Today, we’re releasing a Guide to Completing TILA-RESPA Integrated Disclosure Forms, a companion to the Small Entity Compliance Guide we released recently.

Check out the guide to Loan Estimate and Closing Document forms: 

The guide provides instructions for completing the Loan Estimate and Closing Disclosure and also highlights common situations that may arise when completing the forms. It may also be helpful to settlement service providers, software providers, and other firms that serve as business partners to creditors.

You can see all the resources available for the TILA-RESPA Integrated Disclosure rule.

Thank you,

Consumer Financial Protection Bureau

P.S. We’ve made some enhancements to the way you can access the various regulatory implementation resources. Be sure to check out the changes and the resources available.


Thank You St. Louis

Wow! What a great week. The Mortgage Matchmaker Conference in St. Louis was fantastic. President Erik Janeczko and the Board of the Missouri Association of Mortgage Professionals have done an excellent job of getting NAMB’s Missouri state affiliate up and running again, and even though there were about 75 people there, it was a success. I was able to speak with many of the attendees and many of the exhibitors. I really appreciated the ability to go over and speak to them. Thanks again to my hosts for such a great time.

It’s All About The Numbers

In speaking in St. Louis, I was approached by an exhibitor who wanted to talk about something I said. He commented on the fact that I told everyone that it is all about membership numbers. We need numbers. He said that after hearing this, it started to make sense as to why we are always talking people to join. In Washington, D.C., it’s all about the numbers. How many people are members? Not how much money do you have or how many states you represent, but how many members are part of your association. I explained that, according to the NMLS, there are about 105,000 mortgage originators and we need to have 15,000 of them to make sure we get a good representation. He asked me to send him a blank application and he was going to have his account executives go and get us some members.

A Challenge

With that said, do YOU realize that all it takes is a little effort to go get three members and we would have in excess of 15,000 members of NAMB? I am asking you again to take your business card and put on the back and hand it out to three to five new people and ask them to join. It is only $50 for the year. So ASK them to please join the association. It is time that everyone is part of the solution and not part of the problem.
If you are looking through our NAMB Web site,, you are starting to see all of the work that we have been doing to make it better for you the NAMB member. Now on the front page is my Monday Morning Messenger for all of you to see, and as a member, you get to go inside the site to gain great information for you to use on a regular basis. Also, don’t forget to renew or go get you NAMB Lending Integrity Seal of Approval today.

Coming to a City Near You

All loan originators need it to participate in an upcoming event that will help all of you and you won’t even have to leave your city. Stay tuned as I will have more about this in the very near future.

Contact Me

If you want to contact me about anything, please use the e-mail address or address. My old e-mail address is really not working anymore and it is a chore to go get those e-mails.

Thank You Members!

I want to thank all of you for everything that you as members are doing to make this association successful. I am truly grateful to all of you for your belief in me and in our Board. I just wanted to say a heartfelt “Thank You.”

Something Huge Next Week

Next week, I am going to address a huge topic concerning compliance. I think this one will help everyone and it is a huge topic for all involved in the mortgage profession.

Until next week!

Donald J. Frommeyer, CRMS, President
NAMB—The Association of Mortgage Professionals


FHA’s Galante Offers Alternatives to Rolling Back MI Premiums
APR 10, 2014 1:01PM ET

The Department of Housing and Urban Development is pushing back against industry groups calling for the Federal Housing Administration to reduce or rebalance its mortgage insurance premiums.

“Now is not the right time to do a wholesale rollback of mortgage insurance premiums,” FHA Commissioner Carol Galante told a group of mortgage bankers on Wednesday. “We have a long to go to meet our statutorily required 2% capital reserve ratio.”

Three industry groups have urged FHA to rebalance its 1.35% annual MI premium and its 1.75% upfront MI premium to make FHA loans more affordable. But such a change would reduce FHA revenue.

The commissioner stressed that it’s important to strengthen the FHA single-family mortgage insurance fund and find other ways to increase access to credit. “We must do both,” she told attendees at the Mortgage Bankers Association’s Washington Policy Conference.

HUD is moving ahead with a housing counseling program called HAWK (Homeowners Armed with Knowledge) that will reward FHA borrowers that receive counseling. “That means lower upfront MI premiums at closing and a permanent reduction in the annual premiums after several years or both,” Galante said. She indicated that the details of the HAWK program will be announced very soon.

