LenderNews by Rob Chrisman
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Dec. 26: Lender expansion & contraction; FHA, lenders, & investors continue HMDA changes; HMDA humor

December 26, 2017

Congrats to The Money Source. It is on a major hiring spree to build an in-house ad agency in the greater Detroit area. The marketing team will serve and promote the fintech company’s rapidly growing $21 billion customer portfolio.
 
At the other end of the scale…These aren’t the first, and won’t be the last in a business where many are experiencing contracting volumes and contracting margins. Bank of the Ozarks of Little Rock will stop originating home loans for resale on the secondary market, a line of business that had "operated at essentially break-even." And I’ve heard from a few people that wholesaler 1st California Mortgage (First Cal) will fund its last loan later this week, after reportedly eliminating its AE workforce several weeks ago and perhaps switching its focus to servicing. Every company is taking a hard look at the continued high cost of originating loans, regardless of channel, and evaluating profitability. Watch for plenty of changes in 2018.
 
HMDA
 
Recall that on December 21, the CFPB issued a statement regarding compliance with the HMDA final rule and amendments last September to the HMDA final rule. Although the Bureau did not delay the January 1, 2018 effective date as some had hoped, it acknowledged the difficulties of coming into compliance with the new requirements, stating that the Bureau “does not intend to require data resubmission unless data errors are material or assess penalties with respect to errors for data collected in 2018 and reported in 2019.” According to the CFPB, compliance with the HMDA requirements pose “significant system and operational challenges” and therefore, institutions should focus the 2018 data collection on identifying areas for improvement in their HMDA compliance management systems for future years. The Bureau further advised that it expects that supervisory examinations of 2018 HMDA data will be “diagnostic” to help “identify compliance weaknesses, and will credit good-faith compliance efforts.” However, institutions will still use the CFPB’s new HMDA Platform for data collected in 2017. The FDIC and the OCC issued similar announcements, Financial Institution Letter FIL-63-2017 and OCC Bulletin 2017-62 respectively, and other regulators are expected to do the same.    Law firm Buckley Sandler points out that, “The Bureau’s stated intent to focus on ‘good-faith compliance efforts’ and ‘material’ errors in the early days of the new HMDA requirements is like the approach taken for implementation of the Ability-to-Repay/Qualified Mortgage Rule and the TILA-RESPA Integrated Disclosure Rule. While this flexible approach is generally beneficial for lenders and consumers, it does produce some uncertainty over what will be considered ‘good faith’ or ‘material.’”   The Bureau also announced its intent to engage in additional HMDA rulemaking that may (i) re-examine the criteria determining whether institutions are required to report data; (ii) adjust the requirements related to reporting certain types of transactions; and (iii) re-evaluate the required reporting of additional information beyond the data points required in HMDA, as amended by the Dodd-Frank Act.
 
From Ohio a note to me said, “HMDA 2.0 has just become even more costlier. Instead of implementing the program in 10 days, they just delayed the penalty part of the HMDA 2.0
 
with the understanding that they can revise it during the year. So instead of one unnecessary implementation of HMDA 2.0 in 10 days, we are now facing revisions to a process that provides no valuable information to the users and no additional income for the lender – ridiculous. The CFPB should either cancel it or fully implement it. This now becomes an ongoing endless process for us for another year or longer. This is what is costly to small companies. This is the endless game of playing with a process that is unnecessary and actually has no place in the lending world.”
 
After collecting expanded data on borrowers under the Home Mortgage Disclosure Act (HMDA) rule changes, HousingWire reports that lenders are going to have greater insight than ever before on their lending practices – as will everyone else.
 
FHA is informing mortgagees of planned changes in the FHA Connection (FHAC) system to capture expanded borrower demographic information that mortgagees must begin collecting on January 1, 2018, in accordance with the new Home Mortgage Disclosure Act (HMDA) Final Rule. This information is available to be collected on the Demographic Information Addendum to the Uniform Residential Loan Application (URLA). These changes, however, will not be implemented in FHAC by the January 1st collection date. In the interim, FHAC has been temporarily modified to: Allow mortgagees to submit the demographic information collected if the currently available fields in FHAC match the borrower(s) submission; or Permit the fields to be left blank, if the demographic information collected does not match the currently available fields in FHAC. FHA has not yet established an implementation date for the expanded demographic information changes in FHAC – look for an announcement in the coming weeks. 
 
