CA Insurance, Warehouse, AI, AVM Tools; Fannie Earnings and News; Catastrophe Impact; Occupancy Felonies

As rumors of the demise of HMDA reporting swirl, as well as a 50 percent reduction in HUD headcount and actual VA cuts, think about this the next time you go into a grocery store: It’s not like lending is like buying organic meat or produce. More than in most retail transactions, the organic consumer is buying both a thing and an assurance about a thing, and stores shouldn’t misrepresent something. The consumer may be ill-prepared to deal with that. I mention this because a certain segment of the population would prefer that the CFPB vanish. (Elon Musk has his own “connection” with the CFPB: it has a database containing hundreds of complaints about his car company, Tesla, and it regulates digital payment platforms, something Musk is developing at X.) Others are quick to say, “Better the devil you know than the devil you don’t” and remind us that plenty of states will step in. For example, in California, thank you to Scott S. who reminds me that misrepresenting occupancy can be a felony! California’s AB 3108 makes it felony mortgage fraud for a “mortgage broker or person who originates a loan” to intentionally “instruct or otherwise deliberately cause a borrower to sign documents reflecting the terms of a business, commercial, or agricultural loan, with knowledge that the borrower intends to use the loan proceeds primarily for personal, family, or household use” or “instruct or otherwise deliberately causes a borrower to sign documents reflecting the terms of a bridge loan, with knowledge that the loan proceeds will be not used to acquire or construct a new dwelling.” (Today’s podcast can be found here and this week’s is sponsored by CoreLogic. Originators who leverage their Marketing Solutions as part of their customer retention practices have seen their pipelines increase by up to 4 times when compared to traditional lead generation methods. Hear an interview with Verisk’s Kingsley Greenland on how the Los Angeles fires and flooding in North Carolina are altering catastrophe models used for insurance pricing.)

Lender and Broker Services, Products, and Software

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Optimal Blue made BIG announcements last week during its inaugural Summit in San Diego. If you missed the news, the company unveiled not one, not two, but SEVEN major innovations developed directly from client feedback and designed to solve real-world lending challenges. Attendees saw a few of them showcased on the main stage, including Ask Obi, an AI assistant that dramatically enhances the way lenders can use their Optimal Blue data to drive business ROI by creating a centralized hub for executives and administrators to gather insights. “Ask Obi demonstrates the unique value clients realize by working with Optimal Blue, a provider of comprehensive capital markets technology,” said Erin Wester, chief product officer of Optimal Blue. “Through the power of generative AI, users can have an interactive conversation to better understand the data that drives their business.” Read more about Optimal Blue’s newly announced innovations.

“AI is changing the mortgage game… are you keeping up? Join us Tuesday, February 18, at 2 PM ET, 11 AM PT for the next OriginatorTech Deep Dive to see how AngelAi can help you flood your pipeline with high-quality leads and close more deals… faster. This NMP Webinar will break down how AngelAi’s AI-powered marketing, TRU Approvals (as good as cash!), and lead prospecting tools can fuel your business while saving you time and money. Plus, get an exclusive look at upcoming features like a free integrated phone system and special broker pricing that gives you a competitive edge. With AngelAi and Sun West, you get the tech and the tools to dominate 2025. Don’t miss out: register here.”

“PlainsCapital Bank National Warehouse Lending, a subsidiary of Hilltop Holdings (NYSE: HTH), offers funding for multiple mortgage products and programs with little to no additional requirements. FNMA HomeStyle, FHA 203K Full, Limited, and USDA Rural Housing renovation loans. Mortgage Revenue Bond and DPA loans with extended dwell times, sublimit for lower FICO scores, manufactured homes and other unique mortgage products and programs. With over 20 years’ experience and a well-capitalized, publicly traded diversified financial holding company we provide our customers with confidence to meet their loan funding needs. Many who attended the TMBA Southern Secondary Conference in Houston, as well as others, are interested in learning more about PlainsCapital Bank National Warehouse Lending; please contact Deric Barnett or Brent Amos.”

