Mortgage – HousingWire

VA hikes appraisal fees, turn-times in select markets
UWM cancels secondary offering
CFPB ponders how well HMDA captures discrimination

VA hikes appraisal fees, turn-times in select markets

Posted: 19 Nov 2021 01:40 PM PST

The Department of Veterans Affairs will raise appraisal fees and lengthen allowable turnaround times in select markets across the country in response to high demand for appraisals.

The cabinet-level federal agency, which backs mortgage loans for veterans, said the move was in response to "unprecedented demand for appraisal services" in some markets. The fee increases, which vary by state and county from as little as $25 in Minnesota to $400 in some areas of California, will take effect Dec. 1.

The VA said it had taken note of increased market demand in a "seller's market," in a notice explaining the increases.

"As a result, VA has increased appraisal fees and extended timeliness requirements in some markets facing a high demand for appraisal services," the agency said. "These changes may not be permanent, and VA will continue to assess the market's demand for appraisal services and will adjust appraisal fees and timeliness requirements accordingly."

The VA designated markets as high-demand based on increased demand for appraisal services and a shortage of appraisers. The VA said the fee and timeliness increases will be reevaluated in the future and "may need to be readjusted."

Tom Trott, a branch manager at Embrace Home Loans, called the increases "extraordinary."

"But they need to do it in order to help make the VA loan viable in rural areas," said Trott.

In rural areas, longer travel times between appraisals, coupled with the more complicated reports demanded by the VA process, deter the few available VA-certified appraisers. With conventional financing, in contrast, the appraisal fee is entirely negotiable in different areas, Trott said. Conventional buyers who need an appraisal done quickly can pay a premium.

The dynamic adds to the sometimes-founded perception that VA financing is more difficult, and frequently leaves VA borrowers at a disadvantage.

In the high-demand markets of Florida's Franklin, Indian River, Jefferson, Suwannee and Walton counties, appraisal fees will increase to $750 from the current cap of $500, and turnaround times will increase to 10 business days. In the rest of the state, appraisal fees will increase to $650, and turnaround times remain unchanged at seven business days.

VA appraisers will be able to charge up to $1,000 in some high-demand counties in California, where VA appraisal fees are currently set at $600 statewide.

In Kern, Mariposa, Merced, Mapa, San Benito, San Luis Obispo, San Francisco, San Mateo, Santa Clara, Santa Cruz, Shasta and Tehama counties, appraisal fees will increase to $750. In Alameda, Amador, Calaveras, Colusa and Fresno, fees will rise to $800. In Humboldt, Lake, Lassen, Mendocino, Modoc and Plumas counties, appraisers will be allowed to charge $850, and in Del Norte county, $950.

The VA identified four high-demand counties in the northern and eastern parts of California — Alpine, Inyo, Mono and Siskiyou counties — where VA appraisals will fetch $1,000.

But nowhere in the country will VA appraisals be more costly than in Alaska. Single-family appraisal fees were previously set at $800 statewide, although some areas allowed for longer turnaround times. A VA appraisal in Anchorage will soon run $900, relatively cheaper than the staggering $1,300 it will cost to appraise a single-family home in the sparsely populated Valdez-Cordova census area, which lies to the east of Anchorage.

But in Valdez-Cordova, VA appraisers will have just 12 business days to complete those appraisals, down from the 21 business days currently allotted.

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UWM cancels secondary offering

Posted: 19 Nov 2021 07:49 AM PST

On Tuesday, Mat Ishbia launched a strategy to attract sophisticated institutional investors to United Wholesale Mortgage (UWM) shares and eliminate the "meme stock" label. However, that strategy is dead for now as UWM Holdings Corp. said on Thursday that its principal shareholder, SFS Holding Corp. — a holding company controlled by Mat Ishbia and his father, Jeffrey Ishbia — terminated the secondary offering announced two days before.

"Unfortunately, while there was more than enough demand from potential investors, the overall market conditions were such that the prices offered were not at levels that I will entertain," said Mat Ishbia in a statement.

Following the secondary offering announcement, the stock prices dipped 16.5% from Tuesday to Thursday to $5.52. The market reaction to the termination of the secondary offering was fast: on Friday (around 11:00 am EST), UWM was trading at $6.74, up 21.8%.

Under the secondary offering, SFS Holding Corp. would have sold up to 57.5 million Class A common shares, bringing $317.4 million to the family (at $5.52 per share on Nov. 18). The holding company’s ownership would decrease from 93.6% to 90.6% of outstanding Class A common shares. Still, according to SEC documents, SFS would continue to have around 79% of the combined voting power.

The company's public float would have increased by approximately 50% with the secondary offering, the company said. Consequently, shares would be more liquid, tradable for larger indexes and institutional investors. For example, the S&P 500 index requires a 10% public float level, among other rules, such as having a market capitalization of at least $11.8 billion and four consecutive quarters of positive earnings.

Now, according to the company, no shares of common stock will be sold by SFS at this time.

But on Friday UWM filed a prospectus using a shelf registration process, which allows an issuer to complete multiple offerings in the future, instead of doing it all at once. Under the shelf process, SFS may, from time to time, sell up to an aggregate of 150 million shares of class A common stock at a proposed maximum price of $7.

On Thursday, UWM also said it intends to accelerate its previously announced buyback program and defer its plans to increase public float to a later date.

As UWM's stock has sagged due to mortgage activity cooling down, the company is engaged in a $300 million buyback program announced in May. On Tuesday, the company said it would buy $100 million in shares owned by Ishbia-helmed SFS Holding Corp., at the same price as the secondary offer, paid with existing cash.

