I want to thank everyone for an incredible year.  2010 has come with challenges but all of you have stepped and call yourself a survivor.  No longer are you a survivor, you are a professional in a professionals market.  I am proud to support your business and thank you for all the support you have given my team and I.  I wish you and your family a wonderful holiday season and am excited to work with you in 2011.  So,  go home and be joyful with your family and know that I am grateful to have you in my life.  I have provided 5 Quick Tips for 2011 (see below).  Enjoy…

1. Realize only the GREAT agents are going to make it.

To truly be considered a great agent, we must realize good isn’t good enough any longer. We must commit to excellent service and an exceptional experience for our buyers and sellers. It is not about fancy logos or cute slogans. It is about making sure that anything that can be done to help, is done. That commitment separates us from the pack and enables us to be certain that our current customers will easily recommend us any chance they have.

2. Realize it is the MISSION, not the money.

One of the things that definitely separate ‘good’ agents from ‘great’ agents is the belief that, if we do the right things every day, success is guaranteed. Get up early, get dressed for work and then get to work. We must have faith that by doing so, the money is guaranteed. When we have that type of belief in our business, we concentrate on our mission, not the money. We can rest easily at night because we put in a good day’s work.

3. Know how to communicate points simply and effectively.

Seth Godin put it best: “That what you tell them, they will not believe. That what they tell themselves, they ALWAYS believe.”

The sales process has changed forever. Top achievers realize that it is no longer how well we ‘sell’ our proposition. Instead, it now is about educating the consumer so they can pick the proper option for themselves and their families. If we agree that educating the consumer is the key to success, we must communicate with so much more than words today. Visual depictions (graphs, charts and tables) of the information make it much easier for the consumer to comprehend. Top real estate professionals spend hours on making sure that their four presentations (listing, buyers, price adjustment and presenting the offer) are true learning experiences. They load each presentation with great graphic examples of each and every point they make.

4. Have a ‘talking point’ every day.

People are so thirsty for good, current information on the housing market. If we are the resource of that information, we will be seen as the expert in our market. Visit the KCM Blog (www.KCMblog.com) and read it every day with your morning coffee. Share the posts when appropriate.

5. Build your listing inventory.

The first few months are crucial in determining how you will finish 2011. If you owned a shoe store, you would want it to be well stocked so that every customer could find something that fits. It is no different in real estate. Make sure your real estate ‘store’ is well stocked

“Babies don’t need a vacation but I still see them at the beach. I’ll go over to them and say, ‘What are you doing here, you’ve never worked a day in your life!’.”

~ Stephen Wright     I have attached a flier of questions that you should be asking your non RPM appraiser before allowing them access to the subject property.  With the new appraisal changes I am hearing and reading nothing but heartaches related to out of area appraisers.  The appraisals are done incorrectly with the wrong comps and adjustments.  Values coming low, poor service, etc. etc.  Use this sheet when scheduling your next appraisal.  Remember I can almost co brand any flier you want with your picture and contact information.  If you have a need for a special flier with current market info let me know.  Make it a great Friday and let me know if I can be of service.    

My father used to say, “It’s OK to kiss a nun, but don’t get into the habit.” Speaking of habits, the bond market has become accustomed to the Fed buying 
mortgages. What if they stopped? Federal Reserve President Lacker suggested the Fed may not need to spend the full amount it pledged ($1.25 trillion, 
for folks keeping score at home) to buy mortgages. So when someone like that suggests ceasing the program, it probably means a) the economy is seeing 
enough of a rebound that rates may move higher, or b) the demand for mortgages (artificial, yes, but demand nonetheless) will be lower, pushing prices 
lower and rates higher. So prices indeed did move down after his comments. 

Interestingly, it was reported that net purchases by the Fed totaled over $25 billion in the week compared to the 2009 weekly average of $23.3 
billion. For the six weeks prior to this, the Fed’s weekly totals were below $23 billion. Once again, where would mortgage rates be without the Fed 
having stepped in and been buying production? Would other entities have picked up production of roughly $4 billion a day?

The other day Existing Home Sales were up over 7%. That is great news. But as I mentioned earlier in the week, the “recovery” is not impacting every segment in the same way, and in fact most of the housing price boom has been in the lower-priced home market. For example, sales of houses priced at less than $100,000 were up almost 39%. But sales of homes with a price tag of over $250,000 were actually down, and in fact for anything more than $1 million sales were down 25-30%. 

Who are the large servicers of commercial and multifamily loans, which is supposedly the next big shoe to drop? Coming in first, according to 
the MBAA, is Wells Fargo/Wachovia Bank, with $476 billion in U.S. master and primary servicing at the end of June. PNC Real Estate/Midland Loan 
Services came in second, with $308 billion; Capmark Finance finished third, with $249 billion; KeyBank Real Estate Capital took fourth place, with 
$133 billion; and Bank of America finished fifth, with $132 billion. Add ‘em up to get $1.3 trillion. The MBAA breaks down the servicing into several 
categories, such as largest servicer for commercial securities, largest servicer for life insurance companies, etc.  
And speaking of servicing, Bank of America has completed the transfer of 180,000 FHA and VA loans (mostly held in Ginnie Mae securities) from Taylor, 
Bean and Whitaker. I imagine their IT department put in some overtime on that little project. 

