Carson Spells Out Plans for Leading HUD

HUD Secretary-Designate Dr. Ben Carson calmly answered questions for nearly three hours before the Senate Banking Committee in his confirmation hearing on Thursday, saying that he wanted to run HUD in order to “heal America’s divisiveness.”

The questioning came from some Senators who have publicly expressed doubt as to whether Carson’s background qualifies him to lead HUD, such as Sen. Elizabeth Warren (D-Massachusetts) and Committee Ranking Member Sherrod Brown (D-Ohio).

“Although you have many accomplishments in the medical field, there is relatively little in the public record that reveals how you would further HUD’s mission to ‘create strong, sustainable, inclusive communities and quality affordable homes for all,” Warren wrote earlier this week in a letter to Carson which included 35 questions about how Carson views the role of HUD Secretary.

Carson responded to questions about his background, stating in the opening of the hearing, “Throughout my life, I have done things that many deemed impossible. I pledge to work with this Committee and the dedicated career staff at HUD to solve difficult, seemingly obstinate issues and address the needs of those who rely on the services provided by HUD.”

He continued, “My life story is an example of can happen when we dedicate ourselves to improving the lives of others. Everyone deserves a shot at the American Dream, and I intend to fight for those who are still trying to reach their full potential.”

Carson said he believed HUD is in a position to help heal America’s divisiveness, noting that “One of our biggest threats right now is this political division, racial conflict, and class warfare. It is ripping this country apart—we need to tamp down this animosity. As Jesus said and later Lincoln built on, ‘a house divided against itself cannot stand.’  I see HUD as part of the solution, helping ensure housing security and strong communities.”

Mike Crapo (R-Idaho), Chairman of the Senate Banking Committee, said, “Throughout his career, Dr. Carson has achieved a great deal of success. He has demonstrated a fervent intensity for improving the lives of his fellow Americans, and his intellect, leadership, and life experiences are unique, valuable assets for leading an agency like HUD. Dr. Carson has said he plans to continue his conversation with the American people and do a listening tour if confirmed. This is an encouraging sign that Dr. Carson wants to hear from stakeholders and, more importantly, from the American people.”

President-elect Donald Trump’s choice of Carson, 65, a retired neurosurgeon and former Republican presidential candidate, as HUD Secretary was surprising to some because Carson’s experience has been in the medical field rather than in housing or government. Having been raised in the inner city of Detroit, Carson is passionate about revitalizing urban communities.

On the other hand, Carson has been critical of one of HUD’s key initiatives, the Affirmatively Furthering Fair Housing Rule, which was finalized midway through Julián Castro’s two-and-a-half year tenure leading the Department.

“Since 1968, HUD has been charged with ensuring that all people—regardless of race, ethnicity, or whether they have a disability—have fair and equal access to housing and that its grantees ‘affirmatively further’ this policy,” said Brown, Ranking Member of the Senate Banking Committee. “Here too, Dr. Carson has been critical.  In one of the few statements he has made on housing policy, he called into question more than four decades of civil rights law, and disparaged HUD’s efforts to reduce segregation as “social-engineering schemes” designed to “legislate racial equality.”

Providing Potential Homeowners with a LIFT

The implementation of the NeighborhoodLIFT program, created by Wells Fargo andNeighborWorks America, has contributed to achieving local economic recovery and advancing neighborhood revitalization through homeownership. As part of the effort, Wells Fargo donated $29 million in local initiative grants to nonprofits in support of neighborhood revitalization. NeighborWorks America and its local network members is responsible for administering the program, determining homebuyer eligibility, and providing an adequate amount of homebuyer education.

Kim Smith-Moore, a LIFT Programs National Manager with Wells Fargo Home Lending, said that the program helps make the dream of owning a home attainable for low-income Americans. “The NeighborhoodLIFT program helps make homeownership achievable,” she said. “Having completed homebuyer education, these 12,725 families and individuals are better prepared to be successful and sustainable homeowners over time.”

Throughout the implementation of the program, Wells Fargo surveyed 10,000 LIFT participants to monitor their growth. According to the results, 61 percent of LIFT homebuyers earn 80 percent or less of the area median income, compared with 21 percent of conventional buyers. Approximately 43 percent of LIFT buyers are paying less for housing than they previously were; those who are paying more have only seen a $77 increase. Eighty percent of LIFT participants stated that the homebuyer education services they received will help them manage their finances and sustain homeownership.