“Housing counsel in our mind is very important. We know the borrowers who receive counseling are up to 30% less likely to default on their mortgage than buyers who don’t,” she said.
The FHA is also working on creating a new performance measure that might reward lenders for extending credit to lower-score borrowers.

Lenders have been complaining for some time that a compare ratio FHA currently uses to measure lender performance leads to conservative underwriting in an environment where credit is already tight.

“We have heard loud and clear from lenders,” the FHA commissioner said, that the compare ratio has resulted in a “race to the top” in terms of credit quality.
“FHA is coming up with another performance metric that is maybe more sensitive to bucketing by credit scores for example,” she said. “We will be ready to speak about the specifics of this fairly soon.”


Democrats think cost-benefit analysis is ‘dangerous’

Trey Garrison April 8, 2014

The House Financial Services Committee hearing on the economic consequences of regulatory rulemaking and enforcement on Tuesday got heated early and often.

The House committee hearing examined the cost to businesses in terms of money and productivity of federal agencies like the Consumer Financial Protection Bureau, the Federal Reserve, the National Credit Union Administration and others.

While the hearing focused on all the regulators, the CFPB was the focus of discussion for a great deal of the hearing time.

The committee also discussed products and services that are no longer being offered because of agency actions, and the standards agencies follow in determining whether to engage in formal rulemaking under the Administrative Procedure Act.

Meredith Fuchs, CFPB general counsel, was among the witnesses. Fuchs was questioned CFPB employee allegations of discrimination and retaliation by the CFPB’s leadership.

The committee also raised questions about the CFPB’s use of consent orders, through which the bureau has extracted commitments from financial institutions far greater than existing statutes and regulations.

Committee Chair Jeb Hensarling, R-Texas, said that agencies like the CFPB need to adopt cost-benefit analysis in their regulatory activities – an approach that ranking minority members on the committee have opposed.

“Likewise, many Democrats have harshly criticized cost-benefit analysis. Looking at the pluses and minuses of a rule, the impact on jobs, asking the question whether a rule on balance helps or harms hardworking, struggling American families. The ranking member, for example, declared that legislation requiring cost-benefit analysis is ‘dangerous.’ I believe what is ‘dangerous’ is sweeping under the rug the mounting evidence that many rules promulgated under Dodd-Frank Act and its ideological precursor, the CARD Act, are harming consumers,” Hensarling said.

“The Federal Reserve now reports that one-third of black and Hispanic borrowers would be hurt by the Qualified Mortgage rule. In the American Banker Association’s most recent lending survey of banks, one-third of respondents said they plan to reduce their mortgage lending only to QM loans. Perhaps that is why QM is rapidly becoming known as the ‘Quitting Mortgages’ rule,” he added.

“It is time for all to take off partisan blinders and acknowledge the truth that Washington regulators aren’t always right and more red tape is not always the solution to every problem. It is time to hold Washington accountable,” Hensarling said.

U.S. Rep. Maxine Waters, D-Calif., the ranking Democrat, defended federal bureaucrats and regulators, who she said put the financial system on more stable footing after the worst economic crisis in a generation. Waters called the committee for what she said is “continuing to push an ideologically-driven agenda focused on deregulation.”

Also at the committee hearing examining how burdensome regulations cost jobs, Waters said the committee was avoiding “real, serious issues that need the immediate attention of the committee, issues that grow our economy and create jobs.”

“Rather than accuse ‘Washington’ of restricting ‘economic freedom’ we should be taking up bills that grow our economy and create good jobs for U.S. workers,” she said.

Waters is a vocal defender of the CFPB.

U.S. Rep Scott Garrett, R-N.J., upped the ante on reform, saying that most of the regulatory agencies before the committee should be merged into an agency with more accountability to the people.

“Dodd-Frank bestowed almost limitless powers to the banking regulators and especially to the Federal Reserve. Unfortunately, all of these agencies continue to operate with little, if any, accountability. Instead of technocrats implementing the directives given to them by Congress, the banking agencies now operate as policymakers on steroids—carrying out their own regulatory ambitions and even blatantly defying clear Congressional directive. Mr. Chairman, this is completely unacceptable,” Garrett said. “Given this lack of accountability to Congress, I believe this Committee should seriously examine the appropriateness of merging and reforming these agencies to ensure a greater level of accountability and responsiveness to Congress.”

