“To wait for someone else, or to expect someone else to make my life richer, or fuller, or more satisfying, puts me in a constant state of suspension.”

~Kathleen Tierney

 

I have attached the most recent Kiplinger letter and the California Kiplinger letter.  These are great reads.  Enjoy.  Rates continue to improve today.  Let me know how we can help you.  Have a great Friday. 

 

 

I called up the US Treasury yesterday to ask them how much they’d pay me to loan them money (e.g., buy a Treasury security) for a month. They replied, “Not only will we not pay you any interest, but you’ll pay us interest to loan us your money!” A novel thought – like paying for a storage unit for your junk – but it occurred yesterday where the interest rate on 1-month T-bills was negative. (It also happened back in December, as investors put their money into the most easily-traded securities to help their balance sheets at the end of the quarter. I guess that if I had a balance sheet that needed bolstering, I’d do the same. Banks prefer to carry securities on their balance sheets instead of cash at the end of the quarter, driving up the demand for bills, thus driving up the price, driving down the rate.)

 

What are the borrowers who are still making their payments saying out there? “A promissory note means that I am promising to repay the loan – it doesn’t mean I get to walk on the loan if the property value declines. Since the lender does not share the upside appreciation of an investment property, why should lender be stuck with the downside? I, as a borrower, accept both sides of the risk/reward equation: I get the upside AND the downside. My feeling is that many borrowers, especially for single family homes, believe that they are entitled to a 4%, no down payment, $1,000,000 loan. And somehow, if they can’t get that, that means there is a crisis requiring taxpayer subsidy.”

 

US Bank’s wholesale division sent this note to their brokers: “The American Recovery and Reinvestment Act of 2009 (ARRA), provided for the FNMA/FHLMC high cost county loan limits to be returned to the “higher of” the 2008 or 2009 loan limits. In most Cases the 2008 limits will be the higher limits but there are several counties (located in California, North Carolina & Virginia) where the 2009 limits were actually higher than 2008 limits. On a county by county basis you may be able to originate loan amounts up to the $729,750 limits of 2008. Effective immediately, for program #3626/3627 FHLMC Super Conforming Jumbo, U.S. Bank Home Mortgage Wholesale Division will accept loans at the revised loan limits. You may verify specific high cost counties at the new ARRA limits by checking the following internet site: www.ofheo.gov/Regulations.aspx?Nav=128”

 

GMAC’s minimum FICO for FHA is 580 for correspondents; however, they just implemented a price adjustment for FICOs below 620. (They do not impact GMAC’s Streamlined Refi program.) For FICO >=600 and < 620 -1.0, FICO >=580 and < 600 -1.50, and for FICO’s >=700 +0.125.

 

GMAC, and others, remind us that Fannie Mae has implemented the mandatory use of the Market Conditions Addendum to the Appraisal Report (Form 1004MC) which is intended to provide a clear and accurate understanding of the market trends prevalent in the subject neighborhood. The form provides the appraiser with a structured format to report the data and to more easily identify current market trends and conditions. The appraiser’s conclusions will be reported in the “Neighborhood” section of the appraisal report. Appraisers should be made aware of this taking affect April 1.

 

Lastly, GMAC Correspondent went along with FHA’s Mortgagee Letter 2009-07 “Loan Limit Increases for FHA” and announced revisions to the county limits for calendar year 2009. “The mortgage limits are effective for loans that have final credit approval in calendar year 2009 and will remain in effect until December 31, 2009. CL08-278 is hereby rescinded and is superseded by this announcement.”

 

This morning we’ve seen the February Personal Income & Outlays report which measures consumers’ ability to spend. (As you would expect, if a consumer’s income is rising, they are more likely to make additional purchases. Normally this would be viewed as inflationary, and bad for rates, but at this point, the markets would like to see a pick up in that measure.) Forecasts called for a 0.1% drop in income and a 0.3% increase in spending. Income actually dropped .2%, after January’s .2% increase, and spending was +.2% after being +1.0% in January. The “savings rate”, which many watch, was 4.2% in February, indicating that households were still remaining frugal. The second report comes from the University of Michigan, and is merely a revision to the March consumer sentiment index from 2 weeks ago. It is expected to be about unchanged. The 10-yr is back down to 2.71%, and anyone who didn’t improve their mortgage prices yesterday afternoon will do so this morning.