In the third quarter earnings call with analysts, Tim Forrester, UWM's chief financial officer, said the company had acquired approximately 2.7 million shares through a stock buyback program for roughly $21 million to date.

Ishbia said in a statement that the company will be "aggressive" about the buyback authorization, considering the stock’s low prices.

"If the market returns to a reasonable level, SFS will be willing to do its part by providing availability to increase the public float, but the terms have to make sense, and doing a deal today at these levels did not make sense to me."

UWM went public in January after merging with a special purpose acquisition company (SPAC) called Gores Holdings IV. The company at the time had a valuation of $16.1 billion. On Thursday, the company's market cap was down to $9.2 billion.

Editors note: This article has been updated to reflect that January was the month that UWM went public, not February.

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CFPB ponders how well HMDA captures discrimination

Posted: 19 Nov 2021 03:00 AM PST

The Consumer Financial Protection Bureau (CFPB) is launching a voluntary review of its mortgage data collection — a key tool in bringing redlining cases — to assess its effectiveness in detecting discrimination.

The evaluation of rules implementing the Home Mortgage Disclosure Act will support the CFPB in its efforts to maintain a "fair, competitive, and non-discriminatory mortgage market," the watchdog agency said.

The CFPB wants to hear from stakeholders about "industry outcomes" as a result of the HMDA rule, including how financial institutions comply with the rule's criteria, and the impact of changes to coverage thresholds and data points. The agency asks for comment on whether the HMDA rule has "brought greater transparency to the mortgage market," and whether it helps identify possible discriminatory lending patterns and enforcement of anti-discrimination laws. The operational and compliance costs of the HMDA rule for financial institutions is also an area of interest.

The Bureau said it plans to start its assessment process soon, or may have already started it. The analysis will rely on data from HMDA, as well as third-party servicing data, Fannie Mae and Freddie Mac public loan level data, and the National Mortgage Database.

The HMDA rule, enacted in 1975, was intended to document and discourage redlining, although the discriminatory banking practice had been made illegal in 1968. HMDA was one of several rules — the expansion of the Equal Credit Opportunity Act in 1976, and the passage of the Community Reinvestment Act the following year — to increase public scrutiny of lending patterns and expand access to credit.

Since HMDA was introduced, regulators' definition of redlining has evolved. In a virtual seminar Thursday on "modern-day redlining," attorneys from Garris Horn, LLP, said the CFPB's current definition of the practice is better termed "marketing discrimination."

The HMDA data is a crucial tool for the CFPB in constructing redlining cases.

The CFPB typically prepares a redlining case by comparing lenders’ performance in minority areas to a group of their peers to identify a potential disparity. The agency might also analyze marketing materials, outreach efforts, branch locations, hiring practices and even internal communications to find evidence of redlining.

CFPB Director Rohit Chopra has said combating "modern-day redlining" is a top priority, and the agency has partnered with other federal agencies to increase enforcement. It has also pledged to significantly increase its stable of compliance attorneys.

The agency also uses HMDA data to identify and call attention to systemic issues in mortgage lending. A July analysis of lending patterns in Asian American Pacific Islander communities found that some subgroups have much higher mortgage denial rates. In August, the CFPB found that mortgage lenders often deny credit and charge higher interest rates to Black and Hispanic applicants.

The Dodd-Frank Act transferred HMDA rulemaking authority from the Federal Reserve Board to the CFPB, and the agency has made several tweaks to the act over the years. The CFPB expanded HMDA reporting requirements in 2015, doubling the number of data fields it required lenders to submit, and modifying some of the existing fields.

The agency further refined the HMDA rule in 2017. In 2018, it issued clarifications, after Congress amended parts of HMDA, to exempt banks and credit unions that originate fewer than 500 open- or closed-end mortgages from the recently expanded data reporting requirements. Along with the clarifications, the agency signaled in 2018 it would take up another comment period and rule-making in 2019 to get input on what HMDA data will be disclosed in the future.

In March 2020, amid the early days of the COVID pandemic, the CFPB announced flexibilities to "reduce administrative burden." It would not penalize institutions for not submitting quarterly HMDA reports, although it cautioned that institutions should still continue to collect and record HMDA data in anticipation of a return to the normal data reporting requirements.

The next month, it also set a final rule to amend Regulation C, increasing the permanent threshold for collecting and reporting data about closed-end mortgage loans from 25 to 100 loans. It made 2020 HMDA reporting optional for lenders that did not meet the 100-loan threshold in 2018 or 2019. The mortgage industry cheered those changes.

But the relationship between the mortgage industry and the CFPB has since soured.

In March, under then-acting director Dave Uejio, the agency back-tracked on its Covid flexibilities, and said it would increase its focus on enforcement. On April 1, it instructed all financial institutions to resume the quarterly HMDA reports. The first deadline arrived swiftly: May 31, just two months later, lenders' first quarterly HMDA report was due.

The data reporting requirements also facilitate public scrutiny of mortgage lending. The Markup, an investigative news outlet, used HMDA data to show that conventional loan applicants of color were much more likely to be denied than their white counterparts. The findings got pushback from the mortgage industry, in large part because the analysis did not include credit scores, or loans backed by the Federal Housing Administration or Department of Veterans Affairs. A former Obama-era HUD official said the findings were more an indication of GSE pricing and underwriting that pushes borrowers of color to other government programs, rather than evidence of secret bias, as the article claims.

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Saturday, November 20, 2021