July 2016 - Lessons Learned

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TH E M R EP O RT | 45 O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T DEPARTMENT ORIGINATION ORIGINATION LOCAL EDITION programs toward down payments and closing costs; a one-eighth percent interest rate reduction for low-down payment borrowers who a complete a homebuyer education course; expanded credit history reports that factor in nontraditional sources like tuition, rent, or utility bill payments; and the ability to weigh the income of others who will live in the home, such as family members or renters. Wells' program is somewhat modeled after a Fannie Mae program introduced last year that has been considered overcompli - cated and has had limited success. Wells believes it has made the process more direct and easier for borrowers to understand. The program is also strikingly similar to Bank of America's Affordable Loan Solution, which it rolled out in March and was seen by many as a big-bank sub - stitute for FHA lending. Wells' program is also its first significant step toward meeting its corporate social responsibil- ity goals, announced in April, when the bank made a point to emphasize help for underserved communities nationally. It also is the bank's first major step toward distancing itself from the FHA since agreeing in February to pay a $1.2 billion settlement related to "reckless" certifying of the credit and underwriting quality of FHA loans it originated in 2012. Like most major banks, Wells Fargo has drifted away from FHA-backed lending over the past few years. Though Wells reported making $6.3 billion in FHA-backed loans last year‒‒ and was, in fact, the only major bank to crack the FHA's Top 20 lender list, according to the Wall Street Journal—it has curtailed its association with the FHA over the past two years. According to Market Insider, Wells' loans made up 9 percent of FHA's total mortgage dollars in 2014, but just 2.5 percent last year. Wells remains the largest home lender in the country and is no doubt expecting its new program to make deep inroads into a market that has been less-than- easy for borrowers of limited means to crack since the bottom dropped out of the economy nearly eight years ago. "We developed yourFirst Mortgage to serve the broad population of qualified first-time homebuyers, including the low- to moderate-income customers and the diverse Millennial population—which is more than two-thirds of first-time homebuyers today," said Franklin Codel, head of Wells Fargo Home Lending. "This is good for our customers and benefits the economy by building stronger communities through sustainable homeownership." First-Citizens Bank Resolves Legal Woes HUD AGREES TO SEVERAL REMUNERATIONS FOR THE BANK'S RACIALLY DISCRIMINATORY LENDING PRACTICES. NORTH CAROLINA // HUD has announced an agreement with Raleigh-based First-Citizens Bank & Trust Company to resolve racial discriminatory lending al - legations. According to HUD, the bank was allegedly denying loans to African-American, Latino, and Asian American mortgage ap - plicants at a disproportionately higher rate than white applicants. The charges pertain to retail loans originated by the bank's predecessor, First Citizens Bank and Trust Co., in 2010 and 2011. After analyzing 2010 Home Mortgage Disclosure Act (HMDA) data in 2011, HUD filed a complaint against First Citizens Bank and Trust Co. The bank was merged into First-Citizens Bank & Trust Company, a com - mercial lender in January 2015. HUD said that as the succes- sor, First-Citizens Bank & Trust Company continued to cooper- ate with HUD throughout this investigation and the ultimate resolution announced in June. In response to the agreement, Barbara Thompson, a spokes - person for First-Citizens Bank, told MReport, "First-Citizens fully cooperated with HUD through the investigation and in negotiat - ing the resolution. The agreement does not admit any liability and recognizes the positive efforts the bank has made in the past and continues to make toward providing homeownership oppor - tunities in underserved commu- nities. The resolutions align our common goals of fair housing and access to credit and serves to foster stronger communities." HUD reported that First- Citizens has agreed to take several steps to ensure and protect equal access to credit including refrain - ing from unlawful consideration of race or national origin when se- lecting sites for branch offices and services offered, conducting mar- keting, and defining Community Reinvestment Act assessment areas. In addition, HUD stated that First-Citizens will: • Make $140,000 available to nonprofit organizations that provide credit and housing counseling, financial literacy training, and related programs to first-time homebuyers in North Carolina; • Adopt a new standardized and objective set of guidelines for a second review of retail channel residential loan applications initially denied by the auto - mated underwriting system; • Require all of its employees and agents who have substan- tial involvement in manual underwriting of mortgages in their retail channel to attend fair housing training; • Hire three mortgage banker market specialists that will focus on diverse lending in the Charleston-North Charleston- Summerville, Columbia, and Greenville-Anderson-Mauldin metro areas; • Spend $20,000 for affirma- tive marketing, advertising and outreach to residents in majority-minority census tracts in North Carolina; and • Partner with non-profit or community groups to conduct at least 24 financial education programs in North Carolina for individuals and small busi - ness owners. "This agreement aligns our shared goals of promoting fair housing and expanding access to credit for qualified working families," said Gustavo Velasquez, HUD's Assistant Secretary for Fair Housing and Equal Opportunity. "HUD will use its enforcement powers to ensure that everyone has equal access to credit regard - less of what they look like or where they come from." "HUD will use its enforcement powers to ensure that everyone has equal access to credit regardless of what they look like or where they come from." —Gustavo Velasquez, Assistant Secretary for Fair Housing and Equal Opportunity, HUD

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