All States Join Nationwide Mortgage Licensing System. Verification Checkpoint Provided

The presser below was released this morning by the Conference of State Bank Supervisors
Washington, D.C.—Less than 34 months after its official launch, all 50 states have joined the Nationwide Mortgage Licensing System and Registry (NMLS, or the System). Hawaii became the last state to join NMLS on Monday, thereby ensuring improved supervision of non-depository mortgage lenders, brokers, and mortgage loan originators maintaining licensure through a single system shared by all state mortgage regulators.

“NMLS was built to be the foundation of a coordinated and transparent system of mortgage supervision implemented by state regulators,” said Neil Milner, CSBS President and CEO. “Having all 50 states on the System provides greater transparency within the mortgage industry and makes information available to consumers as they obtain mortgages from state-licensed entities.”

“This milestone is a testament to the hard work and commitment of state mortgage regulators,” said Gavin Gee, Director of the Idaho Department of Finance and Chairman of the State Regulatory Registry LLC (SRR). A limited liability company established by CSBS and the American Association of Residential Mortgage Regulators, SRR operates NMLS on behalf of state regulators. “State regulators have demonstrated their ability to coordinate on an unprecedented level to enhance supervision of the residential mortgage industry and protect consumers,” Gee continued.

Launched in January 2008 with seven states (ID, IA, KY, MA, NE, NY, RI), NMLS now includes 58 state agencies from all 50 states, the District of Columbia, and the territories of Puerto Rico and the U.S. Virgin Islands. NMLS currently tracks nearly 16,000 mortgage companies holding over 30,000 licenses and over 126,000 mortgage loan originators holding over 207,000 licenses.

MORE BACKGROUND INFO: The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the Farm Credit Administration, and the
National Credit Union Administration published in the Federal Register a joint final rule implementing the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) on July 28, 2010. The rule took effect on October 1, 2010, institutions were expected to implement appropriate policies, procedures and management systems to ensure compliance.

REMINDER: At this time there is no licensing action required in the Nationwide Mortgage Licensing System (NMLS) of any mortgage loan originator who is an employee of a federally insured depository institution or an owned and controlled subsidiary of such a depository institution that is federally regulated. HOWEVER these loan officers will soon be forced to comply with licensing laws....the final rule further provides that Agency-regulated institutions must: require their employees who act as residential mortgage loan originators to comply with the S.A.F.E. Act’s requirements to register and obtain a unique identifier, and adopt and follow written policies and procedures designed to assure compliance with these requirements. It is expected that these loan originators will have to obtain a unique identifier, and maintain this registration on the NMLS system sometime in early 2011.

While it might seem "sketchy" that some loan officers face tougher testing standards than others, this is not the case. Even before the SAFE Act, loan officers employed by banks, savings associations, credit unions or Farm Credit System (FCS) institutions and certain of their subsidiaries regulated by a Federal banking agency or the FCA, were already required by Federal regulations to pass a series of tests similar to those taken by independent mortgage originators who must already comply with NMLS today.

Consumers you can check the licensing status of your mortgage professional HERE.

READ MORE ABOUT NMLS REQUIREMENTS

by Adam Quinones - Map by Google Maps

FHFA Releases Framework for Dealing with Foreclosures. Borrowers Must Play Ball

“On October 1, FHFA announced that Fannie Mae and Freddie Mac are working with their respective servicers to identify foreclosure process deficiencies and that where deficiencies are identified, will work together with FHFA to develop a consistent approach to address the problems. Since then, additional mortgage servicers have disclosed shortcomings in their processes and public concern has increased.

Today, I am directing the Enterprises to implement a four-point policy framework detailing FHFA’s plan, including guidance for consistent remediation of identified foreclosure process deficiencies. This framework envisions an orderly and expeditious resolution of foreclosure process issues that will provide greater certainty to homeowners, lenders, investors, and communities alike.

