In response to customer feedback, Fannie Mae will no longer charge a fee to exercise a Property Inspection Waiver (PIW), effective January 1, 2017. This change will make it even simpler and more cost-effective for you to do business with us. The process for accepting a PIW offer will not change – you will be required to provide special feature code (SFC) 801 at the time of loan delivery – but the $75 fee will no longer apply.
As a reminder, PIWs will be enhanced in Desktop Underwriter® (DU®) during the weekend of December 10, 2016, providing Day 1 Certainty™ with freedom from representations and warranties on eligible refinance transactions. If you haven’t already, check out our Property Inspection Waiver webpage to learn more about enhanced PIWs.
Discontinuance of the fee applies to all loans delivered with SFC 801 on or after January 1, whether the PIW offer was issued before or after the DU update.
When a DU casefile receives a PIW offer and it is exercised, Fannie Mae accepts the value estimate submitted as the market value for the subject property and provides relief from enforcement of representations and warranties on the value, condition, and marketability of the property. You are required to represent and warrant that the data (other than the value estimate) submitted to DU is complete and accurate, and must order an appraisal if you have reason to believe that the property’s current market value should be confirmed. For example, a property located in an area impacted by a recent disaster should always have an appraisal.
If you close any loans with accepted PIWs prior to January 1 but deliver them to Fannie Mae on or after January 1, consider whether there is any impact to borrower Closing Disclosures (if the current $75 fee is considered as a settlement charge disclosed on the Closing Disclosure).
DU Refi Plus loans are eligible for PIW offers, and will also no longer have a fee.
Refer to the Fannie Mae Selling Guide for detailed PIW requirements. The Selling Guide will be updated December 6, 2016 to remove references to the fee.
New Opportunity for Mortgage Professionals Seeking to Diversify Market Based Strategies
San Diego, CA – November 28, 2016 – NAHREP Consulting Services, a marketing and strategy consulting firm specializing in the housing and Latino market, introduces The Strategic Markets Concierge Program. This program is a specialized white-glove service designed to meet the needs of lenders looking for strategic advice and tactical solutions to support their diverse market efforts. NAHREP Consulting Services is offering an all-inclusive partnership initiative to analyze, design and implement top of line strategies for lenders to enhance market share into the most rapidly expanding segments of the market today. According to The State of Hispanic Homeownership Report, an annual publication by The National Association of Hispanic Real Estate Professionals, Latinos accounted for 69 percent of the total net growth in U.S. homeownership in 2015. As the rate of Hispanic homeownership continues to surge, it will be critical for mortgage professionals to engage in marketing strategies that cater to the Latino market in order to stay competitive.
“We are like an extension of their team,” said Maria Zywiciel, President of NAHREP Consulting Services. “Many organizations need specialized expertise and support to get their strategy off the ground or to move it to the next level.”
The Strategic Markets Concierge Program can give lenders much needed guidance and resources to develop an effective diverse market strategy. The subscription based program offers a package of specialized services and can be customized to a company’s level of desired support. With highly developed diagnostic and analysis instruments, specialized marketing review, and invaluable support for implementation, this program is an incredible opportunity for highly sustainable growth in 2017.
Lender Letter LL-2016-05 confirms the general and high-cost area loan limits announced by the Federal Housing Finance Agency (FHFA).
· The new base loan limit in most of the country will be $424,100 and all but 87 counties (or county equivalents) will see a loan limit increase.
· This represents a 1.7% increase over the 2016 limit.
· The ceiling limit in most of the country will be 150% or $636,150.
Detailed information and updated resources, including the Loan Limit Look-Up Table, are available on the Loan Limits page.
The updated loan limits will be implemented in Desktop Underwriter® (DU®) the weekend of December 10, 2016. DU Version 9.3 or Version 10.0 loan casefiles submitted to DU after December 10, will be underwritten with the 2017 general loan limits and must be delivered to Fannie Mae after January 1, 2017. Please note: lenders are responsible for determining loan amount eligibility for delivery. For best practices on committing or pooling loans that fall between the old and new loan limits, call the Capital Markets Sales Desk at 800-752-0257.
The following Fannie Mae applications and tools will be updated as of January 1, 2017 to reflect the 2017 loan limits: Loan Delivery, EarlyCheck™, and Pricing & Execution – Whole Loan®.
Congratulations! You’ve survived TRID. You’ve adjusted to the Qualified Mortgage standards. All of your loan officers have been licensed in compliance with the NMLS standard.
