[David] Let us move on. Alice, good to have you here as always. Good, I love it when you’re out. You and, you’re living a good retired life. I love it when you and your husband, Andy, who I love your husband. He’s just an amazing dude, and a man’s man. And you get out doing some things, enjoying your time with him. I think that’s so awesome. But it’s good to have you on camera here with us when you are here. Let’s give us a report. I’m really interested, what you brought to our attention was the Wall Street Journal article, but go ahead and give us your legislative update.
[Alice] Yeah, so as Congress is off on their summer recess back in their local communities, hopefully getting work done there, but this is a good time. It was interesting that this Wall Street Journal article came up about trying to tie together the United Wholesale Mortgage’s financial problems with FHA credit performance. And- Yeah … this article, or editorial, it was not a particular reporter was credited to it, it seems to be the editorial board over at the Journal, and it was not very favorable about the industry, and really tried to segue into that there’s an FHA delinquency problem. Which, when anyone starts dissing my FHA, I’m gonna go check this out. I love their program. The people there are great. And I was really happy to see the Mortgage Bankers Association respond with another letter back to the editor and make a few important points, right? First of all, you can’t put those two things together. UWM’s financial problems are completely unrelated to FHA credit performance as the FHA itself. The FHA insurance fund, like we’ve talked about on this show, is extremely well capitalized. We’ve talked about that there’s even enough money in there to consider reducing the amount of premium that borrowers are having to pay And then Bob Broeksmit, the MBA also commented on the, there is a rise in delinquencies. So that part no one’s disputing. What the problem is the way that the article phrased and showed the delinquencies to be very alarmist to consumers who don’t understand the source of those numbers. And so there is definitely housing costs, home price appreciation COVID era forbearance loss mitigation stuff that’s gone away. Those are definitely logical explanations for the slight uptick. But it was interesting to me, I thought there’s only one place they get those numbers, and that’s Neighborhood Watch. And for those of you who don’t know about Neighborhood Watch, you can just key that in, right? Search FHA Neighborhood Watch and delinquency numbers, and it should come up as your first hit, not Neighborhood Watch, your crime prevention thing. But FHA has what they call their early warning system. It’s super easy to just click on single family. You, yes, there’s selections in there, but you don’t even have to pay any attention to that. Just hit submit on the next screen and submit on the next screen, right? Don’t worry about trying to divide up the data. And you can see the whole report for the last two years. And you can play around with this, and that’s where I’m figuring that the, the journal got their data for what happens in the first year. So they’re claiming about, we’ve got lenders who have 25% first year delinquency rates. This is an alarm we should be sounding that is FHA got a problem out there. I got curious, and I went to look up. What is going on? FHA reported in their report that the delinquency is 6.48%, and so that’s their overall seriously delinquency rate in all their portfolio. Now, for those of you who aren’t familiar with this, serious delin-delinquency means 90 days plus or more, and it includes foreclosures and claims. But in this Neighborhood Watch data, it always includes any loan in that two-year period, and in this case the journal used a one-year period, that would have gone to that number even if it got cured. So think about that, right? It got to 90 days. Many lenders have success still at 90 days where they’re, the borrower is able to come in and they have some kind of cure so that it’s no longer delinquent This Neighborhood Watch numbers are just for lenders. It is just for lenders to understand their portfolio risk and for FHA to watch this. So as I was looking at, they called out Aegis Mortgage. This little company. Oh my gosh. The number was like they did 100 loans in the last two years, and 14 of them are seriously delinquent at this point. And that’s not a national systemic problem. That is the standard. Yeah. No. Now, the Journal got the number by there’s a place you can select for seriously delinquent, in the first year, and that’s where it comes up to 25%, because they had 100 loans and 25 of them had a problem. But again, keeping in mind, we don’t… I couldn’t get to the loan level data here today because we’re in that window where it’s not published. It’ll be out any week now. But because it gets re-updated once a month. But anyway, so .. it’s 25 loans. Even that, it’s not a national headline. Now, there are other l- lender. They mentioned another lender that is repeatedly in this higher category, but that’s where that lender plays in that space, right? You both know we should ta- Neighborhood Watch is a place where lenders manage how can I manage this risk? S- I don’t want to be on HUD’s radar. If I’m over 150% compare ratio, I end up on HUD’s radar. And so I just thought the article was very… took a perspective that is designed to scare consumers, but is not a red flag for this industry when you say FHA’s delinquency rate. It’s a little higher than we like to see. It’s at 6.48. We like it to be a little lower than that. But anyway, I just thought that was… I wanted to put in our two cents on those numbers, and that those numbers- Yeah. That’s good … are inflated. You think it…
[David] The reason I think it’s so important that the industry, again, this podcast is mostly two industries, we have consumers listening, that it’s important that we bring this out because consumers do read the Wall Street Journal. It is an article that gets quoted. In this case, Rebecca Noble is the one that wrote the article. She’s a… I’ve read other articles she’s done. She does a good job. But this one seems to have a little bit of a sensationalizing to it, and it didn’t really represent the false… I think, Kittel, you made the comment just, irresponsible journalism is, I think, what you said to this. And I get it. Comments. Go ahead.
