Why Haven’t Loan Officers Been Told These Facts?
COVID Impacts on Mortgage Insurance Termination For HPA and non-HPA cancellation (non-HPA means cancellation based on current value)
Rotten Payment Record? No Problem! – Not exactly.
FNMA
When verifying an acceptable payment record for a borrower that has had a financial hardship related to COVID-19 in which the servicer provided:
- A COVID-19 related forbearance plan, repayment plan, or Trial Period Plan, and the borrower complied with the terms of such plan
- A payment deferral
- A COVID-19 payment deferral and the borrower made three consecutive monthly payments following completion of the payment deferral (similar to the test used for eligible refinances)
The servicer must not consider any payment that is 30 or more days past due in the last 12 months or 60 or more days past due in the last 24 months attributable to the COVID-19 financial hardship. In addition, the mortgage loan must be current when the termination is requested, which means the mortgage loan payment for the month preceding the date of the termination request was paid.
This policy change was effective for borrower-initiated requests for termination initiated through Fannie Mae’s servicing solutions system on or after March 1, 2021.
FHLMC
For Borrowers who request to cancel Borrower-paid mortgage insurance post-COVID 19 related hardship after the mortgage has been restored to current status, the Borrower’s payment history must meet the following payment history requirements:
No payment 30 days or more past due in the preceding 12 months except when the Delinquency is a direct result of the mortgage being subject to a COVID-19-related hardship (including mortgages on COVID-19 forbearance plans), and, following the COVID-19-related hardship, transition to a relief or workout option to cure the Delinquency (e.g., repayment plan or Trial Period Plan)
AND
No payment 60 days or more past due in the preceding 24 months except when the Delinquency is a direct result of the mortgage being subject to a COVID-19 related hardship (including mortgages on COVID-19 forbearance plans), and, following the COVID-19 related hardship, transition to a relief or workout option to cure the Delinquency (e.g., repayment plan or Trial Period Plan).
For mortgages restored to current status under the COVID-19 Payment Deferral, the Borrower must make three consecutive payments following the settlement of the COVID-19 Payment Deferral to meet this qualification requirement.
Note: The requirements above apply regardless of whether the request to cancel Borrower-paid mortgage insurance is based on original or current value.
Shucks. Investor cancellation requirements are more complicated than the HPA.
Next time you mention that the PMI is cancellable at 80% LTV – please think carefully about what is said to the applicant. But, again, assuming you can successfully articulate all the non-HPA cancellation provisions, should you lead the applicant to believe the GSE’s current cancellation policies may be in effect two, three, four, or five years from now, that could be a material misrepresentation.
https://sf.freddiemac.com/content/_assets/resources/pdf/other/covid_ref_guide.pdf
Behind the Scenes
The Taper Tantrum
Watch Those Refinances, No On and Off Switch for Rate Changes
To Explore Strange New Worlds, to Seek Out New Life and New Civilizations, to Boldly go Where no Person has Gone Before :).
How can Mortgage Originators not only survive the mortgage market downturn but also use these headwinds to create better strategies?
In the book Blue Ocean Strategy, authors Renée Mauborgne and W. Chan Kim identify the extraordinary growth and success Cirque du Soleil achieved when the appeal of the traditional circus offering was waning.
Instead of going head to head with Ringling Brothers, Cirque du Soleil reinvented the circus and found new venues and new circus customers. In doing so, Cirque du Soleil redefined the circus space according to their strategy.
In the 80s and 90s, children, the primary circus customer, grew less impressed with circus acts than previous generations. The loss of circus customers was on account of competing attractions. For younger kids and adolescents, video games were just one of the attractions crushing most other forms of entertainment. Additionally, rising expenses pushed the cost of taking the family to the circus beyond the reach of many households.
Besides the waning appeal of the traditional circus acts, the circus faced even more significant headwinds. The use of live animal acts had many stakeholders concerned about animal rights and animals rights activism. The demise of the traditional circus was in clear view when Cirque du Soleil adopted their bold new strategy.
Cirque du Soleil kept the traditional circus’s lower-cost elements such as acrobats and clowns but ditched higher-cost, higher-risk acts – the animals. Instead of drafty tents and sawdust venues, Cirque du Soleil boldly moved into upscale theater spaces. By unifying the productions into more thematic productions, Cirque du Soleil attracted theatergoers.
Rather than the three-ring circus, Cirque du Soleil offered more sophisticated storylines coupled with highly artistic sets. As a result, this circus became more like a Broadway Show or rock concert. In this approach, Cirque du Soleil opened up another market, previously untapped by traditional circus fare. Essentially, those monied Hipsters and Yuppies searching for the latest trendy experience.
Cirque du Soleil tapped into the monied set, willing to pay for a novel experience. Instead of operating with thin margins and selling peanuts and plastic animals to make ends meet, Cirque experienced tremendous growth and high margins from ticket sales. That is until COVID struck.