But don’t relax now. The CFPB’s next wave-the Home Mortgage Disclosure Act (HMDA) – is bearing down. While the revisions to HMDA will be less intrusive than the recent TRID changes, this is still a major revision to a law that has not changed in more than a decade. The good news is that the standards do not go into effect until January 1, 2018. This gives lenders and their technology partners a little over a year to prepare.
The revisions impact three major areas of HMDA reporting. The new HMDA will change who is required to report, expand the data collected and adjust how the data is collected.
More Lenders Now Under the HMDA Reporting Umbrella
The first thing smaller lenders need to determine is whether they are now required to file an annual HMDA report. Beginning in January 2018, the rule provides for a uniform loan threshold for all institutions (depository and non-depository). Under this new approach an institution must submit a report if it originates at least 25 covered closed-end mortgage loans in each of the preceding two calendar years or at least 100 covered open-end lines of credit in the previous two calendar years. Depository institutions still must meet the requirements set forth in the regulations in addition to the loan volume tests.
The new rule also expands the types of loans that are subject to HMDA. The rule will apply to all closed-end and open-end mortgage loans that are secured by a dwelling. The rule also makes the optional preapproval request reporting mandatory. The preapproval requirement will not apply to open-end mortgages, reverse mortgages, and purchase loans secured by multifamily dwellings.
An Expanding Ocean of Data Collection
The most significant impact in terms of updating technology platforms is the sheer amount of new data the CFPB will now collect. The new rule adds new data points that were specifically required by Congress in the Dodd-Frank Act and other data points the CFPB added to support purposes of HMDA. It adds more than 100 new data points, including: age, credit score, automated underwriting system information, unique loan identifier, property value, application channel, points and fees, borrower-paid origination charges, discount points, lender credits, loan term, prepayment penalty, non-amortizing loan features, interest rate, loan originator identifier and more.
The new rule also changes requirements for collecting and reporting information about a borrower’s ethnicity, race, and sex. It adds a requirement that a lender must report whether it collected the information about ethnicity, race, and sex through visual observation or surname. It also requires lenders to allow applicants to self-identify their ethnicity and race using disaggregated ethnic and racial subcategories.
Moving Submissions Online
The other change that will impact operational processes is the rule changes the method of reporting HMDA data to a new web-based submission tool that the CFPB is developing. Also, in 2020 certain covered institutions will be required to submit quarterly HMDA reporting instead of the current annual reporting requirement.
How can lenders prepare for the updates? From a technology viewpoint, these changes will require significant updates to a lender’s LOS and HMDA reporting systems. Lenders will also need to modify processes and procedures, especially in training related to gathering the additional demographic data required by HMDA.
It is vital to understand the changes in the rule and ensure that your organization implements all the necessary modifications to systems and procedures to ensure compliance and survive the next big wave of regulations.
Docutech Insights Blog by Fred Gooch
Who Is Vulnerable To A Cyber Attack? Everyone. Protect Your Business by Reviewing Your Processes, Plans and Insurance Policies
By Lee Brodsky, President JMB Insurance | Mortgage Banking Insurance Group
Why Is The “We’re Not Big Enough” Defense A Fallacy?
In the past few months, the news has reported on a record-breaking breach suffered by Yahoo, the barrage of hacked emails from members of the Democratic Party and a massive cyber attack that shut down a number of major online entities, including Twitter, Amazon, Netflix and PayPal. While these attacks would seem to act as a warning sign that businesses need to better protect their data and their company from the affects of a cyber attack, many executives instead dangerously assume they’re safe. “After all,” the reasoning goes, “hackers are only interested in huge targets, such as multinational corporations and political parties. They won’t go after me. I’m too small.”
Of course, that outlook flies in the face of current statistics, which suggest that every company–no matter the size–is at risk. In its 2016 Internet Security Threat Report, Symantec noted there is plenty of hacking to go around. Of the companies in their study, small businesses (fewer than 250 employees) accounted for 43% of all attacks, medium size (250-2,500 employees) 22% and large corporations (2500+) 35%. The report also noted that there’s been a steady increase in attacks on companies with fewer than 250 employees over the last five years. In fact, attacks on those companies jumped 11% from 2014 to 2015.
