mortgage

CFPB Fines Mortgage Lender, Real Estate Brokers and Servicer

CFPB Orders Prospect Mortgage to Pay $3.5 Million Fine for Illegal Kickback Scheme

Real Estate Brokers and Mortgage Servicer also Ordered to Pay $495,000

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today took action against Prospect Mortgage, LLC, a major mortgage lender, for paying illegal kickbacks for mortgage business referrals. The CFPB also took action against two real estate brokers and a mortgage servicer that took illegal kickbacks from Prospect. Under the terms of the action announced today, Prospect will pay a $3.5 million civil penalty for its illegal conduct, and the real estate brokers and servicer will pay a combined $495,000 in consumer relief, repayment of ill-gotten gains, and penalties.

“Today’s action sends a clear message that it is illegal to make or accept payments for mortgage referrals,” said CFPB Director Richard Cordray. “We will hold both sides of these improper arrangements accountable for breaking the law, which skews the real estate market to the disadvantage of consumers and honest businesses.”

Prospect Mortgage, LLC, headquartered in Sherman Oaks, Calif., is one of the largest independent retail mortgage lenders in the United States, with nearly 100 branches nationwide. RGC Services, Inc., (doing business as ReMax Gold Coast), based in Ventura, Calif., and Willamette Legacy, LLC, (doing business as Keller Williams Mid-Willamette), based in Corvallis, Ore., are two of more than 100 real estate brokers with which Prospect had improper arrangements. Planet Home Lending, LLC is a mortgage servicer headquartered in Meriden, Conn., that referred consumers to Prospect Mortgage and accepted fees in return.

The CFPB is responsible for enforcing the Real Estate Settlement Procedures Act, which was enacted in 1974 as a response to abuses in the real estate settlement process. A primary purpose of the law is to eliminate kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services. The law covers any service provided in connection with a real estate settlement, such as title insurance, appraisals, inspections, and loan origination.

Prospect Mortgage

Prospect Mortgage offers a range of mortgages to consumers, including conventional, FHA, and VA loans. From at least 2011 through 2016, Prospect Mortgage used a variety of schemes to pay kickbacks for referrals of mortgage business in violation of the Real Estate Settlement Procedures Act. For example, Prospect established marketing services agreements with companies, which were framed as payments for advertising or promotional services, but in this case actually served to disguise payments for referrals. Specifically, the CFPB found that Prospect Mortgage:

  • Paid for referrals through agreements: Prospect maintained various agreements with over 100 real estate brokers, including ReMax Gold Coast and Keller Williams Mid-Willamette, which served primarily as vehicles to deliver payments for referrals of mortgage business. Prospect tracked the number of referrals made by each broker and adjusted the amounts paid accordingly. Prospect also had other, more informal, co-marketing arrangements that operated as vehicles to make payments for referrals.
  • Paid brokers to require consumers – even those who had already prequalified with another lender – to prequalify with Prospect: One particular method Prospect used to obtain referrals under their lead agreements was to have brokers engage in a practice of “writing in” Prospect into their real estate listings. “Writing in” meant that brokers and their agents required anyone seeking to purchase a listed property to obtain prequalification with Prospect, even consumers who had prequalified for a mortgage with another lender.
  • Split fees with a mortgage servicer to obtain consumer referrals: Prospect and Planet Home Lending had an agreement under which Planet worked to identify and persuade eligible consumers to refinance with Prospect for their Home Affordable Refinance Program (HARP) mortgages. Prospect compensated Planet for the referrals by splitting the proceeds of the sale of such loans evenly with Planet. Prospect also sent the resulting mortgage servicing rights back to Planet.

Under the consent order issued today, Prospect will pay $3.5 million to the CFPB’s Civil Penalty Fund for its illegal kickback schemes. The company is prohibited from future violations of the Real Estate Settlement Procedures Act, will not pay for referrals, and will not enter into any agreements with settlement service providers to endorse the use of their services.