In developing this framework, FHFA has benefitted from close consultation with the Administration and other federal financial regulators.

The country’s housing finance system remains fragile and I intend to maintain our focus on addressing this issue in a manner that is fair to delinquent households, but also fair to servicers, mortgage investors, neighborhoods and most of all, is in the best interest of taxpayers

Four-Point Policy Framework For Dealing with Possible Foreclosure Process Deficiencies

1. Verify Process -- Mortgage servicers must review their processes and procedures and verify that all documents, including affidavits and verifications, are completed in compliance with legal requirements. Requests for such reviews have already been made by FHFA, the Enterprises, the Federal Housing Administration, and the Office of the Comptroller of the Currency, among others. In the event a servicer’s review reveals deficiencies, the servicer must take immediate corrective action as described below.

2. Remediate Actual Problems -- When a servicer identifies a foreclosure process deficiency, it must be remediated in an appropriate and timely way and be sustainable. In particular, when a servicer identifies shortcomings with foreclosure affidavits, whether due to affidavits signed without appropriate knowledge and review of the documents, or improperly notarized, the following steps should be taken, as appropriate to the particular mortgage:

a. Pre-judgment foreclosure actions: Servicers must review any filed affidavits to ensure that the information contained in the affidavits was correct and that the affidavits were completed in compliance with applicable law. If the servicer’s review indicates either (a) that the information in a previously filed affidavit was not correct or (b) that the affidavit was not completed in compliance with applicable law, the servicer must work with foreclosure counsel to take appropriate remedial actions, which may include preparing and filing a properly prepared and executed replacement affidavit before proceeding to judgment.

b. Post-judgment foreclosure actions (prior to foreclosure sale): Before a foreclosure sale can proceed, servicers must review any affidavits relied upon in the proceedings to ensure that the information contained in the affidavits was correct and that the affidavits were completed in compliance with applicable law. If the servicer’s review indicates either (a) that the information in a previously filed affidavit was not correct or (b) that the affidavit was not completed in compliance with applicable law, the servicer must work with foreclosure counsel to address the issue consistent with local procedures. Potential remedial measures could include filing an appropriate motion to substitute a properly completed replacement affidavit with the court and to ratify or amend the foreclosure judgment.

ci. Post-foreclosure sale (Enterprise owns the property): Eviction actions: Before an eviction can proceed, servicers with deficiencies must confirm that the information contained in any affidavits relied upon in the foreclosure proceeding was correct and that the affidavits were completed in compliance with applicable law. If the servicer’s review indicates either (a) that the information in a previously filed affidavit was not correct or (b) that the affidavit was not completed in compliance with applicable law, the servicer must work with foreclosure counsel to address the issue consistent with local procedures before the eviction proceeds. Potential remedial measures could include seeking an order to substitute a properly prepared affidavit and to ratify the foreclosure judgment and/or confirm the foreclosure sale.

cii, Real Estate Owned (REO): With respect to the clearing of title for REO properties, servicers must confirm that the information contained in any affidavits relied upon in the foreclosure proceeding was correct and that the affidavits were completed in compliance with applicable law. If the servicer’s review indicates either (a) that the information in a previously filed affidavit was not correct or (b) that the affidavit was not completed in compliance with applicable law, the servicer must work with foreclosure counsel to address the issue consistent with local procedures and take actions as may be required to ensure that title insurance is available to the purchaser for the subject property in light of the facts surrounding the foreclosure actions.

d. Bankruptcy Cases: Servicers must review any filed affidavits in pending cases to ensure that the information contained in the affidavits was correct and that the affidavits were completed in compliance with applicable law. If the servicer’s review indicates either (a) that the information in a previously filed affidavit was not correct or (b) that the affidavit was not completed in compliance with applicable law, the servicer must work with bankruptcy counsel to take appropriate remedial actions.

3. Refer Suspicion of Fraudulent Activity -- Servicers are reminded that in any foreclosure processing situation involving possible fraudulent activity, they should meet applicable legal reporting obligations.

