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Wells Fargo Takes On eNotes

Wells Fargo Home Lending has entered into an agreement with eOriginal, a digital solution provider for the mortgage industry, to enable the acquisition of eNotes through Wells Fargo Funding, their correspondent channel. As the nation’s leading residential mortgage aggregator, Wells Fargo’s launch of eNote capabilities represents a major step forward in the continuing digitization of the mortgage industry.

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“Our expansion in the digital lending space is larger than just our ability to purchase eNotes. It’s a move to broaden our approach to serving consumers and clients as we transform our mortgage business,” said Michael DeVito, Head of Wells Fargo Home Lending. “We’re committed to delivering innovative solutions throughout the mortgage lending process. With eOriginal providing eVault services, we’re aligned with a company that has earned the trust of the digital lending community.”

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“Lenders transitioning into digital mortgage can move forward knowing a trusted technology partner is aligned with the industry’s leading aggregator,” said eOriginal CEO Brian Madocks. “This agreement with Wells Fargo facilitates a new, essential outlet for lenders to deliver loans with eNotes into the secondary market. The capability will make digital mortgages accessible to a broad spectrum of lenders who can realize the advantages of going digital, such as increased efficiency and improved execution while reducing risk.”

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Wells Fargo will begin purchasing eNotes from a select group of lenders, to be followed by a broader market offering throughout 2019. This is the second significant digital initiative launched by Wells Fargo Home Lending in 2018. Earlier in the year, Wells Fargo introduced an online mortgage application for its retail origination consumers.

Big News At Wells

As we all know, Wells Fargo is a huge investor. A lot of times the industry moves on a particular issue once an investor says so. In this case, PROGRESS in Lending has learned that Wells Fargo has made a significant change to its business practices. Here’s the scoop:

In a notice to all of its correspondent sellers, Wells Fargo said: “We know it’s important to continually make it easier for you to do business with Wells Fargo Funding. That’s why we’re excited to share the news that we now accept eSigned/eDelivered Closing documents!”

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Wells added that: “Most Closing documents are now eligible for eSignature/eDelivery to Wells Fargo Funding, except where agency, state, or federal law prohibits.”

So, what does this announcement mean for the mortgage industry? “We’ve been talking about the advantages of eMortgages for some time now but other than Fannie and Freddie accepting them no other major investor has stepped up and said they would accept them as well. This has been a major impediment to adoption since many of our customers do not sell directly to Fannie or Freddie,” stated Tim Anderson, Director of eService for DocMagic.

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“Having a major investor like Wells now saying they will accept a “hybrid” eClosing is big news.  I also think another reason this is happening now is that a lot of loans are getting kicked backed from investors because the originator cannot show hard evidence that the Closing Disclosure (CD) was delivered three days prior to consumption.  With eSign you can electronically apply a signature along with a date stamp on the CD as undisputed proof of delivery where you really can’t in a paper delivery,” Anderson concluded.

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Wells Fargo Wants To Expand Hispanic Homeownership

Wells Fargo Home Mortgage announced today, the first day of Hispanic Heritage Month, its support of the goals of the National Association of Hispanic Real Estate Professionals’Hispanic Wealth Project, which seeks to triple Hispanic household wealth over the next decade.Wells Fargo’s goals over the next 10 years include a projected $125 billion in mortgage originations and a goal of $10 million to support a variety of initiatives that promote financial education and counseling for Hispanic homebuyers. In continued recognition of the importance of hiring and retaining a diverse workforce, Wells Fargo also plans to increase the number of Hispanic home mortgage consultants on its sales team.

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“Homeownership is a vehicle through which many people build wealth and financial stability,” said Brad Blackwell, head of portfolio lending for Wells Fargo Home Mortgage. “Homebuying and its downstream benefits can help improve neighborhoods, local businesses and the overall economy. As the nation’s leading home mortgage lender to racially and ethnically diverse homebuyers, including Hispanics, we support NAHREP in this important mission and want to demonstrate our efforts to do more to increase homeownership to these communities.”

