To those of you who read our newsletter on a regular basis, last month we announced shortly the Company will be taken over by a new non-conforming nationwide wholesale lending organization. As part of that transition it is expected there will be many changes here at Secret! University; possibly many new faculty mentors will be widely available for you and other future students, plus it's all together possible there may be a completely overhauled instructional curriculum - please stay tuned for more on those improvements - possibly in next month's edition.
It's fascinating putting this developing operation together, when daily the Obama Administration is making sweeping changes to the national landscape of industry laws, rules, regulators, etc. What I'm finding most challenging is ... where will rates be 90/150 days out, will Fannie & Freddie even be in business doing the sorts of loans they've done in the past, will the FHA have exploded all over everybody yet, with all the suspect business it seems they're allowing from questionable originators? This crystal ball stuff is becoming more and more difficult these days :-}
Since our announcement in the June 1st newsletter, and an article/interview I saw in the June 8th issue of the National Mortgage News newspaper, plus the nice comment made in the 'What We're Hearing' online piece by their Executive Editor, the stream of phone calls and e-mails we have received, about this wholesale lender undertaking have been most encouraging.
Donovan Backs Extension of 'Skin in the Game' Concept
Homeowners and mortgage investors would not be the only ones with "skin in the game" if U.S. Housing Secretary Shaun Donovan's plan for revising the nation's consumer protection laws comes to pass. The secretary of the Department of Housing and Urban Development told the NAREE conference that "fairness" would be a "fundamental principle" that the Consumer Financial Protection Agency proposed by the Obama Administration would follow. Under that heading, he said, mortgage brokers would "owe a duty of best execution" to avoid conflicts of interest between themselves and their borrower clients. In addition, yield spread premiums would be "banned outright" and prepayment penalties would be restricted. And to reward responsible lending, loan originators would be required to retain a vested interest in the mortgages they write. Brokers would be paid "over time" based on the continued performance of the loans they originate rather than at the closing table. At the same time, lenders and mortgage aggregators would be compelled to retain a 5% interest in the loans so they would be rewarded for making good loans and penalized for making bad ones. The HUD secretary said neither he nor President Obama had any desire to prescribe exactly how brokers should be paid. But they "have to have a duty" to provide affordable products. "Putting a borrower in a mortgage (the broker) knew from day one that the borrower could not afford cannot be allowed to continue," he told the conference. "There has to be a chain there to tie some responsibility to the mortgage to ensure that this kind of situation doesn't ever happen again." None of what secretary Donovan proposed is new, but it is the first time the proposals have been adopted by a key government official.
Broker Group's President Calls Valuation Code "Dangerous"
The controversial Home Valuation Code of Conduct is "the most dangerous thing facing the housing finance industry today," NAMB president Marc Savitt warned at the NAREE conference. He called the HVCC "a train wreck" that will "cause another collapse of the housing industry if something isn't done" to stop it. The NAMB leader said that because most lenders are using appraisal management companies to comply with the new rules, the cost of a valuation has doubled, as has the time it now takes to get one completed. He also maintained that in many instances, the quality of appraisals is poor. And he charged the some appraisal management companies are owned and operated by former subprime lenders. The result, Mr. Savitt told the housing editors, is that borrowers are being overcharged to the tune of $2.8 billion a year. "That's not acceptable," he said. "Consumers are tired of paying for the mistakes and government and the industry."
Builders Seek to Stop Distressed Sale Valuations of New Homes
The National Association of Home Builders wants federal regulators to enforce appraisal standards that would stop appraisers from valuing newly constructed homes at distressed sale prices. Some appraisers are engaged in "inappropriate practices" that will forestall a recovery in the housing sector, according to Jerry Howard, NAHB executive vice president and chief executive. He said valuing new homes at prices below replacement value doesn't make sense. "It is one of the components of why sales are not rebounding," Mr. Howard said in an interview. NAHB is working with banking trade groups on getting the Department of Housing and Urban Development and the Federal Housing Finance Agency to address appraisal issues. "We are hoping to get them to join with us and send a letter to HUD and FHFA," he said.
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