 

A lady inserted an ad in the classifieds: “Husband Wanted.”
Next day she received a hundred letters.
They all said the same thing: “You can have mine

“A man sooner or later discovers that he is the master-gardener of his soul, the director of his life.”

~James Allen

Last Friday was the first day of spring. Congratulations, you made it through winter – now if only your savings had… What is the word on when the conventional $729,250 will be rolled out? Hah! Call me “out of the loop”, but I have none. There are reports that big banks’ retail operations are already advertising the new limits, but I have seen no information from any other business channels and the reps are probably tired of answering the question with, “When Fannie and Freddie let us know.” . As is becoming standard, the big banks are (and many would argue wisely) supporting their own branch network. For example, as recently as 5-6 years ago, Chase had only 500 branches where they might be able to originate some get retail loans. Now, they have over 5,000 branches – do they and other large banks need a huge broker base to help them with their mortgage volume?

The good news is that the Mortgage Bankers Association boosted its forecast for 2009 home-loan originations to $2.8 trillion due to low rates and a wave of refinancing. They estimate refinancing will total almost $2 trillion this year and purchase originations will increase to $821 billion, which would put 2009 originations in the top 4 years of all-time. The bad news, if you could call it that, is that the costs to the borrower are higher than ever – especially if they want to buy down the rate. Mortgage origination fees are the costliest in eight years, and the positive spread that banks are earning (i.e., the difference between their cost of funds – what they pay depositors – and where they are loaning it out at) is huge. Most mortgage companies are already collecting the Fannie & Freddie “adverse market fee” that they will charge officially beginning April 1. Not only are originators collecting added fee income to their bottom lines, but also increased spread income (unless, in the case of mortgage banks, their warehouse banks are charging high rates).

As an example, commercial and retail banks are looking at overnight Fed Funds near 0%, but conforming mortgage rates are near 5% this quarter. And as I mentioned last week, the average spread between fixed mortgage rates and the 10-year T-note is 2.3%, the highest it has been in over 20 years.

We have seen the residential problems – is commercial next? Banks are reporting increased loan delinquencies from owners of office buildings, casinos, and shopping malls. The country’s 10 biggest banks have $327.6 billion in commercial mortgages, and Wells Fargo and Bank of America account for about half of commercial mortgages owned by these 10. According to a study from research firm Reis Inc., commercial property prices are down almost 20% in the past year. Bank of Hawaii Corp., City National Corp., Comerica Inc. and Sovereign Bancorp Inc. were among the companies put on Moody’s list of lenders with a “negative outlook” last week, partly because of their “risk concentrations” in the commercial market.

AmTrust’s Debt-to-Income Ratios, effective earlier this week, for a LTV/CTLV/HCLTV greater than 80% 41% maximum. For a LTV/CLTV/HCLTV equal to or less than 80%, 55% maximum for conforming products and 45% maximum for Jumbo products. For a manual underwrite (“Non-Traditional Credit”): 41% maximum, regardless of LTV.

FAMC is revising and clarifying credit parameters for Conventional Conforming Fixed Rate and Conforming ARM products. Their minimum credit score for a 1 unit, primary residence cash out transaction has been lowered to 640. The maximum LTV/CLTV was previously reduced to 80/80. (A while back they addressed maximum LTVs on second homes and investment properties and increased the minimum scores > 80% to 680. The minimum credit score has been increased from 580 to 620 for LTV’s < 80%.)

Well, rates improved for a bit yesterday, but then worsened slightly as the day wore on. Can you believe that the 10-yr yield is 25 basis points higher than last week’s lows? Today we have already seen Durable Goods (estimated to be -2.5%, they were +3.4% in February, the biggest increase since December 2007, although January was revised to -7.3% from -4.5%), and later on we’ll have New Home Sales (estimated to be down 3%). Perhaps most importantly, we have a $34 billion 5-yr note auction to get through. The Mortgage Bankers Association released their weekly application figures: last week mortgage applications were +32%! Currently the 10-yr is back up into the mid-2.7% range, and mortgage prices are worse by another .125 versus Tuesday afternoon.