NAHREP Hispanic Wealth Project Blueprint focuses on three component goals to facilitate Hispanic wealth creation: a 50 percent or greater rate of U.S. Hispanic homeownership, a 50 percent increase in the first-year success rate of Hispanic-owned businesses, and a 25 percent increase in the number of Hispanic households owning non-cash financial assets such as stocks, bonds, mutual funds and 401(k) accounts.

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NAHREP is the nation’s fastest-growing Hispanic market-focused real estate housing industry trade association with more than 20,000 members across the country. “We are extremely pleased to see Wells Fargo’s support of the Hispanic Wealth Project with new and existing programs that align with the project’s goals,” said Jerry Ascencio, chairman of the NAHREP Foundation. “We look forward to seeing the positive impact on local communities and the continuation of our long standing relationship to advance sustainable homeownership for Hispanic-Americans.”

Quality Control Is The Medicine, Not The Disease

The April 1st National Mortgage News carried a story of the federal government’s legal battle with Wells Fargo, saying that Wells Fargo delivered FHA loans for insurance that they knew did not comply with FHA guidelines. How, you ask did the senior executives know? It seems that their Quality Control process told management about these problems but senior management ignored their QC reports and did nothing about it. An open and shut case-right? Quality Control did its job and management, as is overwhelmingly typical in this industry, ignored the information. These guys should be punished for ignoring this information- right? Wrong! The feds are now going after the senior quality control executive because he knew about the problems and didn’t report them to FHA. In fact the headline of the article warns executives that Quality Control may be hazardous to their legal health!!

In fact, just the opposite is true. Just think, if those executives had paid attention to what the Quality Control reports were telling them, they could have avoided this problem in the first place. Now, instead of the opportunity to show the value of QC, this litigation has firmly established in the minds of executives the risk and potential problem of supporting a good quality control program. And this is occurring just when the federal agencies and regulators are sending the opposite message. Unfortunately this mess has actually been caused by these agencies. Not necessarily by what they require but what they don’t.

The notion that the Wells Fargo QC manager should have reported this information to FHA is ludicrous. While there is a reporting requirement, is it realistic to believe that an internal organization, even if it is viewed as an auditing function, would, or even could report this information without being fired? Come on guys, get real! It was the responsibility of the senior executives to do this, not QC. So why make the QC guy the patsy for this problem? Because they can. And that is the problem in a nut shell.

Quality Control is not part of audit; it is not a file inspection. The intent of Quality Control is to monitor the internal operational processes and identify any that are not meeting the organization’s standards on a non-random basis. Of course, the federal agencies that dictate QC requirements (Fannie, Freddie and FHA) really don’t understand this, despite their new mantra of “manufacturing quality”. Furthermore, until the mortgage crisis they, nor any of the senior executives in the industry, really paid any attention to QC. It was simply a “cost of doing business”. In fact, in order to attract larger lenders to deliver loans to them, these entities would negotiate away many of the QC requirements.

Unfortunately what this lawsuit and article have done is not re-inforce the need to stop ignoring QC but make it appear that a better idea is to eliminate it entirely. That would solve the problem. Executives could claim they didn’t know so they weren’t responsible, and keep originating and insuring loans that don’t meet the requirements.

Of course, there is another way. Fannie Mae, Freddie Mac and FHA could require an independent third party to conduct these reviews and make it their responsibility to report the information. Of course these third parties would have to have employees that were trained and qualified to conduct these reviews as well as conduct valid analyses on the results of the reviews. The industry would have to have some standardization of the methodologies in how the reviews were conducted and a means to measure the effectiveness of the program as well. This third party independence would also mean that investors could obtain this information to evaluate the overall quality and reliability of the company’s operational processes. Just think! Loans that did not meet standards wouldn’t get sold into the secondary market- wow, what a concept.

