I do my share of traveling (California Monday, Ohio yesterday, Tennessee today & tomorrow) and see how the residential lending environment changes in each region. Colorado’s Richey May put out an advisory on how, “State regulatory agencies have been very active lately in scrutinizing independent mortgage companies on a variety of compliance issues, often assessing substantial fines and penalties as a result…” Any owner or compliance person may want to take a gander.

Adjustable Rate Mortgage Developments

Sure, ARM apps are only about 7% of overall retail applications. But that doesn't mean there aren't changes and thoughts about their future shape and form. ARMs look very different in 2017 compared to 2005, and their popularity is edging back up.

For any producer who repeatedly refinances clients, here is a potential setback. The Fed laid out a proposal for a "new & improved" type of 30-year fixed rate mortgage - the COFI (cost of funds index) mortgage. It is a 30-year fixed rate mortgage; however, it has restrictions on refinancing and equity extraction. Essentially, it is an ARM from the banks' standpoint, and a 30-year fixed from the borrower's standpoint. The payment never changes, however the amount of the payment that goes to principal and interest varies with interest rates. When rates fall, the interest component of the fixed mortgage payment falls as well, and that extra payment is applied to the principal, which creates a reservoir of home equity. When rates rise, the interest component increases, and the home equity component falls. If there is no home equity to draw upon, the bank covers it. Essentially the idea would be to replace something that is difficult to hedge (prepayment risk) with something easy to hedge (basically option-like interest rate risk). The added equity build will also limit risk to the government, which still guarantees the credit risk.

Earlier this week Fannie Mae, Freddie Mac's blood relative, made some changes to the committing, delivering, and servicing of whole loan ARMs to better align with the ARM MBS operational process. For whole loan ARM commitments taken on or after, Monday, Sept. 11: Upon rate reset for ARM loans, the new pass-through rate will be (index + loan net margin) instead of (index + required net margin). The net margin on all loans delivered against a commitment will need to match the net margin on the commitment. The minimum gross margin for whole loan ARM commitments is 2.0%. Because of these changes, all references to the Required Net Margin will be removed from the ARM product names in Pricing & Execution - Whole Loan. There will be no impact to pricing templates other than the change to the product name. Review the release notes for more information, including product name changes.

Effective Friday, September 8, Flagstar Bank announced  the Jumbo 5/1 & 7/1 ARMs, Doc. #5415, Jumbo 10/1 ARM, Doc. #5416, Jumbo Fixed, Doc. #5413, and the Jumbo Advantage, Doc. #5427 products now allow for non-permanent resident aliens when the specific requirements have been met. Flagstar also announced improvements to the Fannie Mae HomeReady and Fannie Mae HomeReady High Balance products to allow for a minimum credit score of 620. See Fannie Mae HomeReady, Doc. #5318 for full product requirements.

U.S. Bank Home Mortgage announced the following program enhancement to its portfolio lender paid mortgage insurance programs #3782/3783 fixed-rate and #3319/3320 10/1 ARMs: new conforming limit of $1,000,000; 85% LTV. This enhancement is for 1-2 unit attached/detached primary residences. Refer to the full guidelines for complete details. This enhancement is effective as of September 8, for any new registration, lock, or active pipeline.

Last month Flagstar's LTV requirements on Fannie Mae Multiple Property Adjustable Rate Products were improved to align with the LTV requirements of the Fannie Mae Multiple Property Fixed Rate Products. Overlays pertaining to Cash-Out Refinances and 2-4 Units have also been removed. Additionally, Cash-Out Refinance Transactions will be permitted on Second Homes and Investment properties, it is no longer only permitted for Delayed Financing.

Citi Correspondent Lending's state geographic pricing adjusters will be changing for new best efforts rate locks and mandatory commitments established on/after September 1. These updates will apply to: Conventional Conforming and Agency Jumbo (15- and 30-year Fixed and ARM loans) and Government Conforming and Agency Jumbo Fixed loans. (No changes to state geo adjusters for Government ARM loans.) Due to the number of changes involved, Citi Correspondent is providing a grid detailing both old and new adjuster values by state and product.

