Nov. 23: Thoughts on appraisal waivers, motivating builders, and an Agency shakeup in 2025; vendor news; the ol' turkey prank
The internet is good for some aspects of the news, like telling us that Trump is nominating Scott Bessent to be the Treasury Secretary. Sending your genetic material into the mail, into the internet… what could go wrong? A DNA testing company that promised clients insights into their genetic disposition has suddenly disappeared. The BBC reports it tried several methods to reach the company but failed in this effort. I imagine there are rules and regulations about this stuff… right? Residential lending could probably spare some, although given the amount of money that this industry has spent adopting to the rules and regulations, well, eliminating them isn’t as good as it sounds. This week Marty Green from Polunsky Beitel Green, Matt VanFossen, Chief Executive Officer of Absolute Home Mortgage Corporation, and Loretta Salzano from Franzen & Salzano discussed what Trump’s election win means for the mortgage industry, including the FHFA, CFPB, and the Fed, and discuss the uncertainties around his policy decisions. You can find the show on YouTube here. (Speaking of the media, if you want a Cameo video of the disgraced cabinet pick Gaetz, you can have it for $500.)
Public service announcement: fill out this form or else
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If your business is an LLC or corporation, including a single member LLC, you must fill out this form by the end of 2024, and if you start a new business in 2024, you must report within 90 days of formation. Supposedly the penalties are high if you don’t. Even lil’ bitty Chrisman LLC had to do it.
In 2021 Congress passed the Corporate Transparency Act aimed at reducing money laundering. It is a small business reporting requirement with potential penalties including prison for committing a felony by not reporting. Let me repeat that: failing to fill out this form is a potential felony with two years of prison time, plus a potential daily penalty over $500. This filing provides business ownership information (BOI) to the Federal government.
Reporting is done with a special electronic filing with the Treasury Department’s Financial Crimes Enforcement Network (FINCEN). Please note that this is not the IRS. The required information includes owners and, for new businesses formed in 2024, the company applicants.
To clarify, even if you have set up an LLC just to own a rental property this form is required, and a separate filing and form is required for every single entity, whether an LLC, an S corporation, or a C Corporation. Some exemptions exist, primarily for larger companies and not-for-profit entities. A special warning for folks that have set up their own LLC online, for whom the potential filing penalty is also over $500 for each day late plus potential prison time.
Motivate builders to build & Agencies to listen
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From Michigan, Gerhard N. opined, “As we all know, housing is a big challenge in our country and especially for the first time home buyer. One of the candidates for presidential election ran on a policy of giving $25,000 to first time homebuyers. Personally, I do not believe that would have worked. We already have so many down payment programs and I doubt this would have worked.
“As an outsider observing U.S. politics, we always seem to throw money at a problem, rather than fix it. An example is student debt. Forgiving debt does not fix the problem of expensive college education… You just kick the can down the road.
“As it relates to housing, here is my suggestion for the new administration. Why don’t we incent the builders to build more affordable housing? Rather than give $25,000 to the buyer, let’s give a tax credit to the builder for every new home that is built and sold to a first-time home buyer. Which builder would say, “no” to perhaps a $50,000 tax credit for building more affordable homes? Guidelines can be put in place as to qualification, e.g., the home has to be within a certain price range and has to be sold to a first-time homebuyer. If the house is sold to a corporation there will be a penalty for both parties.
“In addition, now let’s provide a program through FHA/Ginnie Mae where these first-time homebuyers can get a 100% mortgage if they meet certain criteria… Perhaps 12 months of on time rent payments, no delinquent taxes etc. In addition, the rate is more favorable than an existing mortgage for maybe the first three years.
“I am sure the government could mess up the program by making it too complex, but I believe we should incent the builders to build more and then provide the financing options via FHA/Ginnie Mae to these customers. And while we are developing the program, let’s make it easier for builders to build by removing some of the regulations.” Thank you, Gerhard!
Chris Whalen of Whalen Global Advisors LLC asks, “Is President Donald Trump going to clean house at HUD and Ginnie Mae come this January? Just remember the magic words: ‘Schedule F.’ And in the latest issue of The Institutional Risk Analyst, we update readers on the prospects for release from conservatorship of Fannie & Freddie, how rising rates are impacting the price war in the wholesale channel, and who is the leading candidate to head FHFA under Trump. (To subscribe to the IRA Premium Service, use the coupon "IRAAnnual%" to get 50% off forever.)
