Lots of folks are going crazy over the avalanche of rules and regulations that are increasing the cost of every mortgage made in the United States. The latest update on Dodd Frank rulemaking by Davis Polk indicates that of the 398 rulemaking requirements, 58% now have finalized rules and 19% have had rules proposed that may see some modifications in coming months. That leaves about 24% of rules yet to be touched.

And one can go nuts trying to keep track of the bank and mortgage M&A that has happened, and will continue to happen. (Someone let me know when the U.S. borrower starts being better off...) The latest acquisition was announced yesterday from Southern California: Seashine Financial LLC spread the word that it has completed its acquisition of American Interbanc Mortgage, LLC (AIM) a full service mortgage banker with a focus on the Internet retail channel. "AIM is a low cost, "A" paper, direct lender founded in 1998...AIM is focused on originating loans exclusively over the Internet by advertising on sites such as Bankrate and MSN Money. AIM does not originate Alt "A" or subprime mortgages. To obtain a competitive rate advantage, AIM operates on margins that are significantly lower than the industry average. Seashine Financial, headquartered in Irvine, CA is the financial services investment arm of Seashine Capital, a Shanghai China based financial holding company."

Speaking of change, the amount of debt here in the United States is dropping. That can be good news. What is bad news is that a portion of the decrease is due to charge-offs. And leave it to our very own Federal Reserve to write a paper on it! "About 70 percent of the decline in mortgage debt has occurred as a consequence of banks and other entities that held residential mortgages 'charging off' certain loan balances, i.e., removing them from their balance sheets as uncollectable, after borrowers defaulted on their payments and lenders foreclosed. In this note we describe recent changes in how mortgage charge-offs are accounted for in the Financial Accounts of the United States, and their effect on measures of net mortgage borrowing and personal saving in the Financial Accounts."

Many originators, and therefore operations staffs, are impacted by changes in the USDA's RD program. Tom Davis from PMAC writes, "The midterm elections results are in and the Republicans now control the U.S. Senate. More than likely when the current Continuing Resolution (CR) expires on December 11th, the Republican-controlled House and Senate will likely pass another CR which will fund our Government until March, 2015. If another CR is passed in December, there is a strong possibility the current eligible areas will remain intact during the length of the new CR. The CR extends a current general provision regarding housing program eligibility. This means that if a community is eligible today, they will remain eligible the length of the CR. 

"The new USDA guidelines (7 CFR 3555) will go into effect on December 1^st, 2014. Please note that all loan packages that have not received a conditional commitment by November 28 will be subject to the new guidelines.  If a loan application was sent to the USDA prior to December 1^st and a conditional commitment was not issued, the USDA will have to release GUS back to the lender and the file must be re-run through GUS and the new guidelines will apply. Rural Development will not accept new Single Family Housing Guaranteed loan applications from the close of business on November 21, 2014, through the start of business on December 1, 2014. The agency is going to try to eliminate its backlog before the implementation of the new 7 CFR 3555 regulation on December 1. Some states have allocated additional staff to this project. If you are interested in staying in tune with USDA GRH Updates, I would recommend becoming a member of the USDA Guaranteed Rural Housing Experts group on LinkedIn."

During the last month or so, lenders have pushed out USDA-related announcements. Here is a sampling:

In early October Mountain West Financial Wholesale posted changes to USDA program.  New CLTV effective 10/2/14, MWF will accept transactions with CLTVs up to 103% that meet the following criteria: Purchase only, all USDA eligible property types, Note: Max CLTV, including USDA Guarantee Fee and Community Second, cannot exceed 103%. Pricing adjustment effective 10/2/14, the price adjustment for manufactured homes under the USDA program will be 1.50 points. Later MWF spread the word that USDA has announced that Funds are now available for the 2015 Fiscal Year. MWF Wholesale loans that were issued Conditional Commitments "subject to" commitment authority will now be obligated on the Agency's Guaranteed Loan System (GLS).

Plaza Wholesale announced some Elite Jumbo Price Improvements effective for locks taken on or after September 30, 2014. Click HERE for details.

Additional articles of potential interest have been posted by Plaza:

HomePath Program Guideline Updates

Update on FannieMae Retained Fixed Rate Program

Update on USDA Rural Map Change

Updates Warehouse Take-Out Investor List

USDA Temporary Lapse in Funding

Flagstar announced effective for FHA loans registered on or after October 31, 2014, the minimum credit score requirement for most loans is being increased. Regarding USDA loans, Rural Development has issued a notice dated October 14, 2014 stating that their funding for fiscal year (FY) 2015 is now available. As such, they will no longer need to issue RD Conditional Commitments with the "subject to" funding language.

FHA is overseen by HUD, and the industry was pretty happy recently as a Federal district court in Washington DC ruled against HUD's disparate impact claim. The claim said that a lender is guilty of lending discrimination if the numbers don't match the population even if they had no intent to discriminate. This was a very left-wing take on discrimination, and was intended to create lending quotas. On to the Supreme Court!

Whether it is government-sponsored programs like the USDA's RD, various bond programs, or the Agencies, it is hard to argue the role of government (primarily regulators carrying out) in lending as increased. And recently the MBA weighed in regulations and lenders. "As an industry, we've proven we need to be regulated. However, the regulatory avalanche of today's Washington isn't working and we are seeing the results in today's marketplace," Bill Cosgrove, MBA chairman, said. "We all need to come back to center - policy makers, regulators, consumer groups and our industry - to achieve a healthy balance that the American economy desperately needs."

