Thoughts on Provident’s Condo Change; Accumulation of Investor and Lender Changes

Out in
Northern California the weather is generally good, and Triserv Appraisal Management Solutions is searching for a Regional
Sales Executive
for that area. Triserv is a national appraisal
management firm.  “With a service-first culture, national panel of
appraisers and integrated technology, Triserv is able to offer a seamless
appraisal process. In turn, we remain focused on building customer confidence,
improving operational efficiencies and driving performance.  Our ultimate
goal is to create sustainability for the appraisal management industry. And if
investor repurchases are an issue,  Triserv has a team of experienced work
out specialist with a proven track record of assisting our clients cure 60% of
prior appraisal related investor repurchase requests.” If you’re interested, or
know someone who is, contact Brad Harvey, the Director of Sales for the West at
bharvey@triservllc.com.

As
mentioned Friday in the commentary, Provident Funding told its clients that “condominiums
are now unacceptable properties except for high rise condominiums located in
Chicago, Honolulu, San Francisco and Seattle.” I received several inquiries
into why the company did this. “Rob, here’s my theory as to why Provident
made that change. It drives its costs down, and Provident historically hasn’t offered
products that are higher cost to originate. Condos cost more to originate
because of the additional work that the lender has to do to get the project
approved, or the additional risk that the lender takes in supplying reps and
warrants for condos to the agencies. If Provident’s goal is to not originate
higher cost product, this makes all the sense in the world, and look for others
to follow. And high-rise condo complexes mostly likely already have agency
approval – just a theory.”

And this
note: “I wonder if Provident is tightening their underwriting guidelines to
improve their execution in the secondary market.  Pools with Provident as
the servicer are a major red flag (for prepayment risk: extremely low rates +
heavy TPO) in the MBS market and one of the reasons why Gold/FN swaps have been
so negative since Provident is primarily a Freddie servicer.”

And lastly
on Provident’s condo change: “This type of property type does not fit Provident’s
ultimate quality model in terms of both marketability and occupancy fraud. In
addition, the staff has other priorities than to deal with the additional
underwriting burden (the Condo Cert and the Master Insurance Policy and the
Annual Budget and the HOA lawsuits and the surprise assessments to cover
maintenance and capital improvements that were not reserved for by incompetent,
part-time, volunteer HOA Boards.”

Turning to
other investors, here are some happenings in the banks from the past couple of
weeks:

In an
on-again-off-again process that took 9 months, the Fed officially approved Capital One Financial’s $9 billion acquisition
of online bank ING Direct
. The transaction moves Capital One to the 5th
largest bank based on deposit size.

Citi updated its Ineligible
Originator List, a database of brokers, correspondents, and other loan
originators whose loans originations are not eligible for purchase.  The
full list can be viewed on the Citi Correspondent website, along with the
Appraiser/Monitor Ineligible List, which is updated regularly.

The Consumer Financial Protection Bureau
has issued new examination procedures for payday lenders.  Be warned:
they’re very thorough.  The procedures are divided into five “modules”:
marketing; application and origination; payment processing and sustained use;
collections, account in default, and consumer reporting; and third party
relationships.  The modules are so designed to ensure compliance with six
federal statues and regulation set out under Dodd-Frank’s UDAAP provision.

As most know, the FHA and HUD have decreed that mortgagees participating in the
Lender Insurance programs are now required to reimburse HUD for self-endorsed
loans that are ineligible for FHA insurance. (So why would any company
self-endorse??)

A couple
weeks ago the FHA announced new regulation that aims to protect the Mutual
Mortgage Insurance Fund by strengthening the requirements of certain lenders to
reimburse HUD for insurance claims on mortgages that don’t meet HUD guidelines. 
As of February 24th, all lenders with authority are subject to stricter
performance standards that will determine their approval status as well. 
The full release can be accessed at http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2012/HUDNo.12-010.

Fannie Mae has rolled out several Selling
Guide Updates. On January 31, for example, Fannie Mae issued Selling Guide
Announcement SEL-2012-01, which provides updates and changes regarding (i)
Construction-to-Permanent Financing; (ii) effective quality control plans, and
(iii) other miscellaneous Guide topics. The changes to the Construction-to-Permanent
Financing provisions aim to more closely align the policies related to such
financing with standard requirements for other refinance transactions. The
updates to the requirements for the lender to have an effective quality control
plan do not establish any new policies, but seek to clarify requirements for
lenders’ post-closing quality control process. For a copy of the Fannie Mae
Announcement, please see https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2012/sel1201.pdf.

On 1/31 Freddie Mac issued Bulletin
2012-3 to formally extend the Uniform Loan Delivery Dataset (ULDD)
implementation schedule. ULDD mandatory compliance is now required for all
loans submitted to Freddie Mac on or after July 23, 2012 (previously March 19,
2012). To provide a transition period, Freddie Mac will update its system for
the ULDD data points on April 23, 2012 (previously January 23, 2012). The
Bulletin also alerts sellers as to the Single-Family Seller/Servicer Guide
updates requiring new ULDD data points for all mortgages with application
received dates on or after August 1, 2012 that are delivered on or after
November 26, 2012. Lastly, the Bulletin notifies sellers that Appendix A of the
Implementation Guide for Loan Delivery Data has been updated to reflect these
changes. For a copy of the Freddie Mac Bulletin, please see http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1203.pdf.

