mortgage credit

Apache is functioning normally

Apache is functioning normally

Verification, Credit, Servicing, Automated QC, POS, DSCR Products; Events and Training Fast Approaching

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Verification, Credit, Servicing, Automated QC, POS, DSCR Products; Events and Training Fast Approaching

By:
Rob Chrisman

Wed, Sep 27 2023, 10:44 AM

Today I head to Phoenix area for the AzAMP annual conference, and am reminded that, “Change is inevitable, except from a vending machine.” The mortgage industry is constantly changing, although Freddie and Fannie have been a somewhat stabilizing influence. But explaining to someone not in the mortgage business what they, the government sponsored enterprises (GSEs) do, is not easy, but in another one of his Mortgage Musings, attorney Brian Levy offers his thoughts on 15 years of being in conservatorship and whether that means it’s time to drop the “S” in GSE. Let’s just hope they don’t become another Amtrak. (Sign up for Musings here.) One topic that has come up at a few conferences, besides Agency buybacks, is demand for “LIP” and “VLIP” borrowers. Are F&F pushing hard for Low Income Purchase and Very Low Income Purchase business, and requesting high percentages of those products with the “threat” of hitting their overall pricing? Address any questions to your Agency rep, but some would say that in this environment, with everyone fighting for every deal and reduced volume, it doesn’t seem fair or even logical to have such a high demand for sellers with something outside of their control. (Today’s podcast can be found here and this week’s is sponsored by Built. Built is powering smarter and faster money movement for the entire construction and real estate ecosystem, all while reducing risk. Hear an interview with Verisk’s Kingsley Greenland on state level structural issues with property insurance and the current state of federal flood insurance.)

Lender and Broker Software, Programs, and Services

“Unlock a world of potential with DSCR loan options, including programs for Foreign National and ITIN investors with Champions Funding. Our business purpose non-owner-occupied Accelerator, Ambassador, and ITIN Accelerator loan programs make homeownership a reality for global clients and expand your borrower pool across the planet. Access DSCR financing for properties up to $3M/80 percent LTV (Accelerator), $1.5M/70 percent LTV (FN), or $1M/80 percent LTV (ITIN) as a broker partner. Visit here for full guidelines & to register as a partner. There you’ll also find DSCR l No Ratio Accelerator for U.S. citizens, including first-time investors. The Champs are the key to unlocking possibilities for your business & your borrowers’ portfolios.”

“The next gen of Xactus360 is here and is it ever shaking up the industry! Xactus’ proprietary verifications platform offers game-changing features that streamline workflows and empower lenders to work more efficiently, such as a single login for Mortgage Credit and Pre-Qualification reports. Not only that, Xactus360 can help improve your automation with key integrations. Flood ReportsX was recently added. Did you know Xactus’ offers no close, no pay flood zone determinations? That means if the loan doesn’t close, you will not pay for it. Xactus360 also includes Appraisal FirewallX which has met the requirements and is capable of fulfilling Fannie Mae data collection orders in addition to supporting Freddie Mac’s ACE + PDR program. Intrigued? Meet with Xactus at the MBA Annual for a demo of Xactus360 and see how this innovative platform revolves around you. To set up a time, email us.”

Does it feel like your current point-of-sale vendor has lost focus on mortgage? At Maxwell, mortgage is all they do. Constantly looking to improve the origination experience, Maxwell Point of Sale offers unique features to help lenders stand out including lender configurability, technology that pre-fills the application for the borrower, a complete Spanish language application, payment capabilities, quick pre-approval letters and more. With an average implementation time of less than 2.5 weeks, Maxwell Point of Sale can start working to improve your bottom line quickly. Schedule a call with the team to learn more.

“Blue Water Financial Technologies Services (“Blue Water”) continues to add new originators, investors, and due diligence providers to its automated QC platform. Let us be your pipes. Our proprietary technology assists your team with rapidly identifying and remediating exceptions! QC is just one of the many capabilities offered by Blue Water’s proprietary platforms for mortgage assets. Your company can value, transact, transfer and QC your mortgage assets using our Single Sign on proprietary technology. Come meet our team in Philadelphia during the MBA Annual 23 from October 15th-18th for a demo and discussion on how Blue Water can help streamline your operational processes and enhance your throughput with our encrypted, onshore, cloud-based tools! Schedule a meeting with our expert sales team today! Services offered by Blue Water Financial Technologies Services, LLC.”

“Working to Provide the Best Homeowner Experience: Cenlar is more than just a mortgage subservicer. We strive to be our clients’ trusted partner each and every day. And a big part of that is how we care for our clients’ homeowners. A home is most likely someone’s largest asset. That’s why we are continuously evolving to provide the best homeowner experience. Whether that’s the regular cycle of onboarding, escrow, monthly payments and year-end or challenges facing homeowners like natural disasters, we are responsive, anticipatory and always caring. Let’s discuss how Cenlar can meet the mortgage servicing needs of your organization. Call 1-888-SUBSERV (782-7378) or visit here. We want to be your trusted partner, each and every day.”

Connect with Sagent @ #NEXTFALL23. Headed to Dallas next week? Make sure you block off a few dates and times to catch Team Sagent on stage at #NEXTFALL23, plus an opportunity to elevate your personal LinkedIn brand with a sponsored headshot station! On Wednesday 10/4 at 1:15 PM CT, join CLO Wendy Lee for an exclusive “AI” Hive roundtable, which will be a precursor to her Ethical AI Use Cases panel on Thursday, 10/5 at 9:15 AM CT. Plus (if you’re onsite), Sagent is sponsoring the Headshot Station during the event (10/4 @ 1:30PM – 4PM CT & 10/5 @ 10AM – 1PM CT), so reserve your spot via’s NEXT’s app and head on over for a warm welcome from Cheryl McKenzie (who will greet you with a glass of champagne) and get picture ready. For more information, click the link here. Hope to see you all there!

