Tuesday, April 19, 2022

Mortgage – HousingWire

Mortgage – HousingWire

FHA adds 40-year loan term to COVID-19 arsenal

Posted: 19 Apr 2022 01:09 PM PDT

The Federal Housing Administration told mortgage servicers that they can now offer a 40-year loan term as a COVID-19 recovery option.

Servicers for FHA-insured mortgages can offer the modification immediately, according to the latest update to FHA’s mortgage lending policies. For now, only borrowers financially impacted by the pandemic can opt for the loss mitigation option, and it may only be used in combination with a partial claim option.

The administration said that the new loss mitigation option could be an alternative for borrowers who cannot reduce their principal and interest payments by 25% through FHA's existing 30-year mortgage modification with a partial claim.

Mortgage servicers can use the loss mitigation option immediately, but after 90 calendar days, servicers will be required to offer it, the FHA said.

The administration added that some loans funded through mortgage revenue bonds may not qualify for the new loss mitigation option. According to the administration’s mortgagee letter, it added the exemption to ensure that mortgagees that rely on bonds, primarily those state Housing Finance Agencies offer, meet the terms of their bond agreements.

In these cases, the FHA said that it encourages mortgagees and borrowers to use its extensive network of housing counselors to help explain and expedite additional relief.

Lopa Kolluri, FHA principal deputy assistant secretary for housing, said in a statement that the administration has already seen “strong results” as a result of its COVID-19 recovery options.

“Adding a 40-year modification with partial claim to our toolkit for servicers today reaffirms our long-term commitment to continue helping as many struggling homeowners as we can to keep their homes,” said Kolluri.

The administration is also moving to make the 40-year loan modification option a permanent fixture in its loss mitigation handbook.

In early April, the FHA initiated a rule making process to allow all borrowers with FHA-insured loans, regardless of whether they were financially impacted by the pandemic, to opt for a 40-year loan modification, if necessary.

The proposed rule would change repayment provisions for FHA borrowers, allowing lenders to recast a borrower's total unpaid loan for an additional 120 months. The Department of Housing and Urban Development said that the implementation of such an option could prevent “several thousand borrowers a year from foreclosure.”

By increasing the length of the mortgage term to 480 from 360 months, borrowers will have more sustainable monthly payments, the department said in early April. The proposed rule stated that a lower monthly payment will help borrowers become current on their mortgage, prevent re-default and help borrowers keep their home.

In addition to benefitting borrowers, the HUD hopes the rule would reduce losses to FHA's Mutual Mortgage Insurance Fund as fewer properties would be sold at a loss in foreclosure or out of FHA's real estate owned inventory.

Comments from the mortgage industry are due by May 31.

Other government entities, including Fannie Mae, Freddie Mac and the United States Department of Agriculture, have already implemented a 40-year loan modification term option.

The post FHA adds 40-year loan term to COVID-19 arsenal appeared first on HousingWire.

Better.com institutes third major layoff

Posted: 19 Apr 2022 01:04 PM PDT

A force reduction of about 4,000 workers since December apparently wasn’t enough to stop the bleeding for Better.com. The digital lender on Tuesday morning announced that it would be executing its third major layoff, though it did not disclose how many workers would be shown the door.

Sources familiar with the layoffs said it would be “significant” and felt across the company’s divisions, including at Better Real Estate, a brokerage-like venture the company launched last year to get closer to purchase buyers who had not hired an agent. Better hired real estate agents on salary instead of commission, similar to Redfin’s model.

Richard Benson-Armer, the company's chief people, performance and culture officer, told employees in a Tuesday morning email viewed by HousingWire that the cut was “substantial” and was “not the measure we wanted to take.”

"As the mortgage environment in which we operate continues to indicate further declines ahead, we have to do more to ensure Better is appropriately positioned, financially and operationally, to navigate this changing environment," he told workers.

Better.com said it will pay workers a minimum of 60 days in severance – some as much as 80 days – and will cover COBRA premiums until the end of July.

“We continue to prioritize transparency and care as we go through this process, and our leaders will be spending today making one-on-one calls to notify departing colleagues of this news,” Benson-Armer wrote to employees. “If you are impacted, you will receive a call today to learn the news personally and discuss next steps.” 