The consent order filed against Prospect Mortgage is available at:http://files.consumerfinance.gov/f/documents/201701_cfpb_ProspectMortgage-consent-order.pdf

ReMax Gold Coast and Keller Williams Mid-Willamette

ReMax Gold Coast and Keller Williams Mid-Willamette are real estate brokers that work with consumers seeking to buy or sell real estate. Brokers or agents often make recommendations to their clients for various services, such as mortgage lending, title insurance, or home inspectors. Among other things, the Real Estate Settlement Procedures Act prohibits brokers and agents from exploiting consumers’ reliance on these recommendations by accepting payments or kickbacks in return for referrals to particular service providers.

The CFPB’s investigation found that ReMax Gold Coast and Keller Williams Mid-Willamette accepted illegal payment for referrals. Both companies were among more than 100 brokers who had marketing services agreements, lead agreements, and desk-license agreements with Prospect, which were, in whole or in part, vehicles to obtain illegal payments for referrals.

Under the consent orders filed today, both companies are prohibited from violating the Real Estate Settlement Procedures Act, will not pay or accept payment for referrals, and will not enter into any agreements with settlement service providers to endorse the use of their services. ReMax Gold Coast will pay $50,000 in civil money penalties, and Keller Williams Mid-Willamette will pay $145,000 in disgorgement and $35,000 in penalties.

The consent order filed against ReMax Gold Coast is available at:http://files.consumerfinance.gov/f/documents/201701_cfpb_RGCServices-consent-order.pdf

The consent order filed against Keller Williams Mid-Willamette is available at:http://files.consumerfinance.gov/f/documents/201701_cfpb_Willamette-Legacy-consent-order.pdf

Planet Home Lending

In 2012, Planet Home Lending signed a contract with Prospect Mortgage that facilitated the payment of illegal referral fees. The company’s practices violated the Real Estate Settlement Procedures Act and the Fair Credit Reporting Act. Specifically, the CFPB found that Planet Home Lending:

  • Accepted fees from Prospect for referring consumers seeking to refinance:Under their arrangement, Planet Home Lending took half the proceeds earned by Prospect for the sale of each mortgage loan originated as a result of a referral from Planet. Planet also accepted the return of the mortgage servicing rights of that consumer’s new mortgage loan.
  • Unlawfully used “trigger leads” to market to Prospect to consumers: Planet ordered “trigger leads” from one of the major consumer reporting agencies to identify which of its consumers were seeking to refinance so it could market Prospect to them. This was a prohibited use of credit reports under the Fair Credit Reporting Act because Planet was not a lender and could not make a firm offer of credit to those consumers.

Under the consent order filed against Planet Home Lending, the company will directly pay harmed consumers a total of $265,000 in redress. The company is also prohibited from violating the Fair Credit Reporting Act and the Real Estate Settlement Procedures Act, will not pay or accept payment for referrals, and will not enter into any agreements with settlement service providers to endorse the use of their services.

The consent order filed against Planet Home Lending is available at:http://files.consumerfinance.gov/f/documents/201701_cfpb_PlanetHomeLending-consent-order.pdf

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

 

CFPB Issues Mortgage Complaint Report

The latest CFPB Complaint Report for Mortgages shows that, by far, the largest number of complaints filed with the CFPB were with the Credit Reporting Agencies – Equifax, TransUnion and Experian, having 3,897 complaints nationwide on credit reports in January.  Mortgage complaint leaders were Wells Fargo, Bank of America and JP Morgan Chase. To read the latest full mortgage report: click here for CFPB Complaint Report.

The Consumer Financial Protection Bureau (CFPB) is the first federal agency solely focused on

consumer financial protection,1 and consumer complaints are an integral part of that work. The

CFPB helps connect consumers with financial companies to make their voices heard. When

consumers submit a complaint, they work with companies to get the consumer a response,

generally within 15 days. They also publish basic information about complaints in our public

Consumer Complaint Database to empower consumers, inform consumer advocates, and improve the functioning of the marketplace.

Existing-Home Sales Slide in December; 2016 Sales Best Since 2006

Press Release

WASHINGTON (January 24, 2017) — Existing-home sales closed out 2016 as the best year in a decade, even as sales declined in December as the result of ongoing affordability tensions and historically low supply levels, according to the National Association of Realtors®.