 
Today we had Personal Income and Personal Consumption, and later this morning we’ll have the University of Michigan Consumer Confidence figures. Consumer spending (“Personal Consumption”) was up .2%, as expected, in July, mostly attributed to the "cash-for-clunkers" program. June’s spending number was revised to +.6% from +.4%. Unfortunately for people earning incomes, Personal Income was unchanged in July, and thus with spending rising faster than incomes, the personal savings rate fell to 4.2% from 4.5% in June. These numbers, combined with what looks like another day of improving stocks, have pushed the yield on the 10-yr up to 3.51% and pushed 30-yr mortgage prices down (worse) by about .125.

“Every action of our lives touches on some chord that will vibrate in eternity.”

~Sean O’Casey

I guess this is how some borrowers feel when they lock a loan in a volatile market: http://www.megawoosh.com

Or maybe that is how any agent who has a lock with TBW feels. Today is the anniversary of the bombing of Hiroshima, and the date that some are finding out yesterday’s news that a large lender is gone. “TAYLOR BEAN MUST CEASE ALL ORIGINATION OPERATIONS EFFECTIVE IMMEDIATETLY”. Taylor, Bean & Whitaker Mortgage Corp. (“TBW”) received notification from the U.S Department of Housing and Urban Development, Freddie Mac and Ginnie Mae (the “Agencies”) that it was being terminated and/or suspended as an approved seller and/or servicer for each of those respective federal agencies. “Regrettably, TBW will not be able to close or fund any mortgage loans currently pending in its pipeline. TBW is cooperating with each of the Agencies with respect to its servicing operations and expects to continue to service mortgage loans as it restructures its business in the wake of these events.” Supposedly TBW is returning all original notes to the appropriate warehouse lenders and returning any closed files delivered via hard copy to the lenders/banks.

With the unraveling of Taylor Bean, who are the better-known wholesale lenders out there receiving business from brokers? Wells Fargo is still in the game, as is ING, Flagstar, and Fifth Third. Citi is buying broker loans from their larger clients. United Mortgage, Security Atlantic, Provident, Platinum Mortgage, Luther Burbank, Stearns Lending, First Cal, Union Bank of CA, Assurity, and Bank of Ann Arbor are some of the other players that are still left standing.

Hey, is too late to buy stock in AIG, CIT, Fannie, or Freddie because they’re cheap? Their stocks all shot up yesterday: AIG’s +63% (a new CEO takes the helm Monday), CIT up 38%, Freddie was +31%, and Fannie was +30%. AIG, who owns Radian Group, announced that Radian made a $231.9 million profit. Why did analysts guess that Fannie Mae and Freddie Mac climbed? On a rumor that James Lockhart, the director of the Federal Housing Finance Agency that oversees them, will resign soon. Not to be outdone, Citigroup set a record yesterday of 347 million shares trading in the stock market. Citi’s stock was up over 10% yesterday.

GMAC Financial Service’s mortgage division, which includes Residential Capital, saw its pre-tax loss widen to $2 billion in the second quarter. “The distressed mortgage market led to increased credit costs”. GMAC’s total after-tax loss for the quarter totaled $3.9 billion, down from a loss of $2.5 billion in the year-ago period. Company officials attributed the widening loss to a series of charges: the sale of its international mortgage assets, a goodwill impairment related to its insurance division, etc.

Short sales (where the house is sold for less than the outstanding debt) continue to increase. From the buyers point-of-view, although the time-frame involved is variable, lenders appear to be improving their service and turnaround time in dealing with approving short sales. From the seller’s point of view, a foreclosure impacts their credit rating for much longer than a short sale. At this point, the seller is probably going to be liable for any taxes, taxed at ordinary income levels, on the amount of debt that is forgiven by the original lender.

How are brokers dealing with the new TIL issues? It is another hurdle, and they will survive, but here is one question that has come up: “If MDIA applies to creditors collecting money only after making proper disclosures and a waiting period of 3 days, would a brokers’ collection of money be an issue? Although a broker may not be a creditor, brokers may not collect any fees from the borrower, aside from a reasonable fee to receive a credit report, until the borrower has received the initial TIL disclosures. And does this impact the HVCC rules, where brokers must place any appraisal orders through the lender’s approved HVCC compliant process and enter a credit card & pay upfront? The borrower may not be charged a fee, including an appraisal fee, aside from a reasonable fee to receive a credit report, until the borrower has received the initial TIL disclosures. To expedite the process of ordering the appraisal, if permitted by the HVCC, the broker should be able to give the borrower the option of providing his or her credit card information to the broker (for delivery to the creditor) and tell them that the borrower’s credit card will be not be charged until the borrower has received the early TIL disclosures.