The answer, according to MBA leaders, is to open access to credit and stop punishing lenders.

"To really turn this housing market around, federal regulators and enforcement officers must understand the collective impacts of the new rules and severe enforcement penalties," Cosgrove said. "If they're going to regulate us, they must work to better understand the unintended consequences on consumers."

Those consequences, according to the MBA, include credit standards that cut out too many potential homeowners, especially first-time borrowers who can no longer get access to FHA loans.

"FHA-insured loans have always been the bedrock for first-time homeownership. But in the 12 months ending in June of this year, FHA purchase loans fell 18.5%," Cosgrove said. "Let me make this as clear as I can - the future of housing in America is on the line."

David Stevens, president and CEO of MBA, was just as forceful.

"I'm disappointed with the lack of progress," Stevens said of President Obama's administration's slowness to address the suffocating regulation. Stevens called on Obama to change the dialogue on housing from one of distrust to "a dialogue of confidence."

Addressing the Consumer Financial Protection Bureau's approach, Stevens said, "Enforcement should be the exception to the rule, not the rule itself."

The MBA leaders expressed hope that recent comments by Mel Watt, director of the Federal Housing Finance Agency, and Julián Castro, secretary of the U.S. Department of Housing and Urban Development, on expanding the credit box and partnering with lenders, will result in real change to housing finance regulation.

Speaking of recent lender-related FHA news...

In an announcement published in the November 3, 2014 Federal Register (79 FR 65140, click here), the FHA announced that it is not adopting the CFPB's recently issued qualified mortgage points and fees cure amendments for FHA insured loans. Recall that in the December 11, 2013 Federal Register, FHA published a final rule establishing a definition of "qualified mortgage" for single family residential mortgages that FHA insures, guarantees, or administers (78 FR 75215, click here).

PennyMac's announcement outlines the update to FHA Streamline Refinance LLPA Values.

Flagstar Bank Reminder: 2013 tax return extensions expired 10/15/14. For all pipeline loans that have not closed, if tax returns are required and the borrower previously provided a tax return extension for 2013, the returns will now need to be provided in the file to extend the document expiration date. Effective for FHA loans registered and locked on or after October 31, 2014, the minimum credit score requirement for most loans is being increased. Flagstar Bank has previously accepted a temporary Homeownership Counseling disclosure in accordance with CFPB requirements for providing a written list of HUD-approved housing counseling agencies to consumers. As sufficient time has now elapsed for lenders to implement the generation of this list in their systems, effective November 1, Flagstar will no longer be accepting the temporary disclosure and will require the disclosure containing the list of counseling agencies.

Effective for FHA case numbers assigned on or after 08/04/2014, Sun West is accepting HECM Loans with non-borrowing spouse. HECM Loans with non-borrowing spouse must comply with all FHA's requirements as specified in the Mortgagee Letter 2014-07.

Plaza Wholesale posted in response to the CFPB's final rule entitled "Ability-to-Repay and Qualified Mortgage Standards Under the Truth-in-Lending Act," HUD published Final Rule FHA 79 FR 50835 on August 26, 2014, revising the handling of FHA payoffs. Effective for loans closing on or after January 21, 2015, the final rule requires mortgagees to charge interest only through the date the mortgage is paid and prohibits the charging of interest beyond that date. Plaza will begin accepting FHA loans complying with revised regulations with loans closed on or after January 21, 2015.

Flagstar Wholesale posted information as a reminder and to ensure FHA's UFMIP refund and loan calculation requirements are met; Flagstar's Funding Department must receive all FHA Refinance pre-funding documents no later than 5 p.m. ET on the appropriate deadline. In addition, the planned revisions to input requirements for FHA loans with gifts in DU have been delayed. Therefore, until further notice, users must revert to the following gift input requirements: The full gift amount must be input as both the source of down payment and asset. The amount of gift already deposited to the borrower's bank account must be deducted from the account balance and, instead, entered as a gift in the asset section.

Envoy Mortgage CLD announced the following: 1) The maximum DTI for regular FHA and VA loans has changed from 50% to "per AUS" (this change does not include High Balance products); 2) The minimum credit score for Fannie High Balance Fixed Rate products has been reduced from 740 to 660; 3) The FHLMC Super Conforming Fixed Rate product has been released with minimum credit scores of 660 and maximum DTIs of 50%; 4) The overlay regarding 2-4 units in New Jersey has been removed effective immediately.

Penny Mac announced changes to the look-back period. Effective for loans with a note date on or after January 10, 2015, government ARMs, including FHA and VA, must have a 45 day look-back period. For details, click here.

Plaza Home Mortgage announced the upcoming rollout of Plaza's 203(k) Full Renovation program on November 12, 2014. The 203(k) Full program offers additional renovation options not available in the 203(k) Streamlined program, including more funds available for renovation, room additions and structural repair.

The bond market has been treading water for a week while stocks have been doing very well. But that was then, and today we had the monthly employment data. Markets move suddenly based on surprises, based on coming higher or lower than expectations. Forecasters were thinking along the lines of the Unemployment Rate coming in unchanged at 5.9% and October Nonfarm Payrolls being up between 222 and 231k. (In fact, the last several months have seen remarkably stable jobs growth that critics are having trouble arguing with.)

We saw NFP +214k for October and September was revised higher. The Unemployment Rate fell to 5.8%. Average Hourly Earnings were only up .1% - wage growth is certainly lagging. After the numbers the bond market has rallied: the 10-yr., which closed at 2.38%, is down to 2.36% and agency MBS prices are better by nearly .125.