Calling All Washington State Correspondent Lenders

April 27, 2008 by 3 Comments

Did you receive the notice from DFI last Thursday regarding new licensing requirements impacting Correspondent Lenders?  Here’s a portion of the email I received from Deborah Bortner, Director of the Division of Consumer Services.

"Senate Bill 6471 (chapter 78, Laws of 2008), passed by legislature, and signed by the Governor on March 19, 2008, requires that all lenders doing business in Washington be licensed by the Department of Financial Institutions under the Consumer Loan ACT (CLA), chapter 31.04 RCW.  The law becomes effective June 12, 2008."

I’m still digesting all of this…it’s my understanding that if lenders wish to retain their status as a Correspondent Lender in Washington State, they will need to apply for (an expensive) Consumer Loan License.   Gee, I guess that means we can all do loans with double digit interest rates now–how is this helping the consumer?  It certainly doesn’t help lenders…it IS more money for the Evergreen State.

WAMB responded the following day via email:

Many of you received an email from the Department of Financial Institutions on Thursday regarding new licensing requirements for Washington State Lenders.  This email was a result of the passage of Senate Bill 6471 concerning consumer finance companies.  Please know we were not aware of this issue until we also received the notification by email from DFI yesterday.

During the legislation session we were made aware of Senate Bill 6471 and were told that the intent of this legislation was to require that all Consumer Finance Companies who were operating as Mortgage Brokers become licensed.  We were advised that it was not a mortgage broker concern.

Apparently the passage of this legislation has created some unintended consequences for brokers.  The legislation would require any mortgage broker with a correspondent line to also become licensed as a consumer finance company.  We know that if this legislation is put into effect on June 12, it will have an impact on a large segment of WAMB’s membership.   WAMB is working with the Mortgage Broker Commission to minimize these consequences through the Rules Process…."

Well my lending Brothers and Sisters, I highly recommend that you attend the next Mortgage Broker Commission Meeting…it’s sure to be a doozy and we, few and proud, Correspondents must be heard.

Mortgage Brokers Commission Meeting:  Tuesday, May 13, 2008 beginning at 9:00 a.m. – 11:00 a.m. at Bellevue City Hall’s Council Chambers.  Bellevue City Hall, 450 110th Avenue NE, Bellevue, WA 98009.   DFI wants you to fax your RSVP’s with your name, company name, address, phone & fax number to Elizabeth Stancil at 360-586-5068.  Here is a form you can use to RSVP: Download MortgageBrokersCommissionMeetingMay13.pdf

I hope to see you there.  RSVPs are needed by May 9, 2008.

Filed Under: Legislation

Fiduciary Duties for Mortgage Brokers

March 24, 2008 by 3 Comments

Last Friday, Governor Gregoire signed SB 6381 into law giving fiduciary duties to mortgage brokers.  This new law does not apply to loan originators who work for bank-mortgage companies (like WaMU, Countrywide, Wells Fargo, Chase, Bank of America, etc).   

Here are some of the highlights of what the law spells out for loan originators who work for mortgage brokers:

  • A mortgage broker must act in the borrowers best interest and in the utmost good faith towards the borrower
  • A mortgage broker shall not accept, provide, or charge any undisclosed compensation or realize any undisclosed remuneration that inures to the benefit of the mortgage broker on an expenditure made for the borrower.
  • A mortgage broker must carry out all lawful instructions provided by the borrower. 
  • A mortgage broker must disclose to the borrower all material facts of which the mortgage broker has knowledge that might reasonably affect the borrowers rights, interest or ability to receive the borrower’s intended benefit from the residential mortgage loan.  
  • A mortgage broker must provide an accounting to the borrower for all money…received from the borrower.

All of the above seems pretty straight forward to me and SHOULD all ready be happening when consumers work with a mortgage professional.  I have always put my clients best interest first–above mine.   The next two points are more surprising:

  • A mortgage broker may contract for  or collect a fee for services rendered if the fee is disclosed to the borrower in advance of the provision of those services. 

This will allow mortgage brokers to charge a fee for consultation, credit repair, working on preapprovals.  This could change how a Washington State mortgage broker is paid and how much they charge in origination.    

  • The fiduciary duty in this section does not require a mortgage broker to offer or obtain access to loan products and services other than those that are available to the mortgage broker at the time of the transaction.