4. Avoid Delay -- In the absence of identified process problems, foreclosures on mortgages for which the borrower has stopped payment, and for which foreclosure alternatives have been unsuccessful, should proceed without delay. Delays in foreclosures add cost and other burdens for communities, investors, and taxpayers. For Enterprise loans, delay means that taxpayers must continue to support the Enterprises’ financing of mortgages without the benefit of payment and neighborhoods are left with more vacant properties. Therefore, a servicer that has identified no deficiencies in its foreclosure processes should not postpone its foreclosure activities.

FHFA will provide additional guidance should it become necessary.

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Notice I called attention to the phrase "the servicer must work with counsel". I am not sure if this guidance was intended to be a solution or not. If it was, it seems like the borrowers who have claimed to be victims of "robosigning" will still need to be dealt with individually, on a case by case basis, which tells me only time will heal this problem. It also means borrowers must be willing to work with servicers. This is a technicality that can be corrected if all parties involved are willing to play ball. Unfortunately common sense tells me that borrowers will not give in without a fight.

The FHFA made the consequences clear/guilt tripped all the robosigned folks...

"Delays in foreclosures add cost and other burdens for communities, investors, and taxpayers. For Enterprise loans, delay means that taxpayers must continue to support the Enterprises’ financing of mortgages without the benefit of payment and neighborhoods are left with more vacant properties. Therefore, a servicer that has identified no deficiencies in its foreclosure processes should not postpone its foreclosure activities."

Foreclosures should go as scheduled if the servicer has all their ducks in a row. Let’s get on with the correction process already....

by Adam Quinones
in an article from Mortgage News Daily
Statement By FHFA Acting Director Edward J. DeMarco On Servicer Financial Affidavit Issues

What is loan to value ratio (LTV)?

A loan to value ratio (LTV) is a ratio used by mortgage lenders to figure out what amount of a mortgage they will loan you based on the appraised value of the property (or purchase price of the property, whichever of the two numbers is lower). Lenders consider the LTV ratio whether you are purchasing new property or refinancing property you currently own. The loan to value ratio may depend on the type of property - commercial or residential, or primary home, secondary home or investment property. The loan to value ratio may even vary depending on whether the property is a single family home or a condominium.

As an easy example, let's assume that a couple is purchasing a single family primary residence. The couple walks into the local bank to apply for a mortgage. The lender tells the couple that it can loan up to an 80% loan to value on the purchase price or the appraised value of the home the couple is looking to purchase. Let's say that the purchase price is $100,000. So, in this example, the loan to value ratio is 80:100 or 80%. Multiply the LTV ratio by the purchase to figure out the amount of money the bank will loan. Eighty percent of $100,000 is $80,000, which means that the couple will need to come up with a down payment for the difference of $20,000.

The lower the loan to ratio value for a property, the more risk that the lender associates with the property type or borrower. So if a borrower has a low credit score, a history of making late payments, or a high debt-to-income ratio, the borrower is likely to receive a lower loan to value ratio from lenders than those borrowers with higher credit scores, who pay their mortgage on time, and have a low debt-to-income ratio.

For properties that are located in the United States, the typical LTV ratio is 80%. This is because an 80% LTV ratio allows the lenders resell the mortgage to the federal government on the secondary market. Borrowers can obtain higher loan to value ratios, but they will usually have to pay private mortgage insurance on top of their regular mortgage payment. Private mortgage insurance protects the lender since they are exposing themselves to more risk by loaning a borrower a higher loan to value ratio than they normally would.

Fixing Core Failings of the Mortgage Industry: Data Quality, Transparency, Auditability

The mortgage industry has always been cursed by its inability to prioritize initiatives that promote and ensure the efficacy of processes versus the efficiency of processes. Things were so bad that during the thick of the origination and housing boom, a 2007 Mortech study uncovered that two-thirds of lenders had no (zero) system for managing financial or operational risks. It’s always been far easier to justify investments and quantify returns on investments in the areas of loan sales and production than on quality assurance.

