10 Mar 11 Brokers Challenge Loan Officer Compensation Rules
Loan officer compensation rules continue to be challenged as the mortgage industry groups gear up for a battle with the U.S. government. Two groups representing mortgage brokers and other real estate industry professionals have filed suit against federal regulators over new rules governing loan officer compensation that are scheduled to take effect April 1. The Federal Reserve drafted the rules to implement provisions of the Dodd-Frank mortgage reform and Consumer Protection Act that are intended to prevent loan originators from steering borrowers into higher-interest-rate loans.
httpv://www.youtube.com/watch?v=nqNZbSja8ho
The rules, which stipulate that loan officer compensation cannot be based on a mortgage transaction’s terms, will prevent mortgage brokers from collecting rebates on higher-interest loans known as yield-spread premiums, groups representing mortgage brokers say. Critics of yield-spread premiums say they can serve as an incentive for mortgage brokers to steer borrowers into high-interest loans, if brokers pocket the rebates themselves rather than applying them to borrower’s closing costs. Supporters say yield-spread premiums allow borrowers to finance their closing costs and home loan origination fees by paying a higher interest rate on their loan. Those costs can be a “major obstacle to homeownership” for those who can’t afford to pay them out of pocket, the National Association of Independent Housing Professionals said in a lawsuit filed Monday. The Fed’s rule is “arbitrary and capricious,” the NAIHP said in its complaint, because loan officers employed by banks will still be able to provide that same option to borrowers.
Bank loan officers offer loans with reduced or no upfront settlement costs in exchange for a higher rate on the borrower’s mortgage, and recoup those costs by adding a “service release premium” when they sell mortgages with higher interest rates in the secondary market, NAIHP’s suit said.
In overhauling the Real Estate Settlement Procedures Act (RESPA), the Department of Housing and Urban Development (HUD) “expressly approved (yield-spread premiums) as a way for borrowers … to pay settlement costs, including compensation to their broker for loan origination services,” NAIHP said. The lawsuit seeks a temporary restraining order and preliminary injunction barring the Federal Reserve from enforcing the rule. The public would be better served if the newly formed Consumer Financial Protection Bureau drafted a rule to implement Congress’ intent in the Dodd-Frank bill, the group said.
The National Association of Mortgage Brokers today said it’s filed its own lawsuit with the same goal. The section of the rule NAMB objects to “could cause devastating and irreparable harm to small-business mortgage brokers,” the group said. The Fed’s rule-making authority under the Truth in Lending Act (TILA) is scheduled to be transferred to the Consumer Financial Protection Bureau in July.
The Fed announced on Feb. 1 that it would not complete pending aspects of four rule-making proceedings, which included changes to TILA mortgage loan disclosures, restrictions on certain advertising practices and sales practices for reverse mortgages, and changes to the disclosure obligations of loan servicers. The loan officer compensation rules were already finalized when the Fed made that announcement. The Small Business Administration’s Office of Advocacy has cautioned that mortgage brokers may have difficulty determining if they are in compliance with the rules, despite additional guidance issued by the Fed in January.
25 Feb 11 Questioning the Loan Officer Compensation Rule from the Federal Reserve
Is the Federal Reserve way off in their attempt to limit loan officer’s compensation? Even if it’s a good idea to curb loan costs, should the Fed be capping income for an industry? The mortgage loan origination sector will affect thousands of people in each state. Of course every borrower wants a clearer path towards more no cost loan options, but if it deteriorates the industry is it worth it?
In a new letter industry trade groups are urging the Federal Reserve to reject a recent staff interpretation regarding its loan officer compensation rule that would restrict payments between mortgage companies and “affiliated” real estate brokerages and title agencies. The compensation rule becomes operative April 1st, 2011.
Trade group officials recently learned that the Fed staff believes fees paid to affiliated title or real estate brokerage servicers could run afoul of the rule. “This would, in effect, prohibit — for no justifiable reason — a successful and long-established business model that offers consumers one-stop loan services through a network of affiliated companies,” the letter says. The signers to the letter are urging Fed governors “not to adopt” the staff interpretation and consider two possible solutions.