Marietta Rodriguez, the VP of National Homeownership Programs with NeighborWorks America, spoke highly of the partnership and hopes that the program provides quality education for families who are interested in becoming homeowners. “This collaboration with Wells Fargo, our network members, and local communities helps put people on the path to homeownership,” she said. “A study of the first 10,000 homeowners created through LIFT programs illustrates the majority of grant recipients earn 80 percent or less of their area median income. The program is helping mortgage-ready families overcome the barrier of coming up with a sufficient down payment and the required housing counseling education classes are proven to help buyers both prepare and achieve their goals of responsible homeownership.”

Grant funds are available for LIFT programs down payment assistance in Detroit; San Diego County; Minneapolis; Seattle; Columbia, South Carolina; Austin; Jacksonville, Florida; and El Paso. The Wells Fargo 2016 NeighborhoodLIFT program matching down payment assistance grants may be combined with other down payment assistance programs to provide additional financial benefit and homebuyers can obtain mortgage financing from any qualified lender.

Regulator Releases HSBC from Consent Order

The Office of the Comptroller of the Currency (OCC) on Monday dropped its mortgage servicing-related order against HSBC Bank, saying the bank was compliant with the consent order. At the same time, the OCC also levied a $32.5 million penalty against the bank for previous violations of the order.

The OCC originally issued the consent order against HSBC and seven other national mortgage servicers in 2011 and amended it twice, in 2013 and 2015. That order concerned approximately 1,700 accounts with missing, untimely, or incorrect payment change notices, for which HSBC made approximately $3.5 million in remediation payments.

The OCC terminated the consent order with HSBC based on improvements the bank has made to its servicing practices. Kris A. McIntire, Deputy Comptroller of Large Bank Supervision, stated that, “the Comptroller of the Currency believes that the protection of the depositors, other customers, and shareholders of the bank, as well as its safe and sound operation, does not require the continued existence of the 2011 Consent Order,” or the 2013 or 2015 amendments to the consent order.

HSBC Spokesperson Rob Sherman told DS News, “We’re pleased with the OCC’s assessment of the enhancements we’ve made to mortgage servicing over the last several years. The steadfast commitment of our employees to this effort has made HSBC both more compliant and customer friendly.”

While the OCC stated that HSBC was now compliant, it will still fine the bank $32.5 million for failing to correct “deficiencies identified in the 2011 consent order in a timely fashion. As a result, the OCC determined the bank violated the 2011 consent order from October 1, 2014, through September 30, 2016.”

Last April, the OCC had tagged HSBC with a $35 million fine to compensate customers the office said were adversely affected by the bank’s practices.

The bank will pay the assessed penalty to the U.S. Department of Treasury.

HSBC was one of eight national mortgage servicers (the others were Bank of America, Citi, JPMorgan Chase, MetLife Bank, PNC, U.S. Bank, and Wells Fargo) that agreed to a consent order with the OCC in April 2011 over mortgage servicing and foreclosure practices. At that time, the eight servicers agreed to an independent consultant’s review to determine if foreclosure actions during the years 2009 and 2010 were properly conducted. They also agreed to submit a plan to remediate any borrower that had been harmed financially as a result of improper foreclosure practices.

The Independent Foreclosure Review concluded in January 2013 with 10 mortgage servicers reaching an agreement with the Fed and the OCC to pay a combined total of $8.5 billion to more than 3.8 million homeowners whose homes were in foreclosure in 2009 and 2010. The sum included $3.3 billion to be paid directly to borrowers. The claims allege that the servicers mishandled loan paperwork and robo-signed documents related to the foreclosures. The settlement totals were later increased to 15 servicers and a total of $10 billion in payments, according to the Federal Reserve.

The OCC stated that notwithstanding the termination of the HSBC consent order, the Agency will still continue to oversee the Independent Foreclosure Review settlement fund established by the 2013 amendment to the consent order and that uncashed payments to borrowers or borrowers’ heirs will still be available through the escheatment process after the fund is terminated.

CFPB Updates Congress on Mortgage Industry Rules

Three of the initiatives by the Consumer Financial Protection Bureau (CFPB) that have had the biggest impact on the mortgage industry—the TILA-RESPA Integrated Disclosure (TRID) rule (a.k.a. the Know Before You Owe, or KBYO rule), the updated Home Mortgage Disclosure Act (HMDA) rule, and theAugust 2016 updates to the mortgage servicing rules were highlighted in a report on the Bureau’s activities from Q4 2015 to Q3 2016.