Going on, Fannie Mae has expanded guidelines on retirement assets such that
liquid retirement assets that can be withdrawn without penalty can now be
converted to income, and borrowers can use 70% of the retirement account to
qualify. Fannie now has blanket delegation of authority on behalf of PMI
Mortgage Insurance servicers, which means that the latter no longer requires
separate mortgage insurer approval when processing foreclosures sales or
deed-in-lieu of foreclosures.

Freddie
Mac has issued new requirements for non-assumable Guaranteed Rural Housing
mortgages as well as amendments to GRH-related terminology.  Written
approval to sell these mortgages is mandatory, and if you’re looking for a
chapter on “Mortgages for Newly Constructed Homes” and “Newly Built Home
Mortgages,” don’t bother-Chapter K33 has been renamed “Construction Conversion
and Renovation Mortgages.” Sellers are also reminded of the disclosures
required of Freddie under Dodd-Frank: all securitizers (including GSE’s) must
disclose information on ABS and loan purchasing requests, the latter of which
includes the originator’s identity.

Freddie
Mac HARP Overview sessions for housing counselors will be available on a number
of dates throughout February.  These sessions are aimed at nonprofit
housing counseling organizations and provide an overview of the changes to HARP
and borrower, mortgage and property eligibility.  Registration info can be
found at http://www.freddiemac.com/corporate/housingpros/harp_overview.html.

Contingent upon borrowers’ ability to meet the minimum contribution, Fifth Third is allowing gift funds to
be used for reserves on primary residences. Fifth Third have also issued
reminders that as of November 30, 2011, they no longer accept loans that
contain Trust Agreements; full documentation is required for all Super Conforming
loans.

Guild Mortgage spread the word to clients that it
will now close DU Refi plus loans covered by mortgage insurance.

In accordance with the CFPB’s ruling that the USDA annual fee is no longer
considered mortgage insurance for RESPA and TILA disclosure purposes, Home Savings has tweaked the way forms
are filled out.  Loans disclosing USDA Guarantee Fees as mortgage
insurance will be processed as a changed circumstance. A few weeks ago HSOA told
clients that 15-, 30-, and 45-day locks are now available on all
programs.  Although they had previously indicated that 60-day locks were
limited to the HS1000 program, a correction has been issued stating that 60-day
locks are not available at all.

Back in November 2011, US Bank
announced the HASP/HARP enhancements but was then forced to delay.  The
new Delivery Fee Cap reductions are now available for new locks taken on these
programs’ loans so that, if the amortization is less than 20 years, the cap is
reduced to zero, and for amortization is greater than 20 years, the cap is
reduced to .75%.  Investors are reminded that these reductions apply
solely to owner-occupied and second homes with LTVs of more than 80%.

Wells Fargo Wholesale is revising its
policies on pipeline loans in accordance with Dodd-Frank (daily trivia:
Dodd-Frank is apparently allowed to “exert preemption” over select state
laws).  The changes, which come into effect on March 1st, will impact
pipeline loans in California, Iowa, Kansas, Massachusetts, New Jersey,
Tennessee, and Wyoming in a variety of areas, so it’s worth checking out the
full matrix. As of March 1st, loans for attached condos and PUDs will be
subject to changes in Hazard Insurance guidelines requiring more comprehensive
coverage.  Note that this won’t affect detached units, and should the
development’s master policy provide walls-in coverage, the borrower will not
need to obtain their own policy. And starting today, Wells will no longer
originate originating Tablefund loans in Kansas due to restrictions outlined in
the Kansas Uniform Consumer Credit code.  The same goes for originating Traditional
loans with a LTV/CLTV/TLTV of more than 100%.

Due to a high volume of incoming membership applications, Flagstar has announced that MERS will be extending the deadline for
originators of loans with MERS as the original mortgagee from February 27 to
March 31. Other recent changes at Flagstar include some tweaks to the Loantrac
system, guidelines for New York CEMA loans, and conventional underwriting guidelines,
the last of which is to comply with the modifications to Freddie Mac
transactions.

Affiliated Mortgage Company has
decreed that all conventional loans closing more than 30 days prior (reduced
from 45 days) to their purchase by AMC must have an Appraisal Update to ensure
that the property’s value hasn’t declined from the time of the original
report.  All conventional loans delivered for purchase on or after
February 21 will be affected. A wag of the finger: due to a large number of
loans AMC has purchased that had incorrect and insufficient documentation of
the borrower’s receipt of appraisal reports, all loans delivered on or after
February 21 will require a full Appraisal Independence Requirements Borrower’s
Acknowledgement Form.  The form must be executed at least 3 business days
before closing.

Instead of a joke today, how about a little presidential salary trivia?
Presidents began the 1900’s with annual salaries of $50,000. This was raised to
$75,000 for Taft, Wilson, Harding, Coolidge, Hoover (Herbert did not accept a
salary – he gave the money to charity), Roosevelt, and Truman. (During Truman’s
administration presidents began receiving an allotment of $50,000 per year for
expenses.) The salary was raised to $100,000 for Eisenhower, Kennedy (he did
not take a salary), and Johnson. Inflation really began to kick in as it was
raised to $200,000 for Nixon, Ford, Carter, Reagan, Bush, and Clinton, and then
another raise in 2001 to $400,000 for George W. Bush and Obama.

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.

…(read more)

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