Back to something simple, like interest rates. Yesterday we found out that the Non-Manufacturing ISM survey surprisingly declined, which helped rates, and in addition the Fed continues to buy about $4 billion a day, $20 billion a week, of mortgage originations which is expected to continue into the future. How can that hurt? Of course, on some days the markets think that the recession is over with, and that tends to push stocks and rates higher – until it doesn’t, and then both head the other way. And on other days the market focuses on the supply: the Treasury announced they will auction $75 billion next week, $37 billion of 3-yr notes, $23 billion in 10-yr notes, and $15 billion of 30-yrs. All were about as expected, but that doesn’t mean the market won’t go through its usual gyrations next week during the sales.

This morning the news has pretty much consisted of Jobless Claims. Workers filing claims dropped more sharply than expected last week. Initial Claims were down 38,000 to 550k, lower than the 550k expected. The number of people collecting long-term unemployment benefits, however, rose by 69,000 to 6.31 million in the week ended July 25th. (Continuing claims had dropped for three straight weeks.) And the four-week moving average for new claims fell 4,750 to 555,250 in the week ended August 1, which is the 6th consecutive week of dropping. After the news the yield on the 10-yr is up to 3.77% and mortgages are worse by about .125.

“The timeless in you is aware of life’s timelessness; and knows that yesterday is but today’s memory and tomorrow is today’s dream.” ~Kahlil Gibran I want to let you know as of yesterday we started to route appraisal assignments by zip code.  What this means is the appraiser must live within 15 miles of the property being appraised.  The only exception to this is outlying area such as Placer or Mono counties as an example.  We are trying to narrow it down as much as possible. We are also tracking quality of work and turn times. Please continue to let us know if you have an abnormal amount of conditions or you see appraisers turn times not as required.  Remember our appraisers are trained to speak to you at the property, so if you have comps or special circumstances they will be happy to take any info from you at the appraisal.  If you don’t get great service from a RPM appraiser let me know immediately.  My team and I have been able to save many purchases  lately by getting real appraisals, with real values, and local appraisers who actually know the market.  Remember we also have a rebuttal process that gets answers usually within 24 hours.  This is huge and will make your buyers and sellers happy.  We can still close FHA and conventional loans in 20 days or less.   Let me know if we can help protect your seller by prequalifying the potential buyers?  Your sellers are insured they will get a local appraiser.  Your buyers also are insured to get a local area appraiser as well.  My team and I pride ourselves on being the number 1 FHA lender of 500 agents in all of RPM.  We understand FHA, we close FHA, and we can help you with your questions on potential properties, etc.  If the MLS says no FHA we can help.  We find many properties that can sell FHA and the listing agent was misinformed.    If you would like us to set up a office meeting with your office to discuss how HVC is effecting your business and how to make sense of it all let me know.  I can set up a office visit with our very own Senior Appraiser.  The presentation has been very well received and it is information you have to know in today’s market place if you are working with buyers and sellers.         Market Commentary – Tue, Aug 04 – 10:49 AM ET Auto makers are getting a boost from the recent “Cash for Clunkers” program from the government – you can turn in an old vehicle and receive up to $4,500 towards the purchase or lease on a new vehicle. Ford Motor Company said on Monday that car sales for the month of July rose 2.3%, for the first gain since 2007 fueled by the incentive program. GM and Chrysler saw sales decrease but were far less than the year ago period. The Commerce Department reported this morning that Personal Incomes for June fell 1.3% reversing May’s 1.3% gain, marking the largest decline since January of 2005. May’s gain was attributed towards the recent stimulus plan. The drop was larger than estimates of -1.0%. The savings rate fell to 4.6% in June after a 6.2% increase in may. Spending edged up 0.4% in June after a 0.1% increase in May. Analysts had forecasted 0.3% rise. Last November, the Federal Reserve announced its Mortgage Backed Security Purchase Program when it said it will buy up to $1.25 trillion in agency Mortgage Bonds in an effort to bring down home loan rates to kick start the battered housing market. Home loan rates were hovering around 6.5% for a 30 year fixed rate at the time, whereas today rates are slightly above 5%. The United States Postal Service (USPS) has incurred some staggering losses lately prompting the closing of possibly 1,000 offices across the country. The Post Office could incur a loss of $7 billion this fiscal year. Some more good news for the housing markets. Pending Home Sales for June rose 3.6%, well above the estimates of a 0.3% rise signaling that the housing market could be stabilizing. The increase was due in part to lower home loan rates and falling home prices. The rosy report comes after better than expected New and Existing home sales that were recently reported.

“Be patient with yourself. Self-growth is tender; it’s holy ground. There is no greater investment.”

~Stephen Covey
   

                                               

 

                                      Recently several people were seriously injured during the Running of the Bulls in Pamplona. As it turns out, unleashing angry bulls onto a narrow crowded city street is dangerous. Incredible!  