“Home Insurance for your California Clients: Meet Bamboo Insurance! At Bamboo, we know better than most that the California insurance market is putting unnecessary stress on you and your clients. With coverage options disappearing and loan delays piling up, it’s tough to get things done. But at Bamboo Insurance, we’ve got you covered… More than covered, actually. While many insurers are exiting the market, we’re still here, actively writing homeowners’ policies to help keep your deals on track. But we don’t just stop at coverage. We’re dedicated to providing quick, reliable, and hassle-free solutions that protect your clients and let you focus on growing your business. With limited partnership opportunities available for brokers and lenders, don’t wait: Reach out to Chris Irvine, VP of Bamboo Agency, today. Let’s work to get your clients insured so you can both stay assured in an uncertain market. NPN 18657046, CA Lic #0M31082.”

Conventional Conforming Changes

Our industry is estimated to do about $2 trillion in 2025. And while non-Agency loans (think jumbo, non-QM, bond, and portfolio programs) will account for 10-15 percent of that, the lion’s share continues to be loans underwritten, processed, and sold per Agency guidelines. Who’s doing what out there, aside from Fannie Mae’s earnings ($17 billion for 2024) today?

Black, Mann & Graham LLP Memorandum describes that both Fannie Mae and Freddie Mac updated their selling guides to permit hybrid appraisals on loans made under the authority of Article XVI, Section 50(a)(6) of the Texas Constitution (Texas Home Equity Loans). Per Freddie Mac’s announcement, this change will be effective for Loan Product Advisor submissions and resubmissions on or after April 7, 2025. Fannie Mae’s announcement notes that a DU update for the weekend of March 22, 2025, will add the hybrid appraisal expansion.

Fannie Mae’s searchable database of home improvement incentives can help borrowers offset the costs of home improvements that increase energy and water efficiency, resiliency, and more, making it a valuable resource for lenders offering HomeStyle Energy loans.

Unsure of how to submit a Post-Purchase Adjustment (PPA) request, what’s causing an error message, or whether you need to submit a property address change? Fannie Mae updated its PPA FAQs to address your most common questions.

Freddie Mac Single-Family Seller/Servicer Guide (Guide) Bulletin 2025-1 announced updates pertaining to: Property eligibility and appraisal requirements, Expanded eligibility for hybrid appraisals, updated effective date and requirements for automated collateral evaluation (ACE) and ACE+ PDR eligibility expansion, Property eligibility updates and updated documentation requirements for verifying completion, Credit underwriting, Updated requirements for documenting and calculating rental income for certain non-subject investment properties and 2- to 4-unit primary residences, Updated age of tax return requirements reflecting dates specific to the 2024 tax year, Rent payment history, Expansion of rent payment history capability in the Loan Product Advisor® (LPA®) assessment and Guide refactoring. Read the Bulletin for details on these and other updates that impact your business and your borrower.

Fannie Mae’s February Selling Guide SEL-2025-1 introduces new and updated cybersecurity requirements for lenders; updates the Selling Guide requirements specific to policy changes with the release of DU Version 12.0; provides calculation details for early payoff reimbursement, expand the use of property data collection and hybrid appraisals; simplify program registration and documentation requirements for community land trusts; add military income as an income type eligible for validation using an asset verification report, and other miscellaneous updates.

Fannie Mae issued the Fannie Mae Information Security and Business Resiliency Supplement (the “Supplement”) to introduce new and updated cybersecurity requirements that were previously contained in the Selling Guide, Servicing Guide, and Consolidated Technology Guide. Lenders (sellers, servicers, and seller/servicers) are encouraged to adopt these changes immediately but must fully implement them by Aug. 12, 2025.

Effective March 22, 2025, Fannie Mae is expanding its hybrid appraisal policy to provide the industry with an additional appraisal option. Hybrid appraisals utilize a property data collection performed by a trained third-party property data collector, submitted to the appraiser to develop an opinion of value. View Fannie Mae Selling Guide update.

