All Cash Purchases Increase; VA’s Final Rule for Vets to Avoid Foreclosure; HUD’s Settlement with FNF Provides a RESPA Lesson

The U.S.
Census Bureau projected the Jan. 1, 2012, total United States population at
312,780,968. This would represent an increase of 2,250,129, or 0.7 percent,
from New Year’s Day 2011. In January 2012, one birth is expected to occur every
eight seconds in the United States and one death every 12 seconds. Meanwhile,
net international migration is expected to add one person to the U.S.
population every 46 seconds in January 2012. The combination of births, deaths,
and net international migration result in an
increase in the total U.S. population of one person every 17 seconds

something that originators and Realtors like to hear.

Some
people think CNBC’s Jim Cramer is smart while others seem him as an
over-energetic entertainer (at best). Regardless, he certainly seems to like Wells Fargo’s mortgage channel. While we’re on Wells, its economic
team notes that “Most of the economic reports dealing with housing have
shown a little more strength recently. New home sales rose, sales of existing
homes climbed, and new home construction has also improved lately. Low mortgage
rates, an improving job market, and some reported easing in mortgage
underwriting standards has raised hopes that the momentum will carry over into
2012. The news has not been universally positive. The latest
S&P/Case-Shiller data shows price declines accelerating in October. The
20-city index fell 0.6 percent in October and has tumbled at a 6.4 percent pace
over the past three months. Home prices are down 3.4 percent over the past
year. Moreover, price declines have been fairly widespread, with 16 of the 20
markets surveyed reporting price declines in October. The sharp drop in home
prices over the past three months should raise some caution flags for those
expecting dramatic gains in 2012. That
said, 2012 will be a better year
. We have slightly increased our forecast
for the next two years, which marks the first time we have raised our
expectations for housing in any significant way in well over a year.”

But what’s
good for housing isn’t always good for those in the mortgage business. Despite
record low mortgage rates, 2011 has seen a
surprisingly high level of cash home purchases
, according to the real
estate research firm Hanley Wood Market Intelligence. Analysts say tight
lending standards and a search for yield by investors (NOO purchases) has driven
all cash purchases of homes higher. Per the report, 38% of homes purchased in
2011 were bought with all cash, up from 34% in 2010, and double the 19% rate in
2006.

A better
housing market would certainly help the housing agencies. “So where
ultimately do Fannie and Freddie rank amid the confluence of ridiculous
subsidies, private-sector opportunism and ungovernable global capital flows
that contributed to the crisis? Who knows exactly, but the exaggerated ferocity
of the debate lately is a reliable Washington hallmark of an argument fading
into irrelevancy. The financial crisis
isn’t over, and around the world the problem is not housing but governments
whose commitments far exceed their resources
.” So noted this editorial
in the Wall Street Journal.

Another
agency, HUD, recently entered into a
settlement agreement with Fidelity National Financial, Inc. (FNF) based on
allegations that FNF failed to comply with Federal Real Estate Settlement
Procedures Act (RESPA).
Specifically, HUD alleged that FNF, through its subsidiaries,
paid fees for the referral of settlement service business in violation of RESPA.
Real estate brokerages entered into Application Service Provider Agreements
which provided the real estate brokerages with access to TransactionPoint, a
web-based platform that automates the real estate transaction from listing
to closing, and allows the real estate brokers to select real estate settlement
providers for a particular real estate transaction. The real estate brokerages,
in turn, entered into Sub-License Agreements with subsidiaries of FNF to enable
FNF’s subsidiaries to be listed in TransactionPoint as a provider of the
settlement services. As part of the Sub-License Agreement, HUD alleged that
FNF’s subsidiaries paid the real estate brokers a fee for each referral of real
estate settlement services. While FNF did not admit wrong-doing in the case, it
agreed to make a payment to HUD for $4.5 million to resolve the matter.

I wonder
what I would think if my daughter came to me and said, “I didn’t do anything
wrong, but I will pay for the auto body work to repair the big dent.” This case
should serve as an educational tool and reminder for real estate licensees.
Licensees must be careful when entering into arrangements with settlement
providers or their affiliates that result in compensation back to the licensee.
Great care is needed when engaging in transactions with settlement service
providers that result in payments for orders placed with those providers. If a real
estate licensee is offered some type of benefit or payment to steer business to
a settlement provider, a licensee should not take the word of the entity or
person who makes the offer that the activity is RESPA compliant. Every licensee
must do his or her own research to ensure any offer from a settlement service
provider is RESPA-compliant. A simple start is to ask the service provider if a legal analysis that their activity is RESPA-compliant has
been done and, if so, get a copy of the analysis. Every licensee should also
follow up with his or her own counsel and HUD before entering into any
agreement with a settlement service provider that will provide any type of
benefit to the licensee. If a real estate licensee is found by HUD to have
violated RESPA, the finding of a violation may be used by the Department of
Real Estate as a basis for disciplinary action.

