Capital Markets, Servicing Job, Underwriter Pay Did What in 2016? Wells' FHA Price Move Will Move Market

By rchrisman@robchrisman.com

The English language is always changing. For example, when did "blackstone" become a verb, as in, "I was 'blackstoned' last week and will start collecting unemployment!"? Blockchain is another new word. Veronica Lange, head of innovation at UBS, said at a conference that despite the progress in blockchain technology, it will be a decade before the technology transforms financial services. Financial regulators can be expected to take a cautious approach to implementing blockchain technologies unless market disruptions force them to act swiftly, said consultant Jeff Stehm, a former Federal Reserve official. "Risk-averse regulators charged with making sure nothing goes wrong have understandable concerns about change and the unknown," Stehm and lawyer Joe Oehmke write in a report.

 Preliminary results from Richey May's annual compensation survey indicate that total compensation for underwriters and processors increased nearly 20% in 2016. Additionally, overtime paid to those individuals doubled year over year in 2016. There is still time to participate in Richey May's annual Independent Mortgage Lender Compensation Survey to evaluate your compensation strategies and metrics in relation to your peers for over 200 job titles specific to the industry. Check out the sample dashboard on the website, or contact Tyler House for more information on participation.

 Taxes in underwriting                                      

 Yes, "Tax Day" has passed, and lenders and investors must consider filed taxes in their underwriting decision. For example, LHFS issued a reminder regarding 4506 transcripts. Loans dispersed on or after April 18^th will require the 2015 and 2016 returns or all the following: Evidence of filing a Tax Extension (IRS Form 4868-Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) filed with the IRS; Tax liability reported must be compared to the borrower's tax liability for the previous 2 years as a measure of income source stability & continuance. An estimated tax liability that is inconsistent with previous years may make it necessary to require the current years return to proceed. IRS Form 4506-T Transcripts confirming "No transcript available" for the applicable tax year; and Returns for the prior two years.

 FHA, VA, and Ginnie news

 Jamie Dimon of JP Morgan took aim at regulations in his annual letter to stockholders. He was especially critical of the FHA's use of the False Claims Act to hammer lenders who commit unintentional clerical errors but had no intention of committing fraud. This has caused FHA lending (which is the only game in town for subprime borrowers) to become restricted, especially at the big banks. He also called for new uniform standards for mortgage servicing. The cost of servicing delinquent loans has skyrocketed, and this has caused lenders to further restrict credit. JPM estimates that $1 trillion in additional lending could have increased GDP by half a percentage point.

 And any lender servicing FHA loans took note of a recent Florida court ruling. "The District Court of Appeal of Florida, First District, recently held that borrowers waive their affirmative defense that a mortgagee did not comply with HUD's 'face-to-face' condition precedent to foreclosure when they fail to raise the defense until their closing argument at trial. The First District also held that even if the borrowers had timely raised compliance with HUD regulations as an affirmative defense, the mortgagee was not required to comply because the property was more than 200 miles from the mortgagee and its servicing branches."

 Wells Fargo Funding is changing its FICO adjusters for all government Loans, including High Balance, locked on or after May 1, 2017. FHA loans less than $140,000 with a FICO >=680 <700 the adjuster will be (1.500). FICOs>=660 <680 will be (2.500) and FICOs>=640 <660 will be (3.500). Rate Sheets on May 1^st will list all applicable adjusters. In addition, Wells has new adjusters effective for all conventional Conforming Loans with LTVs greater than 90%, including Fannie Mae HomeReady, Fannie Mae DU Refi Plus, and High Balance Loans, locked on or after May 1, 2017. The LTV adjuster is not subject to Fannie Mae HomeReady and Fannie Mae DU Refi Plus adjuster caps.

 FCM posted information regarding additional restrictions for FHA credit scores between 600-639.

 ditech is reminding its clients that the housing payment history guidelines for VA Interest Rate Reduction Refinance Loans and Cash Out Refinance transactions have been revised.

 SunWest's Approved 203K list must be selected from an approved list that has also been reviewed by Sun West prior to ordering any Consultant services or making any agreements with the Consultant or the borrower.

 Mortgage Solutions Financial is offering a pricing incentive on some government purchase transactions.

 For loans locked on or after April 17th, Mortgage Solutions Financial is updating its loan level price adjustments.

 Citi Correspondent Lending will be adding a new feature adjuster to both its mandatory and best efforts pricing for co-ops effective with commitments / locks on Monday, April 17, 2017.