In its recently-released fourth report to the House and Senate Committees on Appropriations coving October 1, 2015, through September 30, 2016, the Bureau laid out some of the materials and helps it provided during that 12-month period to assist institutions implement those three initiatives.

“As the Bureau has issued regulations to implement Dodd-Frank Act requirements, it has focused intently on supporting the implementation process for these rules with both industry and consumers,” CFPB stated in the report. “The Bureau has provided substantial implementation support for these regulations, including engaging in public outreach, speaking at conferences, and publishing guides, summaries, charts, webinars, and other resources.”

The implementation of TRID, which went into effect on October 3, 2015, caused no small amount of consternation among mortgage lenders and other stakeholders in the industry. Among the helps the CFPB has provided are several implementation resources that include a plain-language guides containing an overview of TRID’s key aspects, illustrated instructions on how to complete the new Loan Estimate and Closing Disclosure Forms. The Bureau has also conducted several public webinars on TRID to answer specific questions on the implementation and/or interpretation of the rule’s requirements the Bureau has received since the rule went into effect.

In July 2016, the Bureau proposed updates to TRID aimed at providing greater clarity and certainty surrounding the rule.

“The proposed changes would augment implementation of the KBYO rule, which took effect in October 2015, and further help to facilitate compliance within the mortgage industry,” CFPB stated. “Bureau staff continues to engage in outreach and market monitoring activities to identify implementation issues as they arise, and provide informal oral guidance in response to interpretive inquiries from a myriad of stakeholders.”

The CFPB issued its updated HMDA rule in October 2015 along with resources to help industry stakeholders understand and implement the new rule, including a summary and overview of the final rule, a timeline of the rule’s effective dates, coverage charts for financial institutions to determine if they are HMDA reporters, a summary of reportable data explaining the HMDA data points that are to be collected, recorded, and reported per the updated rule, a compliance guide with a plain-language explanation of the rule, a webinar with an overview of the final HMDA rule, and a number of data submission resources for HMDA filers available on the CFPB’s website.

“In addition to publishing implementation resources, the Bureau continues to engage in extensive outreach activities, including speaking at conferences and other events, to support the implementation of new HMDA mortgage lending data reporting rules and to identify and address implementation issues,” the Bureau said.

The CFPB published a number of resources along with the August 2016 updates to its mortgage servicing rules, including a summary of the new rule, a fact sheet, and a table summarizing how the rule affects small servicers, and a fact sheet explaining the definition of “delinquency” under the new rule and how the new rule applies to TILA-RESPA requirements.

“The Bureau plans provide additional support to facilitate implementation and compliance with the August 2016 amendments to the mortgage servicing rules, and to update the existing compliance guide to reflect the August 2016 amendments,” the CFPB wrote in the report.

Decline? The Delinquency Rate is ‘Simply Normalizing’

The percentage of residential mortgage loans 30 days or more delinquent has been on a steady decline for a few years, but the rate of decline is beginning to slow, according to Black Knight Financial Services’ November 2016 Mortgage Monitor released Monday.

Notwithstanding a slight seasonal increase for November (2.5 percent, approximately 61,000 loans) for mortgage loans 30 days or more delinquent but not in foreclosure, the share dropped by 9.4 percent over-the-year during the month down to 4.46 percent, representing approximately 2.26 million mortgage loans.

“The rate of annual declines in delinquencies has been slowing over the past 18 months after peaking at a 19 percent year-over-year decline in August 2015,” Black Knight stated in the report. “The likely cause is simply normalization in delinquency rates.”

Delinquency rate wasn’t the only metric experiencing a slowdown in decreases in November, according to Black Knight. The number of residential mortgage loans in active foreclosure declined by the rate slowed a bit—29 percent in November compared to a two-year high of 31 percent in September, Black Knight reported. Overall, the number of properties in pre-sale foreclosure inventory declined by 200,000 over-the-year to down below half a million (498,000).

Foreclosure starts, which experienced their lowest monthly total in a decade in October, jumped by 7 percent over-the-month in November up to 60,400—a number that still represented a decline of 9.3 percent over-the-year.

Even with the increase over-the-month in foreclosure starts, November’s total was the third-lowest total for any month since 2006, according to Black Knight.