During the weekend of April 4, the Desktop Underwriter® (DU®) validation service will be updated to expand eligibility for income and employment validation to military employment, base pay, and entitlements when using a 12-month asset verification report. This eligibility includes income and employment for military personnel serving in the Reserves and/or National Guard. Read the release notes

Fannie Mae spread the word that, effective Feb. 3, 2025, to conform to the Federal Reserve’s ISO 20022 standards, the Seller’s Designation of Wire Transfer Instructions Form 482 has been updated to require sellers to provide Beneficiary Address (street, city, state, zip) information for whole loan purchases. The beneficiary address is the address of the business entity receiving the funds.

Monitor industry defect trends and enable more dynamic QC, better action planning and prevention of similar defects. Read Fannie Mae’s Quality Insider to learn about evolving defect trends and gain insights to understand these issues, help manage risk and strengthen loan quality.

Pennymac 25-11 announced its Conventional LLPAs update, effective for all Best-Efforts Commitments taken on or after Tuesday, January 28. Updates to Conventional LLPAs, effective for all Best Efforts Commitments taken on or after Wednesday, January 29 was announced in Pennymac 25-12. Pennymac is updating Conventional LLPAs effective for all Best-Efforts Commitments taken on or after Tuesday, February 04. View Pennymac Announcement 25-14 for details. Pennymac Announcement 25-16: Updates to Conventional and Government LLPAs effective for all Best-Efforts Commitments taken on or after Friday, February 07.

Pennymac Announcement 25-15 describes important updates to Market Area Analysis and Appraisal Reporting. To promote consistency and transparency in appraisal reports, Freddie Mac and Fannie Mae are implementing updates to their requirements related to Market Area Analysis of the appraisal report and have introduced standardized definitions for “Neighborhood” and “Market Area.” These updates are effective with applications dated on or after February 4, 2025.

Capital Markets

We learned yesterday that wholesale prices in the U.S. rose more than expected in January, driven primarily by higher food and energy costs, adding to concerns about persistent inflation. The producer price index (PPI) for final demand climbed 0.4 percent from the previous month, following an upwardly revised 0.5 percent increase in December, according to the Bureau of Labor Statistics. This report came just a day after consumer price index (CPI) data revealed underlying inflation at its highest level in over a year. These trends have fueled speculation that Federal Reserve interest rate cuts may be off the table for 2025, with some economists even warning that additional inflationary shocks could push the Fed to raise rates instead.

Amid these inflation concerns, Federal Reserve Chair Jerome Powell in his semi-annual Congressional testimony reassured lawmakers that inflation expectations “appear to remain well-anchored.” However, ongoing uncertainty surrounding trade policy, particularly Trump’s tariff threats, has complicated the economic outlook. Many economists fear that additional tariffs could fuel inflation further, delaying any relief for businesses and consumers alike. Consumer sentiment data from the University of Michigan and the New York Fed indicate that Americans are growing increasingly concerned about the economy, with much of the anxiety linked to the potential impact of new tariffs. With inflationary pressures mounting and trade policy uncertainty looming, the likelihood of rate cuts has diminished, leaving markets to brace for an extended period of higher borrowing costs.

Mortgage rates were mixed with the 30-year rate falling for the fourth straight week, according to Freddie Mac’s Primary Mortgage Market Survey. For the week ending February 13, the 30-year rate fell 2-basis points and the 15-year rate rose 4-basis points to 6.87 percent and 6.09 percent, respectively. Rates were also mixed versus a year ago, with the 30-year rate 10-basis points higher and the 15-year rate 3-basis points lower. (For the most up-to-date rate information, please visit https://www.mortgagenewsdaily.com/mortgage-rates)

Today’s busy economic calendar kicked off with retail sales (-.9 percent, worse than expected) and import prices (+.3 percent, about as expected), both for January. Later today brings Industrial production and capacity utilization for January, business inventories for December, and remarks from Dallas Fed President Logan. After Retail sales Agency MBS prices slightly improved from Thursday night, the 10-year yielding 4.50 after closing yesterday at 4.53 percent, and the 2-year little changed at 4.27.