Frequent CFPB critic and committee member U.S. Rep. Sean Duffy, R-Wis., said regulatory oversight may be necessary to protect citizens, it’s a bigger threat to the citizenry when the regulatory body itself won’t regulate itself.

“Dirty water is annoying, dirty glasses are annoying, and a dirty CFPB is really annoying,” Duffy said.

In its comments on the hearing, the National Association of Federal Credit Unions stressed that credit unions did not cause the economic downturn yet remain in the crosshairs of regulations created under the Dodd-Frank Act to address the activities of those entities that did.

“Today, credit union lending continues to grow at a solid pace, up about 6.8% at the end of 2013 compared to 2009,” the NAFCU statement says. “In short, credit unions didn’t cause the financial crisis, they helped blunt the crisis by continuing to lend during difficult times, and perhaps most importantly, continue to play a key role in the still-fragile economic recovery.”

In a 2012 NAFCU survey of association members, 94% of respondents said they saw their compliance burdens grow since the 2010 passage of the Dodd-Frank Act. In a March 2013 survey, nearly 27% of respondents had increased their full-time equivalents for compliance personnel from 2012 to 2013; and more than 70% of respondents said they have had non-compliance staff members take on compliance-related duties to address the growing burden.

Scott Alvarez, general counsel for the Federal Reserve Board, said that the Fed has kept apace with Dodd-Frank.

“The Federal Reserve has made significant progress in implementing the Dodd-Frank Act and other measures designed to improve the resiliency of banking organizations and the financial system,” Alvarez said. “The Federal Reserve will continue to work with other U.S. financial regulatory agencies and the institutions we supervise to ensure that these institutions operate in a safe and sound manner and are able to provide credit even during economic downturns.”


Monday, April 7

On The Road Again

As you read this week’s edition, I am traveling to St. Louis to attend the Missouri Conference that is Tuesday, April 8, 2014. At the end of the month, I will be at the Texas Roundup in San Antonio. This is the first State Conference for the new Association there. I will be speaking at both conferences about what NAMB is doing and looking forward to the rest of 2014.

Government Affairs

The GA committee is staying very active with putting together their new “REACH OUT” program that will become active around June of this year. It will be a comprehensive program that will help all members become active in reaching out to their elected officials in both state and national politics. I want to thank Rick Bettencourt and Fred Kreger in being ahead of the game as far as Government Affairs. Roy Deloach, our Lobbyist has also worked a lot of hours in representing NAMB and having discussions on the Hill. These three men have continued to make sure that NAMB is well represented and we have a lot of information coming to us about items being discussed.

NAMB+ Endorsed Provider of the Week

Vegas in September

Plans are coming along very well for the NAMB National Conference in September. It should be about June 1st when the actual conference information will go out and you will be able to register for the conference. I am truly excited that we will be celebrating NAMB’s 40th Anniversary. I will be personally inviting all of the Past Presidents to this event and honoring past Brokers of the Year. You are going to want to be part of this historic event. So start to save your money. We have arranged for some great rates at the Luxor, and we will also have a great Exhibit Hall for all of you to enjoy.

Thank You for Participating in the PAC

I want to also thank all of the people that participated in the PAC auction and PAC donations at the Ledge Conference, especially those that set up monthly donations. You are the true mentors of this association and I appreciate all of your time, effort and donations that you give to PAC. THANK YOU.

The Busy Season

I know that I have begun to be busier as the spring season comes along. My realtors and prospective buyers are getting a little more active in looking for their “DREAM” home. Just a reminder that Refinances are also picking up for those people that have waited until now to look and see what is available.
Remember, Customer service is the key to continued success. Don’t forget about your customer.

Lending Integrity Seal

As a final note this week, I looked at a report that listed the Lending Integrity members by state. I was amazed that some states are at 75-90% of their total membership have this Seal and then others are at 5-15% of their members. You, the STATE Affiliates need to get on your members to make sure that it is part of what each member does at renewal or when they become new members. Please, have your members go on and become Seal Owners today!!! (Remember, you have to be an originator to get the Seal of Approval.)

Thank You!

I thank you the member for being part of this association. We are nothing but the sum of the digits and each of you add up to make this organization successful. I thank you. Over and Over again.
Until next week!

