguised payments for referrals: 1. The amount of the payments made
from Prospect to the real estate agents for marketing were adjusted based on
the number of mortgage referrals given to Prospect. 2. The brokers "wrote
in" Prospect as the mortgage lender in their listings and required that
Prospect pre-qualify all of the purchasers even those who had been pre-qualified
with another lender.
It appears that Prospect maintained various agreements with over
100 real estate brokers which served primarily as vehicles to deliver payments
for referrals of mortgage business. Prospect tracked the number of referrals
made by each broker and adjusted the amounts paid accordingly. Prospect also
had other, more informal, co-marketing arrangements that operated as vehicles
to make payments for referrals. Prospect had brokers engage in a practice
of "writing in" Prospect into their real estate listings.
"Writing in" meant that brokers and their agents required anyone
seeking to purchase a listed property to obtain prequalification with Prospect,
even consumers who had prequalified for a mortgage with another lender.
The CFPB pointed out that Prospect and Planet Home
Lending had an agreement under which Planet worked to identify and persuade
eligible consumers to refinance with Prospect for their Home Affordable
Refinance Program mortgages. Prospect compensated Planet for the referrals by
splitting the proceeds of the sale of such loans evenly with Planet. Prospect
also sent the resulting mortgage servicing rights back to Planet.
Sure, builders will have a preferred lender where there
are discounts, for example, but home-buyers are permitted to use any lender or
mortgage company they choose. If a potential home-buyer (i) is required to use
the lender whom the real estate agent prefers or (ii) pressured to have the
preferred lender pre-qualify them, they can file a complaint online with the CFPB. If successful, in
addition to any damages incurred, the person may also receive a percent of the
recovery.
Recently lawyers & regulators noted that PHH filed a supplemental response to the CFPB's petition for en banc
rehearing and a response opposing the motion filed by Democratic Attorneys
General of 16 states and the District of Columbia to intervene in the PHH
appeal. Supplemental Response. The D.C. Circuit invited the Solicitor
General to file a response to...
CFPB Director Richard Cordray is showing little sign of
easing off the gas as the Trump administration takes hold. Cordray has recently
said that he has no intention of stepping down early, despite pressure from
Republicans eager to overhaul the 5-year-old agency. "It really shouldn't
change the job at all," said Cordray of Trump assuming power. "We
have an independent mandate to do what we do and we'll continue to work to
protect consumers."
Switching gears somewhat, but staying on the regulatory
train, the Independent Community Bankers of America issued a statement calling
on the Trump administration "to rein in the overzealous application of
fair lending laws." Ballard Spahr notes that, "ICBA stated that community
banks are threatened by a recent trend of "unwarranted enforcement
actions" that "harm community banks and the customers they serve by
undermining the availability of credit..."
Attorney Phil Stein weighed in on litigation and legal/regulatory issues that will likely be
top-of-mind for financial services companies, especially mortgage companies and
banks, in 2017. Lawsuits and contractual mortgage buyback claims are still
being filed with a higher percentage of mortgage buyback suits now brought by
entities. Also, plaintiffs are now more prone to pitch their claims as ones for
'indemnification' rather than 'repurchase.' The CFPB may get its wings clipped
to some extent by the incoming Trump administration. At a minimum, its
leadership structure will need to be altered unless the PHH case ruling
requiring such a change is stayed and then reversed."
On the topic of data security & privacy Mr. Stein
noted, "For obvious reasons, the financial services industry stands out as
one that regulatory agencies believe must be particularly prepared to defend
against-and, if necessary, respond to- data breaches." And regarding
financial services professionals as fiduciaries, "There is a clear
conflict brewing in 2017 toward rules such as The U.S. Department of Labor
final rule regarding the "investment advice fiduciary" definition
under the Employee Retirement Income Security Act of 1974.
The constantly shifting world of Freddie & Fannie
(GSEs)
The MBA released a briefing paper developed by an MBA Task Force
outlining its recommendations for "end state" GSE Reform. "With the
new Administration promising to make GSE reform a top priority...MBA's paper
outlines an end state GSE reform model that will preserve and enhance the
policies that work, while fixing the fundamental flaws in the system that led
to their conservatorship. We spent a considerable amount of time with our
diverse Task Force developing a model that will work for all market
participants, regardless of size or business model." The MBA will be
working on a blueprint for the transition process that will be necessary to
ensure a smooth conversion and minimize the "switching costs" and
developing a proposal to serve the affordable housing mission - a critical step
for successful GSE Reform. The complete reform proposal will be ready
later this spring.