Hospital regulations require a wheel chair for patients being discharged. However, while working as a student nurse, I found one elderly gentleman already dressed. He was sitting on the bed with a suitcase at his feet, and he insisted he didn’t need my help to leave the hospital. After a chat about rules being rules, he reluctantly let me wheel him to the elevator. On the way down I asked him if his wife was meeting him. “I don’t know,” he said. “She’s still upstairs in the bathroom changing out of her hospital gown.”

“The willingness to accept responsibility for one’s own life is the source from which self-respect springs.”

~Joan Didion

 

 

The economic downturn has more Americans shifting to smaller homes. For example, Bernie Madoff just traded a 3,500 square foot penthouse for a 9 x 10 windowless studio in lower Manhattan . And for anyone needing financing on larger homes, it appears that Bank of America is truly “ruling the roost” when it comes to jumbo rates – few, if any, can compete, and agents and brokers are once again hoping that their clients don’t wander into a BofA branch any time soon.

 

When did a “hard money lender” become a “private money lender”? This business is certainly prospering, although the industry is highly segmented and typically local. And there is downward pressure on rates, similar to what happened with the subprime business as more companies and capital began pushing rates down to be competitive.

 

Do you want to see if your loan, or your neighbor’s loan, is owned by Fannie? http://loanlookup.fanniemae.com/loanlookup/

Do you want to see if your loan, or your neighbor’s loan, is owned by Fannie’s brother? https://ww3.freddiemac.com/corporate/

 

It is a light week for scheduled economic news. Today we have Existing Home Sales, nothing tomorrow, Wednesday we have Durable Goods Orders and New Home Sales, Thursday Jobless Claims and 4th Quarter Gross Domestic Product (considered old news), and lastly on Friday we have Personal Income and Consumption along with the University of Michigan Sentiment number. Existing Home Sales gives us a measurement of housing sector strength and mortgage credit demand, but rarely impacts rates. Speaking of which, this morning our friend the 10-yr is at 2.64% and mortgage prices are worse than Friday afternoon by about .125. Last week, given the new from the Fed, many originators were selling 4 and 4.5% mortgage securities (generally containing 4.25-5.125% mortgages), which, interestingly, pushed their prices down more than higher coupon securities. Dealers reported about $5 billion in sales on Friday, a very large day, and with only the Fed truly buying (there are other buyers, but “begrudgingly”), that was bound to push prices down and rates higher.

 

MGIC announced that their maximum loan amount for 1 Unit Properties is $417,000 or “Up to the Fannie Mae and Freddie Mac conforming loan limits in areas where the maximum exceeds $417,000. Guidelines for loans greater than $417,000 remain unchanged: Non-Restricted Markets – Maximum LTV 90% / Minimum FICO 700, Restricted Markets – Maximum LTV 85% / Minimum FICO 700, Restricted States – Maximum LTV 85% / Minimum FICO 720. Also unchanged, are the premium rate adjustments for loans greater than $417,000: Monthlies/ZOMP!, Splits and Annuals –  +.25%, Singles –  + 1.25%.”

 

GMAC told their correspondents that GMACB is revising their guidelines for Jumbo: 85% Maximum LTV, Primary Residences Only, Full Income Documentation type only, Properties listed for sale in the past 6 months are ineligible for refinance. FICO Score: 680 Loan amounts<=$650,000; 700 for loan amounts > $650,000, 720 for loans amounts > $1,500,000. GMAC also stated their declining market, DTI, and LTV restrictions.

 

As I understand it, the compensation of sales people and top managers is largely based on performance and loyalty. In more news about bonuses, retention bonuses for senior executives at Fannie Mae and Freddie Mac should be canceled or recouped according to House Financial Services Committee Chairman Barney Frank. He feels that large bonuses to executives at companies receiving government aid must stop. FHFA, the federal regulator that authorized the payments, is refusing to comply. Congress proposed legislation last week that would severely tax these payments and others to any company that has received taxpayer assistance. Are we having fun yet? The White House has toned down its initial favorable response to the House vote last week, and now senators are reportedly cool on the House’s 90% income tax on bonuses paid this year. But they also say some action has to be taken to prevent financial firms from gouging taxpayers.

“Breathe.  Let go.  And remind yourself that this very moment is the only one you know you have for sure.”

