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Conventional Conforming Tweaks Continue

No politician can snap their fingers and make something happen, right? We’ll see. Politico published a Trump administration plan to reorganize the federal government by combining several existing departments and a proposal to privatize Fannie Mae and Freddie Mac, eliminate their statutory charter, and subject them to competition.

Not so fast. The GSE plan is merely an outline and requires congressional approval, which makes it unlikely to be dealt with before 2019, at the earliest. Brian Gardner with KBW observes, “The plan calls for the end of the conservatorship of the government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, and would fully "privatize" them, which means the GSEs would lose their Congressional charter and duopoly status. The administration's GSE plan requires congressional legislation. At this point in the legislative cycle, we think it is unlikely for this plan to be approved before 2019. Click here to see the Trump administration's full reorganization proposal.” The administration's restructuring plan is not radically different from other plans that have been discussed over the last several years.

It is a 3-page outline, is lacking in detail (like recapitalization), and has no discussion about private mortgage insurance. Affordable housing would move to FHA. Almost 20% of FHA volume currently is to borrowers with FICO scores over 720 so if FHA's mandate is narrowed to affordable housing, these borrowers might have to move over to the GSEs. Also, the FHA loan limits were sharply raised post-crisis so FHA and the GSEs have the same loan limits ($679,650). With an affordable housing focus, it would seem hard to justify FHA’s role in financing the purchase of homes priced up to $700,000. It is possible that FHA limits could also be reduced.

To sum things up, the president’s recommendations for reforming GSEs (p.75) would make Fannie Mae and Freddie Mac fully private, shrink them, and effectively eliminate their affordable housing goals. Jesse Van Tol, CEO of the National Community Reinvestment Coalition (www.ncrc.org), sent out, “The Trump administration released its latest assault on America’s working class. The President’s recommendation to abolish the affordable housing goals would be disastrous for young Americans. It would extract a lifetime of rent from families and millennials who currently qualify for a mortgage. This demonstrates the influence of industry lobbyists on this administration.

“By eliminating affordable housing goals from the conventional mortgage market, lenders can choose to loan only to the well-heeled rich and ignore everybody still working their way up the economic ladder. For 25 years, the affordable housing goals at Fannie Mae and Freddie Mac enabled the American Dream to become real for millions by helping credit-worthy people access mortgages.

“I understand the desire to tackle GSE reform. The enterprises are more profitable, more stable and better-regulated than at any point in history. But GSE reform without an affordable housing mandate is not reform, it’s a retreat. Home ownership is near a 50 year low and the entire GOP policy agenda will make it harder for average Americans to build wealth for their families. It will be devastating for the working class. It will divide us even further."

Turning to what lenders and investors have been up to lately dealing with F&F programs…

To align more closely with Agency requirements, Wells Fargo Funding is expanding its LTV/TLTV/CLTV requirements for purchases and rate/term refinances of two-unit primary residences and second homes under the following conventional Conforming Prior Approval programs: Super Conforming Mortgage Program and Manual underwriting.

FAMC has made several updates.  An enhancement has been added for file delivery to allow imaged files to be uploaded through its website. FAMC Now allow community seconds on its Conventional Conforming Fixed Rate Product. LPMI is now eligible on 2 units. Lenders may use projected income/future employment in accordance with LPA.

Flagstar announced the launch of Fannie Mae’s Day 1 Certainty for Asset Validation effective Monday, April 23, 2018. All currently approved Asset Validation vendors have been added for selection in its AUS Submission page. For loans already submitted to Underwriting, Flagstar can enter the information and run updated findings when provided with copies of the Asset Verification reports.

Flagstar Bank updated its guidelines on the Fannie Mae single-closing construction-to-permanent transaction which is processed as a purchase or a refinance based on the timing of lot ownership. Currently, a transaction is treated as a refinance if the lot is owned by the borrower at the time of loan application. To provide additional flexibility for a borrower who purchases the lot with their own funds after application, but prior to or at closing the transaction will be treated as a refinance.  When the lot ownership occurs after or in connection with the first advance, the transaction is treated as a purchase.

Fannie Mae has updated their Community Seconds® “mortgage and donation from entities” policies to include Native American tribes and their sovereign instrumentalities as eligible providers.  AmeriHome currently does not purchase loans on Native American lands. Additionally, AmeriHome will not purchase a loan where any lien is a sovereign instrument (due to restrictions that apply under governing law).

Guild Mortgage will be offering loans for Fannie Mae’s MH Advantage initiative, a new mortgage program for manufactured homes with comparable features to traditional single-family homes. Guild’s MH Advantage program features a down payment as low as 3 percent. The program offers 30-year fixed rate financing with interest rates lower than most traditional manufactured home loans and cancellable mortgage insurance. Manufactured homes that qualify for the program can include custom amenities, such as attached garages, upgraded kitchens and bathrooms, energy efficient appliances and architectural features designed to help the property blend into an existing community or neighborhood.

