Daily Mortgage Commentary
December 17, 2018
“Sunk cost:” “a cost that has already been incurred and cannot be recovered and is excluded from future business decisions because the cost will be the same regardless of the outcome of a decision.” Bought a new headquarters, or paid a big signing bonus for a group that continually sends in bad loans? Sunk cost. Of course, lenders try to avoid those by using a forecasting company like Riivos, but how many months or quarters in a row can a lender have losses before the warehouse bank or Wall Street counterparties say, “No mas?” Rumors of owners putting their own capital back into a mortgage bank abound. At least year-end is in sight – yay!
Jobs & promotions
New Penn Financial is looking for dynamic, growth-minded, mortgage loan originators to work in-house with a new Joint Venture partnership in the Tampa, Florida area. This opportunity is with a prominent agency and is one of New Penn’s newest partnerships. "We are very excited to launch this new venture and partner with another outstanding real estate agency," said Corey Caster, SVP JV Retail. "This venture represents another major step in the growth of our industry-leading Joint Venture platform." If you are interested in hearing more about how to step into an origination role with an in-house audience, contact Vince Daino, VP of Recruiting and Business Development. Additional opportunities are available for LOs and producing managers throughout the country within New Penn’s existing real estate partnerships. Contact Vince for more details.
Sun West Mortgage has named John Brumund Senior Managing Director. With 25 years of industry experience, John brings a diverse background to the leadership team at Sun West. He has held roles as CTO, EVP Wholesale Channel leader and most recently as President of Direct Lending where he built a hybrid consumer-direct, distributed retail model solely focused on purchase business. Brumund has a long-standing relationship with Sun West Mortgage and played an important role in previous growth initiatives. “Sun West is in the perfect position to take advantage of the current market – the company has the desire to capitalize on rapid expansion across the U.S.,” said Brumund. “Trust played a major role in the decision to return. It is difficult to find a partner that keeps its word through the thick and thin, and that is why Sun West Mortgage is home to me."
Lender products & services
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Looking for ways to grow your business? Freddie Mac is collaborating with clients to deliver automation and insights that provide a competitive edge. Cut back on documentation and reduce time to close with Loan Product Advisor automated income and asset assessment capabilities. Save borrowers time and money with ACE appraisal waivers, now available for certain condo unit loans. Grow your condo business with Freddie Mac’s unit-level condo exception tool, Condo Project Advisor. Get greater efficiency with simpler collateral QC and underwriting in Loan Collateral Advisor. Sharpen your edge.
Momentifi is offering a FREE 60-day trial for enterprise accounts who register before the end of this year. While other companies cut back, you can give all your LOs and new recruits access to the CMPS certification course, weekly sales coaching, MBS Dashboard, LOS-integrated CRM and OB-integrated loan comparison software without paying anything at all until March 1. “An extra 1 loan per month, per LO could be all you need to become wildly profitable again,” says Gibran Nicholas, CEO of Momentifi. “The problem is that your LOs may not adopt or use the solutions you’re currently providing to help them grow their sales. This approach allows you to roll out an enterprise-wide solution on January 1, and only pay 60 days later for the LOs who actually use it.” Click here to watch a 3-minute video of the member benefits.
Email Gibran directly to schedule a demo or conversation.
FHA & VA
A large number of minorities and first-time home buyers use the FHA program to buy homes. There’s a lot going on around our biz about this program. The industry is very interested in the note in the Federal Register: “Streamlining Warranty Requirements for Federal Housing Administration (FHA) Single-Family Mortgage Insurance: Removal of the Ten-Year Protection Plan Requirements.” This final rule streamlines the home warranty requirements for FHA single family mortgage insurance by removing the regulations that require borrowers to purchase 10-year protection plans in order to qualify for certain mortgages on newly constructed single-family homes. The final rule also introduces greater flexibility and allows consumers to pursue cost-minimizing strategies without measurably increasing the risk to FHA of affected loans. This final rule becomes effective March 14, 2019.
We also have last week’s FHA announcement of the agency’s new schedule of loan limits for 2019, set by regulation at 115% of median house prices based on MSAs (Metropolitan Statistical Areas). Most areas in the country to experience an increase in loan limits in the coming year. These loan limits are effective for FHA case numbers assigned on or after January 1, 2019. Read FHA’s Mortgagee Letter on 2019 Forward Mortgage Limits or read FHA’s Mortgagee Letter on 2019 Home Equity Conversion Mortgage (HECM) Limits. In high-cost areas of the country, FHA’s loan limit ceiling will increase to $726,525 from $679,650. FHA will also increase its floor to $314,827 from $294,515. Additionally, the National Mortgage Limit for FHA-insured Home Equity Conversion Mortgages (HECMs), or reverse mortgages, will increase to $726,525 from $679,650. FHA’s current regulations implementing the National Housing Act’s HECM limits do not allow loan limits for reverse mortgages to vary by MSA or county; instead, the single limit applies to all mortgages regardless of where the property is located.