One solution would be to exempt “bona fide and reasonable” fees paid for third-party title, appraisal and real estate brokerage services from the scope of the loan compensation rule. “A second solution might be to limit the definition of ‘affiliate’ to include mortgage lending and mortgage brokering businesses as specifically stated in the rule but not to include ancillary providers in that definition,” the letter says. Some of the signers to the letter include the Real Estate Providers Council, the National Association of Realtors, and Consumer Mortgage Coalition. Read the original article was written by Brian Collins for the National Mortgage News.
25 Feb 11 Higher FHA Loan Fees Coming
According to recent data released, FHA loan applications for refinancing and home buying were lower in January than in the previous month or in January 2010. Many mortgage professionals believe the loan demand has dropped as the interest rates have risen. According to the Department of Housing and Urban Development FHA loan applications reached 103,991 in January compared to 112,500 in December and 126,043 a year earlier. The year-over-year figure reflects a drop of 17.5%. There were 55,417 applications for home purchase and 41,178 for mortgage refinancing.
Will borrowers rush to lock into a FHA loan before HUD hikes the FHA Fees?
Year-to-date figures also show a substantial decrease in activity between FY 2010 and FY 2011. Total applications are 26.7% lower with purchase mortgages down 34.3% and refinancing off 22.1%. Total endorsements are 24.1 % off of the 2010 pace with most of the fall-off accounted for by the purchase sector which was down 34 %. FHA refinancing endorsements fell8.1 % and HECM endorsements are at -23.3 % the 2010 level. The total unpaid principal balance amount is $947.8 billion. The portfolio has a current delinquency rate of 8.9 % with 612,443 loans over 90 days delinquent. In December the rate was 8.8% and one year earlier it was 9.2%. The weighted average FICO score for FHA loans was 703, one point higher than the previous month and nine points above the score a year earlier. Many industry insiders have signaled that HUD is tightening guidelines and elevating the FHA credit requirements in 2011.
According to the Lead Planet, in January there were 5,735 FHA loan applications a day. The Department of Housing and Urban Development indicated that the average processing time from application to funding was slightly over 2 months. These figures are from the Single-Family Operations Report for January issued this week by HUD. Even as FHA mortgage rates have increased in 2011, the popularity has been raised since the beginning of the foreclosure crisis but the agency has also raised upfront and annual premiums in the past year. Thirty-year home loan rates have risen more than half a point since the record lows in December of 2010. Declining loan demand in January is no surprise given the uptick in mortgage rates we witnessed. FHA rates are now off those highs but loan production has yet to pick-up. We are curious to see how the FHA’s decision to raise the annual mortgage insurance premium will impact loan demand before the new fee structure goes into effect on April 18th.
08 Feb 11 Impact of New FHA Rules
Many FHA lenders have been deeply impacted by the new rules that HUD enacted in January for FHA lending. Last year, HUD announced that FHA lenders will see increased liability from additional responsibility that comes with originating FHA refinance and purchase mortgages. HUD continued, “Lenders, brokers or other third-party originators, already approved by FHA, will be authorized to continue to originate FHA mortgage loan programs through the end of the calendar year without sponsorship of an approved FHA lender.
The other concerns FHA lenders have is implementation of the Dodd-Frank Mortgage Reform Act this summer is bound to make originating loans more difficult as the government mandates tougher loan restrictions with tighter underwriting guidelines for conforming and FHA guidelines. Read the original article, Approved FHA Lenders and New Rules.
07 Feb 11 BofA Bails Out of Reverse Mortgage Market
Last week, Bank of America Home Loans announced the sale of its Balboa Insurance organization to the QBE Insurance Group Ltd. BofA maintains they are shifting away from the reverse mortgage loan market. A BofA spokesman said they exiting of reverse loan program underline the bank’s additional step to focus on its core mortgage loan operations. The division employed 600 people and if they’re not moved to another area in the company, they will have the opportunity to apply for other job openings at the bank. BofA made new last month because of having to buy back more bad mortgages than previously anticipated.