Plaza's Preferred Purchase Jumbo Fixed and ARM program has always included an auto-pay feature, and while not mandatory, all loans to date have utilized this feature. To simplify processes and offer improved pricing, Plaza's rate sheet will include the auto-pay improvement in the base pricing effective with locks on or after August 8, 2017. With this change, auto-pay will be required and the Preferred Payment Plan (auto-pay) enrollment form must be approved prior to closing for all Preferred Purchase Jumbo loans.

Wells Fargo Funding is updating its Non-Conforming adjusters. The new adjuster amounts are effective for Non-Conforming Loans Locked on or after August 29, 2017, and represent an improvement to price. The new adjusters are specific to the state the property is in and differ between fixed-rate and ARM products.

As a reminder, effective July 24, 2017, PacificPlus Down Payment Insurance was made available to its Correspondent channel. The insurance product is currently available in conjunction with the following Pacific Union Financial mortgage products: Conventional Conforming and High Balance, FHA Specialty Conforming and FHA Specialty High Balance, FHA Standard Conforming and FHA Standard High Balance, Pacific Prime Jumbo, FlexKey - Expanded & Restart, 30 Year Fixed Rate and 30 Year Fixed Rate with 10-Year Interest Only (Grade A- Only), FlexKey - Expanded and 5/1 Fully Amortizing LIBOR ARM.

As of August 11th, FlagStar's Jumbo 10/1 ARM, Doc. #5416 and Jumbo 5/1 & 7/1 ARMs, Doc. #5415 products were improved to allow for properties located in Alaska.

M&T has discontinued its FNMA High Balance DU Refi Plus, LP Open Access 20 Year Term, VA IRRRL ARM, and FHA Streamline ARMs with 2.00 and 1.75 Margins product line(s).

Capital Markets

Yes, rates have crept up a little this week. Why? Tuesday was another day of increased risk tolerance, which tends to nudge investors to sell "conservative" fixed-income investments and take a chance - like in the stock market. Treasuries began the day with modest losses and continued retreating throughout the session. There was a little saber-rattling: U.S. Treasury Secretary Steve Mnuchin said the U.S. is prepared to sanction Beijing if China does not obey newly-imposed U.N. sanctions against North Korea.

Of more interest, as we edge toward year-end and the NY Fed possibly ending its purchases of agency MBS, will be the release of the tentative four-week MBS reinvestment amount, covering the mid-September to mid-October period, in addition to a new two-week FedTrade schedule. Over those 20 or so business days it is expected that the Fed will be reinvesting nearly $1.5 billion a day. While the two-week schedule will go beyond the next FOMC decision (next Wednesday) where the Governors are expected to announce tapering, markets will then need to see if the tapering will begin in the next two-week schedule on a pro-rata basis or be incorporated into the following four-week reinvestment amount (and FedTrade schedule). That aside, the 10-year note worsened .375 to yield 2.17 whereas agency MBS and the 5-year note sold off about .125.

For thrills this morning, as a chunk of the nation continues to undergo clean up and repairs, we've had last week's application data from the MBA (+9.9%, with purchases +11% & refis +9%). We've also had the August Producer Price Index: +.2%, core +.1%. Coming up is the $12 billion 30-year bond auction. After the initial volley of numbers rates are a shade better versus last night with the 10-year at 2.16% and agency MBS prices better by a tick or two.

Jobs and Products

"RMF delivers industry-leading products, top-quality service, and advanced technology platforms to help originators grow their business by adding reverse mortgages to their product mix. We offer line-of-credit, refinancing and home purchase options with flexible repayment for homeowners and buyers age 62+, plus service and support to help facilitate the transaction. To learn more about becoming a partner and expanding your business with reverse mortgages, please visit us at Partners.ReverseFunding.com or call 866-318-2983. (NMLS ID: #1019941) Jumpstart your business with the most experienced reverse mortgage team in the industry at your side. Work with us - getting started is easy."