I see this last point as a conflict with the entire bill.  What if the best loan for a consumer is FHA or VA and the mortgage broker does not have those loans available so they shoe-horn them into a loan they do have access to?  How is that acting in the clients best interest?  The other side of the coin is that if a mortgage broker has never provided a certain product (such as FHA or VA mortgages); how would they know if the consumer would be better off with these loans?

Note to Consumers and Real Estate Agents:  If you are a first time home buyer, have credit scores below 700 or are putting less than 20% down; ask your mortgage broker if they are able to provide FHA financing.  Those who have served our country should ask if VA financing is available. 

Jillayne Schlicke wrote an interesting post on this earlier this month at Rain City Guide.   This law is yet another reason why consumers may want to select a loan originator classified as a licensed loan originator working for a mortgage broker over a loan originator who works for mortgage-bank.

Filed Under: Legislation

Shiney New and Temporary Conforming Limits…Not So Fast!

March 7, 2008 by Leave a Comment

I feverishly posted the new FHA and conforming loan limits for Washington State.  It was pretty darn exciting since many of us in the industry were hearing whisper figures of $493k or so and voila, our new FHA and conforming limit for a single family dwelling is $567,500 for King, Snohomish and Pierce Counties.  This could be a nice bump through the end of this year.

The word is out!  Many Seattle, Bellevue, Everett and Tacoma area homeowners are VERY interested and want to take advantage of "conforming rates" now.   Not so fast….sorry.  (Hey…I’m really hoping that on Monday, I’m eating my words…the proof is in the pudding).   So far all that’s happened is that the loan limits have been announced.   This whole process needs to trickle from Fannie Mae and Freddie Mac and through all the wholesale lenders before those of us on "the streets" can offer you any benefits.   

Be prepared.  I fully expect an "add to rate" on loans from $417,000 – $567,500 (or what ever your area conforming limit is).   This will be to compensate Freddie/Fannie for the additional volumes and risk they are taking on.   The big question is: how much will it be?  My best guess is anywhere from 0.25% to 1.00% to what you currently see for conforming.   

"WHAT?" You say… "You’re telling me that you just quoted 6.00% for conforming today…and 7.00% for JUMBO…yet the new conforming rate for loans over $417,000 may still be 7.00% if I were locking today?"

Yes…that’s what I’m saying.  Again, PURE speculation on my part.

The "new conforming limit" goes back to July of 2007.  It’s retroactive for jumbo mortgages still not bought on Wall Street clogging credit lines.   I think that’s where we may see the most action:  rescuing the Thornburg Mortgages of the world (or at least Wall Street).  This from Bloomberg:

Thornburg specialized in so-called jumbo mortgages of more than $417,000, which typically were used to buy more expensive homes. Until recently, such loans were too big to qualify for purchase by government-sponsored entities such as Fannie Mae. Trading for such “non-conforming loans has come to a standstill, cutting off a source of funds for mortgage companies and pushing down the value of their holdings. More than 100 halted operations or sought buyers last year.

The company’s demise would reduce liquidity even more, said Keith Gumbinger, vice president of HSH Associates, a mortgage- market research firm based in Pompton Plains, New Jersey.

“No one has had anything bad to say about Thornburg; they have served the good-quality, high end of the market,” Gumbinger said. “It’s been a good, well-run business that is taking a beating because of market conditions.”

Thornburg is not a part of the subprime melt down they are being sucked into.  My best guess is that due to the volume and risk of loans that Fannie and Freddie will take on through the end of this year, consumers will see a benefit in pricing when the credit lines have been relieved.   

This may not be the band-aid we’re hoping for.  I don’t want to be a "bummer"…I do want to be practical. 

My best advise to those in the "new (temporary) conforming market" is to not wait for the new limits to be in effect.  Check with your Mortgage Professional to see if they can switch your program to "new conforming" IF it’s a better rate/scenario for you if you’ve all ready began the process under the current guidelines.  This is something that I can offer and I would assume most Mortgage Professionals are able to as well.

Filed Under: FHA, Legislation, Mortgage, Residential Purchase

Quick 4-1-1 on Jumbo Loan-Conforming Loan Limit Increase

February 11, 2008 by 6 Comments

I’m noticing that a lot of Mortgage Porter readers are finding my by googling various terms to learn more about when and how the conforming loan limits will be increased.