After operating a small retail operation, BofA made a big splash into the senior home loan market, when they purchased Seattle Mortgage’s reverse mortgage business for $220 million in 2007. The latest data from Reverse Market Insight shows the bank’s retail channel decreased 29.4% during the year. Yet, BofA was the second largest reverse mortgage lender in the country, behind only Wells Fargo.
26 Jan 11 The State of the Mortgage Industry 2011
In the spirit of politics, Bryan Dornan published an article outlining the “State of the Mortgage Industry.” In April there will be significant changes as the Dodd-Frank mortgage reform bill will finally go into motion. Dornan points out short-sidedness of this bill that is supposed to protect consumers. Like many mortgage executives, he believes that this reform bill is bad for the mortgage industry and ulitemately it will be bad for consumers because the cost to finance a new home and mortgage rate refinancing will rise significantly. In is inevitable that we will see a consolidation in the home financing market as many smaller brokers will close their shops, because they can’t compete with the new rules. The mortgage reform bill will change the way brokers and loan officers are paid and many lending companies have already started down-sizing their loan originators. Read the complete article online > The State of the Mortgage Market
21 Jan 11 Bank Of America Announces More Losses from Bad Mortgages
Home loan defaults and increased mortgage write-downs continue to take their tolls on the housing and financial sectors. Bank of America Corp. (BAC) posted a 4th-quarter loss, weighed down by charges from pre-announced settlements and write-downs related to bad mortgage loans. BofA also reported falling revenue as well. Bank of America closed out the first year of Brian Moynihan’s stint as chief executive with its 2nd-consecutive loss from bad mortgage debt. Moynihan called 2010 “a necessary repair and rebuilding year” and insisted the charges were putting problems behind the bank to start 2011 off well.
Analysts were split on which charges to include in estimates, making comparisons for investors more difficult. After initially falling, shares were recently up 0.2% to $14.57. The stock is up 28% in the past three months. The biggest charge in the quarter was $4.1 billion relating to outstanding and future mortgage repurchase claims. That charge included a $3 billion provision announced earlier this month when Bank of America agreed to buy back bad credit mortgages from Fannie Mae (FNMA) and Freddie Mac (FMCC). But the settlement didn’t settle all of the bank’s trouble with investors in mortgage-backed securities. The bank raised its litigation war chest by $1.5 billion and Chief Financial Officer Charles Noski warned on a conference call that losses from private investors on mortgage-backed deals could be as much as $10 billion.
05 Jan 11 Home Loan Activity Rises
Home loan activity rose over 2% last week as mortgage rates fell. Conforming, VA and FHA mortgage loan activity all inched higher the last week of 2010.
For the week ending December 31, the volume of home purchase and mortgage refinance applications increased 2.3% after falling 3.9% in the prior week to the lowest level since December of 2009. Both weeks’ results included adjustments to account for the Christmas and New Year’s Day holidays.
The Mortgage Bankers Association reported data on Wednesday for the weeks ending December 31 and December 24. The MBA typically reports on home loan activity each week but did not do so last week as it made adjustments for the Christmas holiday.
28 Dec 10 Have Home Mortgage Rates Reached Lows?
2010 may be remembered as the year that home mortgage rates declined to all-time lows. Most economic indicators point towards higher mortgage interest rates going forward as inflation begins to seap in. It’s not just subprime lenders raising rates on bad credit mortgage programs either. Borrowers with good credit are seeing higher rates from conforming, jumbo and FHA lenders.
According to Weiss Researchwhen rates fell to 4.125% last month that was the lowest since Freddie Mac began tracking rates in 1971, as well as the lowest since World War II, a financial analysis and publishing firm in Jupiter, Florida. The highest point last year peaked at 5.21%, in April.
