About Rhonda Porter

Rhonda Porter is an NMLS Licensed Mortgage Originator MLO121324 for homes located in Washington state. Her blog, The Mortgage Porter, is nationally recognized for sharing relevant information to consumers about mortgages. She has been originating mortgages since 2000 at Mortgage Master Service Corporation #40445 Consumer NMLS Website: http://www.nmlsconsumeraccess.org/TuringTestPage.aspx?ReturnUrl=/EntityDetails.aspx/COMPANY/40445 NMLS ID 40445. Equal Housing Opportunity. You can follow Rhonda on @mortgageporter, Facebook and/or Google+

PMI Mortgage Insurance Company is no longer writing new polices

2011-08-20_1844At 6:38 pm on Friday, August 19th, I received an email from PMI Mortgage Insurance Company that they can no longer issue new private mortgage insurance policies as of Friday, August 19, 2011.  Private mortgage insurance is used when you have less than 20% home equity and are not using a program such as FHA, VA or USDA.

We are writing to inform you of the very recent regulatory decisions that have impacted our ability to write new commitments. Specifically, PMI Mortgage Insurance Co. (“PMI

What’s Up with the Helicopters?

No, it’s not Google gathering more information and it’s not Ben Bernanke making money drops.  Starting today, The Department of Homeland Security is funding a study to determine current radiation levels in King and Pierce County. Helicopters will be flying a low levels in neighborhoods from now until July 28, 2011 to create a “baseline” measurement.

From the Office of Radiation’s website:

The helicopter will fly a grid pattern spaced about 600 feet apart at an altitude of 300 feet, flying at 70 mph. The results will be provided to local agencies from the surveyed area by year-end. Some of the data may be withheld for national security purposes. The state Department of Health has been planning this project since 2009.

Large Lender Not Allowing Listing Agents to Use JV Title Companies

An interesting situation has come to my attention via @Talontitle on Twitter:

TalonTweet

It seems that a major lender (a favorite of many local mortgage brokers) is refusing to allow listing agents to dictate who the title insurance provider will be when it is a joint venture relationship benefiting the listing agent’s company.

Many of the local large real estate brokerages in our area indeed have joint venture relationships with title companies.   Rainier Title has partnerships with Coldwell Banker Bain and John L. Scott corporate offices and Commonwealth of the Pacific has a financial relationship with Windermere.

I haven’t brokered a loan in years since we are a correspondent lender with our own credit lines… but I understand that this lender tends to offer some very competitive rates. I am wondering what a mortgage originator would do if they have a purchase where the listing agent has designated their JV title company and this lender is offering the lowest rates that day?

What would you do?  Let the consumer know and talk to the listing agent about (gasp!) switching title companies?  Or work with a different lender who’s rates may not be as attractive but who will permit the JV relationship?

Round Two for the Proposed Mortgage Disclosures by the CFPB

The Consumer Financial Protection Bureau has revealed their latest proposals for the forms that may eventually replace our (seriously flawed) Good Faith Estimate that was mandated by HUD for use in 2010.  They received 13,000 comments from consumers and industry professionals and they’re asking for your “vote” on the newest editions by July 5, 2011.  And for the record, I don’t want to hear any mortgage originator complain about what ever form we wind up with IF you don’t take this opportunity to voice your opinions.

One noted improvement is that closing costs on page two are more detailed…funny how we’re reverting to something that resembles the “old” good faith estimate.   This set of documents do not have an “expiration date” and if it’s truly intended for consumers to shop, I wonder if mortgage originators will be liable if they issue the document without a property address (like our current 2010 GFE).

What I see happening is that many consumers are becoming numb to the plethora of disclosures that are now required thanks to our Governments efforts to dumb everything down.  I would still like to see what ever form is used as a “good faith estimate” resemble the HUD-1 Settlement Statement so that their is consistency for consumers.

Why not just add some boxes at the top of the existing HUD indicating “rate quote” (rate not locked, intended for shopping) and “rate locked” where the lenders fees are locked as well?

I cannot tell from the information that I’ve seen so far if mortgage originators will be required to have a “changed circumstance” before re-issuing a Good Faith Estimate.  I know this has been a major issue for consumers and mortgage originators alike.

Which disclosure do you prefer from this batch and why?

Major Bank No Longer Accepting Third Party Underwriting (aka pmi)

toastEarlier this month, I learned that a big bank is no longer accepting “third party underwriting”.  Third party or contract underwriting is “private mortgage insurance”.  Private mortgage insurance is often used when a borrower has less than 20% equity (or down payment) in a property.  When a private mortgage insurance company is issuing mortgage insurance to the the lender, they are underwriting the transaction.  Sometimes mortgage companies may use private mortgage insurance companies to underwrite files even when no private mortgage insurance is required.

From the memo:

“The clerical and support duty exemption to licensing under the SAFE Act (and other proposed regulations) for loan processors or underwriters who are employees taking direction and subject to supervision and instruction of licensed persons, does not apply to contract underwriters.

