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TH E M R EP O RT | 55 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST GOVERNMENT Millennials Embracing FHA Loans Millennials are facing tight supply and rising home prices head on. I n an environment of tight housing supply and rising home prices, millennial homebuyers are taking out increasingly larger loans backed by the Federal Housing Administration (FHA), according to the Ellie Mae Millennial Home Tracker. Millennials have taken steadily larger FHA loans over the past couple years, rising from an average of $170,167 in November 2016 to $178,862 in November 2017 and landing at $186,454 in November 2018, according to data from Ellie Mae. "We are seeing that as inventory remains relatively slim, bor- rowers are not waiting to buy an affordable home and are instead increasing their loan amount to purchase what is available on the market," said Joe Tyrrell, EVP of Corporate Strategy at Ellie Mae. The Ellie Mae report spotlighted a few metros where FHA loan size is on the rise while asserting that, "Across the coun- try, borrowers are taking out much larger FHA loans com- pared to previous years." In the San Francisco metro, FHA loans averaged $505,871 in November, compared to $460,853 a year prior. In Los Angeles, FHA loans averaged $442,569, compared to $389,031 the previ- ous year. Among FHA loans made to millennials, the large major- ity—95 percent—were purchase loans, while the remaining five percent were refinance loans. FHA loans accounted for 26 percent of millennial loans in November 2018. Sixty-nine percent of loans made to millennials for the month were conventional loans with an average loan amount of $211,268. Among those loans, 88 percent were purchase loans, and 11 percent were refinance loans. Two percent of millennial loans were acquired through the Veterans Administration in November. Across all loan types, the average mortgage loan made to a millennial in November was $192,570. Women made up close to one-third of millennial mortgage loans originated in November, while men accounted for 59 percent. Another nine percent were unspecified, according to Ellie Mae. Millennial mortgage loan applicants were almost evenly split between married and single households with 52 percent identi- fied as married and 48 percent as single. The average age of millennial mortgage loan applicants in November was 29.6. Ellie Mae's Millennial Loan Tracker recorded an interest rate of 5.1 percent in November up from 4.96 percent a month ear- lier and 4.17 percent a year earlier. It took an average of 42 days for millennial loans to close in November. and Disclosure Working Group published an updated version to the RMBS 3.0 TRID Compliance Review Scope© (v2) based on the Amendments to Federal Mortgage Disclosure Requirements un- der the Truth in Lending Act (Regulation Z) as published in the Federal Register [82 FR 37656] on August 11, 2017, (with an optional compliance date of October 10, 2017, and a mandatory compli- ance date of October 1, 2018), the updates related to the Black Hole that were effective June 1, 2018, and the Economic Growth, Regulatory Relief, and Consumer Protection Act enacted on May 24, 2018. The RMBS 3.0 TRID Compliance Review Scope v2, as it reflects the amendments made by TRID 2.0, have included ad- ditional clarity. The guidance and clarifications made by the CFPB, with TRID 2.0 and the subse- quent Black Hole Amendment, effectively reinforced the risk previously identified by the origi- nal RMBS 3.0 TRID Compliance Review Scope, and now with 2.0, this reduced some testing require- ments, reduced the materiality of certain tests, and the addition of a few tests. The impact of v2 will be fewer material compliance exceptions with the associated grading that would have other- wise, previously, prevented loans from being purchased by an in- vestor, whereby the mortgage was targeted for a rated transaction. SFIG, and its membership that participated in the drafting of the original RMBS 3.0 TRID Compliance Review Scope and in the updated v2 scope created a new standard in transparency in aiding the entire mortgage lending industry in translating and navigat- ing the complicated mortgage lend- ing regulatory regime with an eye toward building confidence in the secondary market ensuring that high-quality mortgages can make their way into rated securitizations, thereby providing the necessary liquidity to the marketplace, and making homeownership a reality for more consumers. Although over two years passed between the initial version of the SFIG RMBS 3.0 TRID Compliance Review Scope and the recently published v2, further refinements will be forthcom- ing in 2019, as SFIG continues the ongoing standardization of the TRID review scope while incorporating additional feedback from market participants, CFPB enforcement actions, regulatory clarifications, or case law. The v2 scope document is part of the ongoing output of the SFIG work- groups to bring consistency to the due diligence reviews performed as part of securitization reviews. In addition to working with market participants, SFIG is actively working directly with the CFPB to share the concerns and impediments to future securitizations based on regula- tory uncertainty to attempt to obtain regulatory updates as well as informal guidance to ensure compliant loans are flowing into ongoing securitizations to foster a robust private label securitization for RMBS transactions. There is a common reference re- garding the calm before the storm, but the real calm comes after the storm has been faced. One would be remiss to think only smooth sailing lies ahead, but the winds have shifted, and with the breeze at our backs and smooth water ahead, the SFIG workgroup strives to see the private label securitiza- tion of RMBS under full sail. JOHN V. LEVONICK is special counsel in the Financial Services Practice Group of Pepper Hamilton LLP's, New York office. His practice focuses on consumer financial services regulatory compliance and technol- ogy. Specific areas include consumer lending asset origination, servicing, and asset purchase and sale transac- tions; and assisting creditors, servicers, investors, and service and technology providers with regulatory issues. SCOTT MCNULLA is Director - Regulatory Compliance at American Mortgage Consultants, (AMC). He is responsible for leading the Regula- tory Compliance team and ensure the systems continue to provide accurate results and the operations staff are trained and prepared to provide top tier residential mortgage compliance reviews to clients.