The Ability-to-Repay (ATR) and the Qualified Mortgage (QM) rules are in effect as of January 10. It seems a little late, but yesterday a Subcommittee of the House Financial Services Committee held hearings to consider how the new rules will harm current and prospective homeowners. Representatives from the lending industry spoke about the limiting effect these rules will have on credit availability, especially on credit for low to moderate income borrowers. Committee members are considering proposed new laws to modify these rules.
FHFA has answered a couple of the questions we raised on Tuesday regarding the Congressionally mandated increase in Fannie Mae and Freddie Mac guarantee fees (G-fees). Effective April 1st all G-fees charged by Fannie and Freddie will be increased by 10 basis points. In addition, FHFA said that during the first part of 2012 they will determine whether the new law will require additional increases in the G-fees. Since G-fees are paid from the interest on a loan, this increase will cause mortgage rates on loans going into Fannie and Freddie mortgage-backed securities after April 1st to rise by a similar amount.
Jon Traver, a mortgage industry consultant, joined the Lykken-On-Lending show today to discuss the issues and considerations associated with loan originators and mortgage branches shopping themselves to interested suitors. Jon believes an LO or a branch manager is not doing himself justice if he doesn’t do this. He may find that he is in a perfect place, but he owes himself the effort to find out. Jon has created a matrix of 100 things originators and the intended suitor should consider when trying to determine if the two are a good match for each other. Examples include the sophistication of the suitor’s marketing resources. This varies considerably and to some LOs it is vitally important. To others not so. The size of the suitor and its degree of oversight over the LO’s functions can vary significantly and can be a great thing for one LO but not so for another. Jon’s bottom line is get to know the person to whom you are talking. Consider far more than the surface stuff like product and pricing. These can be important, but there is so much more to know. Click PLAY to listen to the podcast of this week’s BlogTalkRadio/Lykken on Lending with [...]
Prices on lower coupon mortgage-backed securities (3.5% and 4.0%) have improved today while prices on higher coupon securities (above 4.0%) have fallen. The cause appears to be an announcement that the Obama administration is considering a broad refinance program for government guaranteed loans to be refinanced without the normal restrictions, like LTV. The details of plans being considered are not available. The goal of the program would be to stimulate the economy, as people would have more discretionary funds. The downside could come from MBS investors whose investments will pay off much faster than anticipated. On future investments, investors would likely pay lower premiums for higher coupons. This news should have little impact on most loans currently in your pipeline. Read the full article from The New York Times: U.S. May Back Refinance Plan for Mortgages
QRM Update: The FDIC has voted to release its proposed definition of a Qualified Residential Mortgage (QRM). QRMs will be exempt from risk retention requirements. Under the proposed definition Fannie Mae, Freddie Mac, FHA, and VA loans will be QRMs. For non-agency loans to meet the definition and to avoid being subject to risk retention, among other requirements, they must have down payments of 20% or more and DTI of 28% / 36% or less.
Having a strategy and a plan to implement that strategy is always important. For the mortgage industry, it is even more important now as the consequences from regulatory changes are likely to change the origination landscape significantly. Implementing the regulatory changes will take considerable effort in retooling systems, training staff, and monitoring for compliance. All this will come with a price tag. Some companies will choose to get out before the changes are to be implemented. Others will choose to join firms that have the resources to implement the changes. Some firms will implement policies and controls based on the strictest, most conservative interpretation of the new regulations, and others will take a more common sense approach. All this is said to support the argument that over the next year or so we will see considerable movement within the industry. Firms with capital, systems and support in place will be well-positioned to benefit from the movement. So if your strategy is to profitably grow your origination business in a compliant manner, you should have a tremendous opportunity in the coming months. Your plan should include building capital to pay for the cost of change and to support larger volumes, employing systems [...]
Wouldn’t it be nice if Congress would extend the “close-by deadline for those trying to get the Homebuyer Tax Credit? Sure it would. Wouldn’t it be even nicer if they did it now, June 21st, before we all break our backs trying to get the thousands of transactions closed by June 30th? Any anxiety out there right now? Glen Corso, Executive Director of The Community Mortgage Banking Project and an industry advocate, brought to the BlogTalkRadio show today an up to the minute status report on HR 4213, the bill being considered by the Senate which, if passed, will extend the “close-by deadline to qualify to receive the Homebuyer Tax Credit from June 30th to September 30th. According to Glen, there is very little controversy on whether or not to extend the deadline. Most are in favor of it. The rest of the bill, though, includes significant controversy and because of it, might not pass any time soon. As a result, this is not a time to relax. Push to close all the purchase loans that you can before the existing June 30th deadline. Glen also provided a shocking update from the House and Senate Conference Committee working on the [...]
It is being reported that Senate Bill 3217 Restoring American Financial Stability will soon pass out of the Senate. There are many things in this bill which will effect the mortgage industry. In an earlier blog post I discussed the likely impact of the "Skin in the Game" provisions of this bill. In this post, I will discuss the provisions in this bill which will restrict Loan Officer compensation. Glen Corso, Executive Director of The Community Mortgage Banking Project, discussed on the BlogTalkRadio/Lykken-on-Lending show on Monday that the amendment to Senate Bill 3217 which, among other things, prohibits loan originators from receiving compensation based on the terms of the loan. He explained that the amendment was introduced late Tuesday evening May 11th and was passed on Wednesday morning May 12th, giving himself and other industry advocates no chance to weigh in on the amendment. The intent of the amendment is to remove any incentive for an originator to charge more in origination fees to a borrower or to give a borrower a higher mortgage rate than the basic rate and price as established by his or her origination company. So this amendment essentially prohibits companies from paying loan officers a [...]
Senate Bill 3217 Restoring American Financial Stability was the focus of discussion on the show Monday, particularly two recently passed amendments which are of great interest to the mortgage banking industry. The amendments deal with risk retention and loan officer compensation. One is good for the industry and the other is not. Glen Corso, Executive Director of The Community Mortgage Banking Project, joined the show to bring a first hand understanding of the amendments and their status. The amendment that is good for the mortgage industry deals with the risk retention provisions of the original bill. The original bill would have required mortgage originators to retain “skin in the game. It would have required originators to retain 5% of the risk on all the loans they originated and sold to investors. The amendment exempts from the 5% risk retention requirement certain mortgage loans which meet the definition of Qualified Mortgage Loans. Since 90% or more of today’s loans will meet the definition of Qualified Mortgage Loan, the amendment significantly reduces the number of loans on which originators will be required to retain risk. The amendment that is not good for the mortgage industry restricts how loan originators are to be [...]