One explanation for this jump in attacks on small to mid-size companies is obvious. Hackers know these companies are less likely to have a data security plan in place, making them an easier target. Even more, it’s becoming easier for them to initiate attacks through automated malicious code that gets access to your system and sends back the data. Thanks to these unmanned attacks, they don’t need to expend much energy to attack smaller companies making it more worth the effort.
Now in addition to the fact that your data may not be well protected and hacking has become easier, throw into the mix that you’re in the mortgage banking business and collect personal information from your customers, prospects and employees. Put that all together, and it’s no stretch of the imagination to see how your firm could be the perfect target for an enterprising cyber thief.
What Do Cyber Thieves Want From Your Business?
Cyber thieves want data, and the data you collect is particularly valuable to them. In 2015, according to the Symantec report, the top information exposed can all be categorized as personally identifiable information (PII):
This is a shift from previous years when financial information, such as credit cards, was the stolen data of choice, enabling hackers to ring up fraudulent purchases on someone else’s dime. But, credit card companies and users have become quicker to notice atypical purchases, limiting the usefulness of stolen credit card data to the individual hacker and the black market value if they should try to resell the data. As a result, financial info (which includes credit card details and other financial credentials) has dropped from number four in 2014 to number six on the above list.
On the other hand, personally identifiable information offers cyber thieves greater flexibility. Forget stealing one person’s credit card data. With personally identifiable info, a cyber thief can open up countless credit cards in another person’s name. That hacker can also obtain fraudulent government IDs, apply for loans, commit health insurance or Medicare fraud, file for fraudulent tax refunds, resell the data and more.
In a January 2016 press release put out by the Identity Theft Resource Center (ITRC), which tracks breach information made publicly available, they noted that 2014 was the year of the credit card breach, citing 64.4 million debit/credit cards exposed due to breaches. In contrast, 2015 saw breaches expose only 800 thousand debit/credit cards. That significant drop is because hackers were putting their energies into stealing over 164.4 million social security numbers. Appropriately enough, ITRC dubbed 2015 the year of the social security number breach.
Of course, this personally identifiable information (along with a host of other valuable information) is the exact info you need from customers and prospects when you originate or service loans. Even more, you collect much of this same information from your own employees. This helps explain why, according to the ITRC release, the Financial/Banking/Credit industry was ranked third in number of reported breaches (behind Business/Service at number one and Healthcare at number two). This marks the first time the financial industry—your industry—has cracked the top three.
What Could The Cost Of A Data Breach Be To Someone In The Mortgage Banking Industry?
The most important factor in determining the cost of a data breach is not revenue, number of employees or even number of originated loans but rather the total number of records in your database, which can include past and present customers, prospects and employees.
In its 2016 Cost of Data Breach Study, The Ponemon Institute, an organization that conducts research on privacy, data protection and information security policy, found that the average cost per lost or stolen record for a US company in 2015 was $221. They further broke down that $221 into $76 spent on direct costs incurred to resolve the data breach, such as investments in technologies or legal fees, and $145 spent on indirect costs, which included notification efforts and customer turnover.
Even more, the average cost per lost or stolen record for a company in the financial industry was $264. This rate was greater than the average because this industry is more highly regulated (companies could face fines for their breach) and because, when breached, companies in this industry suffer a higher-than-average loss of business and customers.
So, using this average cost per record, even a database of only one thousand records could end up costing you somewhere in the neighborhood of $264,000. How many records do you have in your database? Thousands? Tens of thousands? Hundreds of thousands? The Ponemon Institute found that, of the companies they studied, the average total cost of a data breach was over $7 million. What would be the repercussions if your company suddenly had to deal with a $7 million loss?
How Can Your Firm Protect Itself From Losses Due To A Data Breach?
The first step is to review your current processes and inherent risks. Some of the main questions to ask are:
The extent and cost of a data breach can be reduced if you put into place data governance initiatives. These initiatives act as quality control protocols for how to protect, manage and use your data and should include appointing a Chief Information Security Officer (CISO), creating a business continuity management strategy that identifies your company’s risk of a breach, developing an incident response plan and training employees on proper procedures as well as making them aware of potential threats. Once the strategies are in place, you can then start looking at more tactical executions, such as installing data loss prevention software, which limits the ability of users to send sensitive information outside the corporate network, as well as encryption and endpoint security solutions, which ensures devices connected to your network follow a defined level of compliance and security standards.
While the above recommendations will take some to implement, there are other simpler solutions you can begin undertaking right away.