Here’s what I know (and what I’m speculating) so far:

I’ve heard that President Bush will be signing the bill into law this Wednesday.  Then HUD has 30 days to publish what the median home prices are for various areas.  The new conforming loan limit will be based on 125% of those values.

It’s estimated in the Seattle-Bellevue-Everett area, our new loan limit will be just shy of $500,000. 

While this process is taking place, Fannie and Freddie need to figure out how they’re going to deal with this influx of new business.  Underwriting guidelines will need to be considered and distributed to lenders.  Also, I will eat a shoe if there are no "add to rate" to loan amounts $417,001 and over.   I’m estimating the add will be 0.25% – 0.50% to the now conforming rate.   For example, if your loan amount is $417,000 your rate for a 30 year fixed could be 5.500% – if your loan amount is $417,001 your rate would be 5.75% – 6.00%.   This is still more attractive than what the current jumbo rates are.

Remember, the increase to the conforming loan limit is temporary.  It is currently only valid through the end of 2008.  Who knows, maybe Congress will extend it as they have the PMI deduction if they see it as a benefit to the American economy.

You can see this process will take a little time.  I’m assuming that Fannie and Freddie are diligently working on the guidelines/pricing issues and not waiting for HUD’s home value information.   Even so, it could very well be some time in March before this all takes place.

Stay tuned!

Filed Under: Jumbo/Non-Conforming, Legislation

Conforming Loan Limits to increase soon

February 8, 2008 by Leave a Comment

Being a Certified Mortgage Planning Specialist has it’s advantages.  On being up to the minute updates on legislative changes that impact the mortgage industry.  I just received this email from CMPS which is speculating that the new conforming loan limit in the Seattle-Bellevue-Everett area may be $531,377.  HUD has 30 days to publish what will be used for median home prices. Here is the memo from CMPS:

 

CMPS Legislative Update –  Determining "High Cost" Areas


As we reported to you yesterday, the US Senate passed an expanded version of HR 5140 – an economic stimulus package that includes a temporary increase in the conforming loan limits from $417,000 to as high as $729,750 in high cost areas.  The two things you must know in order to determine if you are in a high cost area:

1.  You must know the formula.  If 125% of the local area median home price exceeds $417,000, the temporary loan limit would be that 125% of the median home price with a cap of $729,750. 

2.  According to HR 5140, the Secretary of Housing and Urban Development will publish the median house prices within 30 days.  We contacted the Public Affairs office of HUD directly to ask if there is anything definitive to reference in the interim, and they said, "no."  The Wall Street Journal published median house prices recently, and you may want to reference this information to get an idea of which areas will exceed the $417,000 limit.  The median housing prices can be found in the second graphic on this web page. 

This will be great news for those with "jumbo mortgages" or piggy backs that need to refinance.   Once I have more "firm" information, you can bet I’ll let you know!

Filed Under: Jumbo/Non-Conforming, Legislation

Senate Banking Committee Meeting Now

February 7, 2008 by Leave a Comment

The Senate Banking, Housing and Urban Affairs Committee is now hearing testimony including the very hot topic of temporarily raising the conforming loan limit and Fannie/Freddie reform.

Click here to watch live.  (Requires Real Player…and it’s not working for me).

OFHEO’s testimony: Download http_www.ofheo.gov media te… 2708LockharttestimonyWeb.pdf

Stay tuned…

Update February 7, 2008  2:00 p.m.:  The Senate has passed the stimulus package.  The Bill is expect to be quickly signed off by The House and then President Bush…possibly by this weekend.

Filed Under: Jumbo/Non-Conforming, Legislation

A Jumbo Question: Conforming Loan Limits

January 31, 2008 by Leave a Comment

A Mortgage Porter reader asks a very timely question regarding the proposed conforming loan limit:

"I just spoke to one of the major lending institutions and he recommended that if I can wait 3 – 4 weeks we may see a change in the non conforming guidelines such as amount that is normally set t $417,000 jump to either $620,000 or $630,000. 

Would you have any information on these possible changes and time line?"

Many people are full of questions regarding what’s going on with the conforming loan limit.  Different figures and stats are being quoted from various sources.

