FHA Insurance Premium to Increase Again; CFPB Servicing Statement; AMC Tax Issues?

This
morning we had the Retail Sales figures. Shopping in Texas can be a different
experience (30 seconds).

Small
lenders can be assured that whatever happens to larger players in mortgage
banking will eventually impact them in some way. It appears that the Obama
administration is putting more pressure
on Fannie & Freddie to write down principal. (I have never missed a
mortgage payment – where do I sign up for that program?)

For the
Chicago area only, I have been retained by a well-established, 100 year old community bank, based in
far NW Suburban Chicago. It is looking to expand its presence in the North,
Northwest and Western suburbs with the addition of a Branch Manager and production team. The bank is an approved FNMA
seller-servicer, and also offers several correspondent options. They have local
operations for underwriting, processing, etc. Any interested parties should
send their resume to me at rchrisman@robchrisman.com.

In other parts of the nation, hiring also continues. Carrington Mortgage Services is expanding its sales force in both
retail and wholesale channels. It has LO positions open in CA, AZ, FL, GA,
NC, VA, PA, and NJ. Carrington is also hiring Wholesale AE’s and Area Sales
Managers for the following states: CA, AZ, WA, CO, UT, TX, NM, IL, FL, GA, VA,
PA, and NJ. “Carrington is a Ginnie Mae Direct Seller Servicer offering a wide
variety of loan programs: FHA/VA direct GNMA, Conventional, Fixed, ARM and
more.” All wholesale candidates are required to have an active broker base
prior to consideration. Interested candidates contact John Cervantes at john.cervantes@carringtonmh.com.

Friday I
noted that the Financial Crimes Enforcement Network (FinCEN) has new
regulations that require non-bank residential mortgage lenders and originators
to establish anti-money laundering (AML) programs and file suspicious activity
reports (SARs), and that law firm Ballard
Spahr
has a free webinar on Thursday for its attorneys to explain the new
requirements and discuss the steps non-bank residential mortgage lenders and
originators must take now to comply with the new requirements.  There is a
link to the webpage where readers can learn more about the webinar.

The drama with FHA continues. For
many months analysts have been pointing to its reserve fund, saying it is below
congressionally mandated levels and some suggesting it is basically insolvent. Even
the White House, in its budget proposal, noted that the agency’s capital
reserves would run out in the coming year, forcing it to draw as much as $688
million from the Treasury. But wait – HUD
Secretary Donovan later said that the banks involved in the $25+ billion
mortgage servicing settlement had agreed to pump close to $1 billion into the
FHA
. He also said the agency would raise premiums on loans it insures in a
further step to bolster its reserves, with the numbers coming this week. Broadly
speaking, HUD’s 2013 budget requests $44 billion from Congress, about the same
as this year. In addition, “HUD is asking for authority to guarantee $400
billion in mortgages through FHA’s Mutual Mortgage Insurance Fund which is
expected to provide 1.2 million single family mortgages, $149 billion in loan
volume, during the year and $500 billion in Ginnie Mae guarantee authority in
order to help finance a wide array of government-insured products” per Mortgage
News Daily.

So let’s see – first, additional
guarantee fees are levied
by the agencies for the next 10 years in order to pay
for a payroll tax cut for two months. And now the five banks involved in the servicing
settlement are chipping in $1 billion in order to support the FHA?
Soon the FHA’s increase in mortgage
insurance premiums will at least go to support itself. The FHA now backs nearly
$1 trillion in mortgages, and more than 9% of those loans are at least three
months past due, per a story in the WSJ. Remember that the FHA doesn’t make
loans but instead insures lenders against losses for mortgages that meet its
standards, and earns income by charging upfront and monthly insurance premiums
to borrowers. The agency said Monday it would increase the annual insurance
premiums by one quarter of one percentage point for loans that exceed $625,500.

The FHA is
taking some additional steps to limit risk and strengthen finances, and HUD may
require indemnification for ‘serious and material’ violations of FHA
origination requirements, and for “fraud and misrepresentation such that the
mortgage…”  Many lenders have not prepared for this risk and have not
begun reserving for the risk but it may not be enough. There are options, one
being insurance to protect from repurchase or contractual liability tied to
loans sold, including FHA. Contact Justin Vedder with Arthur J. Gallagher at justin_vedder@ajg.com to learn more.

