Thursday, January 19, 2017

From John Councilman, NAMB Past President

You may have noticed that News From NAMB is not just links to other media stories but also goes to primary sources.  News From NAMB is different because we find important information that may not be reported elsewhere and we comment on why it is relevant to you, often in a fun way.  Best of all, it is free to NAMB members. News From NAMB is sponsored exclusively by United Wholesale Mortgage. 

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Texas Congressman May Be New CFPB Director

Donald Trump met with former Texas Congressman Randy Neugebauer recently to discuss Neugebauer running the CFPB.  Trump spokesman Sean Spicer confirmed the meeting’s reason with reporters.  Unless a court ruling declaring a sole Director is unconstitutional because it is not subject to the President is overturned by the Supreme Court or reconsidered by the lower court that decided it, Trump can axe Richard Cordray whenever he wants.  Neugebauer has been an opponent of current CFPB actions, introducing legislation to have the agency run by a 5-person panel rather than a sole Director.  Speaking at a conference last year, he said, “Over the last several years, the Bureau’s actions and record have proven it can’t function in a sustainable manner. Perhaps, more than any other Washington agency, the CFPB has demonstrated a lack of transparency and a lack of accountability. It has proven it is susceptible to political influence – bringing into question its independence. This is all the more troubling because the Bureau has an important mission: to protect consumers.”


Trump Expected to Rollback FHA Premium Cut

Several media outlets and the MBA who have been speaking to Trump insiders claim Trump is likely to rollback the FHA premium cut.  Trump has promised to roll back every executive order or memorandum of instruction Obama issued on day one.  Ben Carson would not speak to the FHA premium cut, just saying it is expensive.  This could cause some angst with lenders who are already taking loans with the lower premium.


Carson Appears Before Senate Banking

Dr. Ben Carson, Donald Trump’s nominee for HUD Secretary, appeared before the Senate Committee on Banking, Housing, and Urban Affairs for Carson’s confirmation hearing.  The hearing was going on as this newsletter was being produced.  It was obvious that Carson has become a much more skilled politician.  No one laid a glove on him, although a few tried.  Regarding mortgages, this is interesting…  “Do you believe it is possible to have a 30-year mortgage without a government guarantee?” Senator Tester asked.  “Yes, I believe it is possible,” Carson answered.  “How are you going to do it?” Tester asked.  “The private sector.  But you can’t do it overnight,” Carson responded.  For those of you who have 2 hours to kill, you can watch the entire hearing.


Obama Ex-HUD Official Calls Carson Nomination Offensive

Mark Linton served in senior leadership roles at HUD for 6 years under the Obama administration.  Linton is incensed by Carson’s nomination.  He writes, “Carson’s appointment means that Donald Trump plans to ignore America’s housing and community redevelopment needs by placing a completely unqualified partisan to run an agency he clearly doesn’t understand—or, worse, that Trump does want Dr. Carson to run the agency, acting on his scariest and wackiest views.”


Ginnie Mae Head Resigns

Ted Tozer, who has headed Ginnie Mae for the last 7 years, announced he will be leaving the post effective January 20th.  When asked about his future plans, a spokeswoman said, "His plans are to do what every other political appointee does.”  One must assume that he would become a consultant.  Tozer had the task of making certain there was a market for mortgages in 2010 when few in the private sector were interested.  Tozer gave an insightful interview to National Mortgage News as he departs.  It is no coincidence that Tozer, an Obama appointee, departs on inauguration day.


Could CFPB Complaint Handling Database Lead to Blackmail?

We already know that the CFPB opens investigations based on postings in its Complaint Database.  Now, the CFPB is proposing to allow consumers to rate companies’ dispute handling, perhaps with a 1 to 5-star rating something like Angie’s List.   The CFPB could begin the ratings as early as January 29th if OMB approves the proposal.  One must wonder if consumers could use the complaint and rating system as a means to get debt forgiveness or other compensation by threatening creditors or brokers.  Originally, we were told the Complaint Database would only contain findings where wrong-doing was confirmed.  It has morphed far beyond that.


Who Is Calling the Shots at HUD Now?

Until Dr. Ben Carson is approved by the Senate, someone needs to move HUD into position for the new administration.  The Trump transition team has selected Sarasota Housing Authority executive director William Russell to be the one "laying the groundwork for the permanent people" and keeping HUD operations running smoothly during the transition.  Russell was Deputy Assistant Secretary for Public Housing at HUD before moving to Sarasota in 2005 to take over the city's trouble housing authority.


Is taking clients on a cruise illegal?

A Minnesota title company was fined $50,000 for an alleged kickback scheme where the title company took real estate and mortgage professionals on a cruise.  The Minnesota Department of Commerce said the title company violated RESPA.  So far, none of the loan originators have been fined but it is also illegal to receive a kickback.  The state took issue with the cruise because everyone on it had referred business to the title company.


