Welcome to Today’s Web Seminar!
December 3, 2013
2:00 PM ET
Hosted by:
Moderator: Mark Fogarty
Editorial Director, National Mortgage News
Mark Fogarty has been associated with the mortgage
publications, which include National Mortgage News,
Origination News, Mortgage Servicing News, Mortgage
Technology, and related websites, since 1984.
He also chairs SourceMedia’s wide array of industry
conferences and webinars. He was the news director of the
team that won the George Polk Award for Financial
Journalism in 1988.
PRESENTER: Julie Manson
SVP - Risk Management
Plaza Home Mortgage, Inc.
Julie has oversight of the organization's compliance, quality control,
licensing and internal auditing activities. Before joining Plaza in
2009, Ms. Manson held the position of Executive Vice President,
Lending Division for Home Saving of America and Senior Vice
President Lending Operations and Credit Policy for SCME Mortgage
Bankers. In these positions Ms. Manson was responsible for
business strategy, credit policy, managing operations, compliance
and policy development. Ms. Manson is a member of the Mortgage
Bankers Association Regulatory Compliance Committee. Julie has
been in the industry for 30+ years and holds a DE (Direct
Endorsement) designation with HUD.
PRESENTER: Jason Roth
SVP and co-founder
ComplianceEase
ComplianceEase is a leading provider of automated compliance and risk
management solutions for the residential mortgage lending industry. In this
role, he leads design and manages development of the company’s product
suite. Mr. Roth is an entrepreneurial executive who draws upon strong
Computer Science and Software Engineering experience as well as a
pragmatic approach to management to design and deliver efficient and
innovative enterprise products to the financial services industry. Mr. Roth has
more than 10 years of experience in the mortgage lending and financial
services software industry, with technical expertise spanning design and
development of application software, expert systems, and Web services
platform technologies. Mr. Roth’s prior experience includes work on Adobe
Acrobat and PDF document technology development teams at Adobe Systems,
Incorporated.
He is the named inventor on two U.S. patents and was included in
October Research’s “Top 40 under 40 in the Mortgage Industry”.
PRESENTER: Faith Schwartz
SVP, Government Solutions
CoreLogic
Faith is responsible for managing the CoreLogic government business,
while providing policy maker education and though leadership. Prior to
CoreLogic, she was an executive director at the HOPE NOW Alliance, a
non-profit coalition created in 2007 to bring together, servicers, lenders,
investors, Federal Reserve Banks and government-sponsored enterprises
(GSEs) to help homeowners in distress stay in their homes. Faith is a
former member of the Federal Reserve Consumer Advisory Committee
and currently also sits on the boards of the CoreLogic Academic Research
Council, the Structured Finance Industry Group (SFIG), and HOPE
LoanPort, which provides a communication loan workout vehicle for
borrowers, counselors, and investors.
Faith was recently highlighted by the MBA as one of the 20 Distinguished
Industry Women and in 2012, was selected as one of Housing Wire’s Women
of Influence.
PRESENTER: Scott Samlin
Partner-Financial Services & Products Group
Alston & Bird, LLP
Scott is the former executive director and compliance counsel for the
residential mortgage and lending businesses at Morgan Stanley, where
he helped oversee the operations of Morgan’s whole loan trading desk
and its affiliated mortgage loan servicer, Saxon. Prior to this, he was the
executive vice president, general counsel and chief compliance officer
for EMC Mortgage, Bear Stearns’ primary mortgage loan conduit and
servicer.
Earlier in his career, Mr. Samlin held several senior in-house positions
at large corporations, including vice president and assistant general
counsel at Superior Bank FSB; vice president, senior staff attorney and
compliance officer at Carteret Federal Savings Bank; and assistant
counsel at the New York State Banking Department.
POLLING QUESTION #1
Julie Manson
SVP - Risk Management
Plaza Home Mortgage, Inc.
December 3rd, 2013
Operational/Compliance Risks
• Miscalculation of income, assets or obligations
• Unsupported income calculations/not using 2106 expenses
• Omitted liabilities with no support
• Alimony/child support/property settlements and contingent
liabilities not documented
• Missing documentation
• Judgmental underwriting authority
• Miscalculation of points and fees
• Bona Fide Discount; MI Premiums
• Reconciliation of the final HUD-1
• Affiliate identification
Systems Support/Training/Tools
• QM Testing
• Points and Fees
• Affiliated companies
• Par Rate
• Bona Fide Discount
• APR Calculations
• Paid To/Paid By
• Disclosures
• Counseling Agencies
• Appraisal/Valuation Products Delivery
Decisions, Decisions, Decisions
• Offer non-QM Loans?