Capital Markets

As noted above, Compass Analytics is actively seeking a candidate to join its Hedge Manager team. (To see other positions available at Compass Analytics, please visit its job site.)

If you don’t think the economy is bustling along, know that oil production in the United States reached 10.9 million barrels per day for the week ending 6/08/18, the highest level recorded for our country per records that have been maintained since 1920. Gas is certainly expensive, heading into summer vacations.

I was all set to talk about the 10-year closing three bps lower yesterday due to uncertainty in global equity markets, but that was before the Trump administration called for privatizing Fannie and Freddie. According to the proposal, the conservatorship of FNMA and FHLMC would end, they would be fully privatized, and their role in the housing market would be reduced to allow private companies to compete more effectively in the space. Before we get ahead of ourselves, GSE/housing reform requires legislative action from Congress and they have made little progress so far on that front.

As far as economic releases went, the low initial claims numbers will keep the Fed inclined to raise interest rates. The disappointing Philadelphia Fed Index downturn was led by a sharp pullback in the New Orders Index, and a negative Unfilled Orders Index for the first time since January. The Conference Board's Leading Economic Index for May was driven up by positive contributions from seven of the ten indicators that make up the index, meaning widespread strength. Also of note was a decision by the U.S. Supreme Court to allow states to force online retailers to collect sales tax.

Looking at today, markets will remain focused on headlines related to the global trade negotiations and threats to global growth, as well as the OPEC meeting in Vienna where members are anticipated to announce an easing in production cuts. We also have a couple of minor economic reports of interest out at 9:45am – the preliminary June reads on Markit manufacturing and services PMIs. Friday starts with the 10-year at 2.91% and agency MBS prices little changed versus last night’s close.

Lender Products

Media Center has launched Usherpa, its new marketing CRM platform. Usherpa is the same CRM that Media Center customers have loved for 20+ years but supercharged with new features and upgraded technology to meet the needs of today’s Loan Officers and Real Estate Agents. Read the press release to learn more about how Usherpa will change the game for mortgage and real estate industry professionals.

Click here to watch a 2-minute video of what top producers are saying after participating in the million-dollar Momentifi Business Coaching program that kicked off last week. There are still a few seats available for the next program that kicks off at the Ritz-Carlton Laguna Niguel on June 27-29. The all-inclusive 5-star retreat plus one-year of sales and business coaching is led by Gibran Nicholas, CEO and founder of CMPS Institute and the Momentifi Companies. “I’ll break down the steps to earn $1mm per year, and I’ll help you implement those steps throughout the next 12-months,” says Gibran. “Now is the time to do this because the industry is shifting.  It’s mission-critical for you to modernize your scripts and your sales process before it’s too late.” \

Employment Opportunities

NOVA Home Loans, a large regional mortgage banker aggressively growing its market share in the Southwest, has just hired mortgage veteran Tonda Hall as its Senior Vice President and Regional Manager for Maricopa County, one of the company’s largest markets. Tonda’s leadership and ability to mold successful teams will further NOVA’s commitment to provide outstanding leadership support to its highly experienced origination team. NOVA Home Loans is looking to add talented originators to branches throughout Arizona, Colorado, Las Vegas and San Diego. If you are interested in joining the “Varsity Team” at NOVA Home Loans, please visit its website.

BankSouth Mortgage is proud to announce the opening of its first location in Augusta, Georgia. Mortgage industry leader James Gay joins BankSouth Mortgage to head up the new office located at 233 Davis Road as VP, Market Production Manager. Gay and his team will assist homebuyers and homeowners as local lenders offering an outstanding mortgage experience. "We are thrilled to have James Gay as our VP, Market Production Manager to lead our strategic growth initiatives in Augusta and surrounding markets. James is a dynamic leader and an experienced mortgage banker who is a trusted advisor for the clients he serves. We are excited to welcome James in his new role," said Kim Nelson, CEO of BankSouth Mortgage. “Are you looking for a new home for your production business? BankSouth Mortgage is always seeking to hire experienced mortgage bankers. To find out more, please email us or visit our site.”

Compass Analytics is an innovative FinTech company and leading provider of mortgage pricing and risk management analytics to banks and financial institutions nationwide. Through our collaborative team structure, we provide new Hedge Managers with mortgage industry knowledge and train them on our proprietary technology and analytics. Compass is actively seeking a strong candidate, preferably with 2-3 years of experience, to join its Hedge Manager team in downtown San Francisco or Chevy Chase, Maryland where they will learn to execute trading strategies for our clients, guide clients to greater profitability with best practices, and contribute to the further development of our industry leading technology. Please email your resume with cover letter, including the job you’re applying for in the subject line, to compass-analytics@jobs.workablemail.com. (To see other positions available at Compass Analytics, please visit its job site.)