Market Conditions

Expect mortgage lenders to finally conquer their fear of repurchases in 2016 and ease their standards, but whether those changes will be enough to spur major growth in volume is the big question.

The sources of that doubt are several likely drags on the market: higher rates, higher costs and mixed conditions in the secondary market.

On the plus side, lenders seem increasingly comfortable with Fannie Mae and Freddie Mac’s demands.

“We fully understand when we might be buying back a mortgage if we underwrite to their [expanded] guidelines,” said Scott Haymore, TD Bank’s head of pricing and secondary markets. “I think they’ve made it very clear.”

Both the government-sponsored enterprises, and the Federal Housing Administration that insures loans sold by into Ginnie Mae securitizations, have been encouraging broader lender underwriting and plan to continue to do so next year.

The GSEs have limited lenders’ liabilities […]

The implementation of new mortgage disclosure requirements by the Consumer Financial Protection Bureau has been a significant transition for all lenders, but the compliance process has been particularly thorny for wholesale lenders.

The rules, which took effect Oct. 3, put a premium on accuracy and require that borrowers have three days to review a final Closing Disclosure before closing.

But the complications with upgrading software in order to produce the new forms and ensuring that estimated loan pricing in the disclosure is accurate, among other things, have been magnified in wholesale loan transactions, where there are three parties to the loan transaction instead of just two.

“Wholesale is a weak link in the [CFPB] rule, because the rule says the least about the interaction that exists between the” wholesale lender and the mortgage broker, said Robert Lotstein, managing attorney of Lotstein Legal in Washington.

Issues have included mortgage brokers providing […]