Earlier this month, Better.com, which turned a profit during the refi boom but has not managed to get a toehold with purchase business as mortgage rates climbed to 5%, asked employees to voluntarily quit. It’s unclear how many took Better up on the offer.

A Better spokesperson declined to comment beyond what was in the letter.

The company’s chief executive officer Vishal Garg gained infamy in December when he laid off 900 employees in a Zoom meeting and then criticized the departing employees to remaining workers. In early March, Better laid off another 3,000-plus workers, some of which work in India. Laid off employees discovered they were going to be out of a job when a severance check hit their payroll provider’s app.

Better.com's financial backer, SoftBank, made a $750 million cash infusion last year, out of a total $1.5 billion in committed funding. The remaining $750 million would be doled out after the company goes public via a special purpose acquisition company, known as Aurora Acquisition Corp.

But without reliable access to purchase business, conditions look bleak for Better, and few, if any, Wall Street analysts believe Better can go public in this cycle. The lender reported losses between $167 million to $182 million in the fourth quarter and expects to lose money again in the first quarter of 2022.

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Fannie Mae executes fourth CIRT deal of 2022

Posted: 19 Apr 2022 12:50 PM PDT

Fannie Mae has wrapped up its fourth Credit Insurance Risk Transfer (CIRT) deal of the year, transferring nearly $845 million in mortgage credit risk to a group of private insurers and reinsurers.

The transaction, CIRT 2022-4, involved a pool of 76,600 single-family mortgage loans with an outstanding principal balance of $23.1 billion.

Fannie Mae will retain risk for the first 45 basis points of any loss on the $23.1 billion loan pool. If that $104.2 billion retention layer is tapped out, then the 22 insurers and reinsurers that are party to the transaction will cover the next 365 basis points of loss on the pool, up to a maximum of $844.8 million.

"We appreciate our continued partnership with the 22 insurers and reinsurers that have committed to write coverage for this deal," said Rob Schaefer, Fannie Mae's vice president for capital markets. 

The CIRT transactions are part of Fannie Mae's ongoing efforts to reduce taxpayer risk by transferring it to the private capital market. The coverage terms for this latest CIRT deal, like the other deals so far in 2022, is based on actual losses for a term of 12.5 years. Fannie Mae can cancel the coverage on each deal after five years by paying a cancellation fee. 

The initial deal of 2022, CIRT 2022-1, also transferred millions of dollars of credit risk to a group of private insurers and reinsurers. That credit risk is tied to a $26.1 billion pool of single-family mortgages. 

As part of that initial deal, Fannie Mae retained risk for the first 25 basis points of any loss on the $26.1 billion reference loan pool. If that $65.3 million retention layer is exhausted, then the 22 insurers and reinsurers will cover the next 295 basis point of loss on the pool, up to $770.7 million. 

CIRT offerings 2 and 3 work similarly. The covered loan pool for CIRT 2022-2 consists of some 87,400 single-family mortgage loans with an outstanding unpaid principal balance of $26.5 billion. The covered loan pool for CIRT 2022-3 involves 76,600 single-family mortgage loans with an outstanding unpaid principal balance of $23.3 billion. 

"Since inception to date, Fannie Mae has acquired approximately $18.4 billion of insurance coverage on $635.6 billion of single-family loans through the CIRT program…," Fannie Mae said in a statement announcing the execution of its fourth CIRT deal of the year. 

The post Fannie Mae executes fourth CIRT deal of 2022 appeared first on HousingWire.

BofA settles maternity leave discrimination case for $15K

Posted: 19 Apr 2022 11:11 AM PDT

Bank of America will pay a penalty smaller than the average down payment on a Fannie Mae-backed mortgage, after one of its mortgage loan officers allegedly violated the Fair Housing Act.

According to the Department of Housing and Urban Development, Hung Tran, one of the bank's loan officers at its branch in Fairfield, California, allegedly discriminated based on sex and familial status when he withheld approval of a mortgage loan until the prospective borrower returned from maternity leave. The Fair Housing Act has outlawed discrimination on the basis of sex and family status since 1988.

The bank — which yesterday reported a net income of $7.1 billion and mortgage originations of $16 billion in the first quarter of 2022 — will pay just $15,000 to settle the claims HUD lodged against it. As part of the agreement, the bank denied its employee discriminated, and does not admit any wrongdoing.