Use Strong Passwords
Passwords should be at least 10 characters and include a mix of lower and upper case letters, numbers and non-alphanumeric characters and symbols. Avoid using actual words since hackers can run software that checks for every word in the dictionary (and please, please, please don’t use password, password1 or admin). You can also use a password generator (to develop a password) or aggregator (to store your passwords). Just make sure that if you’re digitally saving passwords, the only way to access them is through a password that you must remember and key in–don’t store that password on your computer or device. This way you limit the damage if your computer or device is lost or stolen.
Enact Strong Password Protocols
Be smart in how you use passwords in your system. Don’t reuse passwords in multiple places (otherwise a compromise of one can give a hacker access to other systems). Instead of sharing one account and one password, give everyone unique login credentials. That way you can easily shut down and create a new account if one is compromised. Additionally, it will be easy to turn off that account once an employee is no longer with the company (and protects you in case they don’t leave on the best terms). Lastly, compartmentalize access. By only giving your employees access to the data they need and not the whole system, you’re limiting exposure should a breach occur.
Keep the software, browsers and applications on your computers, phones, etc. up to date. Old software can have vulnerabilities that hackers can exploit.
Back Up Regularly, Have A Plan To Restore Data
If data is corrupted, locked up in a ransomware scheme or undergoes some other emergency, you want to be able to restore the backup quickly to minimize downtime.
Educate Your Team
Many breaches occur because employees just aren’t aware of the cyber threats, especially how thieves might try to deceive them through email, websites and now social media. Train them on how to protect their passwords and properly react to attachments, links and information requests sent to them in emails (by both trusted and unknown senders) and to let the proper team members know if they notice anything suspicious. Ultimately, encouraging awareness and good habits among your team can positively affect your data security.
Why Do You Need Cyber Liability Insurance?
Good procedures will greatly limit the chance that you could suffer a data breach. But, human error, the speed with which new technologies are introduced and the tenacity of cyber thieves means there’s no 100% solution. So, should a breach actually occur, Cyber Liability Insurance can then be the second line of defense, protecting your company from the immense expenses that you would otherwise have to pay out of pocket.
Most Cyber Liability Policies will cover the costs of reasonable expenses that are the necessary in response to a breach and therefore may include:
As an added bonus, many Cyber Liability insurance products include a risk management component, which can include sample policies, recommended procedures and other best practices that give your company a framework to follow in developing a plan for managing cyber risk.
When seeking out Cyber Liability coverage, work with a qualified insurance agent or broker who has experience working with companies in the mortgage banking industry so that the coverage, limits and other elements are written to the needs of your specific company. You will need to make sure that the policy covers your major areas of exposure and that the limit is high enough to protect you from your potential loss. Here’s where looking at your total data records multiplied by the average cost per record of lost or stolen data is key.
While premiums have been increasing for this coverage as of late, they’re still quite reasonable, especially when comparing policy limits to the potential out-of-pocket risk.
Ultimately, What’s The Biggest Threat To Your Business?
Inaction. You need to acknowledge that a cyber attack against your business is a possibility (maybe even an inevitability) and make a conscious decision to take action and protect your data, customers, business and bottom line.
Nonetheless, despite all the warning signs, many are still not motivated to act, letting the supposed cost, time and labor of enacting proper protocols or purchasing insurance outweigh the very real and much higher cost they’d incur if their system was breached.
Consider CFO Magazine’s 2016 survey of 233 CFOs:
Given the number of past attacks and the respondents concern about future attacks, it’s actually startling to see how few CFOs in the survey are estimating the potential expense of an attack AND how few are seeking out insurance (only slightly more than the number that have been the victim of an attack).
Data breaches are a part of business now. Like Property and Casualty or Workers’ Comp, you need to treat the cyber threat like any other risk to your business and purchase the appropriate coverage. While it’s true, you may have to spend thousands or even tens of thousands now to enact a cyber plan that puts into place safe protocols and includes Cyber Liability Insurance. Keep in mind that the average cost in 2015 for a data breach was over $7 million. Investing now can save your company millions in the future.
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Lee Brodsky has specialized in insurance for the mortgage banking and financial services industry for more than 30 years. In May 2004, he established Mortgage Banking Insurance Group at JMB Insurance. As an independent brokerage, his group helps mortgage bankers and brokers procure various insurance coverages that meet client goals and satisfy investor, GSE or warehouse lender requirements.