Events and Training

Like every other month, September has sailed by, and this Sunday is October. (No, we don’t change the clocks in most states until November.) What’s happening out there? A good place to start is here, and click on “events” for conferences in the future.

Join K&L Gates and special guest, John Beccia, Co-Founder and CEO of FS Vector, for a panel discussion on generative artificial intelligence (AI) in the Fintech and Banking industry on

Thursday, September 28th 9:00-10:30 AM – PT, 11:00 AM-12:30 PM – CT. Discussion will address the legal and ethical risks, mitigation, and best practices to consider across these industries as you develop generative AI products and services or use generative AI in the operation of your business.

In the Dallas area, the TMBA Education Symposium is November 6-7. The Symposium will be held at Westin Dallas Southlake, 1200 E State Hwy 114, Southlake. Early registration ends Oct. 2nd for the best registration rates. I will be there, so please say hi!

If your credit union’s due diligence for quality control relies only on last-minute adjustments during post-closing processes, chances are you’re spending too much time putting out fires rather than adequately serving members’ needs. Market changes demand a more comprehensive and proactive approach to due diligence, and the experts at ACES Quality Management have the wherewithal to help you make that adjustment. Tune into this Inside Track webinar on September 27th at 1 pm CST to learn the why’s and how’s of improving your QC processes.

Looking for more in-depth commentary on weekly mortgage news? Register here for “Mortgage Matters: The Weekly Roundup” presented by Lenders One. Every Wednesday at 2:00 PM EST/11:00 AM PT is a dive into a range of mortgage-related topics, including market trends, interest rate fluctuations, innovative mortgage products, and industry advancements. Listen to a unique mix of age perspective, expertise, and charisma to the screen, ensuring that the information is not only educational but also entertaining. Today features Phil Johnsen, SVP and General Manager of Altisource’s Servicing & Real Estate Solutions Group.

California MBA upcoming Mortgage Quality and Compliance Committee webinar, Navigating the Future of Work: Adapting Return to Office Policies, on Thursday September 28th at 11 A.M. PST. Expert panelists will provide valuable insight on the ever-changing work dynamics, the challenges of managing remote and in-house teams, and MLO enhanced requirements in CA (and other states).

Watch on demand, at your leisure: Millennials and Gen Z’ers represent the largest group of first-time homebuyers. In less than 10 years, 3.1 million will have entered the market. Of these buyers, roughly 75 percent of them report checking social media daily. Making social media a necessary strategy for loan officers. Join Homebot’s VP of Marketing, Ashley Remstad and Mortgage Advisor Sosi Avila as they discuss key strategies and tactics for using social media to your advantage. Register for the webinar here.

Friday the 29th is The Mortgage Collaborative’s Rundown covering current events in the mortgage market for 30-45 minutes starting at noon PT in “The Rundown”. Tom G. and I are joined by Laird Nossuli (iEmergent) and Evan Zuverink (First Commonwealth Bank) to take a dive into Special Purpose Credit Programs.

ACUMA’s Annual Conference is October 1-4 at Gaylord National Resort, National Harbor, Maryland. From legislative and regulatory issues to new marketing and service strategies to cutting-edge technology, conference topics are concurrent with today’s challenges, and networking is a paramount part of the program.

Educate & Elevate with National MI University’s October Webinars. 2023 NextGen Money Mindset: Findings & Insights with Kristin Messerli, October 3rd, 1pm ET. P&L and Balance Sheet Analysis for Self-Employed Borrowers ​​​​​with Marianne Collins – October 4th, 1pm ET. Coaching for Improved Performance ​​​​​with Andrew Oxley, October 5th, 2pm ET. Your Perfect Week with Rebecca Lorenz, October 24th, 1pm ET. Help! I’m in a Funk with Dr. Bruce Lund, October 25th, 2pm ET

MBAC 67th Annual Convention Oct 1-4, 2023 at the Francis Marion Hotel, Charleston, SC. Sponsorship opportunities available, reserve your room at the Francis Marion Hotel use Promo Code MBAC2023 for special rate, Last Day to reserve at this rate, September 11, 2023.

Join St. Louis MBA in Partnership with the Saint Louis Realtors Association for a presentation on the Headwinds & Tailwinds – Economy’s Impact on Housing Market and Where We’re Heading, October 5th, 10:00-11:00, at St. Louis Realtors Association, 12777 Olive Boulevard.

NYMBA ’23 Annual will be held at Turning Stone Resort Casino, October 4th -6th. Kick-off begins with the 2nd annual Golf Tournament at Turning Stone’s Shenendoah course, recently named in Golf Digest’s Editor’s Choice: Top 50 Golf Courses in the U.S. as one of New York’s award-winning courses.

Become a Certified Reverse Mortgage Specialist. CoAMP is partnering with NAMB to bring their CREV course to Denver, Friday, October 6th, 9:00 AM – 5:00 PM MDT at Steward Title: 7979 E Tufts Ave, First Floor Conf Room. Cost for NAMB Members is $199; Courtesy Associate Members and Non-Members is $298 (includes a NAMB Professional/Associate membership). The certification training will give you the information and tools necessary to successfully navigate the product, process, and conversation with potential borrowers.