Loan applications made prior to the recent increase in mortgage rates continued to close, which contributed to strong prepayment numbers (usually a good indicator of refinance activity) for November. In fact, November’s prepayment rate of 1.43 percent was an increase of 56 percent from the previous November. Black Knight said there may be declines coming, with a pronounced drop at the beginning of 2017, as the number of closings on loan applications made prior to the rate increase declines.

How Would Ben Carson Handle HUD?

The question of whether the U.S. Senate will confirm Dr. Ben Carson as the new HUD Secretary will likely be answered on Thursday, January 12, with a confirmation hearing in the Senate Banking Committee.

The hearing will begin at 10 a.m. EST on Thursday, January 12, and will be webcast live. Click here to view the hearing at that time.

President-elect Donald Trump’s choice of Carson, 65, a retired neurosurgeon and former Republican presidential candidate, as HUD Secretary was surprising to some because Carson’s experience has been in the medical field rather than in housing or government.

The lack of experience may work to Carson’s advantage, according to Tim Rood, Chairman of Washington, D.C.-based business advisory firm The Collingwood Group.

“Dr. Carson is an intelligent, impassioned, and empathetic individual,” Rood said in an interview with Neil Cavuto of Fox Business News. “Sometimes the very best policy makers are those who listen; and sometimes, good leaders who are not steeped in the subject matter are better listeners than those who believe they have all the answers.”

Deputy Chairman of The Collingwood Group Brian Montgomery, who served as FHA Commissioner under both the Bush and Obama Adminstrations, stated, “Having spent almost eight years in the Executive Office of the President, I speak from experience in saying a Cabinet Secretary who has the ear of the President is a positive for that agency and individual. In this instance, I think Dr. Carson will be able to ‘elevate’ the issue of housing within the Trump Administration. The fact Dr. Carson is a household name I believe will provide him a larger platform to articulate his vision for how best to help tackle any number of issues within the housing arena: shortage of affordable rental housing, the impact of new regulations which have constricted the mortgage market, and the growing senior population and how best to address their housing need.”

Carson is passionate about revitalizing urban communities, having been raised in the inner city of Detroit. He told Cavuto in November interview that the inner cities across the U.S. were in “terrible shape” and “need real attention.”

Ed Delgado, President and CEO of the Five Star Institute, believes that Dr. Carson is a good choice despite his lack of experience. A former senior executive at Wells Fargo and Freddie Mac, Delgado has met with the past five HUD secretaries to discuss housing reform and the state of the economy as it relates to the housing industry.

“Although Dr. Carson does not come from a traditional finance background, his work ethic speaks to the caliber of leader he is. With the right input and team in place, I believe he will make the best decisions to advance stability across the U.S. housing market.”

“Dr. Carson’s nomination is an indication of the tremendous respect that President-elect Trump has developed for his former rival,” says Ten-X EVP Rick Sharga said. “Dr. Carson has spoken out in the past about the need to revitalize many of the country’s urban areas, so it wouldn’t be a surprise if he focuses on doing that, and trying to find solutions to the growing problem of affordable housing. Since Dr. Carson has also discussed the unintended consequences of over-reaching government regulations, it’s possible we may also see some streamlining, or regulatory relief as well.”

Carson has been critical of HUD’s Affirmatively Furthering Fair Housing (AFFH) Rule, which was cited by outgoing HUD Secretary Julián Castro as one of the greatest achievements of his two-and-a-half year tenure heading the Department. On Monday, Castro expressed concern that Carson would roll back key HUD initiatives such as the AFFH Rule, telling NPR that “I’d be lying if I said that I’m not concerned about the possibility of going backward over the next four years.”

Castro said in the NPR interview that he had spoken with Carson by phone recently but they did not discuss specifics of the job. Castro said he believes that Carson may grow to appreciate HUD’s role once he “learns more about it,” according to NPR.

Sen. David Perdue (R-Georgia), a member of the Senate Banking Committee, stated after a recent meeting with Carson, “Dr. Carson’s heart for humanity is very impressive, and he will bring that commitment to this new responsibility to meet our nation’s diverse housing and development needs. I look forward to supporting Dr. Carson’s nomination and working together to roll back government regulations impeding economic growth so we can bring positive change to the most underserved communities in our country.”

