June 22: Vendor news; secondary deals; data breaches, third-party risk management & other compliance issues; inflation hits parenting
I hope that one day I am rich enough not to give a second look at abandoned furniture on the side of the road. I am certainly nowhere near abandoning an entire house. Urbanization, declining birth rates, and the depopulation of the countryside in Japan have led to the phenomenon of akiya, or long-abandoned homes. A new report from an agency trying to rein in the problem found that the number of abandoned homes not for sale or rent increased by 360,000 from 2018 to 2023, and today stands at 3.85 million units, of which 70 percent are detached, single-family homes. The homes can drag down property values of surrounding homeowners, which compounds the problem; overall, those homes that have become abandoned over the past five years caused the value of neighboring homes to decline by 3.9 trillion yen ($24.7 billion) in the aggregate. Heck, let’s bring them over here and plop them in West Texas, Alaska, and Nevada!
It takes a village… or a bigger paycheck
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Sure, if you’re a homeowner spending $500 more a month on insurance that is $500 you’re not spending on restaurant meals or family vacations. After the highest inflation in 40 years, being a parent in America has never been more expensive than it is today. The average annual cost of raising a child across America’s 100 most populous metros is $22,989, or $413,810 up to the age of 18. And that’s assuming they won’t cost you any money after 18. To cover the basic needs, a dual-income household has to earn a combined $64,229 annually without children. This figure jumps to $91,608 for families with one child, $114,898 with two children, and $133,197 with three children.
The most affordable metros to raise a child until the age of 18 are Jackson (MS), McAllen (TX), Wichita (KS), El Paso (TX), and Lakeland (FL), ranging from $14.6k to $16.3k annually. The least affordable metros to raise a child are San Francisco (CA) San Jose (CA), Boston (MA), Bridgeport (CT), and San Diego (CA), ranging from $32.7k to $37.3k annually. Six of the top 10 most unaffordable metros are located in California.
Ignore compliance at your own risk
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MQMR wrote a hot topic on state-regulated mortgage companies being required to report data breaches to the Federal Trade Commission (FTC). Under an amendment to the Safeguards Rule effective May 13, 2024, the FTC will require certain nonbank financial institutions, including mortgage lenders and brokers, to notify it of data breaches and security events. Specifically, the amendment requires notice to the FTC after discovery of a “notification event” that involves the information of at least 500 consumers. The amendment defines a “notification event” as follows: Acquisition of unencrypted customer information without the authorization of the individual to which the information pertains. Customer information is considered unencrypted for this purpose if the encryption key was accessed by an unauthorized person. Unauthorized acquisition will be presumed to include unauthorized access to unencrypted customer information unless you have reliable evidence showing that there has not been, or could not reasonably have been, unauthorized acquisition of such information. Notification events must be reported to the FTC as soon as possible and no later than 30 days after discovery. The notice must be made electronically on a form located on the FTC’s website: FTC.gov.
Lenders Compliance Group wrote about key features of a policy focused on Third-Party Risk Management. There are essential requirements for a Third-Party Risk Management policy, elucidated as follows: Risk Management, Third-Party Relationship Life Cycle, Governance, and Appendix. Not all third-party relationships present the same level of risk. Indeed, not all such relationships require the same level of oversight. However, a financial institution should apply rigorous risk management practices throughout the third-party relationship life cycle for third parties that support higher-risk activities, including critical activities.
Effective third-party risk management generally follows a continuous life cycle for third-party relationships: Planning, Due Diligence, Contract Negotiation, Monitoring, and Termination. Regarding Governance, the life cycle is governed by tripartite activities: Oversight and Accountability, Independent Reviews, and Documentation and Reporting. Finally, consider including an appendix that lists resources. The resources do not have to be comprehensive. Keep adding to the Appendix as you come across resources that help to manage third-party risk management.
Lenders Compliance Group addressed what self-identification is and why the CFPB expects it. The CFPB focuses on risks of harm to consumers, including the risk that a supervised entity will not comply with Federal consumer financial law. To get ready for the examination, you should do pre-review planning to collect the information necessary to determine the scope, resource needs, and work plan. The information and documentation should be assembled, given that an Examiner in Charge will notify you that the examination team plans to conduct its work offsite and onsite during the review. Timing is critical, and you must be responsive. A strong compliance program is proactive. It promotes consumer protection by preventing, self-identifying, and proactively addressing compliance issues.