 AmeriHome's FHA program guides have been updated to clarify FHA's guidelines for Non-U.S. Citizen Proof of Lawful Residency Documentation and Employment Verification.

Castle Mortgage has Government loan with low to no FICO scores. FHA 580 or approve eligible AUS and VA with no scores. Contact Larry Evans at 949-294-9268 to become an approved correspondent.

 Don't forget that the USDA Rural Development program will help rural, low-income homeowners repair or improve their homes through the Single Family Housing Repair Program. This program offers loans that can be repaid over 20 years with a fixed one percent interest rate for home improvement projects that repair existing damages, remove health or safety hazards, or make energy efficiency investments. Very-low income seniors aging in place can seek a $7,500 grant to help remove health and safety hazards and increase the accessibility of their homes.

 Pacific Union will allow USDA contract underwriting.  The Correspondent should take the appropriate steps to notify USDA of the use of contract underwriting.  The Correspondent is responsible for all actions by the contract underwriter for loans delivered to Pacific Union. Pacific Union will look to the lender for any remedy regardless of the use of a contract relationship. 

 Vendor news

 As is common industry knowledge, the CFPB's authority encompasses vendors, since vendor management is risk management. The CFPB has always had the authority to examine the service providers that support the top financial institutions and has begun actively supervising these service providers. In theory, the vulnerability of the nation's top financial institutions is, in part, related to critical vendors.

 Mortgage Capital Trading, Inc. (MCT), a mortgage hedge advisory and secondary marketing technology firm, announced that it has completed an integration between its secondary marketing solution and PCLender's loan origination system (LOS). The integration seamlessly transmits critical hedge pipeline data, saving time and enhancing information security. "The integration enables mutual lender clients to streamline an otherwise manual data transfer process, allowing them to pass and populate loan details from PCLender's LOS to MCT's hedge model. It reduces the risk of market movement and ensures the optimization of mutual clients' hedge positions."

Ellie Mae announced that it has launched a new major release of Encompass, its all-in-one mortgage management solution. Encompass 17.2 enhancements help lenders of all sizes close more loans, shorten time to close and ensure compliance with regulatory standards. Specifically, the new major release of Encompass includes support for 2018 HMDA collection and reporting changes that expand data capture related to applicants, property and loan features. Additionally, the new major release of Encompass offers secondary marketing enhancements and updates to Encompass Product and Pricing Service.

 HLP, a non-profit tech provider in residential mortgage finance, has integrated automated asset verification from AccountChek by FormFree into its communication platform. HLP connects consumers, HUD-certified housing counselors, mortgage lenders, servicers, investors, attorneys and government agencies to build solutions that have helped more than 500,000 homeowners apply for loan modifications and other options to avoid foreclosure since 2009.

 Capital markets

 For lack of anything better to talk about, suddenly the smartest guys in the room are pricing a lower probability the Federal Reserve will raise interest rates two more times this year, with odds of a June increase down to 47% from 66.5% last week. Blame it on overseas rumblings, or data in the U.S. showing a drop in consumer prices, mediocre retail sales, poor housing starts, or lukewarm manufacturing data. The bigger issue is the Federal Reserve's plan of ending its nearly daily asset purchases.

 That thinking is working its way into U.S. Treasury prices. They jumped sharply, sending yields from the 5- to 30-year maturity down to five-month lows. Weighing against that, however, is the continued chatter about the Fed unwinding its balance sheet. Kansas City Fed President Esther George (non-FOMC voter) said that she favors unwinding the Fed's balance sheet in a passive manner beginning this year. Fed Vice Chair Fischer said he sees no repeat of the 2013 "taper tantrum" when the Fed begins trimming its balance sheet. But the U.S. Central Bank have provided trillions in quantitative easing over the past few years ($1-4 billion a day of purchases nearly every day) so it is going to have an impact. But the markets certainly have time to adjust.

 Yesterday the 10-year yield sank to 2.16% and closed modestly higher. (The low nearly coincides with the mid-November range break following the election.) At the end of the day the 10-year note price had improved .625, while the 5-year Treasury and agency MBS prices improved nearly .375.

 It is a light news day. This morning we've seen the usual MBA mortgage application activity for last week. Apps were -1.8%, with purchases -3%; refis are down over 41% versus last year. Coming up at 2PM ET, 11AM PT, is the release of the latest Fed Beige Book. In general rates are up a shade versus last night, with the 10-year yielding 2.21% at and agency MBS prices worse about .125.