The Mortgage Bankers’ Association, a trade group, predicts that 30-year fixed rates will inch up to 5.1% by the end of 2011 and reach 5.7% in 2012. In a slightly more optimistic prognosis for homeowners or buyers, Frank E. Nothaft, the chief economist of Freddie Mac, wrote in an annual trend forecast on December 6th. that “while some rise in fixed-rates is expected, thirty-year fixed-rate mortgages are likely to remain below 5%” throughout 2011.
21 Dec 10 Home Loan Debt In America Drops
Lower home sales prices, foreclosures and principal reductions have all contributed to lower mortgage debt in the United States. The dollar amount of outstanding mortgage loans in the U.S. continued to fall in the third quarter as more consumers engaged in cash out refinance and home equity loan transactions while others lost their property due to foreclosure or short sale.
According to reports compiled by National Mortgage News and the Quarterly Data Report, U.S. consumers owed $9.807 trillion on their mortgages at September 30th, down slightly from $9.894 trillion at mid-year.
Housing debt peaked at $10.138 trillion at the end of 2009. Some housing analysts, including Laurie Goodman of Amherst Securities, anticipate that another 11 million homes could be lost to foreclosure over the next few years unless the government improves its loan modification efforts. The dollar amount of outstanding mortgages is being reduced because Americans who can afford to are paying down balances.
21 Dec 10 More Home Mortgage News
The Mortgage Bankers Association continues to report that interest rates are all over the map. Home mortgage news has been focusing on interest rates rising and foreclosure proceedures being rectified.
Is home financing available? Yes. Mortgage brokers and mortgage bankers have access to a multitude of lenders and money is available. Also, interest rates are near historic lows and consumers with good credit scores are qualifying. Meet with an experienced loan officers to explore your options.
Is it possible to qualify for a refinance loan? While there are more challenges than in the past, it is possible to refinance. Even if your house value does not come in where you need it, there may be loan programs available. Make sure the cost of refinancing mortgages is either paid by the lender or rolled into the loan.
In other mortgage news, the state of New Jersey courts are threatening to block six major mortgage lenders from foreclosing on most homeowners unless they can verify and document that the foreclosure process is lawful. On Monday, judges ordered six lenders to defend their foreclosure practices and 24 others to produce reports on their process.
New Jersey is now requiring banks’ attorneys to certify that they spoke with a bank employee who reviewed the foreclosure documents, a practice similar to one enacted in October by New York. For now, home foreclosures will continue, but Mr. Rabner said he didn’t expect a rush to push cases through in the meantime. The 6 banks—Ally Financial, Bank of America, Citibank, JP Morgan Chase, OneWest Bank FSB and Wells Fargo—were involved in 29,000 of the 65,000 foreclosure filings in New Jersey in 2010, Mr. Rabner said.
08 Dec 10 Mortgage Interest Deduction
Let’s be honest— homeowners deserve the mortgage interest deduction. Most people bought their home on the assumption that they would get the mortgage interest deduction. MBA reported the home purchase loan applications are way down again, so you have to wonder about the poor timing of the government’s discussions of eliminating this popular interest deduction for homeowners. Most economists believe that if the interest deduction disappears, it could make house values decline another 15%. It is having a chilling effect on some potential homebuyers. Unfortunately, some consumers already believe that the deduction will not be available to them. The federal deficit reduction commission’s recommendation has sown the seeds of uncertainty, as even current homeowners fear that they will not be able to claim the deduction and that their homes will lose even more value.
Historically, the real estate industry has generated 15-18% of U.S. gross domestic product. During the 2001-03 recession, real estate was one of the few growth sectors in the entire economy. Even now, despite serious problems in both housing and commercial real estate, the industry accounts for about 15% of GDP. Many experts have stated that we will not return to better economic times unless and until real estate markets stabilize. 30 year interest rates hover 4% and 15-year mortgage rates are still available at 3.5%. Read the original article online at Lender Intelligence > Will Obama Eliminate Mortgage Interest Deduction?
