Mortech Blog


Tom Erickson

Recent Posts

FHA Looking to Get Back to Roots

Posted by Tom Erickson on Oct 8, 2014 1:26:00 PM

The Federal Housing Administration (FHA) is trying to get back to lending in the low-moderate income level, to borrowers with less than perfect credit scores.  Still, FHA officials have stressed that the agency will not roll back its 1.35% annual mortgage insurance premium or its 1.75% upfront premium, although the industry would view that quite favorably. Though such a change would make loans more affordable, the FHA had to raise premiums to strengthen its insurance fund, which must maintain a 2% surplus (by law).


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Fair Housing Act Update

Posted by Tom Erickson on Oct 1, 2014 2:13:00 PM

The primary purpose of the Fair Housing Law of 1968 is to protect the buyer/renter of a dwelling from seller/landlord discrimination. Its primary prohibition makes it unlawful to refuse to sell, rent to, or negotiate with any person because of that person's inclusion in a protected class.


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CFPB Suggests Relief for Pain Points in the QM

Posted by Tom Erickson on Sep 24, 2014 2:06:00 PM

A lender’s biggest fears when it comes to originating QM loans are twofold:  1) the “points and fees” 3% limit is exceeded and 2) a miscalculation of the 43% threshold for DTI.  Both errors, if found post-closing, could conceivably make the loan a Non-QM loan.  Non-QM loans should have been priced higher to take in the appropriate risk factors, and/or the loan could be put in the Lender’s portfolio.  This can be a loss financially, ties up funds in a portfolio, and can make the lender vulnerable to regulatory and/or civil action that could result in significant financial penalties.


1) 3% “points and fees” limit


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Mortgage Industry Odds & Ends

Posted by Tom Erickson on Sep 22, 2014 1:30:00 PM

Discontinued Products


As the mortgage crisis nears its end, Fannie Mae has announced the HomePath Mortgage and the HomePath Renovation Mortgage products will be retired on October 7, 2014.  These products were designed to help Fannie Mae reduce their foreclosure inventory that had greatly accelerated during the crisis, by offering favorable terms to all potential buyers.  Obviously in Fannie Mae’s estimation, the crisis has subsided sufficiently enough to discontinue these programs.


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Pre-Qualification or Pre-Approval?

Posted by Tom Erickson on Sep 11, 2014 11:30:00 AM

The CFPB has recently tried to clarify the difference in these two processes.  Their “Pre-Qualification” definition states:


Pre-qualification is a lender’s estimate of how much you could be eligible to borrow. You may be asked to supply information about your income, savings, assets, and debt. The lender will review this information and decide how much you might be able to borrow. Prequalification does not mean you will get the loan. But consider making a prequalification request to help you decide on a price range for your new home. Pre-qualifications are usually free.”


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Mortgage Industry Bits and Pieces

Posted by Tom Erickson on Aug 20, 2014 11:33:00 AM

FICO (Fair Isaac Corporation) has announced that they are making a change to their popular credit scoring system. The new product, called “FICO Score 9”, has tweaked the program as a way to assess consumer collection information, bypassing paid collection agency accounts and differentiating between medical and non-medical collection agency accounts.  Medical collection accounts have been found to not be nearly as detrimental in determining credit worthiness as other collection accounts, hence some consumers could see a credit score jump of 25 points or more, meaning more prime borrowers for mortgage lenders.  The last hurdle for the credit scoring change is that Fannie Mae and Freddie Mac must make the change to their underwriting systems for it to become fully adopted in the mortgage marketplace.

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Defining Closing Costs & Prepaid Finance Charges

Posted by Tom Erickson on Aug 14, 2014 11:51:00 AM

There always seems to be some confusion over the definitions for “closing costs” and “prepaid finance charges” as they are relevant to mortgage lending. Closing costs are any costs that are paid in connection with a mortgage transaction besides the purchase price (or pay-off of the current mortgage(s), if a refinance) by either the buyer or the seller. Closing costs are all disclosed at the loan closing on the HUD-1 settlement sheet as required by TILA (Truth in Lending Act).

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Home Mortgage Disclosure Act (HMDA) Reform Proposed

Posted by Tom Erickson on Aug 7, 2014 11:09:00 AM

The CFPB has recently put out a proposed rule change and request for public comments regarding Regulation C, and more specifically, HMDA (the Home Mortgage Disclosure Act).  HMDA, enacted in 1975, requires that many lenders report information regarding home loans for which they receive applications or originate or purchase. The information is available to both the public and to regulators who can use it to monitor whether financial institutions are serving the needs of their communities and to identify discriminatory lending patterns. The Dodd Frank Wall Street Reform and Consumer Protection Act authorized CFPB to expand the HMDA dataset to gather additional information that might be helpful to better understand certain aspects of the market.

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My APR is lower than my note rate --- can that be right?

Posted by Tom Erickson on Jul 30, 2014 1:30:00 PM

The Truth in Lending Act (TILA) and its implementing regulation, Regulation Z, require Lenders to disclose the Annual Percentage Rate (APR) on the Truth in Lending form.  The APR is defined as the cost of credit per year expressed as a percentage of the Loan.  It takes into consideration the closing fees that are defined as prepaid finance charges (i.e., Origination fees, discount points, underwriting fees, processing fees, etc.) and any Mortgage Insurance that is required to be paid throughout the life of the loan.  The reasoning behind the regulation was so that consumers could more easily compare loan offers between lenders to make a more economical choice.


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CFPB Clarifies “Mini-Correspondents” Position

Posted by Tom Erickson on Jul 23, 2014 2:02:00 PM

Reason for the clarification


On July 11, 2014, the CFPB posted policy guidance for mini-correspondents and for Mortgage Brokers who have/or will convert to a mini-correspondent business model.  The CFPB is concerned that some mortgage brokers may be shifting to the mini-correspondent model in the belief that, by identifying themselves as mini-correspondent lenders, they are automatically exempt from the consumer protections that apply to transactions involving mortgage brokers.  There are two primary concerns that the CFPB addresses when looking at such cases. The first is the disclosure of mortgage broker compensation (RESPA-Reg X).Mortgage Brokers must disclose their compensation on the GFE and the HUD-1 settlement statements, whereas mortgage bankers (correspondents) do not.The second is broker compensation must be included in the “points and fees” tests (TILA-Reg Z) for QM and HOEPA, whereas LO compensation for mortgage bankers is not included.

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