Sen. Chuck Grassley (R-Iowa) stated, “I conveyed to Dr. Carson the problems I’ve run into and how I hope for more accountability and transparency for how taxpayer dollars are used to fulfill housing needs under a new administration. I said that the Office of Inspector General appears to be working well, and that such success should continue. I expressed the need for HUD to function well for the families and individuals who depend on public housing programs and for the many people on long waiting lists for public housing, even as money has been squandered in housing authority executive suites. HUD needs to get the biggest bang for the buck. Dr. Carson listened carefully to everything I had to say. I look forward to Dr. Carson’s swift confirmation so he can get to work making much-needed changes at HUD.”

Obama and Warren Reflect On Wall Street Reform’s Progress

Sen. Elizabeth Warren, who rose to prominence in the years immediately after post-crisis as the architect of the Consumer Financial Protection Bureau (CFPB), did not make the cut as Hillary Clinton’s VP.

Warren did, however, meet with President Barack Obama on Saturday to assess the progress of post-crisis Wall Street reform regulation—in particular, the CFPB—in the White House. July 21 marked anniversaries for both the Dodd-Frank Act (six years) and the CFPB (five years).

“The financial crisis wasn’t an unstoppable act of nature,” Warren said. “The whole thing could have been avoided. But we didn’t have rules in place to stop Wall Street from taking enormous risks that threatened the whole economy.”

President Obama added, “Part of passing these strong consumer protections meant passing the first-ever Consumer Financial Protection Bureau, based on an idea that Senator Warren came up with before the crisis even began…Before the Consumer Financial Protection Bureau, you didn’t have a strong ally to turn to if your bank took advantage of you, or if you were being harassed or charged inappropriate fees. Now you do.”

The CFPB launched on July 21, 2011, exactly one year after Obama signed Dodd-Frank into law, as the only government agency whose sole purpose is to protect consumers from predatory practices in financial markets. Warren points to the $11.7 billion in consumer relief handed out to about 27 million families as proof that the CFPB is working for Americans five years into its existence.

The Bureau has not been without its critics in its first five years, however. Republicans have made repeated efforts through legislation to roll back or repeal certain portions of Dodd-Frank; the Republican presidential nominee, Donald Trump, said he wants to eliminate Dodd-Frank altogether.

House Financial Services Committee Chairman Jeb Hensarling (R-Texas) has been one of the most vocal critics of Dodd-Frank, and of the CFPB. In June, Hensarling unveiled the Financial CHOICE Act(Creating Hope and Opportunity for Investors, Consumers, and Entrepreneurs) as an alternative to Dodd-Frank that calls for stronger capitalization rules for banks and at the same time offers regulatory relief for the smaller financial institutions they believe have been adversely affected by Dodd-Frank.

The Financial CHOICE Act also calls for the CFPB to be placed under the Congressional appropriations process and for the Bureau’s director, Richard Cordray, to be replaced with a bipartisan five-member commission.

“The CFPB has an important mission,” Hensarling told DS News in June. “Properly designed and led, it is capable of great good.” At the same time, Hensarling noted that “the CFPB has grown into an unaccountable federal leviathan of more than 1,500 employees with over a half billion dollar budget and the unrestrained power to dictate which Americans can receive credit and which Americans cannot.” He also said the CFPB “by design is not accountable to either Congress or the taxpayers. This defective structure allows the Bureau to evade the checks and balances that apply to virtually every independent regulatory agency, including those responsible for consumer and investor protection.”

In response to the claims made by Republicans who say the economy is weaker, Obama said on Saturday, “Our economy is stronger today than it was before the crisis. Since we dug out from the worst of it, our businesses have added almost 15 million new jobs. Corporate profits are up, lending to businesses is up, and the stock market has hit an all-time high. So the idea that this was bad for business just doesn’t hold water.”

Obama continued, “Whether you’re a Democrat, a Republican, or an Independent, if you’re a hard-working American who plays by the rules, you should expect Wall Street to play by the rules, too, and that’s what we’re fighting for.”

Trump Officially Taps Carson for HUD Secretary

As initially reported by DS News, President-elect Donald Trump has been on-record that he favored Dr. Ben Carson as the next HUD Secretary. On Monday, CNN reported that this preference became official with Trump’s transition team announcing the appointment.

According to CNN, in the announcement Trump praised Carson, 65, for his intelligence and tenacity, saying, “Ben Carson has a brilliant mind and is passionate about strengthening communities and families within those communities. We have talked at length about my urban renewal agenda and our message of economic revival, very much including our inner cities. Ben shares my optimism about the future of our country and is part of ensuring that this is a Presidency representing all Americans. He is a tough competitor and never gives up.”