Donald J. Frommeyer, CRMS, President
NAMB—The Association of Mortgage Professionals


Democrats, Republicans Vow to Continue Probe into CFPB Employment Practices

by Rachel Witkowski
APR 2, 2014 5:23pm ET

WASHINGTON – Lawmakers from both sides of the political aisle reached a rare
accord Wednesday during a House Financial Services subcommittee hearing,
pledging to further investigate allegations of retaliation and
discrimination among employees of the Consumer Financial Protection Bureau.

In the days immediately preceding the hearing, Democrats had called on the
Republican committee leadership to cancel it, saying what was meant to be a
broad discussion prompted by an American Banker article had instead become
about a single case.

By the end of the hearing, however, Rep. Maxine Waters, the top Democrat on
the House Financial Services Committee, said the discussion had been
productive and raised important issues that warranted further examination.

Initially the hearing turned into “one person, one hearing,” Waters told
Rep. Patrick McHenry, chairman of the House oversight and investigations
subcommittee. “But since it’s turned out to be what it is, I agree with you
that it should be held. I like what we have here today . and [those
testifying] just opened up a conversation in a way we’ve never had before.”

The hearing featured Angela Martin, a senior enforcement attorney at the
CFPB, and an independent investigator who was called in to examine her
allegations of discrimination and retaliation. Both witnesses said the CFPB
has a systemic problem of “hostility” by management after employees file

But McHenry told Waters the hearing “is not simply about Angela Martin.”

“It’s the Angela Martins within these agencies, whether there’s one more or
dozens or hundreds more,” he said. “It is important we have that oversight.”

The CFPB declined to send witnesses in response to the allegations, saying
it would interfere with the integrity of the internal grievance process.

Instead, CFPB Director Richard Cordray issued a statement: “I take seriously
the concerns raised at today’s hearing and deeply apologize to any member of
the CFPB staff who feels that they have not been heard or treated fairly.

“I welcome the opportunity to appear before Congress to discuss these issues
fully,” Cordray said.

That appears to be where lawmakers are headed next. Democrats urged
committee leaders to hold a full panel hearing featuring senior CFPB leaders
to discuss broad concerns about the agency’s Equal Employment Opportunity
process and allegations of discrimination. Moreover, Democrats are seeking
to probe possible discrimination at all the federal banking regulators.

“I do not see this as the end, I see this as the beginning,” said Rep. Al
Green, D-Texas, the ranking member of the House oversight subcommittee. “I
believe we are at Genesis and I think Revelations are yet to come. But to
get to revelations, we cannot focus solely on one regulator.

“We have to allow revelations to go through the other regulators as well.
It’s important that we require the empirical evidence necessary to ascertain
whether or not this type of behavior that we are investigating today exists
in other agencies as well.”

Nine Democrats, including Waters and Green, sent letters last week to the
inspector generals of all the federal financial regulators as well as the
U.S. Treasury Department requesting an investigation of their employment
policies and practices with regard to women and minorities.

The hearing originally stemmed from documents obtained and reported by
American Banker on March 6 that showed racial disparities among how
employees were rated. The story also discussed the more than 100 official
grievances filed in the past several months, largely over allegations of pay
inequity and unfair treatment. (The CFPB has since said it was changing the
performance evaluation process.)

But the hearing largely revolved around Martin’s case as a symbol for larger
issues within the CFPB. The panel also heard additional testimony from Misty
Raucci, a former director of the Defense Investigators Group, who looked
into the case on behalf of the CFPB.

Raucci’s report, provided to the CFPB in December, strongly backed Martin’s
allegations that she had been retaliated against by agency managers. The
CFPB has said the report is biased and unfair since it relies in part on
claims by anonymous sources.

Such a claim is ironic, Martin said, because the agency itself relies on
anonymized data for employee evaluations and other actions.

Raucci said Wednesday that she was initially supposed to only collect two to
five statements about Martin’s case, but that it quickly spiraled into a
six-month investigation as she “became a veritable hotline for employees at
CFPB, who called to discuss their own maltreatment at the bureau.” She said
many of the complaints focused on a particular agency division.

“I found that the general environment in Consumer Response is one of
exclusion, retaliation, discrimination, nepotism, demoralization,
devaluation, and other offensive working conditions which constitute a toxic
workplace for many of its employees,” Raucci said in her written statement.
“The corrosive environment of the CFPB workplace was engendered by the
bureau’s perpetual failure to uphold its own EEO policies.”

A spokesman for the CFPB, Samuel Gilford, rejected Raucci’s findings.