During last weekend’s NAMB conference session, Freedom CEO Stan Middleman made a comment to the audience that one of Freedom Mortgages responsibilities is to “provide the brokers with the best price possible so they can be successful.” Last Thursday Freedom Mortgage launched a “best price guarantee” for government loans 640+ FICO. “If you find a better price for a fixed-rate VA & FHA purchase/refinance with a FICO >=640, we’ll match it, and reduce our Lender Fee by $150. (Jumbo and High Cost loan amounts are ineligible.)
Plaza Home Mortgage is accepting the new FHA loan limits and the new VA loan limits for loans locked on or after December 18, 2019 and with case numbers assigned on or after January 1, 2019.
Recently I discussed Ginnie Mae news, and why MLOs should at least be aware of the Agency. Government (by that I mean VA, USDA, and FHA) is an interesting beast. It is more prevalent with some lenders, in some areas, and with some loan officers. In general, of the $1.5 or so trillion in residential originations expected in 2018, 20-25% of it is forecast to be government. It is estimated that FHA is about 12% of total market in 3rd quarter. (F&F is estimated at nearly 60%. 18% non-agency jumbo, non-QM/expanded credit 3%.
Recently the big news was the FHA actuarial study. The focus is on the he economic condition of the agency’s Mutual Mortgage Insurance Fund (MMI Fund), and the overall Capital Reserve Ratio, Congressionally mandated at 2%, clocked in last year at 2.18% but is now up to 2.76% – good news. The “forward mortgage” financial picture has improved nicely, but the overall number is weighed down by the HECM line.
Loan officers think, “Gosh, if the ratio improved, perhaps we’ll see borrower costs decline.” Not so fast. The Announcement was tepid about that, as was a statement by Brian Montgomery. The book of business shows an average DTI above 43% and average FICOs have dropped in the $1.26 trillion insured (an increase of 3%). Freddie and Fannie, and their workmates the private MI companies, are happy to see no premium or MIP decrease. Large banks (think Chase or Wells) are seen continuing to sit on the sidelines, despite FHA continuing to be very profitable for lenders.
Do you review the financials of your subservicer? I have not personally run the numbers but the word on the street has the percentage of non-bank FHA originations is 87% of total FHA originations. Ginnie is very concerned about this concentration, since a) many non-bank lenders are thinly capitalized and b) advances to investors for delinquencies and foreclosures must be made by the issuer, which is a concern. Ginnie Mae issued a memo about servicer quality and may ask for agreements that a servicer has with the issuer because many non-banks use subservicers and become dependent on subservicers’ financial stability. Just something to watch…
FHA is making several improvements in its Electronic Appraisal Delivery (EAD) system and other appraisal-related functionality in FHA Connection, including: Appraisal Logging screen changes; Appraisal Transfers; and Digital Signatures on Appraisals. Refer to the EAD Hard Stop Checks and Error Messages Fact Sheet for complete information on the revised Hard Stops. The EAD General User Guide, including the Hard Stop information found in its Appendix, will be updated at a later date.
FAMC wholesale posted a clarification on VA transactions regarding Privately Held Mortgages. A written VOM may need 12 months of cancelled checks or bank statements to support the payment history.
theLender offers FHA and VA Specialty products accepting FICO’s as low as 500. Contact Eric Turley for details.
Plaza Home Mortgage has updated its FHA FICO price adjustments with most LLPAs improving. There are improved FHA price adjustments for FICOs under 680: FICOs from 580 – 619 have improved by 1.75, FICOs 620 – 659 improved by .250. These improvements apply to all FHA programs. Improvements for FHA FICOs > 720 (excludes 203k), have been reduced by .250 or .500 depending on FICO.
Mortgage Solutions Financial posted an announcement in lieu of clarifications from GNMA regarding APM 18-04 and how enforcement is being implemented.
AmeriHome announced a new Escrow Holdback Program for Fannie Mae, Freddie Mac, FHA, VA, and USDA purchase transactions. The Program allows outstanding, undisbursed escrow funds for postponed improvements on new and existing homes.
LoanStream Mortgage offers “no hassle VA programs.”
Plaza Home Mortgage updated its Wholesale Administration Fee Schedule. Effective for loans with a FNMA 1003 and/or Loan Estimate (LE) with a date of December 1 or later. Fees will be effective in BREEZE and on rate sheets and are as follows: Standard Administration Fee: $945. FHA, VA and USDA Streamline Administration Fee: $495. Second Lien Administration Fee: $500 (Waived in VT and TX).