 

-Oprah Winfrey

 

 

If a broker renegotiated a lock every second, how long would it take to get better rates on 1.25 trillion loans? Over 39,000 years, which is about how long it will take investors to forget the miserable pull-through that they’re facing. Yesterday Fannie 4.5’s moved above a price above 102, plus a conservative .5 point for the value of the servicing, suggesting that a 5.0% mortgage can be securitized and sold at a rebate of 2.5 points. But only if the originator is doing their own securities.

 

Speaking of 1.25 trillion, “To provide greater support to mortgage lending and housing markets, the (FOMC) decided to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion.  Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months.  The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets.”

 

To put “trillions” in a different perspective, Fannie and Freddie own or guarantee roughly 31 million mortgages, or about $5.5 trillion in loans, which is more than half of all U.S home mortgages. That news did the trick, prices shot through the roof, and suddenly Lock Desks and investors are dreading the attempted renegotiations and potential pull-through problems ahead of them.

 

Warehouse lending is a critical link in the housing finance chain. Mortgage bankers (who don’t have deposits) use warehouse banks for the money in revolving credit lines to fund loans that are eventually sold into the secondary market. Once the mortgages are funded and closed they serve as collateral for the advances on the credit line, reducing the risk to the warehouse lender until the mortgage is sold. The proceeds from the sale of the loan are then used to repay the advances on the warehouse line of credit. In other words, if a mortgage bank wants to fund a loan for $100k, they borrow $100k from their warehouse bank, fund the loan, sell it for $101k, pay off the warehouse bank, and keep the $1k for themselves. Easy, right?

 

An industry panel calculated that mortgage bankers that utilize warehouse lines are responsible for approximately 41% of all residential mortgages originated in the U.S. , and 55% of all FHA loans. There is a rumor running rampant in the marketplace that Wachovia’s warehouse operation (you remember Wachovia, whom Wells snatched at the last minute from Citi, but if they could turn back time…) will continue to operate in some capacity under Wells Fargo’s management. That would be big news for any Wells Fargo correspondent clients, if true.

 

It would appear that most mortgage banks that had put tight warehouse issues behind them may be facing them again soon. Mortgage applications in the U.S. increased last week by 21%. Refinancing was up 30%, and this is only expected to grow in the coming weeks. Unfortunately mounting foreclosures are pushing down property values, further depressing household wealth.

 

Do you want to see if your loan, or your neighbor’s loan, is owned by Fannie? http://loanlookup.fanniemae.com/loanlookup/

Do you want to see if your loan, or your neighbor’s loan, is owned by Fannie’s brother? https://ww3.freddiemac.com/corporate/

(Aren’t they one company yet?)

 

Today the market is grappling with the big move in Treasury securities yesterday. They will be announcing the details of next week’s 2-yr, 5-yr, and 7-yr auction ($100 billion is anticipated). We have already seen Initial Jobless Claims fall to 646,000 in the week ended March 14, although the previous week’s number was revised up to 658,000 from 654,000. The number of people staying on the benefits roll, however, after drawing an initial week of aid was up 185,000 to 5.47 million in the week ended March 7, the latest week for which the data is available, from 5.29 million the previous week. This was the highest on record and pushed the insured unemployment rate to 4.1 percent from 3.9 percent the week before, the highest since June 1983. And the four-week moving average for new claims rose to 654,750, the highest since October 1982. We still have Leading Economic Indicators and the Philly Fed survey ahead of us at 7AM PST, but for now the 10-yr is at 2.52% and mortgage prices are up a lot.

“The living moment is everything.”

~ D.H. Lawrence

 

One of the things that impacts the value of servicing is the length of time that the company servicing the loan (i.e., collecting the payments) expects to have the loan on their books. No one wants to pay a 2 or 3 point premium for a loan that they service for only 3 months, so loans paying off early (“prepayment”) is watched carefully. Last weeks’ prepayment speeds indicated a pick up in early pay offs. Interestingly, the Fed’s purchases of mortgage-backed securities, along with the plan to make high LTV loans eligible for refinance has led to increased speeds, and faster expectations moving forward – which has not helped higher rate mortgage prices.