Market Commentary – Mon, Jul 20 – 10:07 AM ET The big news of the day is word that CIT Group has been bailed out by bondholders and should secure $3 billion to avoid bankruptcy. Bondholders Pacific Investment Management Co., Oaktree Capital, Silver Point Capital, and Centerbridge Partners — agreed to the proposal. The only economic report today is the low impact Leading Indicators. Stocks are moving higher on the CIT news and on news that Goldman Sachs reported that the S&P 500 Index will rise 15% in the second half of 2009. Taking a cue from foreign airlines, US carriers may start including a fuel surcharge in the cost of a ticket. The added charge could add $100 to $250 to a round trip ticket according to the destination. The airlines are citing the recent rise in oil from $35 earlier in the year to the current price of $64/barrel. Despite the recession easing it has not yet ended says the National Association for Business Economics’ (NABE) quarterly industry survey. A large majority of the business owners responded that they haven’t seen business bottom out yet, though demand is stabilizing. The net demand index dropped to -5 in the 2nd quarter from the first quarter’s -14. In the fourth quarter it registered -28. How about this economy? The volatility has certainly increased, with one day rates going up because “the worst is behind us” and then the next day rates dropping because “the economy is still failing”. Obviously the newscasters don’t know. But in traveling around the Northeast (Boston today, Maine this evening), it appears that although the economy is still doing poorly, and given our housing and commercial problems it will continue to do so for a while, people are hopeful that we have seen the worst of it. And psychology plays a large part in decision making!     Last week, more specifically at the end of last week, we had quite a bit of economic news: Housing Starts rose 3.6% in June, as did Building Permits., and this was the fourth consecutive increase in single family starts. But on the flip side the Philadelphia Fed Survey continued to show weakness, the FOMC minutes showed that the Fed doesn’t think that we are out of the woods, and there were 1.9 million foreclosure filings in the first half of 2009! This is a 9% increase in total properties from the previous six months and a nearly 15% increase in total properties from the first six months of 2008. The report also shows that 1.19% of all U.S. housing units received at least one foreclosure filing in the first half of the year. The mixed news continues…  Wall Street trading desks are really seeing the typical summer trading. “Some activity in the morning on light volume.” “MBS prices have been stuck in a tight range all afternoon.” “Origination around $2 billon today and the Fed bought their daily $4-5 billion, mostly in 4.5% coupons and about 20% FHA/VA securities.” “Asia closed for holiday Sunday night.” “Treasury prices seem like they’re in quicksand.”  Both Bank of America and Citi released their earnings. BofA earned $3.2 billion, but critics quickly noted that the company generated over $9 billion from selling a stake in China Construction Bank and a merchant processing business, and those helped offset large losses in commercial loans and real estate, along with losses in their credit card division. “The home loan and insurance unit lost $725 million, even as revenue tripled, on credit costs and expenses to help homeowners modify their loans.” “Bank of America saw its residential mortgage income increase more than fivefold in the second quarter to $2.6 billion as it originated $110 billion worth of home loans.” Citigroup made $4.3 billion in the second quarter, also helped by a $6.7 billion after-tax gain from the sale of Smith Barney to Morgan Stanley.  And continuing with company-related news…  If you want a phone job and to work in Iowa (actually a pretty nice place!), Wells Fargo has a job for you. They have increased their mortgage servicing staff by 54% since the beginning of the year and have implemented mandatory overtime as it adjusts to rising demand for loan modifications, according to their EVP of servicing.   MGIC was downgraded by Moody’s Investors Service. They warned of a possible further downgrade further into junk territory in the wake of MGIC’s plan to fund another unit with $1 billion to write new mortgage-insurance policies. This came from MGIC’s announcement of “the Office of the Commissioner of Insurance for the State of Wisconsin (“OCI”) has authorized a contribution of up to $1 billion to the capital of a wholly owned subsidiary, MGIC Indemnity Corporation (“MIC”), to support new mortgage insurance business. The subsidiary will assume the MGIC name and plans to begin writing new business as of January 1, 2010, pending all required approvals. MGIC will continue to issue mortgage insurance policies through December 31, 2009. On January 1, 2010, MGIC will be renamed, and its insurance in force will be placed into run-off, meaning, it will continue to collect premiums and pay claims on that business, but will no longer write new business. At the same time, “new” MGIC will become operational and will offer substantially the same programs, premium rates and guidelines and use similar underwriting, risk management, claims and other operational processes.”

Good morning everyone. I will be in the office today. Let me know how we can help. We are having great success with the new appraisal system in comparison the major banks and brokers out there. I would be happy to discuss why Zack Cooper and RPM are your best opportunity to get a fair appraisal and save your buyers money in the long run. We are still closing FHA loans in less than 25 days and getting contingencies removed in 10-12 days. In a market where we hear so much negativity our referral partners are thriving! Let us know how we can help you with your business, if you have any FHA questions, your buyers, etc. We have also figured out a way to get your borrowers streamlined approvals with the various banks that require approval with the selling bank. Last week we turned around a Wells Fargo required approval in 2 hours and got the offer accepted while others took 3-4 days to complete the approval. We are your purchase lender. Make it a great day.

To your success!

Sincerely,

Zack Cooper

TEAM EMPOWERMENT

925-295-9360 DIRECT

“The best way to get people to think out of the box is not to create the box in the first place.”