We all recognize that a lack of data quality, transparency, and auditability are core failings of the mortgage industry. Efforts to validate the integrity of loan data and quality of loan documents have been underway since the discovery of meta data and XML data (machine and human readable data) and eventually SMART documents over ten years ago.

President Clinton gave mortgage companies ammunition to fight fraud and improve processes with the enacting of E-SIGN legislation in July of 2000. The federal law gave “...electronic signatures, contracts and records the same validity as their handwritten and hard copy counterparts...”

E- Signatures became the linchpin to a fully automated, auditable, and rules based process – the eProcess. Loan software companies and document preparation companies quickly followed suite to be a part of the paradigm shift. Inaccurate and incomplete loan documents could not be signed until they were fixed. Loans would not – could not -progress unless everything was accurate. Anyone electing to “E-SIGN” documents went through rigorous and multi-pronged identification processes – even biometrics - that had virtually eliminated identity fraud cases. A digital seal was applied to the document and the embedded loan data was protected by a “hashmark” that ensured data could not changed once the document was notarized. The very things that could have prevented the mortgage and foreclosure debacle at its core are available, but for how long?

Last week, President Obama vetoed a bill that was designed to facilitate electronic mortgages and e-commerce, in large part over fears that the legislation would make it easier for servicers to get foreclosures approved by the courts. The bill (H.R. 3808) is called the Interstate Recognition of Notarizations Act and required state and federal courts to recognize paper or electronic documents with seals from out-of-state notaries.

White House press secretary Robert Gibbs said - “The President will not sign H.R. 3808...our concern is the unintended consequences on consumer protections, particularly in light of the home foreclosure issue and developments with mortgage processors. So the President is exercising a pocket veto, sending that legislation back to Congress to iron out some of those unintended consequences."

“Tapping the brakes” on 3808 is regrettable but understandable as the industry deals with yet another unprecedented issue. However, we need to be alert to the risks associated with condemning service providers and technology providers for what are really problems of procedures and policy. We as an industry need to be looking forward to the things that validate, mitigate, and share risks. Data driven rules and workflow go a long way toward solving to issues related to poor loan quality. E-Signatures and eNotarizations are the very sorts of things that ensure efficient processes can be performed at scale without deterioration of quality or efficacy.

by Tim Rood

a Mortgage News Daily article

Purchase Demand Rallies Ahead of FHA Updates. Seller Concession Reduction Still in Limbo

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending October 1, 2010.

The MBA's loan application survey covers over 50% of all U.S. residential mortgage loan applications taken by retail mortgage bankers, commercial banks, and thrifts. The data gives economists a snapshot view of consumer demand for mortgage loans.

In a low mortgage rate environment, a trend of increasing refinance applications implies consumers are seeking out a lower monthly payment. If consumers are able to reduce their monthly mortgage payment and increase disposable income through refinancing, it can be a positive for the economy as a whole (creates more consumer spending or allows debtors to pay down personal liabilities like credit cards). A falling trend of purchase applications indicates a decline in home buying demand, a negative for the housing industry and the economy as a whole.

Excerpts from the Release...

The Market Composite Index, a measure of mortgage loan application volume, decreased 0.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 0.3 percent compared with the previous week. The four week moving average for the seasonally adjusted Market Index is down 3.0 percent.

The Refinance Index decreased 2.5 percent from the previous week. The four week moving average is down 4.2 percent for the Refinance Index. The refinance share of mortgage activity decreased to 78.9 percent of total applications from 80.7 percent the previous week.

The seasonally adjusted Purchase Index increased 9.3 percent from one week earlier and is the highest Purchase Index observed in the survey since the week ending May 7, 2010. The unadjusted Purchase Index increased 9.1 percent compared with the previous week and was 34.7 percent lower than the same week one year ago. The four week moving average is up 2.0 percent for the seasonally adjusted Purchase Index.