The bank also said it will make no changes in its current policies. Instead, it will "maintain" its existing policies that it claims allow potential borrowers on temporary leave, including parental leave, to qualify for a home loan without first returning to active work status. The bank agreed to provide documentation to HUD showing that it "already maintains such policies."

HUD will monitor the bank’s adherence to the conciliation agreement, which governs the bank’s behavior for one year. A breach of the agreement would result in a referral to the U.S. Attorney General.

Bank of America declined to comment. Hung Tran, who according to his LinkedIn profile left the bank in February, did not return a request for comment.

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HUD did not immediately comment on the agreement or how many similar claims it receives.

The agreement arose from a complaint that two Napa, California residents filed with HUD in October 2021. HUD has said that in recent years it has struggled to keep up with the onslaught of complaints alleging housing discrimination. HUD said that fair housing complaints reached a five-year high of 8,402 in 2021, and that it desperately needs funding to hire staff to resolve the complaints in a timely manner.

Staffing levels at the division of HUD that oversees fair housing complaints is well below staffing levels of nearly 20 years ago. In 2003, HUD's office of fair housing and equal opportunity had 744 full time employees. As of 2021 the division had just 534.

"The staffing decrease has challenged HUD's ability to keep pace with both the number of complaints filed by the public for violations of their rights and the completion of statutorily required fact-finding investigations," HUD wrote in its recently released equity action plan.

Earlier this year, President Biden proposed a budget increase, which would provide HUD with $1.8 billion for salaries and expenses, $306 million more than it received in 2022. Even if that were approved by Congress, it would only allow for 624 full-time employees at the office of fair housing and equal opportunity.

The post BofA settles maternity leave discrimination case for $15K appeared first on HousingWire.

Blend lays off 200 workers as mortgage industry sputters

Posted: 19 Apr 2022 09:02 AM PDT

Publicly traded mortgage tech company Blend Labs laid off 10% of its workforce amid major headwinds in the mortgage industry.

In a filing with the Securities and Exchange Commission on Tuesday morning, the Nima Ghamsari-led fintech said its “workforce reduction plan” would eliminate approximately 200 positions across the company.

The company, whose white-label technology powers mortgage applications on the websites of major lenders such as Wells Fargo and U.S. Bank, expects to incur about $6.7 million in costs associated with the layoff. Blend says the move will lead to approximately $35.4 million in annualized savings. The layoffs are to be completed in the second quarter, the company said.

In its Q4 earnings report earlier this month, Blend executives told investors and analysts that it was committed to reducing costs at its Title365 arm in light of lower origination volume from its mortgage originator clients. Blend anticipates that the mortgage industry it services will experience a 35% decline in origination volume in 2022, lowering its financial outlook.

"With rapid changes in U.S. interest rates, rising inflation and associated reductions in 2022 loan industry forecasts that commenced in the fourth quarter of last year and has continued into this year, loan originators are now dealing with razor-thin margins and trying to adapt to a new normal," Ghamsari said on the fourth quarter earnings call. "It is clear that this rapid reversal in industry loan volume expectations has impacted our outlook for 2022 revenue growth."

Blend wrote in its Q4 earnings presentation that rising mortgage rates have forced executives to pull back "very hard" on hiring and hinted layoffs in title insurance. 

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Overall, the company, which has never been profitable, lost $169.1 million in 2021, including $71.5 million in the fourth quarter. Blend's net loss more than doubled from $74.6 million in 2020 during the refi boom and with the market headed into a correction, executives warned investors’ revenue would plummet. The company expects revenue to decline 31% to between $230 million and $250 million in 2022 from $363 million last year.

The upside for Blend, according to Ghamsari, is that the company expects to increase its market share during hard times. Blend grew its estimated mortgage market share last year from 10% to 15%, according to Ghamsari, and thanks to major deals with new clients like Mr. Cooper, he expects market share to increase to about 20% in 2022.

As of 11:50 a.m. EST, Blend’s stock was trading 6.46% higher than Monday, at $5.02 a share, with a market capitalization of about $1.17 billion. When Blend made its debut on the New York Stock Exchange in July, its market cap was about $4.6 billion.