SAN DIEGO, Calif., November 21, 2016 -- The Mortgage Collaborative, an independent mortgage lending cooperative, today announced the appointment of David G. Kittle, CMB as its President said John M. Robbins, CMB, the corporation’s Chairman.
“The exceptional growth of TMC dictates we have an experienced mortgage professional at the helm,” said Robbins. “Engaged for more than 40 years in every aspect of our industry’s leadership, David is uniquely qualified to take the Collaborative to the next level and beyond as TMC expands its Lender Member services into the Secondary Market and Technology Innovation.”
“I’m honored to be asked by the Board, my friends and my partners to step into this role,” said Kittle. “The Mortgage Collaborative has an outstanding team that I look forward to working with and expanding in the coming months as TMC moves into new areas that will continue to add profitability to our Lender Members.”
About The Mortgage Collaborative:
Based in San Diego, California, The Mortgage Collaborative was founded in 2013 to empower mortgage lenders across the country with better financial execution, reduced costs, enhanced expertise and improved compliance and to help its members access the dynamic and changing consumer base in America.
The association is managed by its founding members: John Robbins, CMB; David Kittle, CMB; Gary Acosta, CEO of the National Association of Hispanic Real Estate Professionals (NAHREP); and Jim Park, former chair of the Asian Real Estate Association of America (AREAA). Robbins and Kittle are former chairmen of the Mortgage Bankers Association of America (MBA).
SimpleNexus is a select member of the Mortgage Bankers Association and the only mobile technology provider with a SOC 2 security audit incorporated into its services.
In 2011, SimpleNexus pioneered private-labeled mobile apps for the mortgage space. Focusing on mobile, SimpleNexus provides convenience from the beginning of the home search to closing. Borrowers, loan officers and agents all use the technology to stay connected and close loans faster.
The name SimpleNexus was derived from the purpose of connecting service providers such as Loan Officers, to their clients. Building these products brings clients closer to their service providers by offering value. In turn, retention rates, and personal connection is improved, which translates into increased retention.
Yesterday’s TMC Lender Networking Call (record number of attendees) focused on one of the only things everyone in our industry is united around - profitability. How profitable has our industry as a whole been these last few years? How does profitability differ by peer group? What are the drivers (and detractors) of profitability? What are some of the recent trends? Will our industry be more or less profitable in 2017?
I had a chance to kick off the call having a discussion with one of my favorite people, Marina Walsh from the MBA. Marina is MBA’s VP of Industry Analysis, and has the unique perspective of observing and analyzing our industry nationally through all kinds of cool statistics and peer-group data. While Marina is understandably more guarded in her predictions, I’m not. :-) Here’s some of my thoughts on how 2017 will play out.
The industry will write more purchase loan business than any year since 2006, with purchase originations up almost 20% from 2016. Total originations will come in at $1.8 trillion, just shy of this year’s expected $1.9 trillion total.
Rates will not shoot up. Global turmoil and a very soft underbelly to the US economy will continue to make US fixed income assets like mortgage-backed securities a good investment, keeping 30 year rates in the low to mid 4’s.
Nothing will happen with the GSE’s, who will continue to produce a lot of revenue for a government that needs it.
While the oversight of CFPB will change, a significant cybersecurity attack will change their focus.
Investment in technology will eat away at lenders 2017 proftability as they invest in the future. Picking the right technology partners is vitally important for lenders right now.
M&A will be rampant, with medium to large-sized ($1-5 billion/year) IMB’s continuing to add market share.
Industry Leaders Including TMC's David Kittle Provide Insights on How a Trump Presidency May Impact the Housing Industry
How will a Trump presidency impact the mortgage industry? For many, the obvious answer is that if Trump manages to grow the U.S. economy – whether through tax reform, increasing the number of jobs or, perhaps most importantly, boosting personal income – it could lead to a significant increase in home purchases due to pent-up demand.
But a more pressing issue for those in the industry is whether there will be a significant rollback of the onerous regulations that came to be as a result of the financial crisis. With the Republicans in full control of the House and Senate, will Trump replace the Dodd-Frank Act, as he has already pledged to do? If so, how quickly could that happen? Will this lead to the dissolution of the Consumer Financial Protection Bureau (CFPB) or a significant curtailment of its powers? And what of government-sponsored enterprise (GSE) reform?