Anyone trying to modify a mortgage, and then having the borrower (who misled the broker during the original process) mislead them is in a difficult position. So what would you call a modified loan to a borrower who exaggerated (lies) about how little he/she makes (and has) to get a loan modified after lying to get the loan in the first place? A reverse-liar loan? An inverted-liar loan? A double-prevaricator loan? A pathological liar loan? A serial falsifier loan? A storyteller loan? A fibber note? A reverse truth loan? Stay tuned…

Are brokers and loan agents rolling in business these days? Not really. What one loan agent said, “I am working 10 times as hard for 1/10th as much business, and I am having to leap over the tall buildings of credit scores and appraisal to make things work.” Another told me, “Every deal continues to be difficult – there are few slam-dunk borrowers or properties out there right now.”

Chase told their correspondents, “After careful consideration of the current market, Chase Correspondent Lending has made a business decision to discontinue the availability of our Non-Agency products effective Thursday, March 19, 2009. Effective March 19, 2009, Chase Correspondent Lending is making the following revisions to our Agency products and programs: Increasing the cash-out limit on Freddie Mac Fixed Rate High Balance loans from $100,000 to $200,000; Reducing the LTV on Fannie Mae and Freddie Mac Amortizing Fixed Rate Primary Residence Cash-Out Refinance Co-ops from 85% to 80%; Reducing the LTV on Agency High Balance Interest Only 5/1 ARM Primary Residence No Cash-Out Refinance Condos from 90% to 80%; Eliminating Subordinate Financing on Agency High Balance Amortizing 5/1 ARM Primary Purchase Co-ops.”

Thornburg Mortgage, whom every broker in a high cost area remembers with great fondness, said yesterday it may file for Chapter 11 bankruptcy protection. The lending banks are giving Thornburg until the end of the month before calling in the lines.

The news out this morning consisted of the U.S. consumer prices. The CPI rose in February, according to the Labor Department, by 0.4%, about as expected. It is the biggest monthly gain since last July, after increasing 0.3 percent in January. Core prices, which exclude food and energy items, were +0.2 percent in February after rising by the same margin the prior month. On a year-over-year basis, consumer prices were up 0.2 percent. We still have the Fed’s announcement later today, but for now the 10-yr stands at 2.98% and mortgage prices are a shade better.

“Live to the point of tears.”

~ Albert Camus

 

 

GMAC Bank Correspondents should know that GMAC Bank has revised the minimum credit score requirements for all FHA transactions and will no longer accept a credit score below 580, regardless of the underwriting method (AUS or manual). “In addition, GMAC Bank is implementing new mortgage payment history requirements for streamline refinance transactions. Non-Credit Qualifying Streamline Refinance: 0 x 30 during the previous 12 months or life of loan if less than 12 months; Credit Qualifying Streamline Refinance: No more than 1 x 30 during the previous 12 months or life of loan if less than 12 months.” GMAC was also kind enough to remind sellers that they require a functional kitchen (having cabinets and a working sink) for all FHA loans, and that “all properties must be habitable and all appliances, plumbing, electrical, etc. must be functional and in good working conditions.”

 

Chase Correspondent, as part of the ARRA signed a few weeks ago, came out with their temporary increase in the 2009 loan limits, to equal the higher of the 2008 Economic Stimulus Act loan limits or the 2009 Housing and Economic Recovery Act loan limits. They are rolling it out in two phases. In the first phase, starting today Chase Correspondent will begin accepting FHA loans under the revised 2009 loan limits made available under the American Recovery and Reinvestment Act. In phase 2, for the ARRA loan limits on Agency transactions, Chase (and other investors) is awaiting additional direction from the agencies. Upon receipt of this information, they will analyze the Agency requirements and “will advise you of Chase’s policies and procedures in a separate bulletin.” For Chase, the base loan amounts continue to be considered standard FHA loans (1 Unit, $417,000, AK and HI $625,500, etc. based on units).