ConFi Today’s third session webinar, Wednesday, October 11th 11:30 am–12:30 pm PT | 1:30 pm–2:30 pm CT | 2:30 pm–3:30 pm ET; Real Talk About Artificial Intelligence: How Will Enforcement Activity Impact the Use of AI in Consumer Financial Services, will focus on the latest issues and enforcement trends related to financial institutions using AI tools. Specific topics to be covered include Key risk areas, Emerging themes, Risk mitigation steps to take now.

Join Mortgage Bankers Association of Metropolitan Washington for a fast-paced, fun presentation walking through the Fed’s monetary policy, economy, interest rates and housing as we quickly approach 2024. Reading the Markets – A Real-time Economic and Interest Rate Discussion with Bill Bodnar, Thursday, October 19, 10 – 11 am.

Capital Markets

The “higher rates for longer” narrative from the Fed has led to selling in the bond markets over the last several days. Yesterday’s selling lifted yields on 10-year and 30-year Treasuries to fresh highs for the year. “Hawkish” chatter from Fed officials, the latest being Minneapolis Fed President Kashkari saying that a 25-basis point hike prior to year-end was likely, has been the main driver of investor sentiment. Economic data released yesterday showed weaker than expected New Home Sales (actual 675k, expected 695k) and a decrease in the Consumer Confidence Index for September. The U.S. Treasury sold $48 billion in 2-year notes to strong demand ahead of today’s $49 billion 5-year note auction.

Unfortunately, today’s calendar kicked off with mortgage applications decreasing 1.3 percent from one week earlier, according to data from the MBA. August durable goods orders have also been released (+.2 percent, stronger than expected). Later this morning brings a Treasury auction of $24 billion reopened 2-year FRNs and $49 billion 5-year notes. We begin the day with Agency MBS prices better by .125-.250 and the 10-year yielding 4.51 after closing yesterday at 4.56 percent.

Employment

“Are you ever overwhelmed and sense a lack of support? If you’re a business manager leading a hardworking staff and want more strategic guidance and additional resources to thrive, look no further. Nations Lending offers a full suite of tailored support for Producers. With a top-notch Operations department that focuses on streamlining processes to ensure efficient loan origination, with LO-friendly products like Direct Submit, for seamless loan file submission directly to Underwriting. And ACE (Accelerated Competitive Edge) Approvals, our comprehensive underwriting preapproval program saving you time. If you’re interested in excelling with a company that is credited with multiple awards, including three-time Inc. 5000 winner, eight-time winner of Scotsman Guide’s Top Mortgage Lenders, and three-time winner of Top Workplaces for Millennials by Fortune Magazine, then join our family. Become part of our nation and mission to make “home loans. made human.™,” visit Nations Lending to learn more.”

“Visit with a Mortgage Boutique at AIME’s Fuse National Conference in Vegas at booth #418 October 4-7! We are excited for the opportunity to connect with potential business partners, foster meaningful relationships, and explore collaborative pathways to enhance your lending capabilities. Dedicated to providing outstanding service to both clients and partners, a Mortgage Boutique places extraordinary talent at the forefront of our success. Allow us to introduce our newest addition, Alan Michaels, along with his dynamic team. Alan brings a wealth of industry knowledge and a track record of remarkable achievements to the AMB family. We’re thrilled to welcome him aboard and know his expertise will be an invaluable asset as we continue to expand our services and meet the needs of our clients. If you’re passionate about excellence and seeking to join a thriving team, consider a career with a Mortgage Boutique. Contact DJ Ziggas to learn more.”

 Download our mobile app to get alerts for Rob Chrisman’s Commentary.

Source: mortgagenewsdaily.com

Apache is functioning normally

Apache is functioning normally

Ready to buy a home? Whether you’ve already found your dream home or you’re just starting the process, one thing’s for sure—you’ll probably need a home loan. But before you start looking into mortgages, you might need to give your credit score a little evaluation. You need a decent score to get a decent mortgage, but what’s the minimum credit score for a home loan?

The short answer? It depends on a lot of things. If you’re ready to start looking for home loans, but aren’t sure if your score is up to par, we’re to help. Keep reading to learn if your credit score is mortgage-ready.

A Quick Look at Minimum Credit Scores for Mortgages

Mortgages are complex forms of financing, so a lot of factors come into play when you’re applying. Find out more about the minimum credit requirements for these types of loans—and why your credit score even matters—below.

Why Does Your Credit Score Matter for a Mortgage Loan?

Your credit history tells a financial story about you. It lets mortgage lenders better understand whether you’re reliable, how likely you are to pay off your debt and whether your debt-to-income ratio is low enough to allow you to cover your current debt obligations in addition to a new mortgage payment.

If you have bad credit, you may look like a risky investment to potential lenders and you’ll be less likely to get the approval. Or, if you do get approved, you may be required to pay higher interest rates than individuals with a better credit score might pay.

Luckily, you can still get approved for a home loan even with a lower-than-average score. That’s because your credit score is critical, but it’s not the only factor lenders consider. Plus, different types of loans come with different requirements, so you don’t always need a good credit score to qualify.

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What Credit Score Do You Need to Get a Mortgage?

As stated above, the required credit score really depends on what type of loan you’re looking at. Let’s break it down a bit, defining these types of loans, so you can understand more about mortgages and some of your options.

Credit Requirements for Conventional Mortgage Loans

Conventional mortgage loans are not backed by a government entity. They’re offered via private lenders, including banks and mortgage companies. Typically, you need good credit to qualify for a conventional mortgage. For this purpose, that’s considered to be 640 or higher.