Remember
your RESPA lessons: Section 8(a) (12 U.S.C. Section 2607(a)) provides that: “No
person shall give and no person shall accept any fee, kickback, or thing of
value pursuant to any agreement to or understanding, oral or otherwise, that
business incident to or a part of a real estate settlement service involving a
federally related mortgage loan shall be referred to any person.” And 8(b)
says, “”No person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in
connection with a transaction involving a federally related mortgage loan other
than for services actually performed.”

Right
before Christmas the OCC, the Federal Reserve Board, and the FDIC amended their Community Reinvestment Act
(CRA) regulations to adjust the asset-size thresholds used to define
“small” and “intermediate” banks and savings associations
. (I
know – you were lying awake at night worrying about this.) Going forward, banks
and savings associations that, in either of the prior two calendar years, had
assets of less than $1.16 billion are considered ”small banks” or ”small
savings associations”; small banks or savings associations with assets between
$290 million and $1.16 billion as of December 31 of either of the prior two
calendar years are considered ”intermediate.” As required by the CRA regulations,
the annual adjustments to the threshold amounts were based on the annual
percentage change in the Consumer Price Index.  For a copy of the amended
regulations, please see http://www.gpo.gov/fdsys/pkg/FR-2011-12-22/pdf/2011-32727.pdf.

Also right
before Christmas the VA published a
final rule designed to loosen loan modification requirements and broaden
options for helping veterans avoid foreclosure
. The final rule follows and
modifies an interim final rule published in February 2011. “Under the final
rule, the maximum interest rate allowable on a modified loan is determined as
of the date the modification is approved, as opposed to the date the modification
is executed. The final rule also (i) authorizes actually incurred foreclosure
costs to be capitalized into a modified loan balance, and (ii) provides
clarification as to when the holder of a loan may seek VA approval for a
modification.” For a copy of the VA’s final rule, please see http://www.gpo.gov/fdsys/pkg/FR-2011-12-20/pdf/2011-32528.pdf.

Hopefully
the markets behave themselves this week, since many folks are still out on
vacation. Looking back to Friday, a short trading day, the 10-yr improved again
down to a yield of 1.87%. In fact, its yield dropped practically every day
leading up to the New Year’s weekend. One can attribute it to continued demand
(much of it from the Fed), a lack of mortgage banker supply, or half-staffed
companies – but mortgage banks and Realtors are not complaining.

This
morning, however, we find the 10-yr
higher by 7 basis points to yield 1.94% and MBS prices worse by .125-.250
.
Most of this is attributable to overseas markets, with perhaps some risk “coming
out” of the market.  For U.S. economic
news today we have Construction Spending, ISM Manufacturing, and the minutes of
the last FOMC meeting, tomorrow is Factory Orders, Thursday is ADP Employment,
Initial Jobless Claims, and ISM Non-Manf., and then on Friday is Nonfarm
Payrolls & the Unemployment Rate.

Sherlock Holmes and Dr. Watson go on a camping trip.  After a good dinner
and a bottle of wine, they retire for the night, and go to sleep.
Some hours later, Holmes wakes up and nudges his faithful friend. “Watson,
look up at the sky and tell me what you see.”
“I see millions and millions of stars, Holmes” replies Watson.
“And what do you deduce from that?”
Watson ponders for a minute.
“Well, astronomically, it tells me that there are millions of galaxies and
potentially billions of planets.  Astrologically, I observe that Saturn is
in Leo.  Horologically, I deduce that the time is approximately a quarter
past three.  Meteorologically, I suspect that we will have a beautiful day
tomorrow.  Theologically, I can see that God is all powerful, and that we
are a small and insignificant part of the universe…  What does it tell
you, Holmes?”
Holmes is silent for a moment. “Watson, you idiot!” he
says.  “Someone has stolen our tent!”

If you’re interested, visit my twice-a-month blog at the STRATMOR Group web
site located at www.stratmorgroup.com. The current blog discusses the time
frames for borrowers returning to A-paper status after a short sale or
foreclosure. 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.

…(read more)

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