TEAM EMPOWERMENT MORTGAGE CHATTER: Apr. 01, 2009: TBW helps buy Colonial; the new loan limits are here, the new loan limits are here! Kind of.

“Never put off until tomorrow what you can do the day after tomorrow.”

~Mark Twain


Winston Churchill said, “I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” Clever.


Colonial BancGroup, out of Alabama, who apparently is close to running out of money due to loan losses, will receive $300 million – much of it from Taylor Bean & Whitaker. What’s in it for TBW? Gaining control of Colonial and its new thrift charter would help them win federal clearance for a significant expansion of its deposit-gathering operations and provide a stable source of low-cost funding, e.g., critical warehouse capability.


According to the S&P/Case-Shiller Home-Price Index of 20 major metropolitan areas, my house, purchased near San Francisco many years ago, is worth $8.20. Well, at least it seems that way. Their index showed prices down 19% from the prior year, and 2.8% from December. At least consumer confidence, reported by the Conference Board, was relatively unchanged in March after hitting an all-time low in February. Lastly yesterday we had the ISM Chicago Purchasers’ Index which declined to 31.4 in March from 34.2 the prior month, contracting for a sixth consecutive month.


With all of this sour economic news, it is hard to believe that rates could go up much – inflation threats are muted. But they have indeed crept up so far this year, mostly based on the tremendous amount of supply coming into the market. (Remember those supply and demand curves from Econ 1A? They really do work…) In March, however, rates came down due to the Federal Reserve‘s government debt purchases program. The Fed has bought $17.5 billion (out of the announced $300 billion) in Treasury securities since it began the program last week.


The Mortgage Bankers Association’s applications index rose by 3% in the week ending March 27th. The purchase applications index was basically unchanged, and refis gained 3.7 percent. The only other scheduled economic news for today comes out at 10AM EST, 7AM PST, with the “generally-non-market-moving” ISM Manufacturing Index, Construction Spending, and Pending Home Sales numbers. Ahead of that the 10-yr is wallowing around at 2.67% and mortgage prices are… about unchanged.


After a seemingly long wait, all lenders have seen that Fannie Mae has issued Announcement 09-08, Temporary High-Cost Area Loan Limits and Revised Eligibility Requirements for High-Balance Mortgage Loans, to implement the temporary increase in conforming loan limits for high-cost areas authorized by the ARRA. The ARRA permits loans originated this calendar year to “use the higher of the current permanent high-cost loan limits, or the temporary loan limits in place for loans originated in 2008 that were applicable to jumbo-conforming mortgage loans.” Effective May 1, Fannie Mae will accept for delivery from all approved lenders loans originated in 2009 using these new limits.


Although there is no word yet on pricing (I guess that investors will figure that out over the next month, but hope for the best and expect the worst), Fannie revised loan-to-value ratios for certain loan types, implemented new minimum credit score requirements, and added additional appraisal requirements. (And no, I don’t know what they are, but hope for the best and expect the worst. And investors will follow their lead.) Underwriting-wise, for DU case files “effective for deliveries on or after May 1, lenders must manually apply the revised eligibility requirements for loan case files that receive an Ineligible recommendation due to the loan amount exceeding the permanent loan limit for the area in which the property is located. These loans will be eligible to receive the DU limited waiver of underwriting representations and warranties. Because the new eligibility will not be implemented in DU immediately, we will continue to permit deliveries of high-balance mortgage loans that receive an Eligible recommendation from DU and will not require lenders to apply the revised eligibility to these loans until a later date. For manual underwriting, the revised eligibility requirements apply to loans for amounts over the permanent limit for the specific property location, and all manually underwritten high-balance loans with application dates on or after June 1, 2009. Lenders are encouraged to implement the new eligibility guidelines immediately. All manually underwritten high-balance loans with application dates before June 1 that do not comply with the revised eligibility guidelines must be delivered to Fannie Mae before October 1, 2009.”


Announcement 09-08: Temporary High-Cost Area Loan Limits and Revised Eligibility Requirements for High-Balance Mortgage Loans and the new High-Balance Feature Matrix and reference materials to identify the loan limits for specific areas are available on the Loan Limits page on

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