However, if you fall slightly short of that mark, you might still be able to find a lender if your payment history, debt-to-income ratio and other factors are positive. Ultimately, lenders need to know that you’re likely to pay your mortgage as agreed and that you also have the resources to do so.

Credit Requirements for Government-Backed Mortgage Loans

Credit requirements for government-backed loans get a bit more complex. Since these loans are all or partially backed by federal government agencies, lenders may approve you even if you don’t have good credit. However, that doesn’t mean everyone gets approved. Here are some basics about eligibility and minimum credit score requirements for various government-backed mortgage types.

Credit Score Requirements for USDA Loans

These loans are partially backed by the federal government and are available to individuals buying qualifying suburban or rural homes. USDA loan lenders must conduct a thorough review of an applicant’s credit profile. Here are just some of the rules they must apply:

  • If three credit scores are present, they take the middle one. If two credit scores are present, they take the lowest one. If only one or no credit score is present, the lender must do a credit analysis and obtain alternate credit verification.
  • The credit score must be based on at least two trade lines (open accounts) that were active at least 12 of the past 24 months. In short, if you don’t have much credit or you haven’t dealt in credit for years, you may have a challenge getting approved.
  • There must be no significant delinquencies or collection accounts.

Credit Score Requirements for VA Loans

VA loans are available to eligible veterans and their families and are backed by the Department of Veterans Affairs. They don’t require a down payment or private mortgage insurance. The VA does not establish minimum credit score requirements and requires lenders to conduct a comprehensive credit analysis.

VA loans don’t have maximum debt ratios, but the lender has to provide compensating factors that prove they can pay the mortgage if their debt-to-income ratio is more than 41%. Veterans who borrow without a down payment may be limited to mortgages of $453,100 or less.

Credit Score Requirements for FHA Loans

FHA loans are backed by the Federal Housing Administration and are seen as a lower risk by lenders because they’re government-backed loans. This option is a common choice for anyone who qualifies as a first-time home buyer because of its relatively low minimum credit score requirements.

Credit score requirements for FHA loans are:

  • 580 or higher for maximum financing—this means you wouldn’t need a down payment or could have a very small down payment, depending on other factors.
  • 500 or higher for partial financing—this means you’d need at least some down payment orwould need to buy a house for less than it was worth.

You can’t get approved for an FHA loan with a credit score less than 500. Other factors do impact approval, such as your payment history, income and debt level.

Do You Need Good Credit to Refinance Your Mortgage?

A refinance is still a mortgage, so yes, you typically need good credit to get approved for one. Many of the minimum credit scores for home loans above apply to refi loans too. One benefit you get when refinancing is that you may owe less than your house is worth. That could reduce the need for down payments and even help you access better interest rates because the lender has less risk in making the loan.

Has COVID-19 Impacted Mortgage Credit Requirements?

Yes, COVID-19 has impacted minimum credit scores for mortgages. These changes are typically made by each bank. In the early months of the pandemic, uncertainty led many banks to drastically reduce home loans or even put them on hold. For example, in April 2020, JPMorgan Chase changed credit requirements to at least a 700 credit score with a 20% down payment.

However, falling interest rates and improved economic factors caused many banks to loosen requirements in the later months of the pandemic and into 2021. Ultimately, you’ll need to do your research when you’re ready to apply for a mortgage loan to find out what options you might qualify for.

What You Can Do Now

First, check your credit score. You might consider signing up for ExtraCredit. You’ll get access to 28 of your FICO scores—and you’ll see the credit scores that mortgage lenders see. ExtraCredit also has features such as Build It to help you positively impact your credit score if you need to boost it before applying for a mortgage.

Once you have a credit score that’s above 640—or, even more optimally, above 700—you can start shopping for mortgage loans and good rates. And remember that if you do get approved, your credit score also impacts your interest rates. Always ensure you know what your mortgage is going to cost you each month and over the life of the loan.

Source: credit.com

Apache is functioning normally

Nearly $100 billion in option arms are expected to reset in the next two years, with more than half early recasts, a new report released today by Fitch Ratings revealed.

Fitch expects about $29 billion to recast to significantly higher monthly mortgage payments in 2009 and another $67 billion to follow that in 2010.

While some of the loans may be naturally recasting after their initial teaser rate expires, $53 billion of the loans will be doing so because they reached their negative amortization cap, typically set at 110-115 percent of the original loan amount.

An early recast usually takes place if the borrower chooses to make only the minimum payment option each month, which is generally a one percent payment, a deep discount to the fully indexed rate.

To add insult to injury, home price depreciation will put the negative amortization borrower in an even greater hole, surely making many ponder simply walking away.

The only saving grace is the fact that the MTA, the index tied to many of these loans, is just 2.855 percent, down about two percent from a year earlier.

When combined with a standard margin of say 2.50 percent, the fully indexed rate sits below six percent, though Fitch estimates the average payment increase on recasting loans to be 63 percent, or an average increase of $1,053 a month.

“The combined impact of payment shock, negative amortization, declining home prices and restricted availability of mortgage credit may leave many option ARMs’ borrowers unwilling to continue paying their mortgage,” said U.S. RMBS group head Huxley Somerville.

“Also, because of their use as an affordability product, option ARM defaults will likely spread into higher priced neighborhoods, as many borrowers leveraged the very low minimum monthly payment to buy more expensive homes.”

Fitch sees the 90-day plus delinquency rate of 2004-2007 vintage option arm loans more than doubling the current delinquency rate, which ranges between 10 and 24 percent.