Sometimes folks ask me if there are any books out there on how to be an originator. There are, the most recent one being written by Jason Myers. "The Successful Mortgage Broker 

provides an in-depth look at the ever-changing mortgage industry. Whether you are just beginning your journey as a mortgage broker or you're a seasoned vet, this book is sure to shed some light on both the industry and on your professional practices. Learn about the Three Ps, time-blocked schedules, selling on social media, how to use TRID to your advantage, and much more. The wisdom and insight shared in this book will help amp up your game and become a top producer both in the current financial climate and for years to come."

Are you attending the RESPRO Fall Conference in Denver this week? If so, don't miss the panel presentation: Managing Digital Assets and Co-Marketing in an Industry Where Compliance Really Matters. Industry experts Brian Levy, Esq. (Of Counsel, Katten & Temple), Joe Welu (Founder & CEO, Total Expert), Mark Meyer (Founder & CEO, MLinc Solutions), and Lori Day (VP, Marketing & Sales Strategy, HomeServices of America) will prepare you to implement a co-marketing program you are comfortable defending with Regulators. Learn how the CFPB is interpreting RESPA compliance and how to position your co-marketing efforts in the best light. Our experts will discuss typical joint-marketing requests from real estate brokers and other co-marketers, as well as digital marketing, technology, valuation and verification best practices from service providers to the settlement service industry. Don't miss this must-see panel on Thursday, Sept. 14 at 9:30 am in the Mt. Sopris A room at the RESPRO Fall Conference.

In wholesale job news Ditech Wholesale is hiring talented experienced Account Executives in key markets across the country. "Today's AE needs as many loan officer outlets as possible to grow their business. Gone are the days of limited territory size and pigeon holing AEs into small markets. To that end, expansion into non-delegated correspondent and small banks allows Ditech's Wholesale AEs to create a large footprint into their geographic area, while not sharing with a crowded field. 'We are currently looking for seasoned AE's and offer a unique blend of wholesale values overlaid onto correspondent disciplines,' says Wells Constantine, National Sales Manager. 'We are focusing on NC/SC, VA and GA for the Eastern Seaboard, led by Tony Petronio; CO, Dallas & Houston, TX and Los Angeles/Ventura Counties in Southern CA for the Southwest, led by Zeenat Zonte; UT, OR, MO, ID/WY/MT and Sacramento, CA for the Northwest, led by Michelle Thiebaud.'" Click here to review the job description and apply today or contact Owen Welch in HR with questions.

"As Houstonians stay strong and forge ahead to rebuild from hurricane Harvey's aftermath, Envoy Mortgage, headquartered in Houston, Texas continues to place much emphasis in helping those in need. Pat Walden, President and CEO shared after Harvey's devastating wake, 'We greatly appreciate the efforts of all the first responders and citizens who have shown tremendous amounts of selflessness and bravery over the past several days. Even with unprecedented challenges ahead of us, we are strong and we will help the city rebuild.' Envoy is dedicated to assisting its borrowers and employees affected during this difficult time. We have flexible workout options available to those who may be struggling to make their mortgage payments. Visit our website for more information. For Envoy employees currently displaced from their homes, a hurricane relief fund has been established from the outpour of concerned team members across the country. More relief efforts will be shared as Envoy reaches out to help local communities..."

In 2016, the average Loan Officer was paid 101bps on production but the results varied dramatically by type of lender with Banks paying an average of 74bps versus the IMBs paying 120bp on average. How do your payouts compare to peers? Participate in the 2017 STRATMOR Compensation Connection to find out. The survey is only open through September 30, so don't miss out on your chance to find out how your compensation, compensation plans and benefits compare to industry standards and peers. To participate, click here. For questions regarding this program, please email us at CompConnections.