To support the HMDA requirements, AmeriHome is implementing requirements for Sellers to complete the Uniform Loan Identifier (ULI) Field in Correspondent Connect, and to provide the new Demographic Information Addendum (DIA). Loan sales to AmeriHome are typically categorized as Purchaser Code 71 – Credit union, mortgage bank, or finance company for a Seller’s HMDA reporting purposes.
 
Pacific Union will require delegated correspondent clients to provide the Universal Loan Identifier (ULI) number along with the new Demographic Information Addendum, which will be required for all mortgage loan applications taken on or after January 1, 2018. This is a new HMDA Requirement which becomes effective the first day of January.
 
Plaza posted the following announcement: In anticipation of the Home Mortgage Disclosure Act (HMDA) rule implementation in 2018, you are permitted to collect additional data on your applicant. For applications received in 2017, collect race, ethnicity, and sex according to the URLA Appendix B instructions. The additional HMDA data is required for all loans with a final action taken date on or after 1/1/2018. Correspondents who will submit a lender-delegated loan will also need to supply your Legal Entity Identifier (LEI) and the Unique Loan Identifier (ULI) for each loan. Plaza has provided further information to answer some basic questions and clarify some of its requirements.
 
Effective for loans dispositioned on or after 1/1/2018: for HMDA reporting purposes, Fifth Third Mortgage Company, as purchaser, may be classified as number (71) – “credit union, mortgage company or finance company”. Universal Loan Identifier (ULI) – Identifier assigned to identify and retrieve a loan or application that contains the FI’s LEI, an internally generated sequence of characters, and a check digit. For Delegated and Post-Close Non-delegated loans, the lender must provide the ULI the generated for the loan – lenders can use the Closed Loan Submission Checklist. For Non-Delegated Pre-close loans, Fifth Third will generate a ULI.
 
In accordance with the HMDA requirements, for applications taken January 1, 2018 or later, WesLend will require all Brokers to provide the new Fannie Mae Demographic Information (DI) Addendum to the 1003 as a part of their loan submission.  The DI Addendum will replace Section X. of the 1003 and will be used to collect the new expanded Government Monitoring Information (GMI) pertaining to race and ethnicity. Effective January 1, 2018, all 1003s must contain the DI Addendum.  If a DI Addendum is not included with the 1003 or if the old version is provided, the loan submission will be considered incomplete. Loan Set Up cannot hold incomplete files longer than two business days. If the 1003 and DI Addendum are not received within the allotted timeframe, the loan submission will need to be resubmitted as a new loan submission.
 
Events and webinars
 
In FHA training news, register for January 10th FHA webinar which will focus exclusively on SFDMS reporting requirements and is open to all FHA-Approved Servicers, the January 17th webinar providing FHA-Approved Servicers an opportunity to review various default scenarios and the SFDMS reporting, the January 24th webinar in which FHA-approved servicers the opportunity to review what causes fatal and non-fatal errors in Single Family Default Monitoring System (SFDMS) reporting, and what can be done to prevent or fix the problems, and/or the January 31st webinar to learn the consequences of failing to update the Single-Family Default Monitoring System (SFDMS).
 
Peoples Bank and Community Banks Mortgage, a division of NBH Bank, announced the 4th Annual 2018 Colorado Real Estate & Lenders Summit on January 18th in Glendale. This is CO’s largest combined Real Estate and Lender Event, and one can register for free. Speakers include Joe Niego (Buffini & Company), Karl Mecklenburg (Former Denver Broncos Pro-Bowler), Elliot Eisenberg, Ph.D. (Economist), and Matt Tully (Government & Industry Relations Expert).
 
There’s the Friday, January 19th CMLA Luncheon at the Denver Marriott South at Park Meadows. Have lunch with representatives from FHA, VA, USDA, and the HUD-184 program. This expert panel will highlight new and/or changing loan programs and how that might affect you in 2018.
 