(photo: orse)

Source: thetruthaboutmortgage.com

Apache is functioning normally

But depending on how a lender interprets the guidelines, the client could have gotten his application rejected for not having consistent employment for a two-year period without interruptions, explained Gastelum.

“It really comes down to interpretation of the guideline. One lender could have said, ‘Oh, he was out a week, so it’s interrupted and therefore, the second employment doesn’t work.’ The problem is, a mortgage credit reject (MCR) is kind of like your scarlet letter, to be completely honest,” Gastelum said. 

When a lender rejects an FHA application, it discourages the next lender from even reviewing the application because of the extra work the underwriters have to do to override that MCR, mortgage pros told HousingWire. 

All FHA mortgage lenders use a system by the U.S. Department of Housing and Urban Development (HUD) called FHA Connection, a database used to insure and generate FHA case numbers associated with the borrower’s home loan application. When the borrower is denied for an FHA mortgage loan, an MCR report had to be created for that denial. That changed on September 11. 

The FHA’s announcement in early September to waive a requirement that FHA-approved lenders flag rejected loans in the FHA Connection system is a step in the right direction since declined borrowers don’t have to overcome a stigma, loan officers said. 

In a rate-rising environment where it has become more difficult for first-time buyers to get into the market, borrowers won’t have to deal with a file that has an MCR for six months. Even after the six-month period is over, the borrower’s case number would still be attached to his/her social security number.

Demand for FHA loans have risen over the past year to comprise 23.8% of mortgage applications in August 2023, up from 17% from the same period a year ago, according to the Mortgage Bankers Association.

The FHA/VA share in Q2 2023 stood at 22.9% of the entire mortgage origination volume, up from 18% in Q2 2022, according to data compiled by Inside Mortgage Finance and Urban Institute.

Loan officers said that the FHA’s waiver will give borrowers a fairer shot at obtaining financing. Borrowers won’t be subject to lenders’ different underwriting interpretations that could lead to a rejection of their mortgage applications.

“That (MCR) is a subjective stigma based on credit risk tolerance of the particular lender that you went to initially. “This is an underwriting technicality that is unfair and it is a good move to create more fairness,” Billy Taylor, CEO of Hometown Lenders, said. 

“We are really happy about this change because it’s going to provide more opportunity for loan officers and is going to provide more opportunity for buyers to get a second chance,” Michael Borodinsky, VP and branch manager at Caliber Home Loans, said. 

Overcoming overlays

The FHA credit requirements are strict, but borrowers can get an FHA loan with no credit score. In fact, HUD forbids lenders from declining a borrower’s FHA loan application simply because they lack a credit history.

In such a case, lenders will ask for documentation, including a letter from the landlord documenting on-time rent payments, payment history of utility companies and cell phone or internet provider.

Lenders, however, have overlays – rules on top of the federal rules that were published as lenders need to sell those loans to investors who do not want to buy high-risk loans.

“Those overlays – it could be higher standards, it could be lower debt-to-income (DTI) ratios – still exist on a subjective basis on a lender-by-lender basis. So a borrower not knowing that they could qualify for a loan where their credit score is below 640 or 620 could be subject to a denial and then not realize that they could be approved somewhere else,” Borodinsky said.

Generally, the FHA requires a minimum 580 credit score with a down payment of 3.5% to qualify for a FHA loan. Under FHA guidelines, borrowers with credit scores between 500 and 579 must make a down payment of at least 10%. But they may also face tighter requirements. Lenders may require a lower loan-to-value (LTV) ratio or ask that the borrower make a larger down payment. 

Reasons for a MCR vary, said Ted Tozer, non-resident fellow at the Urban Institute‘s Housing Finance Policy Center (HFPC) and the former head of Ginnie Mae. 

“It could be low credit scores, or it could be geographics too – maybe they’re in a market that it’s a soft market where they’re looking at home prices that could be falling. Lenders don’t want to tilt their portfolio to one where these 3.5% down payments could very well become over 100% LTV just because home prices fall,” Tozer noted. 

Industry personnel frequently complained that FHA Connection often didn’t provide sufficient information about mortgage credit rejects to determine why the applicant was rejected, said Peter Idziak, senior associate attorney at Polunsky Beitel Green. 

“It could be the lender’s own standards could be higher or different, or in addition to just the FHA qualifications,” Idziak said. 

For a prospective homebuyer, the new waiver should avoid a possible misrepresentation of their actual creditworthiness, JR Younathan, SVP and California state mortgage production manager at California Bank & Trust, said

“The given waiver doesn’t necessarily open new paths to compete as they could have done that previously. It would only open a new path in the instance that the other lender wasn’t willing to investigate the reasons the denial was registered, and instead rejected the loan file/borrower on the fact it existed at all, thus eliminating that ability to compete,” Younathan noted. 

Regardless of whether the applicant is walking in to the lender for the first or second time, the lender should be armed with enough financial information to assess the credit risk.

“The lender should be confident enough to know what questions to ask, how to analyze their income, how to analyze all the other risk profiles, it really shouldn’t make that much difference, because they should be in a situation where they should be asking the right questions to really understand,” Tozer said. 

Beggars can’t be choosers 

Though loan officers are unanimous that the waiver will make FHA loans more accessible for borrowers, LOs interviewed by HousingWire don’t expect it to increase their production volume.

In a highly competitive environment, lenders had already taken that extra effort to approve loans that would’ve been rejected or already rejected from another lender.

“We’re more likely to underwrite a 500 credit score than a big bank who’s saying ‘I don’t want that risky loan in my portfolio. I don’t want I don’t even want to underwrite it, because I don’t want a 500 or 520 or 560 borrower in my portfolio,’” Taylor, of Hometown Lenders, said.