MortgageOrb polled experts from across the industry to get their views on how a Trump presidency might bring about change in the months and years to come. Participating in this first round of emailed responses are Les Parker, CMB, senior vice president at LoanLogics; Kevin Wall, group president for First American Mortgage Solutions; Kevin Brungardt, CEO at RoundPoint Mortgage Servicing Corp.; David G. Kittle, CMB, vice chairman of The Mortgage Collaborative; and Dr. Rick Roque, managing director of mortgage banking, mergers and acquisitions, technology, and capital fundraising for MenloFinancial.
Q: According to President-Elect Trump’s website, “Great Again” (www.greatagain.gov), Trump plans to dismantle Dodd-Frank – which gave birth to the CFPB. It states that the “Financial Services Policy Implementation team will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation.” In your opinion, how likely is it that Trump will completely replace the act as opposed to keeping certain sections of it intact?
Parker: The House has already provided the template written by Jeb Hensarling, chairman of the House Financial Services Committee, in the proposed Financial CHOICE Act. Hensarling is also liked by President-Elect Trump. Like the Affordable Care Act, regardless of whether it is repealed and replaced or repaired, Dodd-Frank will be substantially changed. The Trump political posture will be to eliminate the CFPB but use it as a bargaining chip to get it passed in the Senate.
Wall: Our desire is that any new legislation supports the progress being made to improve the consumer experience because we have to be able to meet the next generation’s expectations regarding quality and efficiency. As far as the potential impact on our industry, our view is those who take quality seriously using a consumer-centric approach should have less concern over how and when regulations evolve.
Brungardt: Bottom line, I think it is highly unlikely that a Trump administration will completely replace the Dodd-Frank Act. I think it is more likely that the Trump team will focus on quashing individual provisions that his party believes will dampen the performance of the banking and housing sectors. The Trump team recognizes those sectors must perform well for the U.S. economy at large to reach its full growth potential. The president-elect has already outlined some provisions his team deems intolerable, such as the Dodd-Frank, Title II provision that gives financial regulators the authority to take over a failing financial firm and liquidate it. They believe it is a mere loophole for a bailout and lacks accountability. I see a surge of proposed changes, as is typical in the new president’s honeymoon period of the first 180 days. However, I don’t see those changes being completely effectuated in the next 12 months.
Kittle: Dodd-Frank will be difficult to replace in its entirety. First, President-Elect Trump has not focused on housing throughout his campaign. Replacing Obamacare, immigration reform/securing our borders and tax reform will consume his first year in office – all heavy lifts. Parts of Dodd-Frank will be replaced, focusing on the onerous regulations implemented by the CFPB and including putting in place an oversight panel and replacing CFPB Director Richard Cordray’s overly aggressive management style.
Roque: The act itself will not be completely replaced; legislatively, it is easier to modify key provisions, and quite frankly, anti-steering provisions and capital requirements are not bad ideas – they are just onerous at the levels in place currently, and the lack of specificity in the oversight by the CFPB is the largest of issues.
Q: What do you think any new legislation replacing Dodd-Frank might look like – and what impact do you think this will have on the mortgage industry? What would a major rollback of the current regulations do to the industry in terms of operations?
Parker: Maybe the CFPB stands for “Constraint on Freedom to Purchase and Borrow.” It will be less of a constraint on commerce once the desired changes are effected. Smaller financial institutions will escape its regulatory stranglehold. The provisions in Dodd-Frank that address derivatives will stay largely in place. The capital rules will be strengthened, while giving all financial institutions more freedom to innovate. The independent mortgage bankers will probably see less relief than banks simply because of their capital structures. The TILA-RESPA Integrated Disclosures rule, the servicing rules and new reporting requirements under the Home Mortgage Disclosure Act (HMDA) will only change in terms of clarity, enforcement and implementation. The high priority of compliance and quality loan manufacturing will remain, but the reduced regulatory constraints will hasten the transformation of mortgage banking back offices to drive down the transaction cost of getting a loan to an end investor.
Kittle: This depends on who sponsors the reform inside the Senate. Any reduction in onerous regulation and a switch to a positive “work with the industry” attitude will go a long way to improving our industry. I don’t see a major rollback; however, to answer the question, it would increase overall profitability – as the overbearing burden of backroom compliance has severely impacted the small to midsize independent mortgage banker. I would caution every lender, should a rollback occur, to continue its focus on a compliant loan that will avoid any scrutiny for repurchase. This shift would also jar the vendor-compliance sector of our business – as millions have been invested to deliver the “perfect loan” sought by Dodd-Frank and the CFPB.