Appraisal waivers are a thing: a primer
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Investors in loans, whether in securities, individual loans, or via portfolio lending, want to know that the loan is backed by both a solid borrower and a solid property in case something goes awry. Ed Pinto of AEI Housing Center observes, “The share of appraisal waivers for both GSEs combined for September 2024 stood at 16 percent… down from their peak of 33 percent in March 2021.” Ed points out that Freddie’s ACE+PDR and Fannie’s Value Acceptance + Property Data account for only 2-3 percent of overall business.
Mike Simmons, Co-President of AXIS AMC, wrote, “Let’s begin with the obvious: Waivers = no appraisal. No appraisal means no value was established for the subject property. The Waiver process encompasses 4 factors; credit, income, assets, and whatever historical collateral data Fannie or Freddie possess in their data banks (plus other similar properties that may or may not be comparable). The combination of these factors produces some kind of risk score that’s not shared with anyone. By extending the Waiver, the GSE is saying that the transaction is acceptable within their range of potential risk of default or repurchase.
“In other words, no value is ascribed to the property. In the case of a purchase, the contract price becomes the ‘value’ … and that then becomes a new comparable for all subsequent transactions. Fannie has expanded the LTV for a possible Waiver on a purchase to 97% by adding a Property Data Collection report. This gives them a real-time look into the condition of the property (which they can further confirm via the use of computer vision tools on the accompanying photos taken by the PDC’er). But again, none of that’s an appraisal and no collateral value is developed … so no liability to an appraiser. There is no valuation to claim an appraisal is wrong and nobody to hold responsible.
“In the rare instance where a PDC report calls into question some of the suppositions on the property’s condition and no Waiver is issued, Fannie may require a Hybrid Appraisal from an appraiser, but even then the appraiser is working from information (the PDC ‘inspection’), so any liability on their part would be partial, limited, and in the hands of a good attorney, probably meaningless.
“That’s the good news. The bad news is that the appraiser did not receive an appraisal assignment, and it’s arguable whether the market, let alone a borrower, has received (any) accurate or fulsome information on that particular property’s market value.
“Having said all that, the GSEs (and the people that work there) have been a blessing to our mortgage, and financial, markets in a monumental way. When banks and investors in the mortgage bond markets closed their doors to buying the securities that supply the capital behind mortgages, the GSEs stayed the course. They were the only market in large part because they offered the implied backing of the government for the mortgage securities they issued… Something nobody in the public markets could (or does) do. By the way, Fannie Mae & Freddie Mac have returned (above what they borrowed from the Feds) over $200 billion dollars in dividends! Maybe we should put more companies in conservatorship?
“My belief is that the minute they are taken out of Conservatorship under FHFA, they will behave as all other public lenders did and do; they will move to protect their shareholders when markets become stressed. Take a minute and read the Mission Statements of the GSEs. They are unique in who and how they serve the public. We can’t afford to lose that or them. Still not a fan of Waivers though…
Third party provider tidbits
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Call them vendors or third-party providers, basically every lender would be dead in the water without some of their services. Let’s see who’s doing what, in no particular order.
Total Expert launched Engage SMS, a new platform designed to help lenders create more impactful, personalized connections with customers via text. SMS campaigns have an average open rate of 98%, much higher than email's 20%. Not to mention, 45% of text messages get a response, compared to just 6% for email, making SMS a powerful tool for personalized communication. Total Expert is the purpose-built customer engagement platform trusted by more than 200 financial enterprises. Total Expert unifies data, marketing, sales, and compliance solutions to deliver the perfect customer journey across every financial milestone—in any market. Total Expert turns customer insights into actions that increase loyalty and drive growth for modern banks, lenders, credit unions, and insurance companies. Total Expert is now available for purchase on the AWS Marketplace and Salesforce AppExchange.
MortgageFlex Systems, Inc. announced that its Ginnie Mae investor reporting processes have been officially approved. This significant milestone underscores its commitment to providing exceptional mortgage servicing solutions and adhering to the highest industry standards.