The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.25 percent from 4.38 percent, with points decreasing to 1.00 from 1.01 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The 30-year contract rate is the lowest recorded in the survey, with the previous low being the rate observed last week. The effective rate also decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.73 percent from 3.77 percent, with points increasing to 1.14 from 1.13 (including the origination fee) for 80 percent LTV loans. The 15-year contract rate is the lowest recorded in the survey, while the previous low was observed last week. The effective rate also decreased from last week.

The average contract interest rate for one-year ARMs increased to 7.11 percent from 7.04 percent, with points increasing to 0.24 from 0.22 (including the origination fee) for 80 percent LTV loans.
The adjustable-rate mortgage (ARM) share of activity increased to 6.1 percent from 6.0 percent of total applications from the previous week.

THE MBA SAYS:

“The increase in purchase activity was led by a 17.2 percent increase in FHA applications, while conventional purchase applications also increased by 3.6 percent,” said Jay Brinkmann, MBA’s Chief Economist. “This is the second straight weekly increase in purchase applications and the highest Purchase Index level since the expiration of the homebuyer tax credit program. One possible driver of last week’s big increase in FHA applications was a desire by borrowers to get applications in before new FHA requirements took effect October 4th, which included somewhat higher credit score and down payment requirements.”

Jay hits the nail on the head. While new upfront MIP requirements lower the cost for borrowers at the closing table, the plain and simple truth is the increase in the annual premium (paid monthly) pushes monthly costs higher for homeowners. Hence the uptick in purchase demand, led by FHA loans, before the October 4 case number deadline .

From Mortgagee Letter 10-28

HUD has decided to raise the annual premium and correspondingly lower the upfront premium, except for Home Equity Conversion Mortgages (HECM), so that FHA is in a better position to address the increased demands of the marketplace and return the Mutual Mortgage Insurance (MMI) fund to congressionally mandated levels without disruption to the housing market.

Based on the new authority, effective for FHA loans for which the case number is assigned on or after October 4, 2010, FHA will lower its upfront mortgage insurance premium (except for HECMs) simultaneously with an increase to the annual premium which is collected on a monthly basis. This policy change will decrease upfront premiums for purchase money and refinance transactions, including FHA-to-FHA credit-qualifying and non-credit qualifying streamlined refinance transactions.

What items do home appraisers seek to find that would give higher home values?

The The quick and easy answer would be comps (comparable homes for sale in your area) and location. We all know the first rule of real estate is location, location, location. A home across the street that might be exactly the same as yours could be valued at more because it might fall in a better school district or may not have railroad tracks behind it.

An appraisal is subjective but all appraisers should follow similar guidelines. That is to say 2 different appraisers could come to your house the same day and give you two different values. They try to find homes similar in size, location, and appeal to yours. But as we know all homes are not the same. Even in a development built by the same builder, homes vary in size, location, features, views, lots etc. The appraiser will adjust the homes based on the items. Usually they have fixed costs for things, like a home with an extra half bath would add $5000 or a fireplace would add $2500 to the value. There are also more subjective items like condition, build quality, view etc. This can vary greatly and is based on the appraiser and again comps in the area.

What is APR?

Rarely is there such a simple question in the mortgage industry with such a complicated answer. The true definition of this one even puzzles some seasoned veterans. For those of you not interested in long and complicated, here is a very serviceable and very brief definition: APR is the true cost of money over time.

In other words, your mortgage has a NOTE rate, or the interest rate on your loan, but it also has closing costs, prepaid interest, and other finance charges. The APR is the cost of your normal interest and those finance charges over time expressed as an interest rate relative to the rate you are paying on your mortgage.