Speaking
of taxpayer support, recently the CFPB
has released its first semiannual report to Congress outlining its activities
.
The report indicated the CFPB had hired more than 750 employees; fielded 13,210
consumer complaints (70% involved credit cards, 18% involved
mortgages and 12% were other); launched a supervision program to promote
compliance with consumer protection laws; and evaluating and developing
disclosures that make financial products’ costs and risks easier to understand.
The Bureau will soon unveil a prototype
for a new monthly mortgage statement (VIEW)
for consumers designed to clearly show
important information from their servicer. The statement will include the
principal owed on the loan, the current interest rate, the next date on which
the interest rate could change, a description of late payment fees and a phone
number and email address the homeowner could use to contact the company
servicing the mortgage. The agency also is working on a new disclosure rule for
hybrid adjustable-rate mortgages that would require consumers to be notified
months before their first interest rate increase, as well as to be provided
with a good-faith estimate of the new monthly payment. Servicers also would
have to tell customers about alternatives to try to head off a higher interest
rate, such as refinancing, per Politico.

Jerami A.
Marshal, the Chair of the Massachusetts
Mortgage Bankers Association
, was recently quoted, “Investors continue to tighten their evaluation of loan files under post-closing
and pre-purchase review
.  For the first in three decades, investors
are asking for additional documentation that is not required within GSE
guidelines or investor overlays in an attempt, as they say, ‘to strengthen the
loan file.’  Marshal went on to say, “The typical mortgage banker is left
to interpret investor guidelines on a more conservative manner than normal, not
as a means to correct the direction of past mortgage lending philosophies, but
to ensure salability of the loan transaction into the secondary market. 
Because of this, the low credit risk borrower, with a high credit score and low
debt-to-income ratio, is finding it even more difficult to obtain financing at
record low interest rates”.  In his opinion, Marshal says, “There seems to
be a clear direction that the days of common sense analysis under delegated
underwriting authority may become a thing of the past, in the not too distant
future.”

Most, if
not all, of lenders use some type of Appraisal Management Companies, a vendor
industry that sprang from HVCC. Yesterday a press release from NAIHP noted that it discovered many AMC’s are
operating without authority in most states and have failed to pay state income
tax.
“When businesses are formed, they are required to register with their
Secretary of State, for authority to conduct business. That registration alerts
the State Tax Department you exist and may be responsible for certain taxes.
The same holds true if you operate outside your home state, according to Marc
Savitt, NAIHP President. Most AMC’s are only registered in a handful of states,
but operate nationwide. If you’re not registered, you’re not paying taxes, said
Savitt. Although, HVCC and now Appraiser Independence rules don’t mandate the
use of AMC’s, many banks and large lenders, who own all or part of certain
AMC’s, require their usage by consumers. RESPA requires disclosure of these
affiliated relationships. After polling NAIHP members in several states, we
haven’t found one AMC or any of their partners disclosing these affiliations.
We’ve also discovered other RESPA violations as well, said Savitt.”

Turning to
the markets, Monday was more of the same: limited selling by originators met by
buying the Fed and the usual suspects of money managers, banks, and hedge
funds. There was no news here in the U.S., and Greek issues continued to
dominate the press. By the close on Monday the 10-yr was at 1.97% and MBS
prices were pretty much unchanged. This morning things have picked up a little
with Retails Sales for January, +.4%, less than expected, but ex-auto was +.7%,
better than expected. Import Prices +.3% as expected. The impact on the market
is negligible: the U.S. 10-yr note is
unchanged at 1.93%, and MBS prices are up.

In honor
of Valentines Day:
NICKNAMES
If Laura, Kate and Sarah go out for lunch, they will call each other Laura,
Kate and Sarah.
If Mike, Dave and John go out, they will affectionately refer to each other as
Fat Boy, Bubba and Wildman.
EATING OUT
When the bill arrives, Mike, Dave and John will each throw in $20, even though
it’s only for $32.50. None of them will have anything smaller and none will
actually admit they want change back.
When the girls get their bill, out come the pocket calculators.
MONEY
A man will pay $2 for a $1 item he needs.
A woman will pay $1 for a $2 item that she doesn’t need but it’s on sale.
BATHROOMS
A man has six items in his bathroom: toothbrush and toothpaste, shaving cream,
razor, a bar of soap, and a towel.
The average number of items in the typical woman’s bathroom is 337. A man would
not be able to identify more than 20 of these items.
ARGUMENTS
A woman has the last word in any argument.
Anything a man says after that is the beginning of a new argument.
FUTURE
A woman worries about the future until she gets a husband.
A man never worries about the future until he gets a wife.
MARRIAGE
A woman marries a man expecting he will change, but he doesn’t.
A man marries a woman expecting that she won’t change, but she does.
OFFSPRING
Ah, children.  A woman knows all about her children.
She knows about dentist appointments and romances, best friends, favorite
foods, secret fears and hopes and dreams.
A man is vaguely aware of some short people living in the house.
THOUGHT FOR THE DAY
A married man should forget his mistakes.
There’s no use in two people remembering the same thing!

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
residential lending and mortgage programs around the world, part 2. 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.

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