For all underwriters who do not qualify for exemption to licensing, including contract underwriters, compliance requires that anyone who is performing credit underwriting in connection with a residential mortgage be licensed as a mortgage loan originator….to perform credit underwriting tasks, each individual independent underwriter must have the applicable state license.”

It will be interesting to see if private mortgage insurance companies move forward with having their underwriters become licensed mortgage originators.  If other banks follow and pmi companies do not license their underwriters, it would appear they’re toast.   This bank is no longer accepting loans underwritten by pmi companies effective July 5, 2011.

Borrowers would need 20% down payment to obtain conventional financing, if pmi ceases to exist or consider FHA, USDA, VA financing or a combo mortgage (yes, second mortgages are starting to come back).

Update:  Some lenders may still underwrite the loans with higher loan to values – some banks are are firing warning shots that they will not accept loans only underwritten by a private mortgage insurance company if their underwriters are not MLO licensed.  It’s going to be interesting to watch this evolve.

Photo credit: John McClumpha via Flickr

A First of It’s Kind: Mortgage Tech Summit

mts555I am very excited to be participating and attending the Mortgage Tech Summit in Denver this week.  If there is an event like this, it’s news to me.  🙂

The Mortgage Tech Summit is geared towards presenting technology for “street level mortgage originators” and several of the speakers are actual active mortgage originators.  In my session, I’m going to be sharing my “talking good faith estimate” which has been an essential tool in how I communicate with my clients.

The pricing for this event is “progressive”.  The tickets started at $1 and with each ticket bought, the price increases by $1.  As I write this post, the current ticket price is $52.00.

I’m looking forward to learning and sharing with fellow mortgage professionals from across the country this Thursday, June 9, 2011 in Denver.  I hope to see you there!  For more info or to RSVP, visit www.mortgagetechsummit.com and be sure to follow on Twitter @mortgagetechsummit #MTS11

JUST RELEASED: Two Proposed Good Faith Estimates

2011-05-18_0936Consumers and industry professionals can vote on two options for the new Good Faith Estimate that was just released by the Consumer Finance Protection Bureau via their Know Before You Owe campaign.

The CFPB is segregating the “vote” (perhaps “survey” is a better term) between consumers and professionals opinions on the two versions of the proposed mortgage disclosure.

I recommend printing the examples to really get a good look at them.   They both appear to contain the same information, disclosed in different manners.  For example, one features terms at the top of the page and the other has projected payments over 30 years at the top.

GFEoptions

I’m noticing three improvements right off the bat over our current Good Faith Estimate (HUD’s attempt) which has been in effect since 2010:

  • total mortgage payment:  PITI vs PIMI.  The new GFE will actually include proposed taxes and home owners insurance.  HUDs 2010 GFE only discloses principle, interest and mortgage insurance (if any)
  • funds for closing.  Yes, it’s true…the proposed forms actually help borrowers know what funds they should be bringing in at closing.  And it even factors…
  • credits from lender or seller!   The new form may want to just have this be “credits” since sometimes real estate agents contribute towards closing costs as well.

All three of these items have been sorely missed from HUD’s creation that we’ve been mandated to use since 2010.

Mind you, I’ve only had these forms in my hot little hands for about a half hour…it looks like they’re missing any place for rebate pricing (aka ysp as disclosed as a credit in Box 1, Line 2 of HUD’s GFE).  This is a huge oversight in light of the Fed’s Rule on Loan Originator Compensation.   I would also like to see a signature line added (this would eliminate documents that borrowers currently have to sign to state they have received the GFE).

And, if the CFPB is reading this post, I’d be a happy camper if they discontinued having the owners title policy (typically paid for by the seller in Washington state) being quoted on the GFE only to be credited back on the HUD.   This has been confusing for our local consumers and mortgage originators should NOT be held liable for a cost that is not associated with their borrower.  The owners title policy should be treated more like the excise tax: disclosed in areas when it is common practice the buyer pays that cost.

So what are you waiting for? Go check ’em out and let your opinion be known.

High Balance Conforming and FHA Loan Limits to be Reduced after Summer

As of October 1, 2011, high balance loan limits in greater Seattle are set to be reduced from $567,500 to $506,000 for a single family dwelling for both conventional and FHA mortgages.   That’s a loss of $61,500.   This roll back is taking place across the country and will impact all counties in Washington.

Currently, someone buying a home priced at $700,000 in King County could put 20% down and not have a jumbo/non-conforming mortgage.  After September 30, 2011, the same home buyer will need to have 28% down payment (an additional $61,500) for the same scenario.   A home buyer not wanting to put more than 20% down and have a loan amount of the new limit of $506,000 will be able to purchase a home priced around $632,000.

With FHA financing, a home buyer in the tri-county area can buy a home priced at $585,000 with 3.5% down payment with the present loan limits.  After September 30, 2011, the same FHA home buyer who wants to use the allowed minimum down payment of 3.5% will be reduced to a sales price of $524,000.

This could have a dramatic effect on homes priced between $524,000 and $700,000 in our area as potential buyers will be forced to either come up with more down payment and/or use jumbo financing (which has tighter underwriting guidelines and higher rates than conforming or FHA).