Total existing-home sales 1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, finished 2016 at 5.45 million sales and surpassed 2015 (5.25 million) as the highest since 2006 (6.48 million).

In December, existing sales decreased 2.8 percent to a seasonally adjusted annual rate of 5.49 million in December from an upwardly revised 5.65 million in November. With last month’s slide, sales are only 0.7 percent higher than a year ago.

Lawrence Yun, NAR chief economist, says the housing market’s best year since the Great Recession ended on a healthy but somewhat softer note. “Solid job creation throughout 2016 and exceptionally low mortgage rates translated into a good year for the housing market,” he said. “However, higher mortgage rates and home prices combined with record low inventory levels stunted sales in much of the country in December.”

Added Yun, “While a lack of listings and fast rising home prices was a headwind all year, the surge in rates since early November ultimately caught some prospective buyers off guard and dimmed their appetite or ability to buy a home as 2016 came to an end.”

The median existing-home price 2 for all housing types in December was $232,200, up 4.0 percent from December 2015 ($223,200). December’s price increase marks the 58thconsecutive month of year-over-year gains.

Total housing inventory 3 at the end of December dropped 10.8 percent to 1.65 million existing homes available for sale, which is the lowest level since NAR began tracking the supply of all housing types in 1999. Inventory is 6.3 percent lower than a year ago (1.76 million), has fallen year-over-year for 19 straight months and is at a 3.6-month supply at the current sales pace (3.9 months in December 2015).

“Housing affordability for both buying and renting remains a pressing concern because of another year of insufficient home construction,” said Yun. “Given current population and economic growth trends, housing starts should be in the range of 1.5 million to 1.6 million completions and not stuck at recessionary levels. More needs to be done to address the regulatory and cost burdens preventing builders from ramping up production.”

According to Freddie Mac, the average commitment rate(link is external) for a 30-year, conventional, fixed-rate mortgage surged in December to 4.20 percent from 3.77 percent in November. December’s average commitment rate was the highest rate since April 2014 (4.32 percent).

First-time buyers were 32 percent of sales in December, which is unchanged both from November and a year ago. First-time buyers also represented 32 percent of sales in all of 2016. NAR’s 2016 Profile of Home Buyers and Sellersreleased in late 2016 4 — revealed that the annual share of first-time buyers was 35 percent.

“Constrained inventory in many areas and climbing rents, home prices and mortgage rates means it’s not getting any easier to be a first-time buyer,” said Yun. “It’ll take more entry-level supply, continued job gains and even stronger wage growth for first-timers to make up a greater share of the market.”

On the topic of first-time- and moderate-income buyers, NAR President William E. Brown, a Realtor® from Alamo, California, says Realtors® look forward to working with the Federal Housing Administration to express why it is necessary to follow through with the previously announced decision to reduce the cost of mortgage insurance. By cutting annual premiums from 0.85 percent to 0.60 percent, an FHA-insured mortgage becomes a more viable and affordable option for these buyers.

“Without the premium reduction, we estimate that roughly 750,000 to 850,000 homebuyers will face higher costs and between 30,000 and 40,000 would-be buyers will be prevented from entering the market,” he said.

Properties typically stayed on the market for 52 days in December, up from 43 days in November but down from a year ago (58 days). Short sales were on the market the longest at a median of 97 days in December, while foreclosures sold in 53 days and non-distressed homes took 50 days. Thirty-seven percent of homes sold in December were on the market for less than a month.

Inventory data from Realtor.com® reveals that the metropolitan statistical areas where listings stayed on the market the shortest amount of time in December were San Jose-Sunnyvale-Santa Clara, Calif., 49 days; San Francisco-Oakland-Hayward, Calif., and Nashville-Davidson-Murfreesboro-Franklin, Tenn., 50 days; and Billings, Mont., and Hanford-Corcoran, Calif., both at 51 days.

All-cash sales were 21 percent of transactions in December, unchanged from November and down from 24 percent a year ago. Individual investors, who account for many cash sales, purchased 15 percent of homes in December, up from 12 percent in November and unchanged from a year ago. Fifty-nine percent of investors paid in cash in December.