There are changes to investor reporting start February 1st.
Review the Fannie Mae Navigation Tips checklist
to help you stay on track and ensure your readiness. All servicers should be
sure to attend a live forum during the month of February (Tuesdays and
Thursdays) -- Register today on the Changes to Investor
Reporting page.
Jumbo?
"Once again Parkside Lending raises the bar with new additions to
its superior suite of Jumbo products. Now with four different Jumbo products
(Jumbo I, Jumbo III, Expanded Jumbo and Premier Jumbo), we're offering robust
guidelines with aggressive pricing. LTVs as high as 95% with or without
MI, and both fixed rates and ARMs. These products offer great options for
investment properties and are an alternative to High Balance and
Super-Conforming products. Please contact your Parkside Account Executive for
more information or sales@parksidelending.com."
NYCB Mortgage Banking updated its Jumbo Fixed 30
Year and Standard Jumbo 5/1, 7/1 and 10/1 ARM. Self-Employed income requirement
includes business tax returns, year-to-date P&L and Balance Sheet are
required for all self-employment income sources, regardless if the income/loss
from the business is used in qualifying and percentage of ownership. Also,
Mixed Use Properties are not eligible including single family dwellings that
have businesses operating within the dwelling or where the business rents space
inside the home (examples: hair salons, animal groomers, child care services,
business pays rent to borrower etc.).
PRMG posted various product updates. Changes effect
Agency Fixed/Agency ARMs/ Agency High Balance, Agency Portfolio, Du Refi Plus,
FHA products, VA/VA High Balance, USDA and Gold Jumbo.
Mortgage Credit Availability Increased in December. The MCAI increased 0.6% to 175.2 in December. A decline in the MCAI
indicates that lending standards are tightening, while increases in the index
are indicative of loosening credit. The index was benchmarked to 100 in March
2012. Of the four component indices, the Jumbo MCAI saw the greatest
increase in availability over the month (up 1.3%), followed by the
Conventional MCAI (up 0.7%), the Government MCAI (up 0.6%), and the Conforming
MCAI (up 0.04%).
Capital Markets: More corporate debt issuance
Agency MBS prices and U.S. Treasuries pushed higher
Tuesday. Why? The economic data releases came up light. The Chicago PMI
unexpectedly fell to 50.3 for January and the Conference Board's Consumer
Confidence Index fell by almost two points to 111.8. Consumer confidence is
still at relatively high levels, although consumers' outlook was reined in a
bit following the post-election surge. Lastly, call it "old news" but
the Case-Shiller 20-city index rose 5.3% y/y in November. (October's rate was
5.1%.)
Impacting supply & demand, AT&T announced a debt
offering with six tranches of 5, 7, 10, 20, 30, and 40 years following
Microsoft's $17 billion announcement Monday. Longer term mortgage rates are set
by supply and demand, not pegged directly by the Fed. Yet the New York Fed
continues to influence the supply and demand curves by buying $1-2 billion a
day of agency MBS. One can argue that these corporate debt deals can soak up
money to be invested in fixed-income securities by money managers. Regardless,
Tuesday the 10-year closed at 2.45% improving .250 in price whereas the 5-year
T-note and MBS prices improved about .125.
This morning we've had the MBA's survey of application
data said to represent 75% of the retail origination machine. Due in large part
to a drop in FHA applications, overall apps were down about 3%, and volume
last week was 18 percent lower than the same week one year ago. Refis are
32% lower than where they were last year, and now account for less than 50% of
total residential applications, but purchases are up 2%. I have mentioned that
some appraisers have told me that their business is down 50% versus late last
year.
Next up was ADP employment (private payrolls in January
were +246k, more than expected). Ahead of us are the Treasury's announcement of
next week's quarterly refunding, which is expected to consist of all new issues
of 3-year, 10-year, and 30-year risk-free paper, Market Manufacturing PMI,
January ISM Manufacturing, and December Construction Spending. Later brings the
latest decision from the FOMC, which will be released at 2:00pm ET with the
committee expected to keep policy unchanged. With all this going on we start
the day with the 10-year chopping around 2.49% with MBS prices worse .125-.250
versus last night.
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