 

For Chase, FHA loans with base loan amounts greater than these standard loan amounts are considered to be “FHA High Balance” loans, and the maximum base amounts ratchet up to $729,750 (or $1,094,625 in AK and HI), 2 units $934,200, etc. Chase reminds us that the maximum eligible loan amount varies by state, county and number of units, and can be found on HUD’s Web site at: https://entp.hud.gov/idapp/html/hicostlook.cfm

 

More has come to light about the modification program, which goes through 2012. Participating loan servicers will be required to evaluate mortgages at risk of default to determine if they qualify for the program. If they do, those companies can reduce total monthly housing payments to 31% of the borrower’s income by reducing the interest rate to as low as 2 percent for five years, extending terms up to 40 years and forgiving part of the principal. Once the lender reaches the 38% income threshold, the government will kick in matching funds to help lower it to 31%. Underwriting-wise, borrowers will have to provide their most recent tax return and two pay stubs and prove “hardship,” such an increasing housing payments or decreasing income.

 

A Mortgage Banker’s Association survey shows that Florida leads the nation with one in five (yes, that is 20%) home loans one month or more past due, the highest delinquency rate among the 50 states. Of those, almost 9% (320,000 homes) were in foreclosure, compared to a nationwide level of 12% delinquent and 3.3% in foreclosure, representing 1.9 million properties.

 

Fourth largest bank Wells Fargo cut its dividend 85%, saying it will save $5 billion a year. This follows JPMorgan Chase & Co, PNC Financial Services Group Inc and US Bancorp, along with many others. Bank of America Corp has cut its quarterly dividend to a penny per share, and Citigroup, which saw its share price go below $1 yesterday, eliminated its payout. As we all remember, Wells snatched Wachovia from Citi’s jaws for $12.5 billion on Dec 31st.

 

Yesterday was another good day for rates, at the expense of the stock market. Treasury securities started the day much higher, being viewed as a “safe haven” since large bank and financial service companies are being viewed nervously. Mortgage prices improved, but not quite as much (lagging) due to early pay-off fears. The long-await Unemployment data came out this morning, showing that Nonfarm Payrolls dropped 651,000 jobs in February, pushing the unemployment rate to its highest in 25 years at 8.1%. Although the number was in line with expectations, the January and December job losses were revised sharply higher to -655k and -681k respectively. (December’s payroll losses are now the worst since October 1949.) Job losses in February were broad based, with only government, education and health services adding jobs. After the number the 10-yr is back up to 2.86% and mortgages are a shade worse in price.

faq-fannie-mae-making-homes-affordable-program1

foreclosure-prevention-plan1 

“Because you are alive, everything is possible.”

 

-Thich Nhat Hanh

 

 

Seen on a bumper sticker: “Honk if you’re paying my mortgage”. Speaking of paying for someone else’s mortgage, here are the latest in loan modification guidelines released by the US Treasury: http://www.ustreas.gov/press/releases/reports/modification_program_guidelines.pdf or http://www.treas.gov/press/releases/tg48.htm or

program guidelines http://www.treas.gov/press/releases/reports/modification_program_guidelines.pdf. Or Bloomberg presented a good article on the plan, and you can visit http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aN4NFR0MfE4w.

 

Not to be outdone, Fannie and Freddie both came out with announcements. The key points are the elimination of upfront delivery fees (which are likely to substantially increase prepayments),  it is intended to provide low-cost refinancing opportunities to responsible agency borrowers whose home prices have fallen, remove MI fees even if the LTV is as high as 105%, and eliminate post-settlement delivery fees for Freddie Mac loans.

 

Fannie Mae issued “Announcement 09-04”, labeled Home Affordable Refinance – New Refinance Options for Existing Fannie Mae Loans as a follow up to the Treasury Department’s creation of the Making Home Affordable program, a key component of the federal government’s Homeowner Affordability and Stability Plan (HASP). Fannie’s new Refi Plus™ options for Fannie Mae to Fannie Mae refinances “provide significantly relaxed mortgage insurance (MI) coverage requirements to assist borrowers who have experienced home price declines, offer LTVs up to 105 percent, and provide other underwriting flexibilities. The goal is to provide refinance opportunities to borrowers who have demonstrated an acceptable payment history on their mortgage, but due to a decline in home prices, have been unable to refinance to obtain a lower payment or move to a more stable product.” It is for DU product only, starting April 1. Fannie is “retiring” the Streamlined Refinance Mortgage product.

 

They also came out with Announcement 09-05: “Introduction of the Home Affordable Modification Program, HomeSaver Forbearance™, and New Workout Hierarchy.”

