MBA held their annual Convention and Expo in Boston, Massachusetts, October 14-17, 2007.   While attendance was lower and more subdued than in most years, two sessions in particular inspired and drew large crowds.  Sir Richard Branson, founder of the Virgin Companies, led the opening session and Bono, musician and activist, was a featured speaker in the 3rd general session. 

Overall, there was speculation about the current market with its record-breaking number of foreclosures and job cuts, and their effects on the economy & mortgage rates.  Alternative loan programs and affordable housing programs remain on the rise and the future, if any, of sub prime was discussed. The main concern of most attendees was how to weather the storm. 

For people wondering how to stay in business and even grow, the convention's answer was "thinking outside the box." The consensus was that it is time to redefine the way you market, and make sure you are focusing on and compiling market data.  Maurice Jourdain-Earl, Managing Director of Compliance Tech listed 3 key areas of marketing opportunity:  1) areas of exceptional growth; 2) areas of under-performance; and 3) areas with high potential customer growth and low competitor saturation.

There were sessions that included other "outside the box" ideas such as targeting multicultural communities that are growing in home ownership, or adding new loan types such as reverse mortgages and manufactured housing.  They also suggested that you look internally, and make sure you have knowledgeable employees and enhanced technology, or even that you define tasks and functions that can be outsourced and/or off-shored.  
A continuing positive trend is helping the borrower from foreclosure (also something we saw a main focus at the compliance conference featured last month).  Educating the borrower, matching the borrower to the right loan and making sure the borrower can sustain payments is important in prevention. For those borrowers already in a loan, assistance outreach and modification agreements remain big in the secondary market.
 
There was hope that the end of the crisis is coming - though when was debated.  What is true is that our country continues to grow and grow; and, as it does, more and more people will need housing.  Being flexible and adaptable to market changes and new technology and finding new opportunities will help you produce and grow even during these tough times.

The most common releases from investors this month were small program changes (like adding buy down options) or more LTV requirement changes.  Adding the Verification of Employment (VOE), (especially for self-employed borrowers or No Income No assets (NINA) documentation), is popular.  Prepayment penalties are also becoming rare, and more and more investor notices discuss declining markets.  Below are some highlights of the top investor changes

Countrywide

Effective November 13, 2007, Countrywide is launching new conforming balance expanded criteria programs.  These programs offer conforming loan amounts with flexibility in income and asset documentation.  Countrywide discontinued allowing prepayment penalties on fixed rate and fixed period ARM products on loans with a 40-year term, and reminded lenders that 5-year prepayment penalties are no longer allowed on 3-year ARMs (must be 3-year prepayment penalty or less).  Home Equity maximum loan amounts increased

Indymac Bank - Spanish Documents

Indymac releases key Spanish loan application and closing documents.  For these loans, the borrower must execute the English language documents at closing and receive "true and correct" copies translated into Spanish.  If you foresee offering these loans, please let your ProClose client support rep know (or submit a request through ProClose Answers).  Indymac does not offer this on their Heloc, Construction to Perm or Lot Loan programs.

In other Indymac news, Indymac brought back the ALT A LIBOR ARM programs on October 4th, 2007.  For all loans locked on or after October 12th, 2007, the first interest rate change date for ARM Lot Loan products has changed to match the first payment due date.  It was previously the 3rd payment due date under the MTA product and the 6th payment due date under the LIBOR product.  The 3/1 LIBOR ARM (Construction to Permanent Program) is no longer available under the Alt A Jumbo. This discontinuation was announced October 23, 2007.  Effective October 18th, 2007 - the maximum LTV / CLTV for the FlexPay® has also been reduced from 95% to 90%.

GMAC

It was a big month of program changes for GMAC!   New programs over the last month include Fannie Mae Flexible Int-Only Fixed, 5/1 & 7/1 LIBOR ARM products.  Eliminated products include piggyback w/ Flex Select/POA First Mortgage and the removal of the LPMI option on all ARM loans (effective October 22, 2007).  All GMAC Piggyback and HELOC loans require a 660 credit score on all locks on or after October 23, 2007.  New product codes were established to recognize FHASecure loans - T69 (15-year fixed rate), T70 (30-year fixed rate), T71 (1-year ARM) and T72 (3/1 ARM).  Under the FlexSelect Products - the new maximum loan amount is $2 million and first time homebuyers are no longer permitted.