Roque: Dodd-Frank, if replaced or modified, is likely to address GSE reform; capital and retention requirements on servicers; net worth requirements on lenders seeking to attain their U.S. Department of Housing and Urban Development (HUD) approval; regulatory clarity; and the total cap on costs for lender-owned service providers, such as the 3.0% cap.
Q: What do you think replacing Dodd-Frank means for the future of the CFPB? Do you think the bureau will end up being abolished? Or will it live on in another form?
Parker: As much as I would like to see the CFPB go completely away, I think it will survive, but its power will be significantly curtailed in terms of a) leadership structure (it will no longer be a capricious organization, free to operate outside of transparent and traditional oversight) and mission (no more appeals of rulings/enforcement ultimately made by the director; of course, this just changed by court ruling, but it will get codified); c) budget (the bureau will come under congressional oversight and budget authority); and d) enforcement (its ability will be governable and less subjective to leadership’s whims).
Roque: The CFPB is unlikely to be dismantled, but its attitude and working relationship with industry associations and leaders will be softer, more respectful and specific regarding its examinations. I do not believe it will be abolished, as much as I’d like to say it would be, but it is likely to be significantly reduced in scope and influence on the housing markets. Its unilateral judgments, divorced from industry association feedback and feedback from HUD and the GSEs, are likely to end.
Q: How quickly do you think these changes might come about?
Parker: Because it constrains borrowers and many financial institutions – and because President-Elect Trump knows real estate – it will be a top priority. I would expect legislation by the summer.
Kittle: It’s a priority but not in the top five, so it will be awhile – but I would think before the midterm elections in 2018 while Republicans control both Houses of Congress.
Roque: The initial proposals will be made in the next six months; actual changes will likely take effect in the next 12 to 16 months.
Q: Will this lead to a major loosening of credit standards and the return of riskier lending, as some have predicted? (And, what of investors?)
Parker: It will not lead back to the abuses of the past. It will empower lenders to pursue more innovation to improve the consumer and investor experiences. It will help the private market restore the private-label securities market. The greatest obstacle removed by the new financial environment is codified underwriting. Its removal will enable investors to make credit decisions or offer guidelines that reflect changing risk assessments. The new world of mortgage banking is moving rapidly to a significantly different rep-and-warrant model. Fannie Mae’s “Day 1 Certainty” initiative is a step in the right direction and includes implementation of actuarially sound financial models. This should lift investor confidence. Quality will become the norm, not because of new government granular rules, but because of the clarity of rules around capital structure and risk assessment, much like the FASB 157 Guidelines for Fair Value Measurement.
Kittle: An ability to make a good credit decision based on verified documentation, underwriting, has been taken away over the past eight years by Dodd-Frank and the CFPB. Access to credit has been severely impacted by Dodd-Frank, so some loosening is to be expected. A return to riskier lending is probable; however, with an allowable risk-based pricing model, the markets and the American taxpayer can be adequately protected from another credit crisis. The credit-scoring model needs major adjustment. Lenders need the ability to look at more than just one model and include VantageScore in their decision-making process.
Roque: Yes, this will bolster public stocks in mortgage and housing markets and will free up capital constraints from investors looking for regulatory clarity in their capital investments in public or private mortgage companies. This will be a major boost for well-capitalized independent mortgage banks. This will affect less the depositories, given their oversight by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. This will boost the production volume of the independent mortgage banking channel.
Q: In what other ways do you see a Trump presidency potentially reshaping the housing and mortgage markets?
Parker: The cut in corporate income taxes and repatriation of capital and profits will provide sources of funds for a massive urban and rural renewal effort. I expect updated enterprise zones for smart manufacturing modeled after Rick Santorum proposals and original Jack Kemp plans. A significant investment by private enterprise, with public incentives to revitalize rural and urban areas where infrastructure lies dormant, will bring jobs to these economically depressed areas. Finally, the essentially repealed and replaced Affordable Care Act and reduced regulatory burden on the oil industry will enable entrepreneurs to go to these areas and provide “bread winner” jobs. The increase in jobs and gains in income will create exciting times for real estate and real estate financing.
Brungardt: I look at an individual’s history and experience to predict his or her future actions. At his core, the president-elect is a businessperson. As such, I think he fundamentally believes overregulation, a lack of accountability (e.g., bailouts), a lack of transparency and excessive taxes limit the potential of any economy. I expect he will focus on those areas. I think the equities and bond markets are having an initial positive reaction, especially as marked by the flight from safety to higher-yielding assets. This was a much more robust market when the mortgage coupons were higher.