“We do not believe that this report is credible or valid,” Gilford said in
an emailed statement. “It is based upon unsworn statements of sometimes
anonymous witnesses, the veracity and credibility of which cannot be tested.
The investigator also failed to provide subjects an opportunity to address
or respond to the witnesses and all of their allegations.”

Martin said that she also has become a champion for other employees who are
unwilling to come forward for fear of retaliation. She repeatedly said that
lawmakers should not look solely at the details of her case, but at the
“dozens” of other employees who are scared to speak out.

“The time that it takes and the emotional toll on all these employees when
someone can simply say ‘no, it ends here,’ is unacceptable,” Martin said.
“My biggest goal is the restoration of EEO process and the due process
itself. I’m telling you stories about consumer response because that’s where
some of the stories lie. But this is a bureau [wide] systemic problem and
the EEO process itself is unhealthy and needs to be fixed.”

Overall, lawmakers on both sides of the aisle appeared disturbed by Martin’s
testimony, including Democrats normally sympathetic to the CFPB. Most went
out of the way to praise her for coming forward.

Martin, who is white, said she was speaking for many African-Americans and
other minorities who had spoken to her about their cases. She claimed that
many managers at the CFPB were “racist” and made inappropriate remarks. She
also alleged that one division of the CFPB, which was dominated by
African-Americans but managed by white employees, had become known
internally as “the plantation.”

Lawmakers were also alarmed by the sheer length of time it took to deal with
Martin’s case, which started in late 2012 and is still ongoing. House
Financial Services Committee Chairman Jeb Hensarling also asked Martin about
direct contact between Cordray and her about the case. She said he called
her on Aug. 7 of last year and asked her to tell her attorneys to “back
down” so they could strike a deal.

“In a two-minute conversation he told me to tell my attorneys to back down
because he was trying to secure me a position in [the division of]
enforcement,” Martin said. “My reporting structure was the last thing to be
settled and I settled it the next morning and everything was fine and I was
coming back to work.”

But that turned out not to be the end of the case.

“We actually signed the settlement agreement on August 14. But what I did
not know was on August 8, after I thought it was settled, Director Cordray
and somebody else gave that position to somebody else,” she said. “That is
what the fight is about now currently with the bureau that I don’t have a

Hensarling forcefully responded by saying “we will fight not to let you and
the other employees down.”

“It is not my custom to speak at subcommittee hearings, but today is clearly
an exception. As most members, I have been moved by what I’ve heard,” he
said. “As chairman of this committee, if this was merely restricted to Ms.
Martin’s story, as compelling as it is, I would not have allowed this
hearing to go forward. But instead, regrettably, shamefully, this appears to
be the tip of the iceberg.”


CFPB awash in mortgage complaints

Nearly 5,000 a month in 2013 alone

Trey Garrison
March 31, 2014

The Consumer Financial Protection Bureau is in the complaint business, and business is good.

The CFPB received 163,700 consumer complaints in 2013, nearly double the total 90,000 they received in 2012.

The CFPB’s Consumer Response Annual Report shows that the bulk of the complaints – a plurality of 37% – were related to mortgages. Some 37% of overall complaints – about 59,900 – were most concerned with loan modifications, collections, or foreclosures.

“Consumer complaints have become central to the work of this agency. They enable us to listen to, and amplify, the concerns of any American who wants to be heard,” said CFPB director Richard Cordray. “They are also our compass. They make a difference by informing our work and helping us identify and prioritize problems for potential action.”

The full report can be read or downloaded here.

The Dodd-Frank Wall Street Reform and Consumer Protection Act created the CFPB and established the handling of consumer complaints as an integral part of the CFPB’s work.

The CFPB fields complaints about credit cards, mortgages, bank accounts and services, private student loans, vehicle and other consumer loans, money transfers, payday loans, debt collection and credit reporting.

“The most common type of mortgage complaint involves problems consumers face when they are unable to make payments, such as issues relating to loan modifications, collections, or foreclosures,” the report says. “Consumers with successfully completed loan modifications have complained that some servicers do not amend derogatory credit reporting accrued by consumers during trial periods – even when documents provided to the consumers by servicers indicated that they would do so.

“Consumers seeking short sales have reported that second-lien holders refuse to accept or subordinate in a short sale, whereas some consumers who do obtain a short sale have concerns with the loan account being incorrectly reported as a foreclosure,” it states. “Consumers facing foreclosure have expressed concern and confusion about fees assessed in connection with the foreclosure process.”