[Kittle] Yeah. We were talking about it before the podcast as we do about everything we’re gonna discuss, and it’s who did she talk to verify this? Obviously, listen to the great job Alice just did that anybody would understand- Yeah … what Neighborhood Watch is. And obviously the lady who wrote this didn’t talk to anybody, and she doesn’t understand it. So they created a story, basically a headline, and it’s borderline fa- C minus journalism. And it does, and like Alice said there’s no headline here at all. Yeah. So- No … they needed something, somebody to talk about and react and wrote a story. And shame on them for doing it. Yeah. Yeah, because you can pull certain windows, right? The way you run the report, you can pull specific windows. So for people who care about this, want to look into what is really going on with FHA, rely on their actual report. Neighborhood Watch is not designed for public reporting of delinquency rates because there’s, of that major variable that, you know, first of all, I can have a very high compare ratio problem, but it’s all about division. My denominator could be really low, like we said about this one company that only did 100 loans. So- In two years. Yeah. We got loan officers doing more loans than that. That’s what I mean. You can do you can do- Why are they in a headline? It’s like, some people say I have 75% participation rate, and how many loans are you doing or how many members do you have? I have four. Yeah. So you got three members. You can skew the number. Yeah. Alice made one good point there, too, and she talked about- No yeah … didn’t deep dive on it, and that was the FHA Mortgage Insurance Premium Fund. It’s eight and a half to nine times what it’s supposed to be. FHA’s not in trouble. No. And so the article is skewed the wrong way. Yeah. Yeah.
[Alice] There are lenders who are over the 150% compare ratio, but le- for those of you who don’t know, the lenders manage that, right? And that denominator’s constantly changing, the numinate- numerator is. And so in compare ratios, you’re really then having to go back to your shop and decide, okay, do I have to make any changes? And there are over 600 lenders, that report, have, or that FHA manages. So to have just these few that are now have these higher numbers. Granted, there are, I don’t know, there’s let’s see. I can- I’m looking at the report right now. So there are about 60 some odd lenders, maybe 70, that are over the 150%, but that fluctuates month after month. And the lenders all have systems in place to manage that. So- Yeah … I don’t mind FHA getting attention if it’s warranted and we have some positive things to go through. But I just thought the article was they didn’t make inaccurate statements on where their data was from. So I want to make sure that part is clear. I’m not accusing them of making false statements. The statements were correct, but it was just this, I think there’s a bigger context behind from what they brought up.
[David] So good, Alice. Really good. Excellent stuff. Great reporting, great commentary. That’s why our podcast gets listened to as much as it does, because the content we do. Thank you, Alice. Appreciate it very much.
Alice Alvey, Master CMB
She handles development of their World Class Training program designed to support UHM partners and organizational effectiveness.
Prior to UHM, Alice served as Senior Vice President at Indecomm leading the Indecomm-Mortgage U division, Internal QA and Compliance and SaaS technologies. Indecomm acquired Mortgage U in 2013, where Alice was President/Co-founder, providing training and consulting since 1996. Prior to MU she served as SVP of Operations at a national bank overseeing operations for wholesale, retail and correspondent from underwriting through servicing, and compliance.
She has been in the trenches of mortgage lending operations from application through servicing for over 30 years. Her authoring work in training content, policies and procedures and the FHA/VA Practical guides illustrates her ability to bridge regulatory requirements with day-to-day operations.
Alice has been a weekly contributor to the Lykken on Lending show since its beginning in April 2009 and has made her weekly contributions to 450+ episodes!