-Martin Cooper

Market Commentary – Wed, Jul 15 – 10:20 AM ET

Stock markets are rising for the 3rd straight session led by a positive earnings report by Intel, the world’s largest semiconductor, reporting that earnings per share came in at 18 cents versus the 8 cents that was expected. Intel also said that Q3 revenue will be better than forecasts. Intel (INTC) is part of the Dow 30 and a component of the S&P 500 Index.

Mortgage applications in the latest week rose said the Mortgage Bankers Association today. The MBA’s Index of Applications rose 4.3% in the week ended July 10 to 514.4 up from 493.1 the previous week. The group?s refinancing index increased 17.7%, while the gauge of purchases fell 9.4%. The rise was due to lower home loan rates last week.

A surprise reading from the New York Fed showed that manufacturing in that region shrank at the slowest pace in a year led by the biggest increase in orders since the recession began. The New York State Manufacturing Index rose to -0.55 in July from June’s -9.41 reading and was the best level since April of 2008. The report has also boosted Stock prices in the early going.

Inflation at the consumer level increased slightly in June from May pushed higher by rising gasoline prices. The Consumer Price Index (CPI) rose 0.7% in June from the 0.1% reading in May – estimates were calling for a reading of 0.6%. The so-called Core CPI, which strips out volatile food and energy, rose to 0.2% from 0.1% in May.

The CPI year-over-year fell 1.4%, the biggest decrease since January of 1950, while the Core CPI for the last year ended in June was 1.7% down from May’s reading of 1.8% for the past 12 months.

“Besides the noble art of getting things done, there is the noble art of leaving things undone. The wisdom in life consists in the elimination of non-essentials.”

~Lin Yu Tang

I can tell that I am grown up because I get up at 4AM, not go to bed at 4AM, and I no longer consider a $4.00 bottle of wine “pretty good stuff”. The French, known for their wine, celebrate Bastille Day today. It is called Fête Nationale (National Holiday) in France and commemorates the 1790 Fête de la Fédération, held on the first anniversary of the storming of the Bastille: the Fête de la Fédération was seen as a symbol of the uprising of the modern French “nation,” and of the reconciliation of all the French inside the constitutional monarchy which preceded the First Republic, during the French Revolution. (The “Bastille” was the French prison where people were held merely at the king’s judgment.)

Economists focused on mortgage banking, most of who work for Freddie, Fannie, and the large investors, are all scaling back on their estimates of mortgage originations for 2009, and cutting them drastically for 2010. If you are a large company, who has invested extensively in “bricks and mortar”, how are you dealing with expected lower volumes? Recently the MBAA lowered its forecast for mortgage originations, for the fourth month in a row, in 2009 to about $2 trillion. Last week I heard a respected speaker in the business say that his company believes that companies may want to scale their operations toward purchase business, which has hovered around $1 trillion a year. If prices are stable, or slide further, the dollar volume of purchases will slide, and, in the perfect storm environment, rates move higher, refinancing will also drop. The current MBAA estimate of 2009 purchase business has dropped to $737 billion while refinances were reduced $1.3 trillion by the MBAA.

Freddie Mac’s most recent bulletin addresses the deficiencies that they have seen in the underwriting process. The changes don’t take effect until October 1, but look for large investors who sell to Freddie to change, if they haven’t done so already. Freddie’s announcement is directed toward the borrower’s capacity to repay the mortgage, making sure their clients understand Freddie’s appraisal requirements, preventing fraud, and amendments to documentation requirements for Loan Prospector Streamlined Accept and Standard documentation levels. Light-hearted items like those.

Doing relocation loans? Wells’ wholesale will no longer allow trailing co-borrower income (a trailing co-borrower is a borrower who is not the cause of the relocation) to be considered in calculating the qualifying income. “As a result, effective with registrations on and after July 20, 2009, Wells Fargo Wholesale Lending will no longer accept trailing co-borrower income for conventional relocation loan transactions, including High Balance relocation loans. Additionally, effective July 18, 2009, Wells Fargo Home Equity will no longer accept trailing co-borrower income to qualify a transaction.” Wells’ wholesale also announced that they would no longer be buying 40-yr loans.

What do Flagstar and Taylor, Bean, & Whitaker have in common? To the best of my knowledge, with GMAC dropping out, they are the only two lenders participating in the $8k tax credit. It has become a big deal, in spite of the fact that the credit has some pretty severe restrictions. “Consistent with existing FHA Policy, Flagstar will allow tax credit advances with second liens from eligible governmental agencies and instrumentalities of government as long as the organization is also on Flagstar’s list of eligible community second programs. To make certain a non-profit agency is both FHA-approved and an instrumentality of government, refer to the appropriate homeownership center’s list of approved non-profit agencies.” “In the old days”, the Fed influenced the economy through “open market operations”. What are those? The Fed would typically trade in safe, short-term T-bills, buying and selling them to impact the short-term, risk-free rate. Buying securities pushes the price up, and rates down. Although very short-term rates have dipped slightly below 0% a few times recently, usually rates can only go down to 0%, which limits the Fed’s activity and impact. (If a Treasury security goes below 0%, investors would rather hold cash.) So let’s hope that they keep buying, since right now they continue to be the only game (or close to it) in town.