Other common types of mortgage complaints address issues related to making payments, including loan servicing, payments, or escrow accounts.

The CFPB pushes for assistance for consumers with such avenues as foreclosure alternatives, corrections to credit reports, protection from debt collectors, and customer service.

Of all mortgage complaints, 77% are closed with a simple explanation or clarification to the consumer, without relief of any sort.

About 2% of mortgage complaints are closed with monetary relief, while 7% are closed with non-monetary relief.

The report covers all complaints received by the CFPB from Jan. 1, 2013 through Dec. 31, 2013. This is an 80% increase over the previous year’s 91,000 complaints. To date, including this year, the CFPB has received more than 310,000 complaints.


Rise of Mortgage ‘Mini-Correspondents’ Raises Concerns

The hottest channel in mortgage originations is the so-called mini-correspondent business. Loan aggregators seem to be tripping over themselves to work with these small mortgage bankers. There’s just one problem.

Critics say many of these outfits are really mortgage brokers in all but name, lacking the staffing needed to prevent fraud and the capital to repurchase loans that go bad.

And while some view mini-correspondent as a legitimate niche that just requires special attention from lenders, other observers worry that the channel’s primary reason for existence is to allow mortgage brokers to avoid the qualified mortgage rule’s 3% cap on points and fees.

“There is still a question mark about … whether it is an effort to circumvent the Consumer Financial Protection Bureau. That is the big concern right now,” says Tom LaMalfa, an industry consultant.

Mini-correspondents are mortgage bankers that have limited net worth. They can close loan in their own names, but typically the warehouse lines are either provided by entity buying the loans or require lender approval of the takeout investor.

One industry veteran who is highly skeptical of the mini-correspondent channel says these outfits lack the infrastructure to control fraud risk.

“I’ve been in shops that have no underwriters, no docs people and no funders. There are people out there buying loans from them,” says Rick Soukoulis, the CEO of mortgage banker Western Bancorp in San Jose, Calif.

risk continuum

The channel exists because of displacement of originators in the market, says David Lykken, managing partner of Mortgage Banking Solutions, a consulting firm in Austin, Texas. The bar has become higher and higher for mortgage brokers to stay in business because of requirements being put on them by the government, he continues. So a number of them are seeking warehouse lines as a reaction to those changes.


Mini-correspondent is not a new term; the channel existed prior to the housing crisis, says Rick Seehausen, the CEO of LenderLive Networks, an outsourced fulfillment services provider in Glendale, Colo.

“In our sales presentations, ‘mini-correspondent’ is a term that we used back in the early to mid-2000s,” he says. Besides mini-correspondent, other terms for whole loan sellers used in the market include broker-to-banker conversions, delegated correspondent and non-delegated correspondent.

“Is the non-delegated correspondent and the mini-correspondent one thing or two things? I think these are different terms being used to fundamentally describe the same thing,” Seehausen says.

The lines defining these channels are “nebulous,” LaMalfa says.

A dubious distinction was drawn between the yield-spread premium paid to brokers and the servicing-released premium paid to correspondents during the George H.W. Bush administration, when the Department of Housing and Urban Development said the sale of a whole loan was a true secondary market transaction while a brokered loan transaction wasn’t.

This divide drove many of the early broker-to-banker conversions. The fees paid by the purchaser of a closed loan do not have to be disclosed to the borrower but fees paid on a brokered loan do.

A similar rule applies to the 3% fee cap established in the QM rule under the Dodd-Frank Act. Fees paid to the broker by the lender count towards the cap, but whole loan sale fees don’t. The CFPB did not return a request for comment on whether it is looking at the issue.

The typical minimum net worth for a mini-correspondent is $75,000. With such thin capital, Soukoulis says, if there is a problem with the loan, “what are you going to buy back?”

The same worry about buybacks concerns John Councilman of AMC Mortgage, a brokerage based in Fort Myers, Fla. Becoming a mini-correspondent is “too dangerous” for a firm like his, he says.

There is no market for loans that fall outside mainstream investor guidelines, so having to repurchase one, or take it off the warehouse line, “would be devastating because of the losses we would suffer,” he says. Traditional correspondent sellers are “are getting clobbered” when they have to buy back a loan.