Hometown Lenders would perform a manual underwriting for an applicant with a lower credit score to try to get an approval rather than simply rejecting a lower credit score borrower, he said. 

The FHA loan program requires lenders to seek manual underwriting review when a borrower has a credit score lower than 620 and a DTI greater than 43%. According to HUD, borrowers could qualify with a 580 credit score and a DTI of 50%.

“That (loan origination) is the only way we make income. I don’t think it (the new waiver) would affect us at all, we would have looked at that borrower whether there’s an MCR on there or not,” Taylor noted. 

To override an existing MCR would require a level two underwrite – meaning two underwriters would have to underwrite the file as they have the authorization to override the MCR in the FHA Connection system. 

Because the mortgage credit reject is going to be eliminated, we’re no longer going to have to deal with a second underwrite, Gastelum said. 

“It’s not going to be more business. If anything it’s going to bring some of the borrowers that got declined at other companies back to the marketplace sooner,” Gastelum said.

FHA loan limits rose to a maximum of more than $1 million and mortgage insurance premiums for FHA loans were cut by 30 bps this year in line with home price inflation and to provide relief from the steep rise in mortgage rates. 

Some loan officers noted that while the FHA’s decision to cut MIPs was a step in the right direction, the upfront mortgage premium (UFMIP), which amounts to 1.75% of the base loan amount, as well as a monthly premium for the life of the loan, could still be a burden for borrowers compared to those with a conventional loan.  

However, affordability will still remain challenging for borrowers as wages would need to rise and home prices would need to fall to tackle that issue, Taylor noted. 

“You’re not going to change affordability — which is the real reason people don’t have access to housing — by taking MCR off,” said Taylor. 

But any little bit helps, Borodinsky said, citing a tough mortgage origination market that he’s never seen before. 

“I welcome anything that moves the needle even fractionally. Because in this market, beggars can’t be choosers. This market is unlike any market we’ve seen in over 30 years in terms of there being no inventory, high interest rates and a real problem compounded with what’s called the lock-in effect,” Borodinsky said. 

Source: housingwire.com

Apache is functioning normally

Mortgage credit availability increased slightly in August but remained close to the very low levels last seen in January 2013, according a report from the Mortgage Bankers Association.

Overall, an increase in the number of loan programs offering cash-out refinances and mid-range credit scores drove the uptick, said Joel Kan, MBA’s vice president and deputy chief economist.

The trade group’s monthly Mortgage Credit Availability Index picked up by 0.3% to 96.6 in August. A decline of the index, benchmarked to 100 in March 2012, indicates that lending standards are tightening while an increase suggests loosening credit.

As lenders seek to reduce costs, by cutting down on staff and streamlining product offerings, industry capacity continues to decline, noted Kan.

Industry professionals also winded down on their product offerings. The conforming index dropped to its lowest level since 2011. However, the jumbo index, increased after three monthly declines, indicating that the current context provided lenders with some new opportunities, said Kan.

This news comes after a year in which the nation’s largest banks, spooked by surging rates and increased regulatory risks, have shied away from the jumbo mortgage market. HousingWire covered the jumbo downturn extensively in August.

Meanwhile, the Conventional MCAI, which does not include loans backed by the government, increased 0.6% and the Government MCAI, which examines FHA, VA, and USDA loan programs, was unchanged.

Of the two component indices of the conventional index, the Jumbo MCAI increased by 2.7%, while the Conforming MCAI fell by 2.7%.

Source: housingwire.com

Apache is functioning normally

An $18.4 million mortgage-subsidy fund resulting from the 2022 Trident Mortgage redlining settlement is now open to eligible borrowers in three Eastern states.

After a combined state and federal investigation last year found Trident — one of the largest mortgage lenders in the Philadelphia area before it ceased originations in 2020 — had regularly engaged in practices to discourage minority borrowing, the now-defunct company agreed to establish the fund under conditions of the settlement. The fund will support Black borrowers and majority-minority neighborhoods in a region that includes parts of Pennsylvania, New Jersey and Delaware. 

“This subsidy program will make a difference to many hundreds, possibly thousands, of families impacted by historic redlining practices in Philadelphia,” said Pennsylvania Attorney General Michelle Henry in a press release. 

The fund, called Pathway to Prosperity, includes two different programs — HomeAssist and HomeAccess — which will provide as much as $10,000 in financial assistance per qualifying mortgage. The rollout comes after Trident conducted a study to determine the needs of majority-minority communities in the Philadelphia area. Trident is contracting with nonbank lender Prosperity Home Mortgage to administer the fund. 

HomeAssist will provide funding for the purchase or refinance of a primary residence located in a qualifying census tract. HomeAccess, meanwhile, is aimed at assisting current residents living in eligible neighborhoods to purchase a primary residence located in any state Prosperity is licensed. 

“For too long, companies have avoided offering mortgages in neighborhoods that are home to predominantly people of color, denying them equal access to mortgage credit. This is one small step toward correcting that injustice,” Henry said.

Per the settlement, Trident will also provide consumer financial education and engage in community development partnerships within affected communities. Prosperity will open offices in some minority neighborhoods as well. 

Although no longer conducting business as a home lender, Trident had agreed to continue operations to implement terms of the settlement. Both Trident and Prosperity are mortgage subsidiaries of Berkshire Hathaway-owned HomeServices of America, a consortium of companies serving real estate interests. 