Flagstar

Announced October 5^th, 2008, Flagstar is requiring an FBI Disclosure to be included in all closing packages.  A special notice was sent out earlier this month to all ProClose clients and the form has been added to their Flagstar closing form sets.  Please also be aware that Flagstar is requiring that all government closing packages be delivered to their corporate office within 4- calendar days from the date of disbursement.  This allows them to meet HUD's Up Front MIP payment requirements. If the package is received after the 4^th day, when the loan is purchased a fee of 4% of the MIP will be charged as a penalty and deducted from funding.  No further locks are being allowed on Nevada properties under the Jumbo Fixed and ARM Program (5401), the Steady Power ARM (5402) or the high LTV Alt-A program (5418).  Beginning January 2008, Flagstar has added a third tier to their warehouse lending product mix.  The full tier breakdown is posted on the MBS support site along with other full investor bulletins and announcements.

Aurora Loan Services

In line with making sure your borrowers can sustain their loan, ALS now requires a verbal verification of employment (VVOE) on all No doc transactions and that the source of income be one that will reasonably support the loan.  They have also discontinued all Nevada loans for purchase.

Taylor Bean & Whitaker

TBW announced the addition of FHASecure refinance loans with commitments on or after 10/23/2007.  The FHASecure initiative enables homeowners to refinance various types of non-FHA ARMs.  Review Mortgagee Letter 2007-11 for the proper way to originate, process and underwrite an FHASecure Loan.  FHA loans have also been added to TBW's list of products requiring the 4506-T to request two year's proof of filing where the borrower is self-employed.  This is very common in reduced documentation loan types.  Following other trends, TBW also reduced their maximum LTV and CLTV ratios by 5% for loans identified in soft market areas. The ProClose forms department is currently updating TBW ARM disclosures.

CitiMortgage

As of November 1, 2007, CitiMortgage has discontinued all second lien / home equity loan products.  While most of their first lien programs allow for subordinate financing, CitiMortgage is also offering multiple MI options including monthly MI, split PMI and LPMI. 

SunTrust Mortgage

Effective October 31, 2007, the Seller Paid Down Payment Assistance Programs have been eliminated for the FHA 203(b) loan program.  SunTrust has also changed their validation process on a borrower's SSN number and has updated their Maximum LTV matrices.

National City

National City announced that they were exiting the correspondent lending as of close of business Tuesday, October 23, 2007.  They are honoring all commitments and approved loans in the pipelines and will continue to support the lenders to complete the processing of the registrations.  They will continue to offer mortgage products through their retail and wholesale lending channels, which better meet their goals for the future of their business.

Addition of LIBOR Index for FHA loans
Mortgagee Letter 2007-13
Effective October 12, 2007, the Federal Housing Administration (FHA) will insure Adjustable Rate Mortgages using the 1-Year London Interbank Offered Rate (LIBOR) in addition to constant-maturity Treasury indexes. FHA will be pulling the LIBOR index from The Wall Street Journal.

ProClose will be creating new FHA LIBOR ARM notes, riders and disclosures based on demand.  If you are interested in offering this product, please contact your client services representative, or e-mail compliance@Proclose.com.

HUD Amends Standards for Mortgagor's Investment in Mortgaged Property

The Department of Housing and Urban Development (HUD) issued a final rule prohibiting "gifts" to the borrower that contribute towards the Federal Housing Administration (FHA) insurance eligibility fee required by HUD.  It was originally slated to go into effect on October 31, 2007, but the States District Court for the District of Columbia issued a ruling on November 1, 2007 delaying its implementation.

The rule disallows these "gifts" from any person or entity, including, but not limited to: the seller, realtor, broker, or any third party that will financially benefit directly or indirectly from the closing of the transaction.

This will amend the Department's regulations governing specific standards for a mortgagor's investment in FHA insured property. HUD has always held that in order for a mortgage to be eligible for insurance by the FHA, the mortgagor is required to pay at least 3 percent of the cost of acquisition on account of the property. Often seller funded and charitable gifts were used to assist the borrower with the 3 percent investment. HUD has concluded that this practice has artificially inflated the sales price.

Revised W-9 Form Posted by IRS

The IRS posted a revised W-9 form on their website, with a revision date of September 2007. Form AAW91G has been updated accordingly and is now available in your ProClose system.

The changes to the form are as follows: page 1 has a new checkbox for Limited Liability Company, an added space to enter a tax classification for the LLC, and changes in the instructions section. Page 2 has a change to the instructions for LLCs. Page 4 has a new section entitled "Secure Your Tax Records from Identity Theft."

For FHA loans, what is the maximum seller-paid contribution?

Answer:

6% is the maximum amount that the seller can contribute to the closing costs and escrows. They may NOT contribute to the borrower's 3% down payment.