The Certified Mortgage Planning Institute issued this statement yesterday:

CMPS Legislative Update – Higher loan limits inching toward reality!

Yesterday, the US House of Representatives overwhelmingly passed HR 5140 – an economic stimulus package that includes a temporary increase in the conforming loan limit and the upper threshold for FHA loan programs to as much as $729,750 in high-cost areas.  The temporary increase would last only until the end of 2008.  The bill would also restrict Fannie Mae, Freddie Mac and the Federal Housing Administration from guaranteeing or purchasing loans above 125 percent of the median home price for a given area.  That means that the existing $417,000 conforming loan limit for mortgages eligible for purchase by Fannie and Freddie would not increase in areas where the median home price is $333,600 or less.  The problem of course, is that as of right now, no one knows what the median home price is in different markets because this data has never been published by HUD!

Therefore, it would be up to the Secretary of Housing and Urban Development to determine the median home price for different housing markets "as soon as practicable," but no later than 30 days after passage of the bill, relying on existing commercial data where needed.  In other words, if median home prices in your marketplace are $336,000 or less, this bill won’t really affect you; and there’s no way to tell if median home prices in your area are higher than $336,000 until HUD publishes this data.  Nevertheless, jumbo relief is certainly on the way for places like California where median home prices are certain to be above $336,000.

Currently, the loan limit for FHA loan programs is between $200,160 and $362,790, depending on the county where the property is located.  The proposed higher limits for FHA loan guarantees are also set to expire at the end of this year, unless Congress passes other legislation intended to modernize FHA programs by introducing risk-based pricing and lowering down-payment requirements.

While House leaders thought they had reached an agreement with the Bush administration to include FHA modernization as part of the stimulus package, they agreed to continue working on that issue separately at the administration’s request, the Associated Press reported.

In order to make higher limits a reality, the next step is for the Senate to pass the bill and for the President to sign it into law.  The target date for final passage set by the White House and Congressional leaders is February 15, so let’s hope for the best and we’ll be sure to keep you posted as we have more information.

Sources and helpful links:

·          Inman News

·         HR 5140

·         FHA Loan Limit Search – (Current Limits)

Filed Under: Jumbo/Non-Conforming, Legislation, Mortgage

A Reply from Senator Patty Murray

January 31, 2008 by Leave a Comment

Dear Mrs. Porter:

Thank you for contacting me regarding the issue of subprime mortgages. It is good to hear from you.

As you know, in 2008 an estimated two million homeowners could lose their homes as a wave of interest-rate resets are expected on adjustable rate subprime mortgage loans. If nothing is done, this level of foreclosures will undoubtedly result in hundreds of billions of dollars in lost home equity, declining home values in communities across the country, and an overall decline in the U.S. economy. I have long been concerned about this situation. Last spring, as Chairman of the Transportation and Housing and Urban Development Appropriations Subcommittee, I held a hearing to analyze proposals to reform and modernize the Federal Housing Administration (FHA) and other potential remedies to help stem the tide of projected home foreclosures.

I am actively engaged with my colleagues to identify ways to prevent the projected wave of foreclosures from being realized in the coming years. I strongly support efforts between borrowers and lenders to forestall foreclosure, but I believe there are steps that Congress must take as well.

To help educate borrowers of their options to avoid foreclosure, I secured $180 million in the Fiscal Year 2008 Consolidated Appropriations bill to provide housing counseling services across the country. Housing counseling programs assist borrowers with mortgage modification and restructuring so they can avoid or mitigate the losses associated with foreclosure.

In addition, I was a key leader in pushing S. 2338, the FHA Modernization Act of 2007, sponsored by Sen. Christopher Dodd (D-CT), through the Senate. The FHA Modernization legislation provides the FHA new flexibility to tailor products to customers based on their credit rating, income, and relative risk. FHA modernization is a key component in addressing the subprime crisis because it will enable the FHA to offer safe, alternative mortgage options – as opposed to adjustable rate mortgages to borrowers.                                                                                                                             

As the 110th Congress progresses, I will carefully consider all legislation regarding mortgage reform, and will certainly keep your thoughts in mind. Thank you again for contacting me, and please don’t hesitate to share your thoughts in the future.

I hope all is well in Seattle.

Filed Under: Legislation
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