Distressed sales 5 — foreclosures and short sales — rose to 7 percent in December, up from 6 percent in November but down from 8 percent a year ago. Five percent of December sales were foreclosures and 2 percent were short sales. Foreclosures sold for an average discount of 20 percent below market value in December (17 percent in November), while short sales were discounted 10 percent (16 percent in November).

Single-family and Condo/Co-op Sales

Single-family home sales declined 1.8 percent to a seasonally adjusted annual rate of 4.88 million in December from 4.97 million in November, but are still 1.5 percent above the 4.81 million pace a year ago. The median existing single-family home price was $233,500 in December, up 3.8 percent from December 2015.

Existing condominium and co-op sales dropped 10.3 percent to a seasonally adjusted annual rate of 610,000 units in December, and are now 4.7 percent below a year ago. The median existing condo price was $221,600 in December, which is 5.5 percent above a year ago.

Regional Breakdown

December existing-home sales in the Northeast slid 6.2 percent to an annual rate of 760,000, but are still 2.7 percent above a year ago. The median price in the Northeast was $245,900, which is 3.8 percent below December 2015.

In the Midwest, existing-home sales decreased 3.8 percent to an annual rate of 1.28 million in December, but are still 2.4 percent above a year ago. The median price in the Midwest was $178,400, up 4.6 percent from a year ago.

Existing-home sales in the South in December were at an annual rate of 2.25 million (unchanged from November), and are 0.4 percent above December 2015. The median price in the South was $207,600, up 6.5 percent from a year ago.

Existing-home sales in the West fell 4.8 percent to an annual rate of 1.20 million in December, and are now 1.6 percent below a year ago. The median price in the West was $341,000, up 6.0 percent from December 2015.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

Court Rules Consumer Financial Protection Bureau’s Structure Is Unconstitutional

Excellent Article in The Atlantic today on the CFPB

After a spate of recent activity which has included introducing long-awaited regulations for payday lenders and prepaid cards and a nearly $200 million fraud settlement from Wells Fargo, the Consumer Financial Protection Bureau must now face a new challenge—more oversight.

On Tuesday, a Washington, D.C. circuit court found the structure of the CFPB to be unconstitutional. More specifically, the court took issue with the inability for other arms of the government to review or rebuke the Bureau’s judgements or actions and the unilateral power imbued in the CFPB’s director—currently Richard Corday.

The judgement states:

The Director enjoys significantly more unilateral power than any single member of any other independent agency. By “unilateral power,” we mean power that is not checked by the President or by other colleagues. Indeed, other than the President, the Director of the CFPB is the single most powerful official in the entire United States Government, at least when measured in terms of unilateral power.

The court then goes on to proclaim that the director of the CFPB is given more power and autonomy than the speaker of the house, senate majority leader, or even a Supreme Court justice.

Read entire article at The Atlantic

New FNMA and FHLMC URLA’s Announced

Sounds like alphabet soup with all the acronyms,  but Fannie Mae and Freddie Mac have published the new, redesigned Uniform Residential Loan Application forms. So the long-standing 1004 Loan Application that we all know (and often had signed at closing) will soon be history.  The press release reads:

WASHINGTON, DC – Fannie Mae (FNMA/OTC) and Freddie Mac today announced the publication of the redesigned Uniform Residential Loan Application (URLA), the standardized form used by borrowers to apply for a mortgage loan. This is the first substantial revision made to the form in more than 20 years and the changes will allow lenders to deliver an easier, more consumer-friendly loan application experience. The redesigned URLA form includes a reorganized layout, simplified terminology, and new data fields that capture necessary information in an easy-to-read format. Additionally, the GSEs worked together to create a common corresponding dataset, called the Uniform Loan Application Dataset (ULAD) to ensure consistency of data delivery.

“The redesigned URLA is the result of extensive collaboration with industry stakeholders,” said Andrew Bon Salle, Executive Vice President, Single-Family Business, Fannie Mae. “We are proud to be a part of this effort that enables lenders to better serve their customers by providing ease and clarity to borrowers during the loan origination process.”