Kittle: The Affordable Healthcare Act! I’ve been opining about this since 2010. The health of the first-time home buyer and millennials has been damaged by Obamacare. The increasing premiums and deductibles have been burdensome on this group, forcing a family decision: forced healthcare or saving for a car, children’s education or a home. They’re not buying homes, and replacing Obamacare with lower-cost healthcare will refocus this group on becoming homeowners!
Roque: GSE reform is highly unlikely until the second term of a Trump presidency. The present setup with the GSEs is stable, very profitable for the Treasury and working very effectively. The main areas of focus will be on risk retention, government housing programs and a moratorium on new rules yet to be implemented by Dodd-Frank – this could even possibly (not likely, but possibly) affect the yet-to-be-implemented HMDA reporting requirements. Areas to watch will be confidence in the new builder market, tax policy, new housing permits and starts, and, of course, a rapid rise in interest rates; for every 50 to 60 basis points, there is a 0.25% change in rate, with rates exceeding 4.0% (30-year) – we will see this likely to exceed 5.0% by the end of 2017, which will undercut refinance volume but bolster short-term, new purchase volume for on-the-fence buyers. Extended locks and concessions will cut into mortgage banking profits and undermine longer-time pipeline volume until new construction and housing inventory expands – likely to do so in 2019-2020. In 2017, mortgage volume is likely to dip lower than this year by 10% to 20% but rebound in 2018 and 2019, which will exceed 2016 production volumes.
*Article by Patrick Barnard, Editor with MortgageOrb.com. Published on 11/16/16.
Once a year I try to touch on the evils of credit repair as every year I see more and more the damage it can cause a borrower. But it’s not just the borrower that is negatively affected by credit repair. It can also be damaging to the mortgage broker or lender if they are referring their clients to use a credit repair agency.
Why is this? There are several reasons:
We all see ads every day on the internet, TV, etc. for credit repair agencies. Yet very few, if any of these are truly in compliance with the Credit Repair Organizations Act. One of the prohibited practices of the act is in Section 404 (4) (b) “Payment in Advance – No credit repair organization may charge or receive any money or other valuable consideration for the performance of any service which the credit repair organization has greed to perform for any consumer before such service is full performed”. Yet most credit repair companies charge $200-$400 up front before any “repair” is performed. How do they get away with this? Most will claim it is a sign up fee or service agreement fee but does not relate to services performed. By the text of the rule as stated by the FTC and the CFPB this is in direct violation of the Act. If a mortgage broker is referring a client to a credit repair agency they are inadvertently supporting a company that is violating the Credit Repair Organizations Act.
When a borrower signs up with a credit repair agency they are required to provide a copy of their credit report. Credit repair agencies do not have permissible purpose with the repositories (Experian, Trans Union, Equifax) to pull credit. If a mortgage broker provides the borrower with a copy of the credit report that they pulled for the borrower to provide to the credit repair agency they are in direct violation of their permissible purposes for pulling a credit report in the first place.
Throughout the years we have seen audits conducted by the repositories that result in the termination of that broker or lender’s access to credit reports. These audits are triggered by borrowers, who at the recommendation of a credit repair agency have disputed items on their credit report that was provided to them by a mortgage broker. The repositories monitor patterns on the disputes they receive and match them to recent inquiries on the consumer’s credit report. If the repositories find evidence of disputes coming from credit repair agencies or frivolous disputes by a borrower and discover inquiries from mortgage brokers, it is grounds for them to terminate that company’s access to credit reports.
If there are truly inaccuracies on a borrower’s credit report there is nothing the borrower can’t do for themselves that a credit repair agency can claim to do. And they can do it without the cost they would incur with a credit repair agency and without the negative ramifications that can come from using a credit repair agency.
When it comes to credit repair agencies, truly the answer is to just say no. There are many avenues for the borrower to help themselves in repairing any inaccuracies on their credit report. And for the mortgage brokers who want to help advise the borrowers on what they need to do to improve their credit they can they can start with sending the to the Consumer Credit Help section on our website www.advcredit.com. There they can find answers to almost any question they would have concerning their credit report. Mortgage brokers can also contact any of our credit consultants in the rescore department for answers on how they can help their borrowers.
TMC - Chief Operating Officer