Not only have mortgage rates fallen, but LIBOR rates continue to decline. So what? Basically it means that banks have become more comfortable with lending to each other, which is a key step toward banks being more comfortable with lending in general. And this is obviously a good thing. But even if banks are more comfortable, what about the consumer? Unfortunately the consumer is showing more signs of weakness, according to last week’s University of Michigan consumer sentiment report which worsened for the first time since February. And since the consumer accounts for about two thirds of GDP, it is not good news – or is it? If folks like you and me continue to hunker down, it leads to more saving and less spending IF the consumer actually has a job. Today we had two key pieces of information, after the overnight rallies that we saw in Asian and European stock markets and a release of strong Goldman Sachs earnings. The Retail Sales number showed a stronger-than-expected 0.6 percent in June, ex-auto +.3%. And U.S. producer prices jumped by twice as much as expected in June due to energy: +1.8%, the biggest jump late 2007. Taking out food and energy, core PPI was +.5%, also higher than expected. This news, combined with the strength in stocks, has pushed the 10-yr back up to 3.44% and made mortgage prices worse by .375-.5.

“My will shall shape the future. Whether I fail or succeed shall be no man’s doing but my own. I am the force; I can clear any obstacle before me or I can be lost in the maze. My choice; my responsibility; win or lose, only I hold the key to my destiny.”

~Elaine Maxwell

 

We had three pieces of good news for the mortgage industry. First, Bank of America and Morgan Stanley are marketing securities backed by commercial mortgage bonds. Although the exact details are not known, there are reports that BofA is selling $368 million in debt backed by nine commercial mortgage bonds, and Morgan Stanley plans to sell $210 million in similar securities backed by a single commercial mortgage bond. In addition, Freddie Mac is issuing a $3 billion five-year reference note, which is notable in that according to Freddie Mac the deal is the first that didn’t offer concessions to investors that made the new debt more attractive than debt already outstanding.

Second, Chase, American Express, US Bank, Capital One, Bank of New York Mellon Corp., State Street Corp., BB&T Corp. and Northern Trust, Goldman Sachs and Morgan Stanley paid back billions in government investment (TARP), after they all obtained approval last week to pay it back. That is a start in the $700 billion Troubled Asset Relief Program. Yesterday was the first day that banks could pay back the money. Eight other banks received approval last week to repay the government funds.

Third, CitiMortgage announced that LMI pricing incentives are available through them in certain markets, targeted at helping eligible loans in selected low-to-moderate LMI geographic areas for a limited time only. Operators standing by! The deal goes for two months, and the loans must be located on Citi’s list of state, County, and MSA’s – basically low or moderate income census tracts. Skeptics might say that this is a return to extending loans to borrowers who may not qualify, but that is not for me to say. See Citi for details.

Lastly, so I guess this would four good things, inflation appears to be very tame, which, in one way of thinking, points to a relatively slow economy, which in turns suggests that rates will stay low or perhaps move even lower. (See below, however, as rates are up today on the jobless claims data.)

Unfortunately, but entirely expected, mortgage applications in the U.S. fell last week to the lowest level since November. The MBAA index of applications to purchase a home or refinance a loan dropped 16% in the week ended June 12, with refinancing down 23% and purchases down 3.5%.

Bank of America Home Loans Correspondent group told customers that after Monday (earlier this week) “Expanded Approval” recommendations will no longer be eligible with DU Refi Plus, and told them that since DU “may still approve this feature combination and the Correspondent Lending Web site will not restrict these commitments until a future system release. Therefore, clients are required to manually apply this new policy.” BAHL followed Fannie guidelines and told us that after July 1 the borrower may receive no more than $250 cash back at closing, that DU Refi Plus mortgages are ineligible for temporary interest rate buydowns, and that although new single premium lender paid mortgage insurance policies may be obtained on DU Refi Plus transactions if the current loan is subject to a lender-paid policy, the refinance is ineligible for the DU Refi Plus program.

What is the market up to this morning? New claims for jobless benefits rose last week but the number of People staying on the benefit rolls after collecting an initial week of aid fell for the first time since January. Jobless Claims were up 3,000, more than expected, but so-called “continued claims” dropped 148,000 – better than expected and the largest one-week drop since late 2001. On top of that, the 4-week moving average for new claims dipped to its lowest level since mid-February. We still have Leading Economic Indicators and the Philly Fed ahead of us, but for now 30-yr mortgage prices, and the 5-yr Treasury, are worse by .375-.5, and the 10-yr yield is at 3.74%.

“What greater thing is there for two human souls than to feel that they are joined…to strengthen each other…to be one with each other in silent unspeakable memories.”