Despite the untenable position this lawsuit has created for Wells Fargo’s QC manger, maybe the situation has a silver lining. Maybe, just maybe, all parties involved in ensuring that quality control is valid, effective and drives improvement by senior executives will come together to create a Quality Control process that actually works. I’d be glad to help. Just give me a call.

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Wells’ HELOC Revamp Is Long Overdue

You Can Download This Full Article As A PDF HERE

NEW-GeorgeYThe Wall Street Journal broke the story that Wells Fargo last November had begun requiring most of its customers to start paying principal – not just interest – on their home equity lines of credit (HELOCs).

This prompts three questions: First, what took the financial press so long to find this out? Second, what took Wells, the biggest residential mortgage and home equity lender in the country, so long to do this?

And third, why did the bank feel that it had to keep such a good and long overdue idea such a big secret?

The collapse of the housing bubble was devastating to the HELOC business, previously a fast-growing, low-risk, highly profitable business for the vast majority of retail banks and credit unions who offer the product. But since the peak year of 2009, lines of credit outstanding have dropped 26%, from $714 billion to $526 billion in the first quarter of this year, according to the Federal Reserve.

Even worse, lenders have lost billions on soured HELOCs they’ve had to write off. The delinquency rate on HELOCs stood at 3.37% at the end of the first quarter, down from 4.69% at the peak in early 2012 but still more than 10 times the 0.37% rate in 2003, before the housing bubble burst.

HELOCs used to be one of the safest consumer loans banks made, with delinquency rates well below 1% industry wide. But that figure skyrocketed during the recession as lenders made loans in anticipation of continued high home prices.

That was the same bet millions of homeowners made, taking out bigger and bigger HELOCs to build swimming pools, borrow more on their credit cards, and make additions to their homes they didn’t really need. The banks should have known better, of course, but they didn’t.

Until Wells made its historic move, the vast majority of HELOC borrowers have only been required to make interest-only payments for the first 10 years, during which time they can continue to draw down their lines, up to their maximum. Starting in year 11, but only then, borrowers are required to start making principal payments, too. Before then, of course, borrowers had the option of making principal payments.

When the housing market crashed, too many homeowners couldn’t make those higher principal payments.

It’s not clear yet how many lenders will follow Wells’ lead, although two of the banks’ biggest national competitors, Bank of America and J.P. Morgan Chase, have said they’re considering it. But other smaller lenders say they will continue to offer I-O HELOCs for the first 10 years to differentiate themselves from Wells.

For example, Navy Federal Credit Union, the nation’s largest credit union, says it has no plans to change or eliminate its I-O options on both its fixed-rate home equity loans and HELOCs, although it acknowledges that only a “small percentage” of its members choose interest-only loans.

It’s not like Wells has priced itself out of the market by demanding principal payments from day one instead of 10 years out. Typical monthly payments for most Wells HELOC customers will rise, of course, but not as much as you might think. For example, the interest-only payment on a $30,000 HELOC at the current 4.875% APR would be about $121. A fully amortizing payment including principal would be $158.83, a difference of less than $40 a month.

However, by doing so, the homeowner will pay off his loan and build equity in his home faster, or free up more equity to borrow against.

It’s clearly a more borrower- as well as lender-friendly idea. You have to wonder why it’s taken this long for a lender to make the move.

Yet while Wells is making this more responsible change, both for itself and its customers, a growing number of lenders are once again starting to make HELOCs up to 100% of the value of the property, one of the main reasons for the collapse of the housing bubble and the demise of the HELOC product.

Proving once again: Too many people in the mortgage business just never learn from their mistakes. It’s good to know that at least one lender has, if a few years late.

About The Author

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Wells’ HELOC Revamp is Long Overdue

Early this month the Wall Street Journal broke the story that Wells Fargo last November had begun requiring most of its customers to start paying principal – not just interest – on their home equity lines of credit (HELOCs).

This prompts three questions: First, what took the financial press so long to find this out? Second, what took Wells, the biggest residential mortgage and home equity lender in the country, so long to do this?

