Mortgage Broker Products, Jobs and rates, Zillow, CFPB, & RESPA in the Spotlight?

By rchrisman@robchrisman.com

Mary Clancy goes up to Father O'Grady after his Sunday morning service, and she's in tears.

He says, "So what's bothering you, Mary my dear?"

She says, "Oh, Father, I've got terrible news. My husband passed away last night."

The priest says, "Oh, Mary, that's terrible. Tell me, Mary, did he have any last requests?"

She says, "That he did, Father."

The priest says, "What did he ask, Mary?"

She says, "He said, 'Please Mary, put down that damned gun...'"

It seems the general public is not moving. Not because they don't way to, but because of... the influence of government regulations!?

 Brokers should know that Carrington Mortgage Services, Wholesale Lending Division, has two important announcements. First, reduced LLPAs on FICO < 600 on Streamlines (FHA and VA IRRRLS) are available for all loan locked through March 31^st. Check out our rate sheet for specific information and reductions. Next, Carrington removed several guideline overlays to make it easier to get those tough loans closed. Changes to FHA, VA and Conventional guidelines have been made to matrices. For example, no minimum FICO required for all FHA, VA IRRRL, and USDA Streamlines, with a 12-month current mortgage. These are just a few of the changes made recently in Carrington's ongoing effort to become easier to use and with a commitment to their "under-served' strategy!" Talk to your AE for details. Brokers new to Carrington should contact Matt Evans, VP Sales West, (949-517-6033) or Sam Bjelac, VP Sales East, (410-603-8053).

 Upcoming events.

 Tomorrow join PCLender President Joe Langner and Vantage Production EVP Todd Ballenger as they help you uncover the secret sauce you need to succeed in today's purchase market. Learn how to optimize prospect conversion and retention rates with data-driven automated marketing, ensure 100% adoption of new technology solutions and close more purchase business in 2017; click here to register now!

 2017 is the year of mortgage tech integration. Is your LO team ready? Join me on Thursday, March 23^rd at 1-2pm ET for my webinar The Future of Mortgage Technology. Loan officers are placing increasing demands on the technologies they rely on to grow their businesses. At the same time, they are experiencing "tool fatigue" as inboxes fill with pitches for products that promise end-to-end nirvana. But most LO's will tell you they don't need new tools, they just want the great platforms they already use to talk to each other. Moderated by tech industry veteran and Floify CMO, Holly Hamann, I'll share insights on how the fusion of mortgage tech will impact LO's, which processes will be affected first, and what new skill sets you'll need on your teams. Register here!

 The regulatory environment

 Lenders took great interest when ReMax Gold Coast and Keller Williams Mid-Willamette were fined by the CFPB, along with Prospect Mortgage, LLC. The reason? Illegal kickbacks relating to mortgage business referrals. 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..."

 Should Zillow be worried? There are some out there saying, "Yes." Any time someone says that buying Zillow leads is non-compliant in the CFPB's eyes is cause for concern. There is news that CFPB examiners were asking questions about whether a lender paying for leads or marketing on Zillow was a referral and therefore a RESPA violation.

 Sure, Zillow provides a "Lender Directory" for consumers. And the website states, "Zillow is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help." And remember when the CFPB partnered up with Zillow to collect homebuyer information.

 But RESPA is a wide-ranging statute. RESPA section 8 prohibits exchanging "any fee, kickback, or thing of value" for the referral of specific settlement service(s) in connection with the closing of a mortgage transaction. You cannot pay for business. Mortgage loan originators/mortgage lenders cannot exchange or entice a "thing of value" with anyone in a position to refer the customer. Same goes for title agents/attorneys. Since it is generally real estate agents who find themselves in the best position to refer business, much of RESPA section 8 activity has focused on real estate brokers, mortgage companies and title agents/companies. 

 Jeremy Potter observes that, "There are 2 RESPA-related activities around Zillow. Lenders can purchase leads from Zillow or real estate agents on Zillow. Lenders can pay Zillow or real estate agents on Zillow for a photo and contact info on the property page...mortgage lenders and mortgage brokers advertise on Zillow. Financing is relegated to the bottom of the property page. Nevertheless, real estate agents are given top billing and often included prominently to the left or below the property information. Zillow charges, not surprisingly, for this advertising. Real estate agents often find themselves with several offers from mortgage loan originators to pay for the cost, split the cost or otherwise share in the advertising. RESPA and CFPB see the deferment of a payment that someone would otherwise have had to make as a thing of value. 

