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CFPB Ruling and Takeaways for Lenders; Fed Change in Leadership

January 31, 2018
by admin

Whale oil manufacturers… switchboard operators… real estate agents? “Knock does everything a traditional real estate agent does and so much more.” Launched by founding team members from Trulia.com… And don’t forget who owns Trulia: Zillow. Can an LO watch Trulia’s dog during the open house? Are small lenders endangered? Another is going away: Massachusetts’s HarborOne Bank has acquired Cumberland County Mortgage in South Portland, Maine. (Cumberland was already providing revenue for HarborOne through a TPO relationship with Merrimack Mortgage, which HarborOne bought in 2015.) In larger lender news, SoFi is cutting its mortgage staff.

CFPB Developments, and the 250-Page Ruling

In legal news, the DC Circuit Court won’t upend CFPB’s single-director power structure. The court concluded that the CFPB’s single-director structure is constitutional, even though the president can only remove the director for cause. The court also reinstated the portion of the October 2016 panel opinion concluding that the CFPB misinterpreted the Real Estate Settlement Procedures Act (RESPA) and its statute of limitations. Some believe it will head to the Supreme Court.

Because of the ruling, the $109 million penalty imposed on PHH is vacated and the case will go back to the CFPB, where new leadership must decide whether to pursue the action. PHH, which allegedly took illegal kickbacks for mortgage referrals, has 90 days to seek review by the Supreme Court. In general, the ruling checked the agency’s practice of making new interpretations of law through enforcement actions.

Try wading through this sentence: “Applying binding Supreme Court precedent, we see no constitutional defect in the statute preventing the president from firing the CFPB director without cause,” D.C. Circuit Judge Nina Pillard wrote for the court. Still, the mortgage lender PHH Corp. gets a new chance to challenge the $109 million penalty the agency imposed for alleged misconduct. So, the U.S. Court of Appeals for the D.C. Circuit has reinstated its prior holding that payments for bona fide services provided and made at fair market value do not violate the Real Estate Settlement Procedures Act (RESPA).

In a 6-3 decision, the D.C. Circuit Court of Appeals ruled that the CFPB’s current structure is constitutional and that the CFPB Director can only be removed by the President for cause. In its ruling, the Court affirmed the need for the CFPB to be run by an independent director, noting that agency “independence shields the nation’s economy from manipulation or self-dealing by political incumbents.” The decision by the appeals court means that a president can only fire the head of the Consumer Financial Protection Bureau for cause.

Recall that acting CFPB Director Mick Mulvaney outlined his views on the appropriate role of the CFPB in a memo to Bureau staff and subsequent editorial in the Wall Street Journal. He urged the Bureau to “exercise, with humility and prudence, the almost unparalleled power given to us to faithfully enforce the law in furtherance of the mandate given to us by Congress. But we go no further.” His interpretation of their mandate would lead CFPB to “work for the people. And that means everyone…those who take loans, and those who make them,” contrasting that with what he characterizes as the Bureau’s previous “pushing the envelope” philosophy. Finally, the editorial outlines his intent to review the full extent of Bureau activities with a focus on formal rulemaking rather than enforcement, data-driven prioritization and enforcement that penalizes “quantifiable and unavoidable harm to the consumer.”

And last Wednesday, the CFPB sent out the first of several Requests for Information (RFIs) as part of Mulvaney’s assessment of Bureau operations and practices. The RFI seeks comment on Civil Investigative Demands (CIDs). Specifically, the RFI requests comments and information to assist the Bureau in assessing potential changes to the CID processes. The notice seeks public input from entities who have received CIDs in the past or members of the bar who represent these entities.



Capital Markets

It was no surprise that the FOMC (Federal Open Market Committee) made no policy changes yesterday and very little changed in the actual statement. The Committee firmed up its stance on inflation saying that it is expected to move up this year versus remaining somewhat below 2 percent in the near term. Other than that, they removed references to the fall hurricanes and their effect on economic growth. As mentioned yesterday, this sets the stage for a smooth transition in leadership from Janet Yellen to Jerome Powell and the market now puts the probability of a rate hike in March at 83 percent.

Another area the markets were watching Wednesday was the refunding announcement from the US Treasury. The total net funding is expected to be $441 billion; $71 billion lower than previously announced. 10-yr and 30-yr auctions will increase by $1 billion each though the Treasury will continue to fund the government heavily across the yield curve and the report noted that “Treasury auction sizes need to rise substantially over the few years.” This ties in with recent themes regarding overall supply and demand, and the expectations that yields will need to rise for the increasing supply to be absorbed by the market.