· Now for the long and boring stuff:

APR stands for Annual Percent Rate and was made a requirement of mortgage disclosures by the Federal Truth in Lending Act. It is intended to level the playing field among mortgage quotes. For instance, one loan might advertise a 4.5% NOTE rate, while another advertises 6.5% rate. But both of those loan's APRs could be exactly the same, meaning that although the 4.5% loan appears to be the better deal, if you take closing costs and finance charges into consideration, the cost is actually the same as the 6.5% loan. In fact, if you were to sell or refinance the house sooner rather than later, you'd probably pay less interest overall on the 6.5% loan!

Perhaps the most idiotic thing about APR is that the finance charges that contribute to the APR calculation must be manually checked and included by the person originating the loan. Because of this, two identical mortgage quotes could have completely different APRs because one of the loan originators didn't do their job correctly. Even worse for consumers is that the lower APR quote in this example would be the one generated by the inferior originator. My blanket advice is to know the NOTE rate of the loan you are applying for, and know the exact closing costs. Do not trust anyone's calculation of APR.

FHA MIP Updates Go Live on Today; Flood Insurance Officially Extended

On the legislative front, President Obama signed into law S. 3814, a bill that will extend the National Flood Insurance Program(NFIP) for one year to September 30, 2011. And H.R. 3081 passed the House of Representatives, which among other items is the authorization to extend current loan limits for mortgages provided through Fannie Mae, Freddie Mac, and the Federal Housing Administration. Passage of the legislation will ensure that current loan limits for single-family residential mortgages will remain in place until September 30, 2011 at 125% of local median home sales prices, up to a maximum of $729,750 in high-cost areas. The floor for FHA is $271,050; the floor for Fannie Mae and Freddie Mac conforming loan limits is $417,000. The bill also appropriates $20 billion so that FHA can continue making loan commitments through the end of 2010.

Everyone in the FHA biz knows that Monday is a big day. FHA will lower its upfront mortgage insurance premium (except for HECM's) while simultaneously increasing the annual premium, which is collected on a monthly basis. This change will affect purchase money and refinance transactions, including FHA-to-FHA credit-qualifying and non-credit-qualifying streamlined refinance loans. (Hawaiian Homelands Section 247 loans are not affected by these changes, for anyone doing business in the state whose motto is "Ua Mau ke Ea o ka 'Āina i ka Pono.")

Private mortgage insurers have been licking their chops for Monday. They have grappled with credit losses on policies, claims of bad policy rescission, and an inability to compete with FHA's prices on new insurance. So with the increase on Monday could come the restoration of competitiveness of private insurance, potentially letting the companies win back market share and rebuild their reserves. And anyone watching that business has seen MI companies increasing riskier loans in somewhat subtle ways. Most believe that the MI companies, as a whole, are still fairly well capitalized. And of course lenders undoubtedly will benefit from the better prices, service and product diversity after Monday's FHA premium changes.

Most investors have credit and guideline overlays, over and above what the government agencies allow for programs.CitiMortgage, currently ranked #5 in volume among lenders right behind #4 GMAC, releases its overlays monthly. Citi's clients are aware of them, but include restrictions on initial & final 92900A and 92900-LT forms, VA Funding Fee information, source of funds documentation requirements, savings documentation, maximum VA loan amounts ($1 million prior to the VA Funding Fee), etc., etc. In other words, in this environment, borrowers had better have proof of anything or any transaction for practically every investor.

On to the fixed income markets. After some intra-day volatility, mortgage (MBS) prices ended Thursday unchanged from Wednesday's closing prices, with about $2.2 billion being sold. 10-yr notes worsened about .125 in price and moving to 2.52%. This was all after new U.S. claims for jobless aid fell last week, while manufacturing in the nation's Midwest region grew faster than expected in September, supporting the view that economic activity picked up a bit in the third quarter. There are, of course, large-scale trends occurring around the world, with commodities on the rise, the dollar sinking, several European countries still wallowing - so one might ask what a few percentage points in an ISM survey or the NY Fed's Empire Index means. It is a valid question.