And third, why did the bank feel that it had to keep such a good and long overdue idea such a big secret?

The collapse of the housing bubble was devastating to the HELOC business, previously a fast-growing, low-risk, highly profitable business for the vast majority of retail banks and credit unions who offer the product. But since the peak year of 2009, lines of credit outstanding have dropped 26%, from $714 billion to $526 billion in the first quarter of this year, according to the Federal Reserve.

Even worse, lenders have lost billions on soured HELOCs they’ve had to write off. The delinquency rate on HELOCs stood at 3.37% at the end of the first quarter, down from 4.69% at the peak in early 2012 but still more than 10 times the 0.37% rate in 2003, before the housing bubble burst.

HELOCs used to be one of the safest consumer loans banks made, with delinquency rates well below 1% industry wide. But that figure skyrocketed during the recession as lenders made loans in anticipation of continued high home prices.

That was the same bet millions of homeowners made, taking out bigger and bigger HELOCs to build swimming pools, borrow more on their credit cards, and make additions to their homes they didn’t really need. The banks should have known better, of course, but they didn’t.

Until Wells made its historic move, the vast majority of HELOC borrowers have only been required to make interest-only payments for the first 10 years, during which time they can continue to draw down their lines, up to their maximum. Starting in year 11, but only then, borrowers are required to start making principal payments, too. Before then, of course, borrowers had the option of making principal payments.

When the housing market crashed, too many homeowners couldn’t make those higher principal payments.

It’s not clear yet how many lenders will follow Wells’ lead, although two of the banks’ biggest national competitors, Bank of America and J.P. Morgan Chase, have said they’re considering it. But other smaller lenders say they will continue to offer I-O HELOCs for the first 10 years to differentiate themselves from Wells.

For example, Navy Federal Credit Union, the nation’s largest credit union, says it has no plans to change or eliminate its I-O options on both its fixed-rate home equity loans and HELOCs, although it acknowledges that only a “small percentage” of its members choose interest-only loans.

It’s not like Wells has priced itself out of the market by demanding principal payments from day one instead of 10 years out. Typical monthly payments for most Wells HELOC customers will rise, of course, but not as much as you might think. For example, the interest-only payment on a $30,000 HELOC at the current 4.875% APR would be about $121. A fully amortizing payment including principal would be $158.83, a difference of less than $40 a month.

However, by doing so, the homeowner will pay off his loan and build equity in his home faster, or free up more equity to borrow against.

It’s clearly a more borrower- as well as lender-friendly idea. You have to wonder why it’s taken this long for a lender to make the move.

Yet while Wells is making this more responsible change, both for itself and its customers, a growing number of lenders are once again starting to make HELOCs up to 100% of the value of the property, one of the main reasons for the collapse of the housing bubble and the demise of the HELOC product.

Proving once again: Too many people in the mortgage business just never learn from their mistakes. It’s good to know that at least one lender has, if a few years late.

About The Author

[author_bio]

An E-Delivery Super Highway

PROGRESS in Lending has learned that Capsilon, a provider of document imaging for mortgage lenders and investors, has released a Network Delivery capability, which enables users to deliver secure and compliant loan packages to leading GSEs and financial institutions. Users of Capsilon’s DocVelocity product can now deliver a single or group of loan packages for batch delivery to seven flagship institutions.

Four supported major investor institutions include Chase, Citibank, Flagstar Bank and Wells Fargo Bank. Three supported government institutions include Fannie Mae, Freddie Mac and the Federal Housing Authority. With a single click, loans are sent directly to these institutions according to their prescribed formats and protocols.

DocVelocity’s quality control features provide more efficient selection, mapping, translation and tracking of mortgage documents to ensure accurate and on-time delivery of quality loan packages. Using DocVelocity delivery, the correct documents are selected, properly named and reflect the desired stacking order.