After all of Wednesday’s news and events, the 10-year Treasury note yield fell 1 basis point to 2.72 percent. Employment costs, which are viewed as an inflation signal, showed wages and salaries steadily rising, keeping the prospect of increasing inflation in the minds of market participants. The Chicago Purchasing Index came in at 65.7 indicating that manufacturing activity in the Chicago Fed regions continues to expand near multi-year highs. Pending home sales were +0.5 percent from December 2016 as well as month-over-month, quite a contrast to new home sales which rose 14 percent last year.

Unfortunately for lenders, yields continue to rise, and the WSJ warns of increased bond supply (due to surging US deficits) while Washington may be headed towards another shutdown battle

Next week (the spending authorization expires on 2/8). On today’s calendar we have Challenger Job Cuts (-3%), weekly jobless claims (-1k to 230k), productivity (-.1%, labor costs higher), and two more manufacturing reports. The day starts with the 10-year yielding 2.74% and 30-year agency MBS prices worse .125 versus last night’s close.


Employment, Training, Products

In TPO job news, “are you in need of a Regional or National Sales Leader in your existing (or startup) Wholesale or Correspondent Channel? A results-oriented Sales Executive is seeking a new opportunity to help lead a mortgage company in achieving it’s 2018 (and beyond) goals. If you are a Mortgage Banker who shares a commitment to providing exceptional client experiences, please connect at careers@wholesalemortgageteams.com All institution sizes and locations will be considered.”

Sierra Pacific Mortgage is hosting a webinar to help you push past any barriers when selling to Millennials. Register for this free 45-min session on February 13th which can help you understand this particular customer a little better and how to market to them, communicate with them, and, ultimately increase your customer base.

Come grow with VITEK – the possibilities are amazing! VITEK has a great opportunity for an RVP Production, and for Branch Managers in the greater Pacific Northwest. There is flexibility in the locations of these new positions – if you are passionate about driving sales production, have deep roots in your market and have a loyal team that can leverage your network, we are willing to consider locations in mid-tier markets all over WA, OR, and northern NV. We are a 30-year old local and community focused direct lender (Fannie, Freddie, GNMA) with the marketing and operations structure to support and grow established high performing production/processing teams. For a confidential conversation about either role, contact Tom Putnam, VP Strategic Business Development (916-486-6422).

“At Caliber Home Loans, Inc. our products make us different and our people make us great, but it’s our business model that makes us successful as a lender. Our CEO, Sanjiv Das, recently explained how we leverage technology to both provide a better borrower experience and make the jobs of our employees easier. If you’re a high-producing loan officer looking to work for a technology-driven originator and servicer, visit Caliber or contact Jeremy DeRosa.

Lakeview has significantly expanded eligibility for its Agency No MI program, increasing the potential to help high LTV borrowers looking for the lowest payment possible. Income limit requirements now include any loan that receives a HomeReady® or Home Possible® “Eligible” message from DU or LPA. The Lakeview Agency No MI program is changing the way originators sell payment, with both purchase and refinance options. As a true Agency No MI Program with LTV’s up to 97%, the program helps boost volume, re-engage with agents, and combat the all-to-common “what’s your rate?” question from rate shoppers. Contact your Lakeview Correspondent Business Development Director or Wholesale Account Executive to learn more. With the Lakeview Agency No MI Program, It’s All About the Payment.

Freddie Mac is Reimagining the Mortgage ExperienceSM to create a smarter, simpler, and less costly origination process. We’re using big data and advanced analytics to offer our automated collateral evaluation (ACE) — allowing you to underwrite certain loans without an appraisal – speeding up and lowering the cost of an origination. Available exclusively through Loan Product Advisor®, ACE can help you shave 7-10 days off the time it takes for loans to close and save your borrowers $300 to $700 on the appraisal fee (Source: Freddie Mac lender feedback). Loans that are eligible for ACE can also receive immediate certainty on relief for representations and warranties related to the property’s value, condition and marketability. Ready to save your borrowers time and money? Visit the Loan Advisor Suite web page or talk to your Freddie Mac account executive to learn how to get started.

GSF Mortgage Corp. is seeking to acquire small to mid-sized lenders who are considering a transition of their firm. As an alternative to a large box lender or regulatory intense bank, GSF will work with the owner on a transition that preserves the culture, staff and legacy of the company. GSF is a direct seller/servicer with Fannie Mae, Freddie Mac and a Ginnie Mae Issuer. We retain most of our loan originations and are well capitalized. GSF has access to resources, technology and pricing power of the large lenders, along with the ability to adapt your existing business plan to our platform. As an owner, you can be assured that your teams will be set up for long-term success and growth. All conversations are confidential. Please reach out to Rich Obermeier to set up an informal discovery call.

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