Councilman, the president-elect of NAMB, a broker trade group, says he looked at becoming a mini-correspondent, but instead AMC Mortgage has gone the opposite direction. It dropped two of its three mortgage banker’s licenses, in Pennsylvania and Florida, and kept the one it had in Maryland only because it used to originate some loans there for its portfolio.

In a lot of cases with the new crop of mini-correspondents, it is the takeout investor that is providing the green light to close, not the warehouse provider, says Soukoulis.

That situation is “like having a credit card in your wallet, but unless you showed up with me at Macy’s you couldn’t buy a pair of socks; ‘I’m here with Brad, he’s good for those socks.’ It is a ridiculous proposition,” he says.


Stanley Middleman, the CEO of Freedom Mortgage in Mount Laurel, N.J., agrees that the staffing is thin at many of these mini-correspondent shops. But he says he looks at the channel from the perspective of the creation of the mortgage servicing right asset.

There is a legitimate difference between the various origination channels in terms of the work to be put in by the buyer regarding the acquisition of the related mortgage servicing right. As the amount of work a company like Freedom has to do to originate the MSR asset increases, the price paid for it decreases.

Buyers are willing to pay the most for bulk portfolio purchases of MSRs, because they have to put the least amount of work into their creation, says Middleman.

Of the nine points along the continuum Middleman describes (see chart, above), mini-correspondent is in the middle. The buyer pays less than a closed loan purchased on a flow basis, but more than it would for a loan the buyer has to close in its own name that is originated by a broker.

Up and down the scale, companies must weigh the cost of acquiring loans against the savings from having someone else produce them, to determine what is best for their own business.

“With costs running away as fast as they are, today it may be more relevant to do less of the work and have … less exposure to personnel costs by off-loading some of those responsibilities you took on to pick up additional margin when volume was high,” Middleman says. “By understanding the different channels, you can better manage your business by altering your delivery process and using that to your advantage.”

Freedom has put its mini-correspondent unit together with its wholesale unit. “We consider them similar because we underwrite the loans and draw the documents for those loans in both those instances,” Middleman says. But because the mini-correspondent funds the loan in its own name, it gets a little bit of a better price than a broker, he says.

Other companies lump the mini-correspondent channel together with the full correspondents, and Middleman says he wouldn’t second-guess their decision. “It’s just chocolate and vanilla. It is who prefers to do what and for which reason. Often it is driven by the sales force and the company’s ethos and the way they see the world,” he says.


While Middleman says Freedom is comfortable with the size and structure of the mini-correspondents it buys from, Soukoulis at Western Bancorp fears the bar for new mini-correspondents is moving lower.

“The salesman is in charge of the boat. It is everything you don’t want,” he says. Particularly considering the role fly-by-night mortgage brokers played in the industry’s last debacle.

“We’ve worked real hard since the collapse to get a little bit more control over the brokerage side of the business,” so brokers can’t falsify borrower names or appraisals. “It is virtually impossible, other than for occupancy, to commit fraud.”

But the skeletal staffing and paltry capital at many mini-correspondent shops could push the needle back into the opposite direction.

If there is a problem with the loan, the aggregator is likely stuck with it, just as if the loan had been brokered. The mini-correspondent lacks the net worth and/or access to scratch and dent or other credit facilities to repurchase the loan, Soukoulis argues.

Seehausen at LenderLive begs to differ. Lenders, he says, have strict controls over the mini-correspondent, and little risk. The originator “has a loan the investor wants to buy. The investor’s looked at it and said ‘Yep, I like this loan.’

“And that’s all good. There is nobody trying to circumvent the system here,” Seehausen says.

Rather than lightweights, mini-correspondents were typically “larger brokers that could have been mortgage bankers anyway,” he argues. They just didn’t have much incentive to obtain warehouse lines before Dodd-Frank’s fee cap and other rules tipped the scales in favor of doing so.

“You don’t get a warehouse line if you don’t have a healthy and strong balance sheet, profit and loss statement and things of that nature. The smaller brokers aren’t going to able to do that,” Seehausen says.

Even for captive warehouse line, the mortgage banker has to meet certain financial thresholds, Seehausen notes. These lines have requirements for the mortgage banker to maintain financial performance or the line can be revoked.


Graduating to mini-correspondent status empowers brokers and allows them to create strategic partnerships with vendors, warehouse banks and investors, says Scott Compton, divisional production executive for Plaza Home Mortgage in San Diego.