~George Eliot

 

 We have had some good success with the small amount of appraisal rebuttals that have already gone through the RPM Appraisal System.  We recently had a appraisal come in less than purchase price where upon the loan agent submitted the appraisal to the Bank, after review, the Bank lowered the sales price to the appraised value.  We have also had success with “meeting in the middle” where both the appraiser, myself and the realtor provided information to come to a mutually agreed upon price.  In some smaller instances the value has also remained unchanged.   The best advice here is the more information the better as I do review the appraisal, review all the supplied information and then write a rebuttal to the appraiser if the information does have merit.  Upon writing a rebuttal to the appraiser, they acknowledge receipt of the information and then offer their opinion.  The appraisers are all trying to work with RPM and all have been very cooperative.  Please also remember, if you or your borrower are still unsatisfied after this process has been exhausted, you can order a new appraisal.  Another good idea is to have the realtor bring comparables to the inspection date as they are one of the few people that can still talk about value with the appraiser. Attached is the RPM Appraisal Review Process form which can be used to rebut an appraisal.  Please fill out the information and send back to me and I will review the attached data.  Thanks for all your help and patience as RPM Appraisal tries to make this system most beneficial to you.

 

When is the best time to add insult to injury?  When you’re signing someone’s cast. What some may feel is along the same lines, do you remember how the former Countrywide Financial president formed PennyMac Mortgage last year to buy troubled home loans and related securities? And how people in the business cried foul: “First they originate the stuff, then give the mortgage business a bad name, and now they’re buying their loans back at 10 cents on the dollar?” Well, soon you may be able to buy stock in them. On Friday they filed with the SEC to sell as much as $750 million in stock to the public. PennyMac Mortgage Investment Trust would make some of its investments under a federal plan to offer financing to buyers of toxic mortgage assets from banks, the filing says.

 

Flagstar reminded their customers that “FHA has extended the temporary property flipping waiver that allows lenders and the property disposition firms they hire (or with whom they are affiliated) to sell properties on which they’ve foreclosed without regard to FHA’s 90-day seasoning requirement. The waiver is in effect for loans with purchase agreements signed by the borrower and seller on or before May 10, 2010. Individuals or entities that purchase foreclosed homes are not exempt from the 90-day seasoning requirement. When the property seller is not exempt from FHA’s seasoning requirement, the borrowers may not execute the purchase agreement before the 91st day after the seller acquired the property. FHA requires a second appraisal when a property is being sold within 180 days of the seller’s

acquisition date and the sales price is more than 100% greater than the seller’s acquisition cost. This applies to all FHA purchases, including transactions where the seller is permanently or temporarily exempt from FHA’s 90-day seasoning requirement.” For additional information, refer to the FHA Mortgage Letter 2006-14 – Property Flipping Prohibition Amendment.

 

Flagstar also changed the pricing on all table-funded government loans with properties located in North or South Carolina to reflect a hit of 10 basis points.

 

Lastly, on June 5^th Flagstar will limit eligible manufactured home transactions to rate and term refinances of loans currently serviced by Flagstar Bank. Purchase, cash-out refinance transactions; or rate/term refinances of non-Flagstar serviced loans will be ineligible. This change applies to all products where a manufactured home is an eligible property type. Pipeline loans outside of these guidelines must be locked prior to Friday, June 5^th.

 

AgFirst announced that they will not be able to purchase loans originated under the DU ReFi Plus program when the previous loan has active Mortgage Insurance (MI) and is NOT currently being serviced by AgFirst. Per AgFirst, “The MI companies have not yet clearly defined operational procedures for the transfer of the MI from one servicer to another.   The servicer that originates the refinance (AgFirst) would be held responsible for the transfer of the MI to the new loan.  With the uncertainty in procedure and the absence of uniformity, the risk is too great.”

 

Union Bank of California, where many brokers have turned for jumbo product, reminded their brokers that their investment property financing, for purchase or no cash out refinance, has no restrictions on the number of properties owned or financed. “Union Bank will finance up to 3 investment properties for the same borrower  Loan amounts up to: 1 unit $750,000, 2 units $1,100,000, 3 and 4 units $1,500,000. Available on all programs, Interest Only or amortizing, including the Two Step Mortgage.”

 

Franklin American came out with their High Balance conforming loan limits originated under Fannie Mae’s Temporary High-Cost Area Loan Limits. An Addendum to the Conforming Fixed Rate provides underwriting criteria and loan parameters as allowed by FAMC. As with other investors, the list can be seen at http://www.fhfa.gov/webfiles/2082/HighCostLoanLimits2009_ARRA.xls Underwriting by FAMC is required on loans for lenders with delegated underwriting authority less than $650,000, and on all loans having loan amounts > $650,000 regardless of lenders delegated authority. Lenders should refer to their most recent FAMC approval letter to confirm their delegated underwriting loan limits.

 

So here we are, on a Tuesday that every year feels like a Monday. We have Treasury auctions today, tomorrow, and Thursday. Today we also have a series of “soft” economic releases: S&P/Case-Shiller housing index, Consumer Confidence, Richmond Fed, and so forth. Tomorrow and Thursday we’ll see Existing Home Sales and New Home Sales. Durable Good comes out Thursday, and on Friday we finish the week with GDP and the Chicago Purchasing Managers Index. Prior to this we find the 10-yr at 3.41% and mortgage security prices better by a shade.