Following a four-year investigation, Trident was fined a total of $24.4 million, which included a penalty of $4 million owed to the Consumer Financial Protection Bureau for various violations. Among the investigation’s findings were derogatory language, including racial slurs, used in emails between Trident staff, and marketing campaigns that excluded minority consumers. More than half the population of Philadelphia is Black or Hispanic.

Attorneys general of the three affected states participated in the investigation, along with the CFPB and the U.S. Justice Department. All voiced approval of Trident’s program.

“The launch of this important loan subsidy fund marks a critical step in our efforts to redress Trident Mortgage Co.’s mortgage redlining practices, and to begin the process of making whole the communities that have been harmed by generations of systemic housing discrimination,” said New Jersey Attorney General Matthew J. Platkin.

“It will take generations to truly repair that harm — but this subsidy program will make a real, tangible difference for hundreds of redlining’s victims,” added Delaware Attorney General Kathy Jennings. 

Redlining, defined as a systematic practice of underserving or discriminating against predominantly Black, Hispanic or other ethnic neighborhoods, has been prohibited since the 1960s with the enactment of the Fair Housing Act. But violations continue decades later, with multiple financial institutions this year involved in redlining lawsuits. 

This past spring, Pennsylvania-based Essa Bank and Trust was also fined $3 million for purported infractions in the Philadelphia area. And in January, City National Bank of Los Angeles resolved allegations against it by agreeing to pay more than $31 million, the largest redlining settlement in history. Allegations have similarly hit the likes of KeyBank and HSBC in 2023.  

Source: nationalmortgagenews.com

Apache is functioning normally

The Federal Housing Administration (FHA) on Thursday announced that it has issued a waiver to a requirement that FHA-approved lenders flag rejected loans in the FHA Connection (FHAC) system, an effort the agency says will improve access to government-insured mortgage financing for qualified borrowers.

“FHA has determined that this flag does not improve risk management and is often why other lenders will reject an applicant even when that applicant might otherwise qualify for a loan,” the agency explained in an informational notice distributed on Thursday. “Currently, when a mortgagee rejects a borrower’s application for an FHA-insured mortgage, the denial information must be entered on the Mortgage Credit Reject (MCR) screen in FHAC.”

The resulting warning flag would become associated with both the individual borrower and their case number for six months, ultimately requiring a review from the regional Homeownership Center (HOC) when a borrower applies for a government-insured loan from another lender during that period.

“By waiving this provision of the Single Family Housing Policy Handbook 4000.1, FHA will no longer require lenders to enter rejection information in FHAC, streamlining the loan underwriting process and removing an unnecessary barrier for borrowers who wish to obtain FHA-insured financing,” FHA said.

The waiver is effective for all cases pending endorsement on or after September 11, 2023. Any cases pending endorsement that have the aforementioned flag will see those removed at that time, FHA said. The MCR screen itself will also no longer be available in FHAC beginning on that day.

The waiver is also a new permanent policy change. It will be incorporated into future versions of the Single Family Housing 4000.1 Handbook, according to the agency.

Source: housingwire.com

Apache is functioning normally

One year ago, the Community Mortgage Lenders Association merged with the Community Home Lenders of America, creating the Community Home Lenders of America.

What have we learned from the last year?  First, there is a critical need for a national trade group that distinctly and vigorously advocates for the interests of small and mid-sized independent mortgage banks.  

When Silicon Valley Bank imploded, certain parties in Washington re-doubled their efforts to engage in scaremongering Washington policy makers about the alleged significant taxpayer “risks” of IMBs. This allegation is unfounded – but these types of claims can have consequences, they can’t go unchallenged.

So, CHLA promptly released a report decisively rebutting the overhyped claims of IMB risk, documenting the “ubiquity” of both financial and consumer regulations on IMBs, and explaining how regulatory overreach could undermine the availability of affordable mortgages precisely at a time when homeownership challenges are rising because both mortgage rates and home prices are rising.

We have learned (or reaffirmed) that there is a critical need for an association that continues to educate Congress and federal agencies about the key role of IMBs in access to mortgage credit, leading the market in originating loans for minority, underserved, and first-time homebuyers.

Last October, CHLA continued the practice of releasing an annual “CHLA IMB Report.” This report explains what IMBs are, uses statistics to show the growing mortgage market dominance of IMBs (e.g.,  IMBs originate 90% of FHA and VA loans), and highlights the key issues for IMBs, along with practical policy recommendations.

We have learned that a larger organization means more resources, more member expertise, and a diversity of opinion that strengthens our advocacy efforts. CHLA and CMLA had represented slightly different arcs of the market for smaller lenders.  The combined group gives us more breadth, ranging from the smallest IMBs to much larger mid-sized IMBs that securitize FHA, VA, and GSE loans

On behalf of small correspondent lenders, for example, CHLA has advocated for a Ginnie Mae cash window and a proposal to make aggregators more accountable to correspondent lenders in challenging GSE repurchase requests. Large mortgage lenders often have their own lobbyists in Washington or an outsize role in trade groups.  So CHLA sees vigorous advocacy on behalf of smaller IMB lenders as an essential part of our mission.

We have learned that a larger organization translates into significantly greater policy successes.  Key priorities that CHLA has been an acknowledged leader on came to fruition this last year – including an FHA premium cut, a number of much appreciated flexibility provisions related to Ginnie Mae pooling, and divestitures by ICE in response to CHLA criticism and FTC opposition to their purchase of Black Knight (although our push to fight abuses continues).