Mortgage Applications Improve a Little

Mortgage applications were up .8% over last week in the MBA’s latest survey.  That really is not that impressive because last week was not that good.  Compared to last year at this time, mortgage applications are down 1%.  Of course, rates are the culprit.  Refis still won’t die, making up 53% if the applications.  Applications for newly constructed homes were 2% better than the previous year.  November was a hot month for new home mortgages this year so December showed a dramatic drop as rates shot up and people were absorbed in the holidays.


Small VA Lenders Will Need to Upload Submissions

While most VA lenders have automatic authority, there are still a lot of small lenders who do not have an underwriter on staff with automatic approval.  The submit using Prior Approval.  VA used to allow a package to be shipped to them for underwrite.  Times are changing and now VA is requiring an electronic upload into WebGLY.


Global Warming is Real According to HUD

While HUD didn’t come out and say exactly that, they are preparing for more flooding.   "Our nation is faced with mounting and compelling evidence that future flooding events will be increasingly costly and frequent," says HUD Secretary Julian Castro.  HUD’s answer is to require construction or rehab using HUD financing to be 2 feet instead of 1 foot above the Base Flood Elevation.  For the time being, the proposal would only affect HUD-financed single-family and multi-family construction and 203Ks.


Are Land Records an Endangered Species?

MERS was the first step in avoiding fees paid to county real estate recording offices.  MERS simply holds the rights and it is passed from one entity to another without recording transfers in the land records.  Going one step further, the Bitcoin people are talking about “block chains” where there is a distributed public ledger that does not require trust in other parties or in a central list authority.  Check it out if you want to bend your mind a little.


Moody’s Pays $864 Million on Subprime Bond Ratings

It’s amazing that 8 years after the mortgage meltdown companies are still paying gigantic penalties.  This time it was Moody’s turn to pay up for admittedly using a more lenient standard than what it published.  Forbes points out that this could happen again.  The problem is that bond issuers are the ones paying for the ratings.  So, if Moody’s wants a client, there is reason to believe that they could be pressured to improperly rate the bonds.  Standard & Poor’s paid out $1.5 billion a year ago.


SOFI Finds Mortgages Better Than Student Loans

SOFI made a name for itself refinancing student loans.  Lately, it has been pushing low-red tape jumbos and special cash-out deals from Fannie Mae.  According to the online lender, mortgages are its major growth area, now funding over $100 million a month.


Fannie Mae Loses Right to Avoid State Courts

Fannie Mae has asserted that it was given the right under its charter to move any suit filed against it to federal court.  The Ninth Circuit agreed with Fannie.  But, the Supreme Court reversed the Ninth and said Fannie Mae has no such right and must defend suits in state courts.  That will make it much easier to sue the GSEs.


TARP Did Little for Low-Income Borrowers

The Troubled Asset Relief Program (TARP) was supposed to help those struggling to make their mortgage payment.  No one struggles more than those making less than $30,000/year.  A recent audit of the program showed that 3 out of 4 Hardest Hit with incomes under $30,000 were turned down for help.  HAMP had rules like a 45% DTI that virtually ensured these people received no relief.


Rate Outlook

Most economic news shows a slow but steady economic recovery. That leads to slight inflation.  The Producer Price Index increased by .3%, slightly higher than expected.  Retail Sales were up .6%, again slightly better than expected.

The Eurozone is seeing rising inflation now.  That is particularly bad since their economies are stagnant.  We called it “stagflation” back in the energy crisis of the 70s.  Business wasn’t that great but prices were going up because energy costs shot up.  That strikes fears in any economist’s heart.

Industrial production rose 0.8% versus the expected 0.6% increase. Capacity use was 75.5, expected 75.4. Consumer prices held the line this week, coming in at only .3% and the core at only .2%.  Housing starts were 1226K versus the expected 1195K.  The Philadelphia Fed business conditions index was 23.6, much higher than the expected 15.

Today, “seasonally adjusted” unemployment claims dropped to the lowest level in years at 234,000.  But “seasonally adjusted” doesn’t really tell the whole story.  This time of year, employers layoff seasonal workers. Jobless claims were actually 379,000, well above other weeks in 2016 but better than the same time last year.  The media runs with what it is fed and posts the seasonally adjusted number which has some merit but only tells half the story.  Job losses should slow in a week or so or we will have a new story.

In the only negative news, the NAHB Housing Index was 67 versus 69 last month.  There is no more major economic news this week so rates should be steady through the weekend.

Rates were doing just fine this week until Dallas Fed President Kaplan said that he sees upside risk to energy prices in the next 3-5 years.  Energy is a prime component of inflation.  That, coupled with the Fed Beige Book showing wages going up, sent rates into a sharp rise.

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