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The fight to standardize educational training for LOs

Posted: 19 Apr 2022 03:00 AM PDT

HW-LO-mortgage

The raison d'etre is the same whether you work as a mortgage loan officer at a depository bank or an independent mortgage bank – originate a purchase mortgage or refinancing for a client.

But the educational foundation and understanding of mortgage products, rules and regulations can differ dramatically between depository LOs and their nonbank counterparts. 

Federal regulations mandate that nonbank LOs take training prior to being certified. To maintain their license, a nonbank LO must take continuing education courses on an annual basis. Loan officers working for depository banks are not bound by the same requirements.

Several LOs who made the leap from a depository institution to a nonbank told HousingWire that they struggled with education requirements and felt less knowledgeable than their nonbank LO colleagues.

Some nonbank stakeholders take issue with the lack of uniformity of educational requirements for all LOs. They believe it has the potential to create consumer risk. 

Most recently, the Community Home Lenders Association, an influential nonbank trade group, renewed calls for the Consumer Financial Protection Bureau to create uniform requirements for all LOs. As of now, the CFPB does not have plans to make any changes.

Regulations to oversee them all

The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) established a number of requirements that loan officers must complete to be licensed in their respective state. 

Requirements for nonbank LOs include a 20 hour pre-certification course; eight hours of annual CE courses; registering in the Nationwide Mortgage Licensing System (NMLS); and submitting fingerprints to NMLS for a criminal background check. 

Congress moved to implement more stringent requirements on nonbank LOs because prior to 2008, "anyone off the street could be hired" as a loan officer and this was a way to enhance consumer protection, said one veteran LO.

Depository banks, however, were not bound by all of the requirements put in place by the SAFE Act. The only overlapping requirement is that all bank LOs must be registered with the NMLS and submit fingerprints for a background check.

John Jeha, an LO at Stonecastle Mortgage who also works as a continuing education instructor, said that depositories were not impacted as much by the SAFE Act because there was already heightened oversight. 

"The banks said that they don’t need to do all this continuing education and the pre- licensing that we have to do as a nondepository," Jeha said. "The depositories say that they teach all of their people this stuff anyway because they have so many regulations."

The Office of the Comptroller of the Currency (OCC), the Federal Reserve System, and the Federal Deposit Insurance Corporation (FDIC) oversee and regulate the activities of banks. 

"These organizations impose response training responsibilities on banks to have a well-trained staff," said a source who requested anonymity because he was not authorized to speak about bank regulation. "So that falls under the normal oversight, the safety and soundness, and normal oversight requirements by the banking agencies."

A spokesperson for the Conference of State Banks Supervisors, which owns and operates the NMLS, said that both sides are subject to significant oversight by federal regulators or state regulators.

"We are all professionals and it's important to always stay abreast of skills and trends," the spokesperson said.

Learning materials up to par?

Although depositories are not required by law to have their loan officers take pre-licensing training or have them annual recertify, some depositories make their LOs do onboarding training and annual training modules.

The depth and quality of these training sessions differ from lender to lender, and are done in accordance to individual banks' needs. 

Sam Elder, mortgage loan consultant at First United Bank, said that the Oklahoma-based depository requires LOs to do training modules annually. The modules cover some mortgage-related topics, but there are also topics that pertain to other facets of working at a bank.

"Here’s the thing, we learn about stuff that’s not applicable to us. On the mortgage side, there's certainly banking, you know, your customer stuff," he said. "There are things that are very, very specific to mortgage, and there are things that are not specific at all, or even necessarily applicable to us. You're having to learn more things at a bank."

Karol Bourdet, a former LO at Wells Fargo who transitioned to Precision Home Loans in 2020, said that the depository required training classes when an LO is first hired and then there is an annual online training.

"The testing is mostly related to bank requirements topics and a few origination topics, i.e HMDA, Fair Lending etc.," she said. "But nothing in my opinion like the continuing education classes or the three-hour test for state licensing." (Depository LOs are not required to be licensed on a state-by-state basis, they can originate loans in any state.)

Continuing education for nonbank LOs is more rigorous, with a heightened focus on the Truth in Lending Act, Equal Credit Opportunity Act, and the Real Estate Settlement Procedures Act (RESPA), multiple LOs and continuing education teachers said.