 "So, by paying the real estate agent's Zillow invoice, in exchange for customers (even, I suppose, potential ones), a mortgage loan originator could violate RESPA. In response, most companies that engage in this or allow their folks to do it on their own instruct employees to split the cost based on the amount of advertising - 1 agent and 1 loan officer would split 50/50.  1 agent and 3 loan officers may split it 25/25/25/25.
 "Someone implied that during a CFPB exam the examiner took issue with the purchase of leads from Zillow. This would be the second type of activity mentioned earlier. It is not clear whether that means purchasing Zillow leads from Zillow or purchasing Zillow leads from a real estate agent. Either way, it is a further blurring of the line between sales & marketing activity (ok under RESPA) and paying for referrals of business (not ok under RESPA). The statute has always been vague, the regulations are not much better - though they do provide for 'bona fide services' at 'fair market value' which is some standard at least, and the regulator(s) have been unwilling to go on the record with a new rule or formal interpretation. Because its messy, most companies trying to steer clear of regulatory risk also steer clear of any agreement that moves toward the informal line in the sand. Unfortunately, that decision puts the 'good guys' at a disadvantage. Without knowing the rules of the road, companies trying to follow the rules start questioning any lead buying, sales activity that comes from a referral source even if it's a giant, general website like Zillow..."

 Capital Markets Update

 In terms of rates, yes, the Federal Reserve's Open Market Committee meets this week, and yes, it is anticipated that it will raise short term rates. Naysayers were hoping Friday's job report would take some of the wind out of the Fed's sails, but no such luck. First American Chief Economist Mark Fleming summed it up, and added some context. "The jobs report for February is very good news for the economy. The increase of 235,000 non-farm payroll jobs soundly beat the already high expectation of 195,000 jobs.

 "The ISM manufacturing and non-manufacturing employment indices For February already indicated a 215,000 non-farm payroll jobs increase. This combined with drop in the unemployment rate to 4.7 percent and 2.8 percent year-over-year growth in wages are all signs of a strong labor market. Specifically for the housing market, construction employment continues to add jobs, 177,000 over the last six months. It's interesting that specialty trade contractors, and heavy and civil engineering job categories were highlighted -- a sign of growing demand for home improvement and infrastructure development, perhaps."

 He finished with, "Based on CME Federal Funds futures prices before the release, the odds of a Fed rate increase at the meeting next week were already over 90 percent. This employment situation report only gives more reason for the Fed to move sooner rather than later."

 Markets don't like uncertainty, and certainly the jobs report removed some of that. So, rates actually improved slightly Friday with the 10-year yield rallying back below 2.60%, after hitting an overnight high of 2.63%. The 5-year T-note and agency MBS prices improved slightly.

 Of interest was the release of the NY Fed's tentative MBS reinvestment schedule. MBS reinvestments over the coming four-week period are estimated at $18 billion, as expected by IFR Markets, down from $25bn which was the estimate for the previous four-week period. We're at about $1 billion a day - given reduced volumes probably a good thing.

 This week's economic calendar includes monetary policy decisions from five major central banks starting with the Fed on Wednesday, with the Bank of Japan, Bank of England, and Norges Bank on Thursday, and the SNB on Friday. Here in the United States there is no news of note today. Tomorrow we'll have the Producer Price Index, and on Wednesday the MBA's application data from last week, the Consumer Price Index, Retail Sales, and the NAHB Housing Market Index      for March. But most importantly will be the FOMC rate decision.

 Thursday the 16^th things continue with Housing Starts and Building Permits, the Philly Fed Business Outlook, JOLTS job openings, and Initial Jobless Claims. The economic week wraps up St. Patrick's Day and with Industrial Production and Capacity Utilization, a series of numbers from the University of Michigan, and Leading Economic Indicators. We start the week with the 10-year yielding 2.57% and MBS prices roughly unchanged versus Friday's close.