• Retail, Wholesale, Mini Correspondent, Correspondent
• Fulfillment; Bona Fide Warehouse Lines
• Wholesale Compensation Agreements
• Lender Paid vs. Borrower Paid
• RESPA Cures
• Decision on Higher Priced Mortgages
• Rebuttable Presumption
Keys to Success?
• Detailed policies and procedures
• Continuous training, monitoring, testing
• Budget for Defects
• Loan loss reserves
• Robust Technology
• Analytics/Feedback Loop
What does 2014 hold?
• Loan Limits reduced in 2014?
• Prepare to offer Jumbo loans
• Know Before You Owe (August 2015)
• Systems mapping and testing
• NAMB: “how to disclose lender-paid compensation?”
• Regulatory Scrutiny
• Federal
• State
Quantifying the Impact of
Dodd-Frank & QM
Jason Roth, SVP & Co-founder
ComplianceEase
• Our Dodd-Frank impact study - background
– New rules are clear, eventual impact is not
– Lack of real data available
– Goal: Confirm areas of highest impact
• Methodology
– Analyze trends in loan fees / rates
– Construct “model” of current lending
– Subject current lending to new rules
• Results: QM
– No safe harbor for more than 1 in 5 loans
– More than half due to fees over 3% threshold
– Over threshold by average of $1,500
– Rest due to high APRs (QM without safe harbor)
• Results: High-cost mortgage
– Nearly 3% of loans would be “high-cost”
– Nearly always due to fees
– Overages on average more than $1,000
• What stands out?
– Confirms fees are the biggest risk to safe harbor
– Estimated overages are not trivial
– Market will need to shift
• Where might we see changes?
– Private mortgage insurance
– Use of discount points / higher rates
– Scrutiny of small fee variations
Faith Schwartz
SVP, Government Solutions
CoreLogic
The opinions shared in this presentation are those of the author and not necessarily those of CoreLogic
© 2013 CoreLogic, Inc. All rights reserved. Private & Confidential
Source: Consumer Financial Protection Bureau
© 2013 CoreLogic, Inc. All rights reserved. Private & Confidential
© 2013 CoreLogic, Inc. All rights reserved. Private & Confidential
Source: CoreLogic
© 2013 CoreLogic, Inc. All rights reserved. Private & Confidential
QM – What We Know and Do Not Know
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•
Substantial Government role in mortgage markets and GSEs/FHA have temporary and
permanent exemptions for underwriting. QM – GSE temporary exemption for seven years or
until broader reform; FHA – QM alternative definition.
QRM Rulemaking is still outstanding – proposed as broadest definition that aligns with the
CFPB QM definition
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•
Government Share v. Private Label Securitization
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G-fees increased twice by 10bps each time in 2012. DeMarco recently announced FHFA was committed to increase in
the “near term.” Conforming loan limits are traditionally reviewed by FHFA in November. DeMarco has publicly stated
there will be at least a 6 month implementation timeline
Have all of the Rep and Warrant issues been adequately addressed? Is the private label securitization plumbing ready?
What is the current incentive to do anything beyond balance sheet and Government channel (FHA/VA/GSEs/USDA)?
What is the quantifiable litigations risk of QM v. Non-QM?
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•
Could cause increased pricing issues as it is difficult to distinguish between QM “safe harbor” v. rebuttable
presumption of non-QM. Costs of non-QM (rebuttable presumption) and proposed non-QRM capital requirements
may be different, but priced directionally the same.
The proposed alternative (QM Plus) overlays a 30% down payment and other credit factors that would significantly
narrow the number of loans falling under QRM. Proposed for comment for feedback as an alternative.
Currently there is no ability to co-mingle pools of QRM/QM – this has received a number of comments
What impact will state consumer protection overlays have?
There are a lot of other things going on
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TILA – RESPA and E-Closing; HMDA; Rep and Warrant Risk; Forced Placed Insurance; GSE Reform (?)
© 2013 CoreLogic, Inc. All rights reserved. Private & Confidential
Loan Level
Current HMDA Reporting
Dodd-Frank Additions (Section 1094)
Application loan number and date
Universal loan ID (optional)
Loan type, purpose and amount
Total Points and Fees Calculation
Action taken on the application and date
Presence of NegAm
HOEPA flag
Length of intro rate period
Lien Status (first, subordinate, unsecured)
Duration of prepayment penalties
Rate spread on higher-priced mortgage
Rate spread (against benchmark TBD)
Term to maturity
Property
Originator:
Location by MSA, state and census tract
Parcel ID (optional)
Type
Property value
Filed by lender
Channel (Retail v. Broker)
Loan originator ID number (optional)
Borrower/Applicant
Race, ethnicity
Age
Gender
Credit Score
Annual Income
Other Info:
Owner occupancy, request for preapproval, reason for denial
© 2013 CoreLogic, Inc. All rights reserved. Private & Confidential
That the CFPB considers appropriate
Final Considerations Beyond QM
• Final QRM – where will it come out?