The documents are being published now, in an effort to provide the industry with ample time to become familiarized with the URLA and ULAD updates and plan necessary changes to their systems. Lenders may begin using the redesigned URLA on January 1, 2018. A timeline for required use of the redesigned URLA and ULAD will be established at a later date.

Revisions made to the URLA form and corresponding ULAD include:

  • Redesigned format: Improved navigation and organization that will support accurate data collection and better efficiency for a more consumer-friendly experience.
  • New and updated fields: Capture loan application details that reflect today’s mortgage lending business and support both the GSEs’ and government requirements.
  • Clearer instructions: Simplified terminology enables borrowers to complete the loan application with less help from the lender.
  • Revised government monitoring information: Incorporates the revised Home Mortgage Disclosure Act (HMDA) demographic questions.
  • Spanish informational version: Will be available soon.

The GSEs collaborated closely with lenders, technology solution providers, mortgage insurers, trade associations, housing advocates, borrower groups, and other government agencies (CFPB, FHA, VA, and USDA-RD), throughout the URLA project from the initial requirements gathering, reviews of the form revisions, and contributions to the data. For the first time, the GSEs conducted extensive consumer and lender usability testing across the U.S. to gather their feedback on the URLA designs. The designs were updated based on the responses gathered and were used in subsequent usability testing and industry outreach.

Today’s announcement is part of the Uniform Mortgage Data Program (UMDP), a larger joint initiative undertaken by the GSEs, under FHFA direction, to standardize single-family mortgage data in the U.S.

To learn more about the redesigned, consumer-friendly URLA and corresponding dataset – ULAD visit – https://fanniemae.com/singlefamily/uniform-residential-loan-application.

Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more visit fanniemae.com

Mortgage Delinquency Rate Hits 10-Year Low

press release
   

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased 11 basis points to a seasonally adjusted rate of 4.66 percent of all loans outstanding at the end of the second quarter of 2016. This was the lowest level since the second quarter of 2006. The delinquency rate was 64 basis points lower than one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.

The percentage of loans on which foreclosure actions were started during the second quarter was 0.32 percent, a decrease of three basis points from the previous quarter, and down eight basis points from one year ago. This foreclosure starts rate was at its lowest level since the second quarter of 2000.

The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the second quarter was 1.64 percent, down 10 basis points from the previous quarter and 45 basis points lower than one year ago. The foreclosure inventory rate was at its lowest level since the second quarter of 2007.

The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 3.11 percent, a decrease of 18 basis points from previous quarter, and a decrease of 84 basis points from last year. The serious delinquency rate was at its lowest level since the third quarter of 2007.

Marina Walsh, MBA’s Vice President of Industry Analysis, offered the following commentary on the survey:

“Mortgage performance improved again in the second quarter primarily because of the combination of lower unemployment, strong job growth, and a continued nationwide housing market recovery. The mortgage delinquency rate tracks closely with the nation’s improving unemployment rate. In the second quarter of 2016, the mortgage delinquency rate was 4.66 percent, while the unemployment rate was 4.87 percent. By comparison, at its peak in the first quarter of 2010, the delinquency rate was 10.06 percent and the unemployment rate stood at 9.83 percent.

“In addition, the delinquency rate of 4.66 percent for the second quarter of 2016 was lower than the historical average of 5.36 percent for the time period 1979 to the present. Among the various loan types, the delinquency rate improved for conventional loans as well as FHA loans. The FHA delinquency rate dropped to 8.46 percent, its lowest level since 2000.

“The percentage of new foreclosures initiated in the second quarter was 0.32, the lowest rate since 2000, and 13 basis points below the historical average of 0.45 percent. FHA loans saw a 15 basis point drop in the percentage of new foreclosures, which pushed the rate down to 0.48 percent, its lowest level since 1993.

“Continuing a downward trend that began in the second quarter of 2012, the foreclosure inventory rate fell again to 1.64 percent in the second quarter of 2016. The FHA foreclosure inventory rate dropped 26 basis points from the previous quarter to 2.15 percent, its lowest level since 2001.

