Justice Dept. Settlements Put FHA Lenders on Notice


Two recent Justice Department settlements, one with a large nonbank mortgage lender and the other with a small one, speak volumes about how much Federal Housing Administration lending has changed.

Franklin American Mortgage in Franklin, Tenn., on Wednesday agreed to pay $70 million for knowingly originating home loans that did not meet the guidelines of the Department of Housing and Urban Development, which oversees the FHA. A day earlier a much smaller lender, RanLife in Salt Lake City, agreed to pay $1 million for underwriting loans that failed to comply with HUD’s regulations.

Those dollar figures might seem like peanuts compared with bank settlements in the hundreds of millions or more. But more of the FHA market is shifting to nonbanks, and the cases highlight nonbank lenders’ tendency to under-report deficiencies and their other shortcomings. Moreover, the cases underscore the reason why big banks have backed away from […]

Royce Introduces Bill to Break FICO ‘Monopoly’ for GSEs


WASHINGTON — Fannie Mae and Freddie Mac would be able to evaluate and use new credit scoring models under a bill introduced in the House that seeks to create more competition in the credit scoring industry.

The two government-sponsored enterprises have been using the FICO 4 credit score model since Fair Isaac Corp. introduced it in 2004. That has created a government-sanctioned monopoly, according to the sponsors of the bill.

“The GSEs’ use of a single credit score is an unfair practice that stifles competition and innovation in credit scoring,” said Rep. Ed Royce, R-Calif.

Royce is a senior member of the House Financial Services Committee and chairs the House Foreign Affairs Committee.

Rep. Terri Sewell, D-Ala., noted the FICO 4 is outdated and said it doesn’t “necessarily take into account something as simple as whether borrowers have paid their rent on time.”

VantageScore Solutions has […]

Time to Earn Those Mortgage Referrals


Mortgage lenders now have to get referrals from their real estate agents the old-fashioned way: earn them.

Lenders have long relied on formal contracts with agents, known as marketing services agreements, to get referral business. These agreements call for the parties to advertise together or provide other services to consumers.

But in 2015 the Consumer Financial Protection Bureau, while not outlawing the practice, put the industry on notice that it considers certain forms of MSAs to violate of the Real Estate Settlement Procedures Act ban on payments for a referral.

In response, several major lenders, including Wells Fargo, PHH Mortgage and Prospect Mortgage, said they were terminating their MSAs. With these arrangements on their way out, traditional word-of-mouth referrals are now the best and most cost-effective way of driving new business.

Some are suggesting that an end to MSAs will help level the playing field between […]

How TRID Will Affect Lenders’ Processes, Volume in 2016

Mortgage originators will spend much of 2016 working their way through the hiccups caused by the October implementation of new mortgage disclosures, but those problems are unlikely to have a meaningful impact on loan origination volume next year.

“I expect origination volumes to be flat to slightly down because of some of the other things going on in the market today,” said Brian Benson, chief executive officer at closing cost data provider ClosingCorp. “I don’t know that the regulatory changes are appreciably going to change industry volume.”

While total mortgage volume may decline somewhat, purchase mortgage volume is expected to increase over 2016. Frank Nothaft, the chief economist of CoreLogic, predicted a 10% increase in purchase dollar volume, driven by improved home sales and higher prices. He said he expects the rate of price increases to flatten out as the year goes on.

Another driver of higher purchase volume […]

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