We learned (or reaffirmed) that having a bottom-up, member-centric trade group makes it easier to set priorities and take actions that reflect what matters most to community-based IMBs.  Many initiatives CHLA pursued this last year were issues that Members suggested on our weekly calls.  These resulted in CHLA proposals to reign in abusive trigger leads, to fight FICO’s 400% discriminatory fee hike and to develop proposals to recruit more minority and underserved loan originators (the best way to help IMBs do an even better job of serving those borrowers).

Finally, we have learned (or reaffirmed) that a trade group does not just have to reflexively advocate for special interest provisions for their members, but also has a vested interest in consumer protections.  

Consumer confidence in the mortgage process is critical to the success of mortgage lenders and the right thing to focus on.  So, CHLA recently released its “Consumer Bill of Mortgage Rights,” identifying seven critical gaps on mortgage consumer protections.   

These include universal licensing of all loan originators, reigning in trigger leads, rolling back the FICO credit score hikes, consumer protections for dual compensation, and FHA ending their Life of Loan premium policy.

We can’t wait for the next year.  And any IMB that likes what we are doing, give us a call, join our mission.

Source: nationalmortgagenews.com

Apache is functioning normally

A community bank in Oklahoma is upset over the Department of Justice’s characterization of the redlining settlement the two parties entered into Monday.

Endeavor Moore Media – stock.ado

American Bank of Oklahoma has agreed to settle redlining charges brought by the Department of Justice and will make restitution by lending $1 million in Black and Hispanic neighborhoods in Tulsa. 

Executives of the Collinsville, Oklahoma, bank denied wrongdoing. In a press release late Monday, they said they entered into the settlement “to avoid the cost and distraction of protracted litigation.” 

Chief Executive Joe Landon criticized the DOJ for disclosing racially charged emails the government claims American Bank employees forwarded to each other, and for mentioning the 1921 Tulsa Race Massacre in its press release announcing the settlement, as well as in the complaint against American Bank. 

Both consent order and complaint were filed Monday in U.S. District Court for the Northern District of Oklahoma in Tulsa. 

According to the DOJ’s 24-page complaint, American Bank employees circulated emails that contained racial slurs, including use of the “N-word” in its entirety. Other emails exchanged among co-workers at the bank touched on sensitive topics like immigration, gang violence and the supposed decline of Detroit, Michigan.

American Bank of Oklahoma CEO Joe Landon

But in an interview Monday, Landon said “the majority” of the emails DOJ referenced came from outside the bank “and I have no control over that.” 

“I get 100 to 200 emails a day. I don’t read them all,” Landon added. 

In a subsequent statement, American Bank claimed that “many of the quotes were taken from unsolicited communications forwarded or written by third parties, and others were taken out of context.”

“Any racially or ethnically insensitive sentiments included in these emails do not reflect our culture or values,” American Bank added in the statement. 

The DOJ also noted some of the neighborhoods American Bank allegedly redlined were victimized in the 1921 Race Massacre, where white rioters destroyed the city’s largely African American Greenwood District, killing as many as 300 people, according to some accounts.

“Providing equal access to credit is essential in every community, but the painful history of Tulsa makes this agreement particularly poignant because the redlined areas include historically Black neighborhoods that have endured the legacy of racial violence and the continuing effects of segregation and discrimination,” Assistant Attorney General for Civil Rights Kristen Clarke said Monday in a press release. 

The complaint is more explicit on this point, stating the “area that [American Bank] redlined includes the historically Black neighborhoods in Tulsa that were the site of the 1921 Tulsa Race Massacre.”

Landon, for his part, said he founded American Bank in 1998, nearly eight decades after the attack on Greenwood. He voiced his concern that mentioning the Race Massacre might dampen customer interest in the lending program American Bank has agreed to undertake in the settlement.

“We were kind of shocked that they brought that up,’ Landon said Tuesday in an interview. “We didn’t see the relevance. We’re moving into a new community. We’re going to do our best. I think we can be successful there. … I sure don’t see it as helping.”

Andrea Mitchell, American Bank’s attorney, called the DOJ’s references to the 1921 Race Massacre “politically charged and entirely irrelevant.”

“Seeking to link bank conduct to this event over 100 years ago entirely undermines the remedial purpose of a consent agreement, which is to create a framework for banks to develop trust with minority communities to be able to better serve those communities with mortgage credit and other banking services,” Mitchell, managing partner at the law firm Mitchell Sandler in Washington, said Tuesday in a statement. 

A DOJ spokesperson declined to comment on its references to the 1921 Race Massacre. 

The DOJ claimed the $383 million-asset American Bank steered clear of minority neighborhoods in the Tulsa metropolitan statistical area, confining its operations to majority white communities. “American Bank of Oklahoma engaged in the illegal practice of redlining and failed to serve the diverse members of our Tulsa community as they attempted to purchase homes,” Clinton Johnson, U.S. attorney for the Northern District of Oklahoma, said in DOJ’s press release. 

The DOJ alleged that American Bank’s federal regulator, the Federal Deposit Insurance Corp., warned about fair-lending risk and recommended specific measures to address the issue. None of the recommendations were implemented and, as a result, American Bank made far fewer mortgage loans in Black and Hispanic neighborhoods compared with similarly situated lenders, according to the DOJ. 

But Landon said American Bank’s business model has been to focus on small towns in eastern Oklahoma, rather than deliberately avoiding lending to mortgage borrowers in Tulsa’s minority neighborhoods. “I’m from a small community,” Landon said Tuesday. “I’ve always lived in a small community. I love small towns. That’s one of the reasons we chose where we are. It had nothing to do with race.” 

Source: nationalmortgagenews.com