“Of the 50 states and Washington, DC, 47 states either had no change or saw declines in the foreclosure inventory rate in the second quarter of 2016. New Jersey and New York had the highest percentage of loans in foreclosure, at 5.97 and 4.48, respectively. Florida’s percentage of loans in foreclosure dropped to 2.72, a significant improvement over 2011, when it was the state with the nation’s highest percentage of loans in foreclosure at 14.49 percent. California’s percentage of loans in foreclosure was 0.66, the eighth lowest among all states in the nation.”

First American: Loan Application Defect and Fraud Risk Declines

Press Release 7/31/2016

First American Financial Corporation, a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, today released theFirst American Loan Application Defect Index for June 2016, which estimates the frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications. The Defect Index reflects estimated mortgage loan defect rates over time, by geography and by loan type. It’s available as an interactive tool that can be tailored to showcase trends by category, including amortization type, lien position, loan purpose, property and transaction types, as well as state and market comparisons of mortgage loan defect levels.

“The Defect Index has fallen 5.3 percent over the last three months, and this trend shows no sign of abating. The index has been reaching new lows this year, continuing its long-term trend. Since its inception, the Defect Index has been consistently trending lower, apart from the increases in risk in 2013 and early 2015,” said Mark Fleming, chief economist at First American.

“There are two factors driving the long-term decline in the Defect Index, the impact of improvements to the systems and production standards mitigating risk throughout the lending industry, and the continued strength of refinance application activity due to low mortgage rates. According to the MBA, refinance activity is up slightly on a year-over-year basis. The average rate for a 30-year, fixed rate mortgage was 3.57 percent, compared to 3.6 percent in May,” said Fleming. “Our research finds that refinance applications are inherently less risky than purchase applications, so defect and fraud risk declines as refinance applications become a larger share of the overall mix of loan applications.”

The Defect Index for refinance transactions declined 3.2 percent month-over-month, and is 15.5 percent lower than a year ago. The Defect Index for purchase transactions declined 1.2 percent month-over-month, and is down 11.1 percent compared to a year ago. Since defect risk for both purchase and refinance transactions peaked in late 2013, defect risk on refinance transactions continues to decline much more than defect risk for purchase transactions, declining 40.0 percent as compared to 23.7 percent for purchase transactions.

“We expect the declining loan application defect risk trend to continue into July, as the impacts of ‘Brexit’ and global uncertainty keep rates low, triggering an increase in the volume of lower risk refinance loan applications,” said Fleming.

June 2016 State Highlights

  • The five states with the highest year-over-year increase in defect frequency are: Maine (+14.0 percent), North Dakota (+13.6 percent), Missouri (+10.0 percent), Montana (+5.3 percent), and Alaska (+2.8 percent).
  • The five states with the highest year-over-year decrease in defect frequency are: Michigan (-31.4 percent), Florida (-21.8 percent), Delaware (-19.5 percent), Connecticut (-17.8 percent), and New York (-17.6 percent).

June 2016 Local Market Highlights

  • Among the largest 50 Core Based Statistical Areas (CBSAs), the only one market with year-over-year increase in defect frequency is: St. Louis (+9.9 percent).
  • Among the largest 50 CBSAs, the five markets with the highest year-over-yeardecrease in defect frequency are: Detroit (-35.9 percent); Jacksonville, Fla. (-23.5 percent); Miami (-22.7 percent); Louisville/Jefferson, Ky. (-20.3 percent); and Orlando, Fla. (-20.2 percent).

Where in the Application is the Defect Risk?

“In the post-crisis housing finance landscape, the attention paid to the borrower’s ability-to-pay and emphasis on issuing loans that have a reasonable and sustainable mortgage payment has increased. In other words – income matters,” said Fleming. “Within the Loan Application Defect Risk Index, we also measure specific risk categories, including defect, misrepresentation and fraud risk associated with the reporting and documentation of income in a mortgage loan application.”

