The Dreaded Question

Originally posted on cuinsight.com.

Guest post written by Dan Green, Executive Vice President, Marketing, Mortgage Cadence, LLC  

Mortgage Cadence, LLC is the NAFCU Services Preferred Partner for Mortgage Processing and Fulfillment Services.

It’s not hyperbole to say every parent of children between the ages of three and six dread THE QUESTION. You know which question I am talking about. It’s so anxiety-provoking that I can’t even write it down. The typical parent cringes, preferring a root canal over providing an answer, any answer, reliably offering an apocryphally obtuse response, hoping either little Emma or Ethan will be satisfied. And they are, for a while. Until they are not.

The Dreaded Question à la Credit Union Mortgage Lending

We’ve been satisfied with obtuse answers and strategies for decades to our own dreaded question: Where do homebuyers come from? Over the past 30 years, roughly as long as credit unions have been making mortgage loans, we have not had to confront the brutal reality that homeowners are not delivered by the stork. Serial refinance booms every 12 or 24 months have kept pipelines full and balance sheets happy and growing. It has been a great run. We learned a lot about the real estate finance business. We got efficient, more efficient than many of our counterparts, and we provide a better financing experience for members. We’ve been satisfied not confronting the dreaded question. Like little Ethan and Emma, however, our satisfaction with obtuse answers has reached its end.

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Groundhog Day

Originally posted on CUInsight.com.

Guest post written by Dan Green, Executive Vice President, Marketing, Mortgage Cadence, LLC.

Mortgage Cadence, LLC, is the NAFCU Services Preferred Partner for Mortgage Processing and Fulfillment Services.

Where I am from in the frozen northern Midwest, winter is always coming. Even in the middle of summer when temperatures are in the middle 90s and humidity is as high, Frosty the Snowman’s seemingly endless visit is on our minds. Not negative thoughts, not really. People who inhabit the frost lands tend to think practically.

One of our favorite winter holidays should come as no surprise: Groundhog Day. Everyone knows the story. If Punxsutawney Phil sees his shadow and returns to his burrow, we’re popsicles for another six weeks. If, on the other hand, P. Phil does not see his shadow, an early spring is in the offing. We’ll take every sunny winter day we can get. Except on February 2— when dark and dreary is best. A blizzard is even better. Means it’s time to break out the board shorts and head to the beach.

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The Five C’s of Lending

Originally posted on CUInsight.com.

Guest post written by John Levonick, Chief Legal & Compliance Officer, Mortgage Cadence LLC.

Mortgage Cadence is the NAFCU Services Preferred Partner for Mortgage Processing and Fulfillment Services.

If you were lending in the early 80s into the mid-90s you were taught the four-Cs: capacity, credit, collateral, character.  Rules to live by, rules to lend by.  And remarkably proscriptive. Underwrite, close, repeat. Follow these, make good loans. Even way back then, though, there was an unofficial fifth C.  Its situation was rather like Pluto in reverse, which of course used to be a planet though now it’s not.  Compliance is now the official fifth C where it was not before.  Compliance is a full-fledged member of the club, supplanting almighty capacity as the first of the order.

Truth be told compliance has always been an underwriting factor.  Rules, regulations, GSE requirements. Each weighed on every loan decision.  Today’s rules heighten the obligation.  January’s Qualified Mortgage (QM) and Ability to Repay (ATR) Rules only serve to place greater emphasis on their importance. Underwriters of several decades ago could keep the rules of the era straight and apply them consistently. No longer.  Think of the sheer number underwriters must consider:

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A Momentous Occasion: First-time Homebuyers

Originally posted on CUInsight.com.

Guest post written by Dan Green, Executive Vice President, Marketing, Mortgage Cadence, LLC.

Mortgage Cadence is the NAFCU Services Preferred Partner for Mortgage Processing and Fulfillment Services.

Last week remarked one of life’s momentous occasions. They occur for everyone, and in everyone’s life there are those we never forget. Mine? My daughter and her husband became first-time homebuyers.

“What’s the big deal”, you might be thinking.  Thousands of former renters become new homeowners every day. Millions every year. Moreover, her father, me, is a mortgage guy. Of course my daughter bought a home. What else would she do?

Ten years ago, I would have wholeheartedly agreed with you. Even seven years ago. Less than that, not so much. The truth is, as the housing crisis unfolded and the economy plunged deeply into recession, the American Dream became simply that for many people. The pundits thought, and there’s much been written over the past five years: we had seen the end of homeownership in the US. As the theory went, people would choose to rent instead, keeping their mobility and employment options open while incurring less financial risk.

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The Looming Impact of Dodd-Frank

Originally posted on CUInsight.com.

Guest post written by John Levonick, Chief Legal & Compliance Officer, Mortgage Cadence, LLC.

Mortgage Cadence is the NAFCU Services Preferred Partner for Mortgage Processing and Fulfillment Services.

Dodd-Frank impacts lenders in many ways. In the span of less than two years there are now many new rules that will have material impact on the conduct of all mortgage originators and assignees. Consider the following impending rules:

  • Qualified Mortgage (QM) / Ability to Repay (ATR)
  • LO Comp Rule (Reg. Z)
  • Appraisal Rules:
    • Joint Rule (TILA / Reg.Z – HPML)
    • Copy Rule (ECOA)
  • Escrow Rule
  • Know Before You Owe / Integrated Disclosures (TILA / RESPA)

While all are important, the Ability to Repay (ATR) elements of the Qualified Mortgage (QM) rules is first on our list. That’s where we’ll turn our attention this month.

The Ability to Repay requirements with the Qualified Mortgage

A QM is a new loan classification that represents how the lender has made a thorough assessment of, and has fully documented, a borrower’s ability to repay their covered loan. Currently, Regulation Z, as amended by the Board of Governors of the Federal Reserve System in 2008, prohibits creditors from extending Higher-Priced Mortgage Loans (HPML) without regard for the consumer’s ability to repay. The ATR rule extends application of this requirement to all loans secured by dwellings, not just HPMLs. Also of note, this final rule establishes a Safe Harbor that contains a “presumption of compliance” with the ATR requirement for non-HPML QMs. While the ATR rule does not specify any particular underwriting model, lenders must consider and validate, at a minimum, 8 discrete underwriting factors:

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