Despite Cirque’s COVID-related demise, Cirque du Soleil carries on today and offers everything from dinner theater to musicals. Hopefully, Cirque du Soleil has another reinvention act and will repeat their Blue Ocean successes.
What are the untapped markets in mortgage origination? First, let’s look at how and where you get your current business.
Who are your primary referral partners, and from where do you get your business? E.g., real estate agents, builders, financial planners, attorneys, relocation companies, past customers, consumer direct. Build out a list of where and how you get your business. This list serves as both a benchmark for improvements and an analysis tool that you will use to identify overlooked Blue Ocean opportunities.
In a contracting market, the focus must be manifold. Preserve current business, grow new business streams.
Next week, the Journal unpacks solidifying current business sources and identifying novel opportunities to increase business from existing conduits while identifying new markets.
Tip of the Week
Project Management Skills for Loan Origination – Communication
Last week, the Journal unpacked the process of monitoring our communications. Of course, when planning communications, we have to make assumptions that may prove valid or invalid. However, while managing communications, we learn more about our key stakeholders’ communication needs. While on the fly, we must pivot and tweak the communication plan to improve efficiency.
Dashboards sound like a great idea, but there is little room for error when communicating with key stakeholders. Dashboards are like text and email, prone to enlarging communication gaps.
MLO’s might consider that when messaging key stakeholders, their communications default should be to push interactive communications. The pushed communications allow for a better feedback loop. A feedback loop allows the message receiver to confirm that they understand the message as intended in real-time. Interactive communications are things like telephone, face to face, or video-conferencing.
Pushing communications means you take the initiative to message the stakeholder. Pick up the phone and call, schedule a presentation, or send a report. Pushed communications are proactive and may provide a feedback loop. Pulled communications sound like a good idea, like the dashboard you wish stakeholders would use to check loan status.
However, in practice, when leveraging pulled communications, the effectiveness of the message is more often unknown. Furthermore, key stakeholders may resent jumping through hoops to find out what they want to know. So err on the side of overcommunicating with key stakeholders.
Like it or not – you are the loan manufacture leader. Your ability to rapidly connect with novel key stakeholders or maintain and improve buy-in with more familiar stakeholders will define your overall origination success.
Your credibility, likability, and trustworthiness largely revolve around effective communications. However, the mode and media of communication are insufficient to guarantee the success of your communication. If you have little social capital with those you must influence, what then? In other words, if the message recipient is disinterested in your message because you are just another salesperson, how can you build the significance of what you are communicating to the message recipient?
It will help to communicate in their language.
The compliance discourse about English Language Proficiency (ELP) touches on a literal linguistic barrier. Challenges related to ELP are very real. The Journal hopes to tackle this challenge in future editions. But we are talking about another linguistic challenge. The less noticeable but just as significant language barrier has to do with communication and influence styles.
The less obvious language barriers are often ethnically or sexually stereotyped. For example, in the wonderfully dated and, by today’s standards, wholly inappropriate book, Men are from Mars Women are From Venus, John Gray attempts to shoehorn people into stereotypical models of how people communicate along biological sex lines. That said, the book hits on an important topic. That being that people have different communication styles. However, rather than focus on sexual stereotypes and simplistic binary communication types, if you look for the tells, people’s behavior reveals their predominant communication style if you watch and listen.
Rather than try to shoehorn people into communication and influence styles by sex, study the evident and subtle tells. For example, the look of someone’s desk, their manner of dress, even their job responsibilities provide clues about how to influence the person to be more receptive to our communication.
The Journal will demonstrate how to attempt to shoehorn people into one of four communication or influence styles.
First, give them the ears to hear, then give them the message. There are parallels with the Journal series on getting to home plate (the Journal series on The Prospect Buying Process). Getting to home describes the necessity of recognizing all the more minor buying decisions the prospect makes before the big yes. Next week, the Journal looks at influence as it relates to effective communications.
2021 CE – Sneak Preview
Is now a good time to go long or short on the stock market? Is the residential real estate market overbought? Time to sell? Are you confused about where to invest your hard-earned money? Stop messing around and make the best investment you will ever make – invest in yourself. Yes, that means professional development. Be the best version of yourself that you can be. Expand your horizons. Why not get on one or more of the developing market waves?
Are you interested in Low-Moderate-Household-Income lending? Do you wonder about getting started with loan manufacture requiring alternative credit (nontraditional credit)? Have you heard all the horror stories about collaborations with Housing Finance agencies? Grab the bull by the horns and take some chances. Join us for a primer on getting started with these types of loan programs.
CE should be an opportunity for professional development. That you might expect – but we promise that you will have fun at the same time. So how can you enjoy hours and hours of law, ethics, and regulation? Well, swing on by the LoanOfficerSchool.com 2021 continuing education classes and find out!