This year’s Independent Mortgage Bankers Conference program, January 22nd-25th, developed by IMBs for IMBs, is shaping up to be the best ever. Sessions are packed with concrete and actionable information. each crafted to provide you with practical takeaways. The popular TechLive session is back as a general session completely focused on fintech solutions to digital mortgage.
 
“Use the upcoming CalyxVision 18 user conference to fast track your mortgage business. Conference offerings include everything from LO marketing and sales training to hands-on, advanced Calyx training classes to help you take full advantage of your software’s capabilities and integrated service providers. The conference, from Calyx Software, will be held 2/11-2/14, in San Francisco, and is designed to equip you and your mortgage staff with strategies and best practices to significantly improve your business through actionable steps. Register at CalyxVision.com.”
 
The Mortgage Collaborative hosts its 2018 Winter Conference at the Grand Del Mar hotel in San Diego, CA 2/11-2/13. “TMC’s conferences provide a very different experience than other industry events, as the format is almost exclusively lender-led discussion based sessions on very specific industry issues and topics. TMC’s conference goal is to have all attendees walk away feeling like it was productive time well spent outside of the office, and armed with very actionable ideas and initiatives that they can implement into their businesses upon returning home.”
 
Capital markets
 
Turning the way-back machine to Friday, the 10-year Treasury note finished last week yielding 2.49% after a week of positive economic news. What nudged rates on Friday? New and existing home sales were strong as well as builder sentiment. Areas recently hit by natural disasters, the West and South, has the largest increased in new home sales; +31% and +15% respectively. This may suggest that buyers may be replacing lost homes. Additionally, the share of new homes sold but not yet under construction was above its 5-year average of 31% with a reading of 35%.
 
There was some optimism that the passage of the tax bill would lead builders to begin constructing lower priced homes, which have been in short supply due to low profit margins. It will remain to be seen what effects the changes to the mortgage interest deduction, now limited to $750,000, and the cap of $10,000 on state and local taxes will have on home prices, demand, and resales in higher priced areas. The increase in the standard deduction could reduce the financial incentive for younger households to become homeowners as well.
 
Yes, it is already Tuesday, and we do have a full week of economic news ahead of us. If you care about property values back in October, there’s the S&P CoreLogic Case Shiller indices today, along with some figures from Richmond and Dallas on manufacturing. Tomorrow, is the MBA’s survey on last week’s application data, as well as Consumer Confidence and Pending Home Sales. Thursday is Initial Jobless Claims and some trade figures. In what is expected to be thin trading all week, we find the 10-year yielding 2.49% and agency MBS prices nearly unchanged versus last week’s close.
 
 
(Thank you to Merrimack’s Greg Korn for this creative gem.)
 
TWAS THE NIGHT BEFORE HMDA!
 
Twas the night before the HMDA changes took effect,
And Visions of “demographic information” were making me a wreck
 
Our business is always changing, and accurate data is needed,
Now we have 48 separate fields that must be completed.
 
Pre-quals don’t count, but Pre-Approvals do,
Why can’t I get the Adverse Action to come through?
 
A requirement to report which AUS to Submit,
My LOS has lost track …My Underwriters might QUIT!
 
My borrower has indicated they do not wish to Report,
The processor is unsure and wants their Passport.
 
Fair Lending Analysis is promising! HMDA Data Is Clear.
No signs if Disparate Treatment, Now the examiner is my only fear!
 
Policies and Procedures are documented and known,
LO’s have been trained what to say when the app is by Phone!
 
IT is always helpful when the data has been Scrubbed,
All this to ensure that no protected class has been Snubbed.
 
Reporting isn’t due until Twenty-Nineteen,
Figuring this out is borderline Obscene!
 
Then all of a sudden…came the sound of a bell;
No, it’s not Santa-it’s the ring from my cell.
 
I sprang up to answer, still tucked in my bed,
It’s my Board of Directors all filled with dread.
 
More Efficiency and Profit is at the top of their pile,
requesting more staff will surely result in denial.
 
And for all who think the implementation may be delayed,
I promise you the new HMDA Regulation is here to stay!
 
Wishing Happy Holiday’s to all and a prosperous New Year! 
 
 
Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Servicing: All It’s Cracked Up to Be?” 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.
Rob
 
(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are over 300 mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2017 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)