“Our Network Delivery capability improves the way loan documents are submitted to GSEs and prominent financial institutions,” said Sanjeev Malaney, chief execultive officer at Capsilon. “This capability empowers lenders of all sizes to seamlessly meet the complicated formatting and transmission requirements of these large institutions.”

Beware The Schneiderman

*Beware The Schneiderman*
**By Lew Sichelman**

LewS***Who is Eric Schneiderman and why is he out to get us? That may soon be the mantra of mortgage market players, if it isn’t already. And soon, very soon, the name Schneiderman could replace the names Cordray and Frank as the Man from the Dark Side who is hell bent to straighten out this business of making and selling home loans.

****If you haven’t heard of Eric Schneiderman, the Harvard law school graduate who is the highest ranking law enforcement officer in New York, the bet here is that you will. After all, the Empire State’s legal offices have been a virtual launching pad for careers in Washington as, among other posts, regulators, legislators, cabinet secretaries, federal judges – even a Supreme Court justice.

****I don’t have any inside information about New York’s top cop’s future intentions. But my guess is that sooner or later, Schneiderman will be pacing the official halls in Washington sooner or later, in one form or another.

****Why should that concern you? Just the other day, the 65th Attorney General of New York announced that he is suing Wells Fargo in an effort to get the bank to honor its commitments under last year’s landmark National Mortgage Settlement.

****At the same time, he announced that his office had reached an agreement to suspend an enforcement action against Bank of America, which has agreed to implement a robust set of systemic reforms intended to ensure that the standards outlined in the Mortgage Settlement are honored throughout his state. If the reforms are successful, it is anticipated that Bank of America will replicate them nationwide.

****“Too many homeowners in our state are facing unnecessary challenges as they fight to keep their homes,” the NY AG said. “While Bank of America has chosen to work with us to take the steps required to adhere to their commitments, Wells Fargo has taken a different path. (But) both of these cases should send a strong message that the big banks must comply with the legally binding Servicing Standards negotiated in the National Mortgage Settlement, or face the consequences.”

****But Schneiderman is hardly a one-trick pony. Here’s a look at his resume since his election in November 2010 as the Empire State’s 65th Attorney General:

****In his first weeks in office, the NY AG launched a new “Taxpayer Protection Bureau” to root out fraud and return money illegally stolen from New York taxpayers at no additional cost to the state. He also bolstered the Attorney General’s Medicaid Fraud Control Unit, which has since already recovered millions for taxpayers. And as part of his effort to crack down on corruption and restore the public’s trust in government, Schneiderman launched a groundbreaking initiative expanding his office’s authority to investigate public corruption involving taxpayer funds.

****And that was just the start. In year one of his watch, Attorney General Schneiderman filed a legal challenge to the discriminatory Defense of Marriage Act to compel the Uncle Sam to treat all New York marriages equally; sued federal regulators to force a health and environmental impact review of proposed gas drilling in the Delaware River Basin, and challenged the Indian Point nuclear power plant’s practices related to high-level radioactive waste storage, earthquake preparedness and fire safety.

****More recently, he’s gone after the smartphone business in an attempt to curb thefts by encouraging the cell phone industry to adopt technologies to deter the rising epidemic of violent incidents of smartphone theft by drying up the secondary market on which stolen devices are sold.

****But more germane to this audience is the fact that Schneiderman has taken a leading role in the national fight for a comprehensive investigation of misconduct in the mortgage market. He has demanded a fair settlement for home owners, one that holds banks accountable for their role in the foreclosure crisis, provides meaningful relief to owners and investors, and allows a full airing out of the facts to ensure that abuses of this scale never happen again.

****Toward that end, the Attorney General filed suit in June against HSBC Bank USA and HSBC Mortgage Corporation for failing to follow state law related to foreclosure actions and the way the companies placed homeowners at a greater risk of losing their homes.

****Attorney General Schneiderman is committed to bringing similar actions against other mortgage lenders who hold borrowers in the shadow docket in defiance of state law, his office says. So be on guard, now and into the future.