Accordingly, the Bureau’s rating system provides incentives for such practices through the definitions associated with its top rating. This early detection can limit the size and scope of consumer harm. Moreover, self-identification and prompt correction of serious violations represent concrete evidence of an institution’s commitment to address underlying risks responsibly. In addition, appropriate corrective action, including both correction of programmatic weaknesses and full redress for injured parties, limits consumer harm and prevents violations from recurring in the future. Thus, the rating system recognizes institutions that consistently adopt these strategies.
MQMR wrote a compliance FAQ on why approved seller/servicer need to report a single fidelity bond or errors and omissions loss to Fannie Mae in certain instances. Fannie Mae requires an approved seller/servicer to report to Fannie Mae within 30 days after discovery of the occurrence of a single fidelity bond or errors and omissions policy loss that is mortgage related and the amount exceeds the lesser of $250,000 or the policy’s deductible, even when no claim will be filed or when Fannie Mae’s interest will not be affected. It is a common MORA examination finding that a seller/servicer does not have a process in place to ensure Fannie Mae of such notification within 30 days. The requirements are set forth in A3-5-04 of the Single Family Selling Guide.
In addition, a seller/servicer must report to Fannie Mae within 10 business days of receipt of a notice from the insurer regarding the intended cancellation, reduction, nonrenewal, or restrictive modification of the seller/servicer’s fidelity bond or errors and omissions policy. The seller/servicer must email Fannie Mae a copy of the insurer’s notice, describe in detail the reason for the insurer’s action if it is not stated in the notice, and explain the efforts it has made to obtain replacement coverage or to otherwise satisfy Fannie Mae’s insurance requirements.
Vendor/third-party provider updates from soup to nuts
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The Community Home Lenders of America (CHLA) issued a statement regarding the CFPB final rule to establish a registry of nonbank corporations that have violated consumer laws: “While CHLA appreciates a staggered compliance period for smaller IMBs, CHLA renews our request in our comment letter to exempt smaller IMBs, since they already report violations to the NMLS.” CHLA formally submitted a comment letter to the CFPB, asking for: (1) safe harbor compliance status for IMBs that comply with NMLS reporting requirements for agency and court orders, and (2) an exemption for all but the largest IMBs from a proposed new requirement to designate a senior executive responsible for compliance with such orders.
New American Funding’s affiliate, NAF Cash, is set to revolutionize the homebuying process for countless Americans with the launch of NAF Cash Maps, an innovative new tool designed to empower homebuyers with comprehensive, data-driven insights into the U.S. real estate market. With NAF Cash Maps, homebuyers can access detailed analytics on cash transactions by state, helping them make informed decisions and stand out in competitive markets. The tool’s interactive map format and historical data trends offer a unique advantage, empowering buyers to navigate the market with confidence.
Truework, the one-stop platform for income and employment verification, announced its new integration with the Exchange network of mortgage-specific service providers available to customers of the Empower® loan origination system (LOS) by Dark Matter Technologies. With this integration, mortgage lenders can access the Truework platform and verify U.S. employees’ income and employment directly within the Empower LOS making the process more predictable and deliver a seamless mortgage journey to more borrowers.
MSU Federal Credit Union chose FINOFR to provide a digital Mortgage retention solution for your members which allows them to self-serve “Resetting” their rate without any back-office time or cost. Even though the Fed has not lowered rates, the US 10Y has dropped from 4.7 percent on 4/25/24 down to 4.2 percent on 6/17/2024. Are you prepared for lower interest rates? Contact Foster Kelly to learn more about FINOFR’s Reset Mortgage solution.
Are you struggling to manage and retain your top talent in this ever-changing market? Look no further than SitusAMC’s new white paper, “The Secret to Managing and Retaining Talent in 2024.” Bringing together unique perspective and intelligence forged from decades of building and managing high performing real estate teams for leading lenders and investors. Covering five critical issues that employers must consider in today’s shifting demographic trends and evolving employee preferences.
Secondary market activity
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What happens in the secondary markets, among many things, directly impacts rates in the primary markets that your borrowers see.