If a nonbank LO fails to recertify their license, they are effectively cut off from the industry. Depository LOs who may have forgotten to take their annual classes get to keep their license, former and current loan officers at banks said.

William Kidwell, a loan officer at Intelligent Investments, LLC., said that both nonbank LOs and depository LOs need to be held to higher standards in their training. 

"My mindset is that if we believe that individuals who deliver mortgage services are working with consumers with the single largest asset that they have, or will likely have, I have to wonder, how we can have people doing that with 20 hours of education or no education," Kidwell said. 

He noted that the continuing education courses for nonbank LOs do not provide the necessary understanding of advising consumers on "difficult balance sheets, cost versus debt, and debt service parameters," but that at depository institutions it may be even worse.

Kidwell also criticized an existing loophole that gives LOs who jump from a depository to a nonbank 120 days to originate loans without any pre-licensing education.

"I don’t know about everybody else on the planet, but I don’t know that I would want my neurosurgeon to have 120 days to learn to be one, just because he was a doctor someplace a year before that," Kidwell said. 

A level educational playing field?

Loan officers who transition from a depository to working for an independent mortgage bank often experience challenges in getting up to speed on all the regulatory material, LOs who made the jump said. 

According to Jeha, LOs leaving depositories and coming to the non-depository side of the business generally don't have as much training.

"[These LOs] are not very understanding of the rules and regulations that somebody at a nondepository company knows about," he said. "I think non-depositories are much better at training and the rules and regulations make us more knowledgeable than depository LOs." 

Bourdet, a former LO at Wells Fargo, said that the pre-licensing test was "definitely more rigorous" than the education material at the California-based depository.

"In my opinion the LOs working for depositories could be less knowledgeable about products and regulations," she said. "I think that the depositories are not as picky in making sure they are hiring LOs with mortgage lending experience. Usually the nonbanks look for experienced LOs with a book of business."

She added that during her time at Wells Fargo, case bankers would sometimes give out misinformation to the customer about mortgages.

"The bank bankers are not trained in mortgage lending, just consumer lending products, i.e. equity and car loans," Bourdet said. 

In its October 2021 letter to the CFPB, the CHLA said high-profile scandals by depositories – such as Wells Fargo's fake accounts controversy – have put a spotlight on the consumer risk that arises from a lack of training. 

"The combination of unqualified bank mortgage loan originators, combined with senior bank management pressures on employees to push profitable mortgage products

without regard to suitability, represents a clear consumer threat," the CHLA said.

However, a recent 26-state federal investigation that penalized 400-plus LOs for effectively cutting class and slapped Danny Yen, the perpetrator who masterminded the fraudulent CE scheme, with a $75,000 penalty, raises questions about the effectiveness of the continuing education programs as a whole.

Calls for change

In its October 2021 letter, the CHLA called on the CFPB to close loopholes in the LO Comp rule, which implemented certain sections of the SAFE Act in 2013. The trade group has been making this call since 2014. 

According to the CHLA, an amendment to the SAFE Act in 2010 requires every mortgage loan originator, including those working at banks, to be "qualified." 

However, the trade group argued that the watchdog's 2013 rule "created the unique exemption that bank mortgage originators enjoy from licensing [and] testing." The CHLA also noted that the CFPB considered and then rejected requiring a bank LO to meet the same requirements as non-bank LOs. 

"That rule merely requires unspecified mortgage training and a non-independent background check, both of which can be carried out in-house by the bank," the trade group said. 

The letter added that "it is incongruous that bank employees that sell insurance or securities must be licensed and meet high qualification standards, but a mortgage LO selling mortgage products- a sector that brought down the economy in 2008- are exempt from the basic requirements that apply to every other financial profession." 

"There are no plans to make the education requirements mandatory across the board," a spokesperson from the CFPB said. 

Jeha said that having uniform requirements for all LOs would help consumers "immensely." 

"For somebody on my side of the business, the non-depository side, not only do we have to do the education, but I would say 95% of loan officers have to pay for it themselves," Jeha said. "So they’re motivated to make sure that they’re doing the right thing. At a depository institution. It’s like, 'Oh, another class I have to take. It’s online. There’s no live classes, there’s no interaction. I just have to get through it. And then I’m just going to continue doing what I’m doing.' Standardizing it would be much better."

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Mortgage – HousingWire

Mortgage – HousingWi...