Carson, a retired neurosurgeon who became a household name last year when he began a campaign to win the Republican nomination for the presidency, has never served in a government position.

“Dr Carson is an intelligent, impassioned, and empathetic individual,” said Tim Rood, Chairman of The Collingwood Group. “Sometimes the very best policy makers are those who listen and sometimes, good leaders who are not steeped in the subject matter are better listeners than those who believe they have all the answers. After a challenging eight years, what HUD and the country really needs now is an opportunity for our public officials to address problems from a fresh and open-minded perspective and listen to the industry.”

“Hailing from Detroit, Dr. Carson is all too familiar with the housing issues related to inner-city housing,” said Ed Delgado, Five Star Institute President and CEO. “It is our hope that, as HUD Secretary, he puts forth policies and programs intended to rebuild markets hard hit by the Great Recession.”

National Association of Realtors President William E. Brown stated, “Realtors know that the incoming Secretary of Housing and Urban Development has a big job ahead. Potential homebuyers face a range of hurdles, from rising prices to mortgage credit that’s burdened by fees and extra costs. We congratulate Dr. Carson on accepting this important challenge and wish him the very best of luck in meeting the task ahead. While we’ve made great strides in recent years, far more can be done to put the dream of homeownership in reach for more Americans. The National Association of Realtors and its 1.2 million members looks forward to working with Dr. Carson to fulfill this important mission.”

National Association of Home Builders Chairman Ed Brady said, “NAHB congratulates Dr. Carson on his nomination as HUD secretary. He is a thoughtful leader who is sure to assemble a professional team of policy experts and be a great spokesperson for housing. Upon his confirmation to the Cabinet post, NAHB looks forward to working with Dr. Carson to promote pro-housing policies that support homeownership, provide rental housing opportunities for low- and middle-income households, and remove regulatory barriers that are needlessly raising housing costs for hard-working American families.”

Carson, who was raised in the inner city of Detroit, told Neil Cavuto on November 22 that the inner cities are in “terrible shape” and need “real attention.”

“You know, there have been so many promises made over the last several decades, and nothing has been done,” Carson said. “So it certainly is something that has been a long-term interest of mine. And I’ll be thinking and praying about it seriously.”

Trump’s initial announcement in November that he was considering Carson to lead HUD came as a surprise to many because Carson reportedly said on November 15 that he does not want to serve in the Trump Administration.

On November 21, however, Carson told Fox News that he would give “very serious consideration” if he were offered a cabinet position in the Trump Administration. He explained his position via Facebook later that same day, saying, “There is no reversal of my position in terms of working with the Trump administration. I have always made it clear that I preferred to work outside of the government as an advisor, but if called upon, I would serve inside of the government. I believe it is important to have voices that are outside of the administration combating media bias and the divisiveness that has infected our country.”

The Fed Raised the Rates…Now What?

For the first time in a year and only the second time in a decade, the Federal Open Market Committee (FOMC), the policy making arm of the Federal Reserve, voted on Wednesday in its eighth and final meeting of the year to raise the federal funds target rate by 25 basis points up to the 0.50 to 0.75 percent range.

With the labor market widely considered to be at full employment and the unemployment rate at a post-recession low of 4.6 percent, according to theNovember Employment Summary from the Bureau of Labor Statistics, members of the FOMC felt the time was appropriate for a rate hike.

“In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1/2 to 3/4 percent,” the FOMC said in its statement. “The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a return to 2 percent inflation.”

Analysts in the housing industry have been speculating for weeks as to what the effect of a Fed rate hike would be on mortgage interest rates and overall affordability. In the month prior to the Fed voting to raise the federal funds target rate, the average 30-year FRM rose by more than 50 basis points to a level above 4 percent for the first time in more than a year.

“While the Fed’s hike of 0.25 point in short-term interest rates may trickle down to long-term rate products like 30-year mortgages, the more immediate impact will be felt by borrowers with variable-rate mortgages and home equity lines of credit who can expect an increase in their payments at their next rate reset,” said Tim Manni, mortgage expert at NerdWallet. “Homebuyers shouldn’t be particularly concerned with today’s Fed move. Even with rates hovering over 4 percent, they’re still historically low. Most market observers are expecting a gradual rise in home loan rates in the near term, anticipating mortgage rates to stay under 5 percent through 2017. Of course, that’s barring any unforeseen economic event.”