Freddie Mac released its 2023 Green MBS Impact Report showing the company issued $1.85 billion of Single-Family Green Mortgage-Backed Securities (MBS) for the year. The report highlights the estimated impact of the Single-Family Green MBS program and provides an overview of Freddie Mac’s Sustainability Strategy and Single-Family Green Bond Framework. Freddie Mac’s 2023 Green MBS issuance increased by more than 35 percent over 2022, even as overall MBS market volume declined. Freddie Mac estimates that the collateral in its 2023 Single-Family Green MBS issuance saved enough energy to power more than 2,000 homes for a year, avoided greenhouse gas emissions the equivalent of taking more than 2,700 cars off the road for a year, and saved an estimated average of nearly $700 in annual utility costs for each homeowner with a mortgage included in a 2023 Freddie Mac Single-Family Green MBS. From its inception in 2021 to year-end 2023 Freddie Mac Single-Family Green MBS Issuance totaled nearly $3.8 billion original unpaid principal balance of bonds. The securities were backed by more than 10,000 qualifying Freddie Mac mortgages. For more information on how these figures were calculated and other benefits of Freddie Mac’s Single-Family Green MBS issuance and associated Single-Family Green Bond Framework, please see the report and associated data supplement at FreddieMac.com.
Fannie Mae released a new disclosure for its single-family mortgage-backed securities (MBS), the Social Indicator. This disclosure helps investors easily identify MBS issued since March 1, 2024 that meet the criteria outlined in Fannie Mae’s Single-Family Social Bond Framework. With the Social Indicator, investors using the PoolTalk and Data Dynamics platforms and other third-party systems, such as Bloomberg, can now easily identify the over $3.6 billion in single-family social bonds that Fannie Mae has issued to date and monitor future issuance to analyze for fit in their portfolio. This latest disclosure enhancement is another step Fannie Mae has taken to attract new sources of capital to the U.S. mortgage market. Fannie Mae’s Single-Family Social Bonds are backed by loans to populations that typically face barriers to obtaining affordable housing or access to credit. Fannie Mae’s Mission Index disclosure is the foundation of the Single-Family Social Bond Framework, which adheres to global standards and is validated by a Second Party Opinion.
Fannie Mae priced Connecticut Avenue Securities (CAS) Series 2024-R04, an approximately $708 million note offering that represents Fannie Mae’s fourth CAS REMIC transaction of the year. CAS is Fannie Mae’s benchmark issuance program designed to share credit risk on its single-family conventional guaranty book of business. Year to date, Fannie Mae has issued approximately $2.9 billion of notes under the CAS program. The reference pool for CAS Series 2024-R04 consists of approximately 54,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $18.6 billion. The reference pool includes collateral with loan-to-value ratios of 60.01 percent to 80.00 percent, which were acquired between July 2023 and September 2023. The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages and were underwritten using rigorous credit standards and enhanced risk controls. Fannie Mae will retain a portion of the 1A-1, 1M-1, 1M-2, and 1B-1 tranches, and initially will retain the full 1B-2H and 1B-3H first-loss tranches. To promote transparency and to help credit investors evaluate our securities and the CAS program, Fannie Mae provides ongoing, robust disclosure data, as well as access to news, resources, and analytics through its credit risk transfer webpages.
Freddie Mac announced the pricing of the Freddie Mac Seasoned Loans Structured Transaction Trust (SLST) Series 2024-1, a securitization of approximately $297.5 million including both guaranteed senior and non-guaranteed subordinate securities backed by a pool of seasoned residential mortgage loans. The SLST program is a fundamental part of Freddie Mac’s seasoned loan offerings which reduce less-liquid assets in its mortgage-related investments portfolio and shed credit and market risk via economically reasonable transactions. The transaction includes approximately $275.2 million in guaranteed senior certificates and approximately $22.3 million in non-guaranteed subordinate certificates. The underlying collateral backing the certificates consists of 1,863 fixed-, adjustable-, and step-rate seasoned loans, and includes both loans modified to assist borrowers at risk of foreclosure and loans that were never modified. As of the Cutoff Date, none of the loans are more than 150 days delinquent. Freddie Mac’s seasoned loan offerings focus on reducing less-liquid assets in the company’s mortgage-related investments portfolio in an economically sensible way. This includes sales of Non-Performing Loans (NPLs), securitizations of re-performing loans (RPLs) and structured RPL transactions. Since 2011, Freddie Mac has sold almost $10.2 billion of NPLs and securitized approximately $78.3 billion of RPLs consisting of $30.4 billion of fully guaranteed MBS, $35.5 billion via the Seasoned Credit Risk Transfer (SCRT) program, and $12.4 billion via the SLST program. Requirements guiding the servicing of these transactions are focused on improving borrower outcomes and stabilizing communities. Additional information about Freddie Mac’s seasoned loan offerings is available at: http://www.freddiemac.com/seasonedloanofferings/.
Okay, some of these are a little freaky.
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