“If the income is being inaccurately measured or misrepresented intentionally in the loan application, the borrower’s true ability-to-pay and the sustainability of the mortgage are incorrectly measured. Interestingly, the trend in income-related defect risk offers some good news. The risk related to income is down 3 percent over the last three months and more than 10 percent in the last year,” said Fleming. “This beneficial decline in income-related defect and misrepresentation risk is a benefit of the technological and process investments made by the lending industry to meet compliance and regulatory requirements. The result is better measurement at the loan application level of the borrower’s ability-to-pay and more accurate identification of sustainable mortgages.

“Income-related misrepresentation and fraud risk is declining, as loan underwriting standards have become more disciplined and as the lending industry have made compliance and regulatory driven investments,” said Fleming. “We continue to improve our ability to accurately project a borrower’s ability-to-pay and the sustainability of a mortgage — a benefit to consumers and lenders alike.”

Next Release

The next release of the First American Loan Application Defect Index will be posted the week of August 22, 2016.

Methodology

The methodology statement for the First American Loan Application Defect Index is available athttp://www.firstam.com/economics/defect-index.

Disclaimer

Opinions, estimates, forecasts and other views contained in this page are those of First American’s Chief Economist, do not necessarily represent the views of First American or its management, should not be construed as indicating First American’s business prospects or expected results, and are subject to change without notice. Although the First American Economics team attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. © 2016 by First American. Information from this page may be used with proper attribution.

About First American

First American Financial Corporation (NYSE: FAF) is a leading provider of title insurance, settlement services and risk solutions for real estate transactions that traces its heritage back to 1889. First American also provides title plant management services; title and other real property records and images; valuation products and services; home warranty products; property and casualty insurance; and banking, trust and investment advisory services. With revenues of $5.2 billion in 2015, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2016, First American was recognized by Fortune®magazine as one of the 100 best companies to work for in America. More information about the company can be found atwww.firstam.com.

Bank requires few mortgage documents: Seems like housing deja vu

Excerpt from CNBC 6/9/16

 They were a hallmark of the U.S. housing crash: Mortgages that required little or even no documentation.

During the boom, they were called “stated income” loans, but advertised as “low-doc” or “no-doc” loans. When the damage was done, they were deemed “liar loans.” Both lenders and borrowers alike would write basically anything on the mortgage application to get the deal done. Now, nearly a decade after the financial crisis began, a new version of the stated income loan is making a comeback.

“Lite Doc.” That is what Quontic Bank, an FDIC-insured community lender in New York City is calling its product. It requires only verification of employment and two months worth of bank statements. For self-employed borrowers, it requires documentation of one year of profit and losses. The Lite Doc loans are five-year adjustable-rate mortgages with interest rates in the low- to mid-5 percent range, according to the bank. Thirty-year fixed-rate loans, which when fully documented can offer rates in the high-3 percent range, are not part of the offering.

Read full article here

Due Diligence Required of ALL Closing Staff

We all use auxiliary help when times are busy.  Signing agents and temporary help.  But beware; are you giving “non-employees” dangerous access to personal information that you are responsible for?

The DOJ has issued a press release regarding  a temporary employee who’s job was simply copying loan documents. In that capacity, she  stole personal  information belonging to over 250 would-be home buyers and used that information to obtain fraudulent credit cards.

Use due diligence in the hiring and overseeing of all of your help and assure they are properly licensed.   Even non-employees require oversight in the title and closing business.

Department of Justice Press Release – Temporary Help Steals Information to Get Fraudulent Credit Cards        Read article here at the Department of Justice Website

Get Your Closing Paperwork Right with the New TRID

Remember, all loan applications taken through July 31, 2015  fall under the existing HUD regulations using the existing HUD-1 and Truth in Lending Rules, regardless of the closing date.

Loan applications taken as of August 1st will require the TRID change.  In the real world, that means we will be alternating between BOTH TRID and the OLD HUD-1/RESPA/TIL forms well into August, September and October.

Good article from Locke, Lord, LLP about the CFPB’s “Sensitivity” to issues faced with TRID – the new Truth in Lending and Respa form changes that start with loan applications taken August 1st.

Info On Home Closing

Home Closing 101: An Educational Initiative of the American Land Title Association