Nov 23, 2015

With TRID Regs in Place, Mortgage Industry Braces for What's Next

According to Mortgage news, Strategies that help mortgage lenders get a handle on final Dodd-Frank Act implementation costs and better reach the next generation of homeowners will be among the hot topics discussed during the 2015 Mortgage Bankers Association's Annual Convention.
"Everybody and their brother will be asking each other 'How's TRID going with you?'" said Terry Moore, senior managing director at Accenture Credit Services.

Everybody and their brother will be asking each other 'How's TRID going with you?'" said Terry Moore, senior managing director at Accenture Credit Services.

The long-term operational effects of Dodd-Frank compliance might not be clear for at least another year or two. In the meantime, as initiatives like the Truth in Lending Act-Real Estate Settlement Procedures Act Integrated Disclosures take root, mortgage bankers will be looking for any clues that can help them budget for the future.

"Everybody's going to be on the lookout for what the new normal looks like," said Rick Roque, managing director of retail lending at Michigan Mutual, a national retail and wholesale lender based in Port Huron, Mich.

With many companies adding personnel and operational support to minimize closing delays under TRID, lenders are debating whether these costs represent a short-term or permanent investment.
"I think folks should have visibility on that in the next two to three weeks," Moore said in an Oct. 5 interview.

The work to establish system and processes changes to implement TRID may be in the industry's rearview mirror, but concerns remain about other compliance requirements, including increased enforcement of fair lending regulations, said Roque.
"There will be a fair amount of conversation about what technology you use to manage TRID and fair lending requirements," he said.

As operational costs continue to rise and the Federal Open Market Committee considers a rate hike that could further hamper profits, wary lenders are sticking to a "batten down the hatches" mentality that limits new initiatives to technology and process changes that increase efficiency and reduce credit risk.

Meanwhile, opportunistic firms with the risk appetite to aggressively pursue revenue growth will focus on strategies to finance underserved borrowers or acquire competitors. Roque put his firm in this camp, and expects as much as 15% to 20% attrition in 2016 due to the likelihood of increased costs and competition.

The challenge of rising costs and slowing volume for lenders also carries over into the secondary market, where the return of private capital remains limited and investors await the Qualified Residential Mortgage securitization regulation going into effect later this year, according to Lisa Weaver, a senior vice president at ISGN.

"How big the market really is for private capital, that will be a general theme of the conference because the volumes have gone down," she said. "There's very little growth in the market."
And so long as government agencies dominate the secondary market, attendees will be interested in what they have to say about purchase criteria and risk management technology.

Attendees will also be looking for more transparency from the government-sponsored enterprises about how they price credit risk.
"I'd like to see the GSE speakers expand and clarify the present opportunities, as well as the future intention, of the new risk-sharing pricing," said Kurt Noyce, president of Embrace Home Loans.
The status of the agencies' manufactured housing rule will be another hot topic at the conference, said Joseph Murin, a former Ginnie Mae chairman who now heads an investment firm and sits on the boards of two mortgage-related companies. Attendees also will be interested in details Ginnie Mae plans to provide on its new liquidity requirements for nonbanks, said Murin, who is a member of NewDay USA's board of advisors and Cherry Hill Mortgage Investment Corp.'s board of directors.
A Federal Housing Administration proposal to establish a 12-month deadline for servicers to file mortgage insurance claims should also spark discussion, Murin said. Servicers are concerned the proposal may be too strict, given the current industry average for filing FHA insurance claims is 30 months.

Another government-related hot topic will be the additional leeway the Consumer Financial Protection Bureau is giving small and rural lenders when it comes to the Qualified Mortgage definition, he said.
In addition to recent government and regulatory issues, mortgage professionals are concerned about more long-term challenges, including how best to manage liability for third-party business partners, Murin said.
"That's an issue that's going to be more in the forefront," he said.
There also will be discussion about the future of the government-sponsored enterprises and what more the industry can do to both lend to and hire millennials, said Murin.

"The whole industry needs to think more about who is going to step in and start taking over the mortgage banking industry as time goes on," he said. "It's not something you can discuss once and forget about."

Gas below $1? Good or bad?

The impact of lower gas prices on the economy can be seen in two ways. One; on the industry related - energy, and the other on the broader economy.

Obviously the impact on the energy sector is negative and the related mortgage industry is going to be negatively impacted (states/regions that have a positive correlation with the amount of money being spent on energy).

The broader economy will have a positive impact, due to the fact that people are going to have more disposable income from the lower prices they pay at the pump; and also hopefully the lowering of inflationary pressures due to lower transportation costs. The second factor has the potential to improve the entire consumer centric economy. 

A recent article in 24/7 Wall Street/USA today questions whether gas would go below $1 a gallon in states that have lowest taxes today and have refiners that have excess capacity.