PRMG has updated various Product Profiles to the following: Agency Portfolio and FHA Standard and High Balance, VA and VA High Balance, Expanded Access – AA Credit Grade, Expanded Access – B-C Credit Grade, Closed End Seconds and TCF, and CHFA Programs.
PennyMac Correspondent posted an announcement regarding FHA and USDA updated seasoning requirements.
FHA published Mortgagee Letter (ML) 2018-08: Updated Guidance on Home Equity Conversion Mortgage (HECM) Claim Type 22 (CT-22) Assignment Requests. This ML provides consolidated and updated guidance regarding the submission of HECM assignment requests to the Department of Housing and Urban Development (HUD). It outlines the documentation and procedures required to demonstrate that a HECM has been serviced in accordance with applicable HUD regulations and meets all assignment eligibility criteria regarding the provision of evidence of: current hazard insurance; provision of alternative evidence of death of borrower; clarification of “current” taxes; submission of evidence of completion of repairs; and submission of clarification regarding mobile home title. The guidance in this Mortgagee Letter benefits both HECM borrowers and servicers as it allows alternative sources of documentation, as well as streamlines some of the claims processes. It also modifies or supersedes policy language in ML 2017-05, where applicable, and is effective immediately.
The Federal Reserve is expected to increase short-term rates this week, but the U.S. 10-year closed the week -2bps to 2.89% as positive domestic economic figures offset disappointing economic data from China and the eurozone. Growth in China’s Retail sales slowed to a pace not seen since early 2003 while growth in Industrial Production was reported at its slowest pace since early 2016. Both French and Eurozone Manufacturing PMI declined in December, as did Services PMI for the same time period. The U.S. Retail Sales report showed that core retail sales, which exclude auto, gasoline station, building materials, and food services and drinking places sales, and are used in the computation of the goods component for personal consumption expenditures in the GDP report, increased.
This week’s calendar began with the Empire State Manufacturing Survey for December (expected to decline, it indeed went to “10.9” from “23.3”). The NAHB Housing Market Index for December is up next. Things are light tomorrow, with only November Building Permits (prior 1263K) and Housing Starts (prior 1228K) at 8:30 ET. Wednesday sees the usual weekly MBA Mortgage Index but also November Existing Home Sales and the December FOMC Rate Decision. Thursday brings weekly claims figures as well as December Philadelphia Fed, November Leading Indicators, before the week closes with November Durable Goods; Q3 GDP – Third Estimate, November Personal Income and Spending, and PCE Prices. We begin the week with the 10-year yielding 2.88% and Agency MBS prices better a few ticks, so rates are a shade lower from Friday’s close.
The Perfect Man:
– wakes up at 5 am everyday
– exercises everyday
– makes his own bed
– cleans his room
– works sincerely
– does not touch alcohol
– helps in the kitchen
– does not indulge in night life
– always punctual
– prays daily
– hits the bed at 9PM sharp
Such a perfect man can only be found in jail.
Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Servicing: Don’t Underestimate Liquidity.” If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.
(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2018 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)
Dec. 15: AI mortgage predictions, borrowers who want to film transactions, First American & blockchain, the SEC & cybersecurity
December 15, 2018
Computers are everywhere, and there are plenty of people who’d like to get into yours. (Of course, security is not confined to computers. I was on the phone last night with a friend, and he told me that a few years ago his identity was compromised and several credit cards were stolen but that was about it. He never turned it into the police because he discovered that the thief was spending less than he did.) Not only that, but computer scientists are racing ahead with developments focused on artificial intelligence. And what about borrowers who want to film the transaction? Let’s check in. Intelligence, artificial and otherwise Lower, a technology company aimed at improving the online mortgage and refinance experience, announced the launch of its company and internal, proprietary artificial intelligence (AI) technology. “LOAi is a first-of-a-kind
Dec. 14: AE, LO jobs; Full Eagle wanted; compliance, documentation products; loan amt. changes in the primary markets
December 14, 2018
Lots of folks in the mortgage biz like statistics and odds. They may not remember them, but they like them. (As Marcus L. writes, “People still play the lottery even though most of us can’t get the USB in the first time correctly and those odds are 50/50.”) Plenty of home loans are impacted by student debt. For every 100 students who enroll full-time in college or university, 42 percent will graduate within four years and 18 percent more will graduate within six. This means that 40% of college students get all the benefits of student debt without obtaining a degree. And put another way, of those 60 students of every hundred who graduate, 42 will leave with student loans and five will default on those loans by the age of 33. For the 40 who don’t graduate, 10 will