The Home Affordable Modification program, which runs through 2012, is meant to help borrowers who are in default, at risk of imminent default, or in foreclosure. They can have their loans modified to a more affordable monthly mortgage loan payment equal to a target 31 percent of their gross monthly income. “Program participation is required for all eligible Fannie Mae portfolio mortgages and MBS pool mortgages, and is optional for other qualifying mortgage loans that are not subject to Fannie Mae’s credit loss guarantee and are held by servicers in their own portfolios or are serviced by servicers for other portfolio or securitization trusts or investors.”  We also have Fannie Mae’s HomeSaver Forbearance option, which is designed “for borrowers who are not eligible to participate in a Home Affordable Modification but have the willingness and ability to make reduced monthly mortgage loan payments for a defined time period. During the forbearance period, the servicer should be working with the borrower to identify and implement a more permanent foreclosure prevention alternative.”

 

Freddie Mac came out with their “Relief RefinanceSM Mortgage intended to help borrowers who are making timely mortgage payments, but have been unable to refinance due to declining property values and tightening credit terms by offering expanded LTV/TLTV/HTLTV ratios, no post settlement delivery fees, except for the Market Condition delivery fee, relief from standard mortgage insurance requirements, and simplified appraisal and borrower eligibility requirements. The refinance requirements for first-lien conventional mortgages are that they currently are owned or securitized by Freddie Mac. The only post settlement delivery fee that applies to Relief Refinance Mortgages is the Market Condition delivery fee – they are waiving all other post settlement delivery fees. “Borrowers eligible for this offering must be current on their monthly mortgage payments with no 30 day or more late payments in the most recent 12 months. You may start accepting applications from borrowers who meet this and all other requirements for the offering tomorrow, March 5. Relief Refinance Mortgages are only eligible for sale through the selling system, effective for Freddie Mac settlements on or after April 1, 2009. In all cases, in order to originate a Relief Refinance Mortgage, you must be the Servicer of record for the existing mortgage and you must be able to demonstrate that Freddie Mac currently owns the mortgage being refinanced.” Check with your Freddie rep for more details.

 

Consolidation continues to occur in mortgage banking. The latest, for example, comes out of Minnesota with River City Mortgage & Financial acquiring American Mortgage Corp. American Mortgage, which is based in Edina , lists 15 Twin Cities branch offices on its Web site, and has originated $2.5 billion in mortgages over the past 10 years. River City has 55 branches in six states and has originated $3 billion in mortgages since it opened in 1994.

 

A significant new indicator hints that as Sacramento was among the nation’s first housing markets to stumble and fall, it may now be among the first to point the way out. The chief economist for the California Association of Realtors said that the subprime loan crisis that triggered the housing and economic downturn – while destroying dreams of homeownership in thousands of Sacramento-area households – has largely run its course in the region. “In Sacramento County we’re through 80 percent of the subprime resets.” California is through 67 percent of its subprime resets, the CAR report indicated, but seems to fail to mention Alt-A resets… http://www.sacbee.com/business/story/1669819.html

 

Ah, back to interest rates today. This morning Jobless Claims, expected to drop slightly for last week, actually did and fell by 31,000 to 639,000. That number remains near record highs, reminding us of the tough job market. The four-week moving average for new claims rose to 641,750 in the week ended Feb. 28 from 639,750 the week before. Of course tomorrow we have the Unemployment data, with the unemployment rate expected to near 8%. However, the market will take what it is given, and the yield on the 10-yr is back down to 2.88% and mortgage prices are better by about .250.

“When you arise in the morning think of what a privilege it is to be alive, to breathe, to think, to enjoy, to love.”

~ Marcus Aurelius

 

 

Q: What’d the 0 (zero) say to the 8?

A: “Nice Belt.”

 

Speaking of belts, and their tightening, a survey says that “48% of all millionaires say the outlook for the economy is gloomy. The other 52% are no longer millionaires.” Will Rogers defined a recession as “when your neighbor is out of work, and a depression is when you’re out of work”. Jokes aside, Economists define a recession as two quarters of negative GDP growth, whereas a depression is 3 years of it and/or a decline in real GDP of 10% or more.  We’ve had a 6.7% decline so far in the 2nd half of 2008, so great interest will be placed on this quarter’s numbers. Tell that to builder Toll Brothers, the largest U.S. builder of luxury homes, who just reported their 6th consecutive quarterly loss. The NAR is predicting that sales of newly built properties probably will fall to their lowest level in 46 years of data.