Real estate agents like dealing with lenders, including mini-correspondents, he said, because “they think you are in control [of the transaction] and you truly are,” Compton told attendees at the Regional Conference of Mortgage Bankers Associations in Atlantic City, N.J. in March.

A retired New Jersey regulator in the audience, Sue Toth (who is also a past president of the American Association of Residential Mortgage Regulators), brought up an alarming trend: There are websites which say originators can act as mini-correspondents while still licensed as brokers. In New Jersey, at least, this “is a no-no,” she said. The Garden State has a strict definition of who qualifies to be a mortgage banker.

Compton replied that his company will do a one-on-one interview with the prospective mini-correspondent and the first topic is licensing. Many of those looking to make the move have been told by others that they could be a mini-correspondent with their current status, only to be told later by regulators that they could not, he said.

Soukoulis says he founded a mortgage brokerage and moved up to be a mortgage banker a number of times in his career.

“There is nothing wrong with the emerging mortgage banker market. But nobody ever let me do it for $75,000 in net worth,” he says.

Even if the mini-correspondent channel lasts, the name may not.

“I think it’s a bad term because nobody feels good about being a ‘mini’ anything,” Seehausen says.





Today, we’re releasing the Small Entity Compliance Guide for the TILA-RESPA Integrated Disclosure Rule, designed to help you determine your federal mortgage disclosure compliance obligations for the mortgage loans you originate.

Check out the TILA-RESPA rule compliance guide:

The guide highlights issues that you might find helpful to consider when implementing the rule. It may also be helpful to settlement service providers, software providers, secondary market participants, and other firms that serve as business partners to creditors.

In the coming weeks, we’ll send you an update when a companion guide with details about completing the new integrated disclosure forms is available. We also posted Loan Estimate and Closing Disclosure forms in both English & Spanish and samples for different loan types.

See all the resources available for the TILA-RESPA Integrated Disclosure rule.

Thank you,

The Consumer Financial Protection Bureau

P.S. We’ve made some enhancements to the way you can access the various regulatory implementation resources. Be sure to check out the changes and the resources available.


‘Big Swath’ of Borrowers Left Behind, FHA Commissioner Says

by Brian Collins

MAR 27, 2014 3:08pm ET

Since March 2011, Carol Galante has served as the Federal Housing Administration commissioner, where she has strived to recapitalize the agency’s mortgage insurance fund and revamp its reverse mortgage program.

In a March 25 interview, the FHA commissioner discussed recent market trends and the issues relating to access to credit.

Q: We are seeing lenders lowering their minimum credit score requirements for FHA borrowers. Are you encouraged by this trend?

A: Yes. We think one of the major issues in the market right now is that lenders have not been lending to the FHA’s full credit spectrum.

A recent Urban Institute shows that 13 million people have credit scores between 580 and 680. There is a big swath of potential borrowers that are not being served. We think it is a good thing that lenders are taking a more serious look at this population.

Q: Is the FHA still planning to adjust its automated underwriting system [Total Scorecard] in April to encourage lenders to the use manual underwriting more often?

A: We think Total Scorecard as an underwriting system is great for most borrowers. We just want to be sure that those who are being referred to manual underwriting are getting the full treatment they need.

Previously, borrowers were referred to manual underwriting, but the lender was not given a lot of detailed guidance about what to look for in terms of reserves and compensating factors to get that borrower approved. Now lenders will have more detailed guidance to follow.

Q: One trade group is urging FHA to lower its annual premium while boosting its upfront fee. They contend the 1.35% annual fee pushes up the [debt-to-income] ratio—making it harder for borrowers to qualify for a FHA loan. Is FHA considering any changes to its premium structure?

A: I would say there are two issues—access to credit and affordability.

Lending to the full credit spectrum is in my mind the biggest problem. There are a lot of people who qualify in that credit spectrum and we need to be serving those borrowers.

Affordability is also an issue. But our view is that right now we have to be doing things that expand access to credit but also continue to protect the FHA fund.

The mortgage insurance premiums we put into place were very important in terms of pricing our risk appropriately and ensuring we are protecting the fund as well as providing access.

Q: FHA purchase mortgage endorsements have been trending down. Do you expect to see a pickup in FHA loan volume going forward?

A: Our purchase volume has gone down with the rest of the market. It is actually quite stable in terms of our market share. I really think this is [more] a broader market issue than a FHA issue.

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