Non-QM continues to boom – and it’s more important than ever for mortgage originators to add it to their toolbox, according to Angel Oak Mortgage Solutions.
“I think it’s an absolute must,” said Tom Hutchens, executive vice president of production at Angel Oak Mortgage Solutions. “It’s more than important – I think as a loan officer today, if you are not offering non-QM, you’re short changing yourself and allowing competitors to take business from you.”
Hutchens said the company was focused on training loan officers on how to promote and sell non-QM products.
“As the market has pulled back and refinances have gone down, everyone wants to go after purchase transactions,” Hutchens said. “Non-QM, to me, is the perfect purchase product. It gives loan officers more tools to go after more homebuyers. They need to get in front of not only real estate agents, but builders and even other loan officers. So we’re teaching them how to expand their network. Expanding that network and using non-QM products to leverage that expansion is how they’re going to build a bigger purchase business.”
Non-QM’s comeback is still a relatively recent phenomenon – all the more reason, Hutchens said, for originators to make sure they’re educated on the space.
“We’re still at the very early stages of loan officer awareness and education – and even earlier stages for everyone else in the real estate food chain. Realtors and builders really don’t understand non-QM at all.”
“Non-QM right now is around 80% to 85% purchases,” he said. “That statistic tells me that if you want to be a purchase-oriented loan officer, you have to offer non-QM.”
The industry lost a Supreme Court battle in 2015 protecting the use of "disparate impact" in housing discrimination cases, but legal observers see potential for the fair-lending tide to turn if Judge Brett Kavanaugh is confirmed to the high court.
The 2015 ruling, related to how Texas awards housing tax credits, bolstered the legal standard under the Fair Housing Act that lenders can be punished for a discriminatory result they did not intend.
But the court has yet to resolve questions on two other topics related to fair lending that experts say could have more favorable results for banks if the Supreme Court moves even further rightward with the addition of Kavanaugh.
One deals with whether disparate impact applies to cases argued under a different law, the Equal Credit Opportunity Act. The other involves whether cities and other jurisdictions can claim damages, such as lost tax revenue or foreclosure-related costs, from lending policies alleged to have harmed minority borrowers.
"To the extent that you have a more liberal judge, they are more likely to say that disparate impact is fully applicable under ECOA," said Rod Alba, senior vice president for mortgage finance at the American Bankers Association. "To the extent that you have a more conservative judge, they are more likely to rule that disparate impact does not apply under ECOA."
But the other question, regarding cities arguing that a bank's discriminatory lending practice was a "proximate cause" of injury, may come up sooner with at least three different lawsuits moving through lower courts.
"Where we think the law can develop is in further establishing what exactly is that robust causality, what is that proximate cause. That’s where we think the court could set a very high bar," said Richard Andreano, practice leader of Ballard Spahr's Mortgage Banking Group. "While it would allow the claims still to exist, it could set the bar very high to really limit it to cases where the plaintiff clearly showed that the practice they were complaining of did in fact lead to the disparate results that they’re citing."
WASHINGTON — The leadership of the Consumer Financial Protection Bureau may soon be in play again as President Trump is reportedly weighing whether to pick a new White House chief of staff.
At the top of his shortlist is Mick Mulvaney, who currently pulls double duty as head of the Office of Management and Budget and the acting director of the Consumer Financial Protection Bureau. If Mulvaney were to get the nod from Trump, he would likely need to give up control of both agencies.
While Mulvaney downplayed these reports on Friday, the speculation has left many wondering what the administration would do with the CFPB if Mulvaney got promoted.
Following is a guide to the possibilities:
Trump picks another Senate-confirmed acting director
Trump has two ways to pick an acting director. The first, via the Federal Vacancies Reform Act, allows him to pick anyone who is already confirmed by the Senate, while Trump’s permanent nominee, Kathy Kraninger, is vetted by the Senate. That statute is what Trump used to install Mulvaney in the first place.
That gives Trump flexibility for who to pick as a temporary steward, including recently-confirmed heads of other banking regulators, such as Comptroller Joseph Otting and Federal Deposit Insurance Corp. Chair Jelena McWilliams.
“Who would that be?” said Isaac Boltansky, director of policy research at Compass Point Research & Trading. “Would it be the head of the OCC?”
Dear Valued Mortgage Professional
As your NAMB President, I am pleased to report that our advocacy work on your behalf has led to a successful ‘YES’ vote in the House Financial Services Committee on the Mortgage Fairness Act of 2017, H.R. 2570, a critical bill that will now better serve consumers and mortgage brokers throughout the United States.
This bill aims to amend the Truth in Lending Act which revises the definition of "points and fees," for purposes of determining whether a mortgage is a "high-cost mortgage," to: (1) exclude compensation taken into account in setting the interest rate and for which the consumer was not separately charged, and (2) include compensation paid by a consumer or creditor to an individual employed by or contracting with a mortgage originator.
“The passage of the Mortgage Fairness Act of 2017 marks a great day for our industry,” said Valerie J. Saunders, Executive Director of NAMB. “As a past Government Affairs Chair of NAMB, I would like to personally express the utmost gratitude for the leadership expressed on this bill by Congressman Jeb Hensarling, Chairman of the House Financial Services Committee, Congressman Blaine Luetkemeyer and Congressman Bill Posey, as the bill's sponsor, as they led the committee’s efforts to pass this critical piece of legislation. I am also very proud of the tireless energy the extended NAMB team put forth in this process as they played a large roll in this successful effort.”
President Trump has yet to formally name Kathy Kraninger as his choice to head the Consumer Financial Protection Bureau, but her nomination is already in trouble — and that may be just fine with the White House.
Kraninger has no experience in consumer finance and is currently Mick Mulvaney’s deputy at the Office of Management and Budget, two points likely to guarantee opposition from Senate Democrats and a grueling confirmation battle that will likely stretch out for months.
“The Democrats will certainly strongly oppose Kraninger’s nomination,” said Alan Kaplinsky, co-practice leader at Ballard Spahr’s Consumer Financial Services Group.
With Sen. John McCain, R-Ariz., still out on extended medical leave, Senate Republicans have just 50 votes, giving them no room to maneuver if Democrats stay united. If even one GOP senator opposes Kraninger, her nomination will fail.
“I’ll be very surprised if the Republicans push" her nomination, Kaplinsky said. “While the Republicans still have the ability to get her confirmed, I don’t see them picking a fight right now before the midterm elections. They will reassess things after the elections.”
But that risk appears to be part of the White House plan, according to industry observers, and ultimately designed to extend Mulvaney’s tenure as acting CFPB director for as long as possible.
“Either Ms. Kraninger is confirmed and she continues the reforms begun by Mulvaney for a five-year term, or her nomination is defeated and Mulvaney continues the reforms himself until well into next year,” said Ben Olson, a partner at Buckley Sandler and a former deputy assistant director at the CFPB. “The longer the nomination process lasts, the longer the Vacancies Act allows Mulvaney to stay.”
The White House may even be secretly hoping Kraninger’s nomination is defeated.