29 Nov 10 Home Mortgage Rates Come Down
After a rise in rates last week, home-mortgage rates stabilized this week, with rates on fixed-rate mortgages barely changing, according to Freddie Mac’s weekly survey of conforming mortgage rates, released Wednesday. 30-year fixed mortgage loans averaged 4.4% for the week ended Nov. 24, up from 4.39% last week. The rate averaged 4.78% a year ago.
Fifteen-year fixed-rate mortgages averaged 3.77% this week, up from 3.76% last week. It averaged 4.29% a year ago. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 3.45% this week, up from 3.4% last week. The ARM averaged 4.18% a year ago.
But mortgage rates on one-year Treasury-indexed ARMs fell, averaging 3.23%, compared with 3.26% last week. The ARM averaged 4.35% a year ago.
To obtain these mortgage interest rates, the 30-year fixed home loan rates required payment of an average 0.8 point, the 15-year fixed-rate mortgage required an average 0.7 point, and both ARMs required an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.
He also said that homeowner balance sheets are improving. “Mortgage delinquency rates continued to move down in the third quarter, with the overall delinquency rate falling to 9.13%, the lowest since the first quarter of 2009. For the first time during the housing downturn, the overall delinquency rate is lower than it was a year earlier,” he said.
28 Nov 10 Fannie Mae Tightens Mortgage Lending Guidelines
It’s no secret that lenders have tightened Freddie Mac, Fannie Mae and FHA guidelines in 2010. Fannie Mae has made it clear that they will continue to require more from borrowers in 2011. Fannie Mae is getting tougher on debt-to-income ratios, or the amount of a borrower’s gross monthly income that goes toward paying off all debts.
The maximum ratio for those seeking a conforming 30-year fixed rate mortgage loans will drop to 45% from 55% under the new guidelines. But perhaps the toughest news from Fannie Mae concerns borrowers who have gone through foreclosure. They will be excluded from obtaining a Fannie-backed loan for seven years, up from four.
Interested Party Contributions (IPCs) funds that flow from an interested party through a third-party organization, including nonprofit entities, to the borrower. Fannie Mae does not permit IPCs to be used to make the borrower’s down payment, meet financial reserve requirements, or meet minimum borrower contribution requirements.
27 Nov 10 2011 Home Loan Limits Announced for Freddie Mac
Today, Freddie Mac announced its maximum conforming home loan limits for 2011. The government funded mortgage giant extended the mortgage loan limits at least the first nine months of 2011. A spokesman for Freddie Mac said the home loan limits will be unchanged from those in effect during 2010 as the result of new calculations from the Federal Housing Finance Agency. HUD made a similar announcement a few weeks ago for FHA loan limits.
The 2011 conforming mortgage loan limits (applicable to non-high cost areas) remain:
► $417,000 for home loans on one-unit properties
► $533,850 for home loans on two-unit properties
► $645,300 for home mortgages on three-unit properties
► $801,950 for home loans on four-unit properties
Maximum home loan limits for the nation’s high cost areas for the first nine months of remain unchanged from last year. The current maximum high cost limit is $729,750 for a 1-unit single family property in the contiguous United States, although actual loan limits for a specific high-cost area may be lower than the maximum permitted loan limit. The 2011 maximum loan limits for high cost areas are in effect for mortgages originated through September 30, 2011, consistent with a Congressional continuing resolution that extends the current maximum limits.
The continuing resolution sets the maximum loan limits for high cost areas for the first nine months of 2011 as the higher of the maximum limits determined under the Economic Stimulus Act of 2008 (ESA) and the Housing and Economic Recovery Act of 2008 (HERA). These limits are updated annually by FHFA. After calculating the 2011 HERA loan limits and comparing them to the ESA limits, FHFA determined the maximum loan limits for high cost areas for the first nine months of 2011 would be the same as the 2010 maximum loan limits for these areas. For more information on the conforming loan limits, visit the Federal Housing Finance Agency website at www.fhfa.gov.