If you’re a current home owner who has been considering refinancing and your mortgage balance is $500,000 to $567,500, I recommend taking action now.  Not only will your borrowing power be reduced but local home values may take a hit with the reduced financing options should Congress not extend the limits…I wouldn’t count on Congress (ever).

I wouldn’t wait until September 30, 2011 either.  The last time we phased into new loan limits, lenders were very unorganized…it really was a mess.   Some may adopt the new loan limits much earlier in order to avoid being stuck with a loan that exceeds the new limit (having a jumbo loan at a conforming rate) on their books.

I feel like Debbie Downer! 🙁

Barney’s Letter to Ben on Loan Originator Compensation

barneyIt appears that Barney Frank penned a letter to Ben Bernanke a week before the Fed rule on Loan Originator Compensation was originally scheduled to go into effect.  Poor Barney was worried that the Fed had perhaps gone a little too far with their rule and that they should perhaps reconsider a few items (they have not as of yet) stating “I believe it was a mistake for this rule to go beyond what was required in the Financial Reform Act…”

Barney is requesting two changes to the Fed’s rule on LO Comp:

1) allow mortgage broker companies to pay their employees on consumer/borrower paid compensation.  Barney Frank writes regarding the Fed’s rule “…differs from Section 1043 of the Financial Reform Act, which merely states that if a loan originator receives compensation from the consumer, that originator cannot receive compensation from another source…while the more restrictive Fed rule prevents the sharing of the consumer-paid compensation by the firm with an employee for that employee’s work on the loan…

2) allow mortgage brokers to make small fee reductions at closing to cover shortfalls which sometimes result because of last minute third party fee changes, extensions, etc.

Frank adds that he’s aware that some loan originators will use this tactic (helping with closing cost) “with the intent of circumventing the rule’s consumer protections.  Therefore, it would be appropriate to limit the frequency of such use and to limit either the dollar or percentage of the reduction, and to monitor a loan originators’ use of this flexibility to ensure that such flexibility is not abused.”

Is it just me or does that last paragraph seem whacky?   How is a mortgage originator who helps pay an extension fee abusive to the consumer?  I seriously don’t get it.

In my opinion, if the Fed wants LO Comp to not be a factor in the transaction, then they should probably ignore Barney’s second request.  I’m picturing NAR contacting Mr. Frank insisting that this be corrected so that their members are in a situation at closing where they might have to cough up some of their commission.

Now that we’re a few weeks into the new LO Comp rule, I do like having my pay taken out of the equation.  Can’t wait to see all the other changes coming this summer with Dodd-Frank <sarcasm> and all the back peddling that will probably happen (just like this) from all of the unintended circumstances it will cause.

You can read the entire letter to the Honorable Ben Bernanke from Ranking Member Barney Frank here.

Hat tip to NAMB.

FHA Annual Mortgage Insurance Increasing Next Week

FHA’s annual mortgage insurance premium is increasing effective on case numbers issued Monday, April 18, 2011 and later.  If you have an FHA transaction in process (or are considering an FHA refinance) you need to contact your mortgage professional ASAP to make sure they  have your FHA Case # no later than Friday.

On a sales price of $400,000 with the current minimum down payment of 3.5%, the monthly difference in payment between a case number by Friday and one on Monday is $80.42 per month!

And if your a mortgage originator, hopefully you don’t issue a Good Faith Estimate without your case number or your employer won’t be too happy with you.   Here’s a memo I just received from a wholesale lender:

Please note that increasing the annual (monthly) MIP is not considered a valid changed circumstance under RESPA to increase “Our Origination Charge” in Block 1 / HUD Line 801. Any unapproved changed circumstances will result in restitution to cure being charged to the originator.

This is a perfect example of why mortgage originators are sometimes hesitant to issue a Good Faith Estimate.  How do you cure a fee that is paid for a minimum of 60 months and 78% loan to value based on the original sales price?   And now that mortgage originators cannot pay to cure (correct) a Good Faith Estimate, their employers must…and this, my friends, is part of the reason why employers of mortgage originators (banks, mortgage companies, credit unions, etc.) are having to slightly pad the rates you have access to due to the Fed’s Loan Originator compensation rule.

Here’s HUD’s FAQ’s on RESPA regarding what happens if there are GSE, FHA or Mortgage Insurance program changes:

This could constitute a changed circumstance if the loan originator did not have notice of the GSE, FHA or other mortgage insurance program change prior to the issuance of the GFE. A loan originator may issue a revised GFE reflecting only the increased charges resulting from the ―changed circumstance‖.

There has been plenty of notice about this change…I’m just wondering how many LO’s (or their employers) might be caught by having to issue a Good Faith Estimate during this past week due to having all six pieces of information constituting an application, only to have the borrower “float” or not commit to proceeding…and then deciding to lock or commit Monday or later.

It’s not pretty.

GSE, FHA or Mortgage Insurance program changes.
A: This could constitute a changed circumstance if the loan originator did not have notice of the GSE, FHA or other mortgage insurance program change prior to the issuance of the GFE. A loan originator may issue a revised GFE reflecting only the increased charges resulting from the ―changed circumstance‖.