Mark Fleming, Chief Economist with First American, estimated that the 25-basis point increase in the federal funds target rate will result in a decline in existing-home sales down to a seasonally-adjusted annual rate of 5.55 million—in October, National Association of Realtors reported an annual rate of 5.60 million for existing-home sales, highest in more than nine years—and that the year-over-year growth rate for nominal price appreciation will fall to 4.0 percent. Also, First American’s Real House Price Index (RHPI), which adjusts prices for purchasing power by considering how interest rates and income levels impact the amount a consumer can borrow, estimates that real house prices will increase by 4.4 percent by December 2017.

“In addition to the impact on existing-home sales and house prices, first-time home buyers will feel the most impact of the rate increase,” Fleming said. “In short, real house prices provide a more relevant way to compare changes in affordability over time because they are adjusted for differences in home buyers’ income and the impact of interest rates on financing costs. Increases in real house prices decrease consumer house-buying power and, therefore, affordability by the same amount.”

Realtor.com Chief Economist Jonathan Smoke stated, “Today’s Fed announcement is going to have the greatest impact on first time home buyers as they consider their monthly payment budgets. Rates will likely stay the same until about March so buyers considering a purchase in 2017 may want to consider getting into the market now. The Fed—and financial markets—will have to wait to see what comes of U.S. fiscal policies in the weeks and months ahead and how that impacts the economy and the potential for more inflation. Signs point to the Fed raising rates at least three times next year, and just like we’ve seen in the last month, mortgage rates will likely move proportionately in anticipation of those increases, as clear data emerges about stronger economic growth and inflation.”

National Association of Federal Credit Unions (NAFCU) Chief Economist Curt Long said that overall, the effect of the 25 basis point on U.S. households should be minimal, but at the same time, “for the millions of savers living on fixed incomes it surely comes as a relief, especially if it is accompanied by a forecast for more in 2017. To that end, the committee’s economic projections may hold more interest than the statement itself,” said Long. “For typical Main Street Americans, the move serves as a reminder to review the rates on their savings and borrowings and to shop around. They may find that even in a low-rate environment there are institutions willing to provide superior rates and higher-quality service than the big Wall Street banks.”

Long continued, “The Fed will not make any assumptions about President-elect Trump’s economic agenda. A large spending bill accompanied by tax cuts certainly has the potential to increase growth and inflation, paving the way for faster rate normalization in the coming years. But the Fed will stick to its wait-and-see approach.”

FHFA Final Rule Brings Welcome News for Non-Bank Servicers

The Federal Housing Finance Agency (FHFA) announced today the issuance of the Acquired Member Assets (AMA) Final Rule to reorganize and relocate the current regulation governing the Federal Home Loan Banks’ AMA programs.

“I think the main outcome is first to address something we had to because of Dodd-Frank,” said Fred Graham, Deputy Director for Federal Home Loan Bank Regulation. “This was taking the references to NRSRO ratings out of the rule.”

The FHFA says that as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, this final rule removes and replaces references in the current regulation to, and requirements based on, ratings issued by a Nationally Recognized Statistical Ratings Organization (NRSRO).

“We also made a couple of changes that bring the rule more in line with what is going on in the mortgage market. This includes taking into account the fact that a lot of servicing is done by non-banks,” said Graham. “At one time, the servicing from AMA had to be done by members and that is not practical given the change in the landscape of the mortgage market. The rule addresses that as well.”

Further, according to the announcement, the AMA final rule provides a Federal Home Loan Bank greater flexibility in choosing the model it can use to estimate the credit enhancement required for AMA loans. According to FHFA, the final rule also adds a provision allowing a Federal Home Loan Bank to authorize the transfer of mortgage servicing rights on AMA loans to any institution, including a nonmember of the Federal Home Loan Bank System.

Another key feature of the final rule is the allowance of the Federal Home Loan Banks to acquire mortgage loans that exceed the conforming loan limits if they are guaranteed or insured by a department or agency of the U.S. government.

“The final rule excludes a proposed provision that would have eliminated the use of private, loan-level, supplemental mortgage insurance (SMI) in the member credit enhancement structure required by the AMA regulation, but does require Banks to establish financial and operational standards that insurers must meet to be qualified to provide insurance on AMA loans,” adds the FHFA.

Finally, the final rule deletes some obsolete provisions from the current regulation, and clarifies certain other provisions, says the FHFA and it will become effective January 18, 2017.