• GSE Reform – New leadership?
– Conforming Loan Limits
– G-fees
– Common Securitization Platform (CSP)
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•
•
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E-Closing TILA-RESPA
HMDA
Rep + Warrant Risk
State overlays of Consumer Protections Over QM
© 2013 CoreLogic, Inc. All rights reserved. Private & Confidential
Data Disclosure
The Database: Data pulled from CoreLogic Loan Level Mortgage Analytics (LLMA) contributed servicing data. The dataset covers
85 percent of the Prime market and 71 percent of the SubPrime (including active). For the sake of these analysis’ “Overall Loan
Count” for 2012 is defined as approximately 1.8 mm loans. Loans with missing parameters, such as Debt to Income (DTI), FICO
and Loan-to-Value (LTV) were removed from the sample. Roughly 50 percent has been removed, but analysis was done to ensure
that the data was not skewed by removals (proportion of refinances; high LTV loans; low FICO; etc.)
Considerations & Assumptions: QM analysis is done for the ‘General QM’ definition and does not take into consideration any of
the exemptions. The analysis does not account for the three percent points and fees threshold. CoreLogic has provided multiple
cuts to allow for analysis with or without refinance programs that do not require full documentation and will fall beyond the
bounds of QM upon the effective date. The user can determine what percentage of the no to low doc refinances would be
approved when documentation is required in the post-QM world. Also, some of these programs are temporary refinance
programs and this should be taken into consideration when assessing a future normalized market. HARP is scheduled to expire on
Dec. 31, 2015.
Data provided on slide two includes owner occupied and non-owner occupied. Universe includes all channels of origination
(Balance Sheet, PLS, GSE, VA, FHA, USDA).
The data series comes from Jan. 2012 to Dec. 2012. Readers should account for the underwriting standards and size of the credit
box post-2008.
© 2013 CoreLogic, Inc. All rights reserved. Private & Confidential
Additional Research (QM/QRM)
ATR/QM Standards: Foundation for a Sound Housing Market
QRM and Risk Retention Standards: Foundation for a Sound Housing Market
© 2013 CoreLogic, Inc. All rights reserved. Private & Confidential
Top Five Issues Presented by the QM Final Rule
and Some Solutions to Consider
Scott D. Samlin, Partner
Alston & Bird LLP
• Do you need to prove the borrower’s ability to
repay (“ATR”) on all loans and not just
QM/ATR?
– See attached Underwriting Factors comparison
chart
• Are jumbo loans able to be submitted to
Fannie Mae’s Desktop Underwriter (“DU”) or
Freddie Mac’s Loan Prospector (“LP”) and
approved?
– If so, will such loans fall within the QM GSE
exemption even though they cannot be purchased
by the GSE’s due to the loan amount?
– FN 50 in the July 24 FR Release
• Residual Income – when is it germane and
how do you calculate?
• VA Underwriting Guidelines are considered by
many to be the best widely available residual
income tool already in use – but as the CFPB
admits, outdated and very limited.
– New York example: $800 per month delineated;
same amount for Manhattan as Buffalo .
• QM documentation – what will investors and
other secondary market participants require?
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Reps and Warrants
Rating Agency Credit Enhancement
Third Party Insurance or Certification
GSE Approval
Borrower Affidavit
Fannie Mae 1003 (Uniform Loan Application) Addendum
Preclose Scripting
• Points and Fees Issues
– Will interest rates rise due to the 3% fee cap; will
lenders be concerned about making HPMLs?
• Fair Lending Issues
– Unequivocal Interagency Guidance?
– “Do not anticipate” . . . “Absent other factors”
– No HUD participation – Fair Housing Act
– All QM “may” be a legitimate business need existing business model already all QM?
Q&A Session
Questions????
For More Information Contact:
Julie Manson
julie.manson@plazahomemortgage.com
SVP - Risk Management, Plaza Home Mortgage, Inc.
Jason Roth
J.Roth@complianceease.com
SVP and co-founder, ComplianceEase
Faith Schwartz
fschwartz@corelogic.com
SVP, Government Solutions,CoreLogic
Scott Samlin
Scott.Samlin@alston.com
Partner-Financial Services & Products Group, Alston & Bird, LLP