Our successful Ginnie Mae reporting approval is a testament to our team's hard work, dedication, and expertise. We have invested in state-of-the-art technology and processes to ensure accurate and timely reporting, enabling us to deliver reliable and efficient services to our clients. This accomplishment further strengthens their ability to support client's needs and contribute to the housing market's overall health.
Mortgage Automation Technologies (MAT), a leading innovator in fintech software and hardware, and the company behind The BIG Point of Sale platform, proudly announced a strategic integration with Gateless, the leader of intelligent automation for mortgage lending.
This integration brings the power of Gateless' Smart Underwrite® technology into The BIG Point of Sale ecosystem, enabling mortgage companies to quickly notify loan officers and their clients of required underwriting conditions, the results of any underwriting review, and loan approvals via mobile devices. This accelerates decision-making and improves accuracy across their lending platform. Within the Smart Underwrite® solution, loan information including credit, income, and asset source data and/or documentation undergoes meticulous analysis, automating key facets of the underwriting process, while ensuring compliance with investor guidelines. The results: a new benchmark for operational efficiency and cost to originate a loan, higher quality loans with reduced risk of repurchase, and an unparalleled borrower experience.
DomiDocs, Inc. is proud to release HomeLock™ 3.0+AI, the most advanced AI-Powered Residential Property Fraud Protection System available on the market today. American homeowners now have a competitive edge with access to groundbreaking technology
designed to safeguard their home against the rapidly growing threat of numerous types of residential property fraud. HomeLock™ 3.0+AI takes a proactive approach, scanning public and private databases, purchase and sale sites, social media, and rental sites by parcel number and address to detect fraud with advanced algorithms. This system is also the only one capable of effectively protecting vacant land, a top target for criminals.
FICO, the global analytics software leader, announced the launch of its new FICO® Score Mortgage Simulator. The new analytic tool for mortgage professionals simulates the potential impacts to a consumer’s FICO® Score with various simulated changes to their credit report data, such as reducing credit card balances or deleting a collection account. The FICO® Score Mortgage Simulator is the only score simulator for mortgage professionals that uses FICO Scores and the actual FICO Score algorithms. Xactus LLC, the leading verification innovator for the mortgage industry, is the first technology partner to be working with FICO to bring FICO® Score Mortgage Simulator to market.
Momentum Builder and Sales Mastery have officially joined forces to create a unified powerhouse: Sales Mastery Powered by Momentum Builder in order to “amplify our impact and delivering even greater value to you – our community of driven, passionate professionals. To mark this exciting new beginning, I’m proud to announce the theme of our 2025 flagship event: Beyond Boundaries. Taking place October 14–17, 2025, in Dallas, Texas, this event will be unlike anything we’ve ever done before. Here’s what you can expect from Sales Mastery Powered by Momentum Builder: Unmatched expertise from two of the industry’s most respected brands. Transformational tools and coaching designed to meet you at every stage of your sales journey. Cutting-edge insights and connections to take your business further, faster. And until December 1st you can take advantage of special pricing!”
STRATMOR Group’s New Repurchase & Appraisal Underwriting Study! Are you up to date with the latest industry benchmarks on mortgage repurchase rates and appraisal underwriting costs? Join Reggora and STRATMOR Group on December 12 at 11:00 a.m. PST / 2:00 p.m. EST as they unveil findings from STRATMOR’s New Repurchase & Appraisal Underwriting Study. The webinar will dive into insights gathered from leading lenders across the industry, including repurchase rates (understand how your performance compares with industry averages), appraisal Underwriting Costs (gain visibility into typical costs from appraisal findings, LLPAs, and defect fees), defect and Risk Metrics (explore common reasons for repurchases, the financial impact of appraisal-related issues, and best practices for risk management, and labor and Time Benchmarks (see average times for appraisal reviews and learn where automation could yield time and cost savings.) Register now!
This Thursday don’t fall for this prank. Or the ol’ pregnant turkey prank!
Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you're interested, visit my periodic blog at the STRATMOR Group web site. The current STRATMOR blog is “A Lender’s Personal Touch Can Help After a Disaster.” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).
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