 

 

Let’s ease into the week with some puns:

No matter how much you push the envelope, it’ll still be stationery….

A dog gave birth to puppies near the road and was cited for littering….

A grenade thrown into a kitchen in France would result in Linoleum Blownapart….

Two silk worms had a race. They ended up in a tie.

“I am so glad you are here. It helps me to realize how beautiful my world is.”

~ Rainer Maria Rilke

 

During the Civil War President Lincoln was being heavily criticized for military blunders. In 1862 he wrote, “If I were to try to read, much less answer, all the attacks made on me, this shop might as well be closed for any other business. I do the very best I know how – the very best I can; and I mean to keep doing so until the end. If the end brings me out all right, what is said against me won’t amount to anything. If the end brings me out wrong, ten angels swearing I was right will make no difference.” Ben Bernanke keeps that statement on his desk – interesting.

 

Wells Fargo’s correspondent group, who announced last month that they would take the new high balances with DU approvals, starting tomorrow will buy high balance LP (Freddie) loans. “New 2009 Higher Conventional Conforming Loan Limits Available for Delegated Loan Prospector® Transactions. Wells Fargo Funding will accept Loan Prospector delegated transactions with the 2009 temporary loan limits…Sellers should refer to Freddie Mac’s Super Conforming guidelines for details and revised eligibility requirements for all Super Conforming Loans. In addition to Freddie Mac’s guidelines, Sellers must also comply with the Wells Fargo Seller Guide.”

 

Wells Fargo ’s wholesale group tweaked the requirements for Freddie Mac Relief Refinance Mortgage loans with a debt ratio greater than 50%. “A loan with debt ratio greater than 50% may be approved when all of the following are met: A letter from the borrower regarding any reduction of income/job loss in the last six months is required. If the borrower indicates nothing has changed, the following compensating factors must be present to demonstrate borrower ability to pay: minimum 12 months of seasoning on existing first mortgage, no more than 1 x 30 late, payment is decreasing, and borrower has maintained a DTI that is higher than the new DTI for a minimum of 12 months (e.g. no significant new debt or reduced income).” If the loan is for a second home or investment property, standard reserve requirements (two months of reserves on each other financed second home or investment property) must be met.

 

Also note that Wells’ wholesale group stated that “DU will determine the appraisal product or PIW eligibility. However, for DU Refi Plus loans, when the property is a condominium, cooperative, 2-4 unit or the property was previously purchased as an REO/foreclosure in the past 12 months, a full appraisal is required regardless of the DU response provided. For the Freddie Mac Relief Refinance Mortgage program, Wells Fargo will indicate on the validation form whether an appraisal is required.”

 

JPMorgan Chase & Co. is pulling back on its mortgage operations in Massachusetts, closing offices and reducing its headcount throughout the region. Chase, apparently, will remain active in the area but also continue to focus on their “depository footprint” where it has a banking retail presence. Six of seven state offices are expected to be closed, as was a Rhode Island office in December. http://www.bostonherald.com/business/general/view/2009_05_19_JPMorgan_Chase_to_cut_Massachusetts_mortgage_offices/

 

Other news:

• Mortgage applications, according to the MBAA, rose 2.3% for the week ended May 15. The refinancing gauge was +4.5%, but purchases were -4.4%.
• Regions Financial, which has received $3.5 billion of TARP money but was told by stress tests that it needs to raise more capital, said it plans to raise $1.25 billion through stock offerings, half of the sum that federal regulators told it to raise to withstand a potentially deep recession. The public offerings include $1 billion of common stock and $250 million of preferred shares automatically convertible into common stock.
• Toll Brothers, currently the largest U.S. builder of luxury homes, saw its second-quarter revenue fall 51%. Based in Pennsylvania , they are the second-worst performing U.S. homebuilding stock this year having lost more than a third of its value since 2006.

 

On Monday night the House voted in favor of legislation that will give federal authorities more tools to combat mortgage fraud and create a commission to examine the financial crisis. It would authorize $490 million over two years to hire fraud prosecutors, increase enforcement actions and add funds to the Secret Service and Housing and Urban Development Inspector General. It also allocates funds to the Postal Inspection Service and sets up a commission of outside experts with subpoena power to examine the financial crisis and make recommendations. It also creates a bipartisan commission of experts with authority to review the causes of the economic situation and recommend changes.

 

In other Washington DC related news, Fannie Mae announced plans to securitize its holdings of mortgages that are not already packaged, into bonds. Per one trader, this helped fuel the issuance of $55 billion this month of debt backed by “seasoned” loans. Fannie’s plan is to take $256 billion of its single-family whole loan portfolio and $108 billion of multi-family loan portfolio and securitize that as well. Let’s hope that there are buyers out there! Speaking of buyers, this market is very, very quiet. “Dead in the water” as we used to say on the trading desk. The 10-yr seems happy around 3.23%, and mortgage security prices are about unchanged from Tuesday afternoon.