 

Guarantee Bank has left many small and mid-size mortgage banks with one less warehouse option. In a phone call to clients, they are exiting the business, although many companies that use Guarantee have several months to find new lines from warehouse firms like First Tennessee or Comerica.

 

Following other banks like BofA, Chase, Citi, and PNC , U.S. Bancorp (the 8th largest bank in the US ) cut its dividend 88 percent. Prior to 2008, U.S. Bancorp had announced dividend increases in 36 straight years.

 

Last week lock desks around the nation noticed that locks fell. The MBAA reported that mortgage applications for the week ending Feb 27th fell for the second week in a row by 12.6%, with refinancing applications down over 15% and purchases down almost 6%. This follows the previous week’s number showing a drop of over 15%. Are homeowners and potential homeowners waiting for lower rates? Perhaps, but the slowdown is giving Ops staffs a chance to catch up on processing, underwriting, drawing docs, funding, and warehouse lines, although management teams are hoping that lower applications are not here to stay. If so, it will not bode well for April numbers. The industry is already seeing mortgage companies reduce their profit margins slightly, or in some cases reducing margins but raising fees. Talk of upfront lock fees is increasing, and many brokers are charging borrowers for appraisals at the start of processing.

 

According to Sheila Blair, chairman, the FDIC is investigating more than four-thousand cases of alleged mortgage fraud worth more than $7 billion. Blair also expects an increasing number of civil suits against mortgage brokers and others who allegedly defrauded lenders. *OK, I made that up. In fact, the FDIC is actively hiring new staff: http://www.npr.org/templates/story/story.php?storyId=101097890&ft=1&f=1001

 

CitiMortgage Correspondent announced new MI FICO and LTV criteria, effective 3/9. Many investors are already at these levels already, and some may be considering raising the bar further. “To obtain Mortgage Insurance for Loans with LTV > 80%, regardless of documentation process, the following criteria is generally now required by the MI companies: A credit score of 660 or greater for Full Amortization Loans for a primary residence &second home under a purchase or rate/term refinance, a credit score of 680 or greater for Interest-Only Loans, a credit score of 720 or greater for Cash-out Refinance Loans, a credit score of 700 or greater for Agency Jumbo Loans, and, in Florida, if the property is located in a declining market as designated by the MI companies, the property must be a detached 1-unit property.

 

Ok, so what is going on today in the market? Rates are higher, prices lower, primarily attributed to stable stock markets rather than anything else. This could balance out yesterday’s rate improvements. It appears that most lenders are locking 30-yr loans between 4.75% and 5.25%, with the Fed continuing to buy securities that hold those rates. The ADP Employer Services said U.S. private employers cut 697,000 jobs in February, and although the correlation is always questionable, it has caused the market to wonder about Friday’s unemployment data. That does it for the day on scheduled news, although we will see the Fed’s Beige Book out in several hours along with the expectation that the Treasury will announce $60 billion in new issue debt tomorrow. The yield on the 10-yr Treasury, also of questionable correlation to mortgage rates recently, is currently 3.02% and mortgages are a shade worse than yesterday afternoon.

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“Sometimes even to live is an act of courage.”

~ Lucius Annaeus Seneca

 

In the old days, I used to have what we called a “stock portfolio”, and I also used to think that I was pretty smart since it went up year after year. Now the DOW is back to 1997 levels, and is down 22% in just the last two months! It doesn’t take a math professor to tell you that if a stock looses 50% of its value, going from $100 per share down to $50 per share, in order to go from $50 per share back to $100 it has to go up 100%, or double. And many analysts just don’t see the stock market doing that any time soon in this environment. Of course, if a stock pays a dividend, the yield has doubled – if the company continues to pay it.

 

Yesterday the improvement in rates was directly attributed to the falling stock market. The DOW dropping 300 points when it is in the 7,000 area is not the same percentage hit as when it drops 300 in the 14,000 area. Treasuries saw the ol’ “flight to quality bid” as the economic news was pretty dismal, including the losses from tax-payer owned AIG and Construction Spending falling over 3%. Today’s rates are a little worse, with the 10-yr back to 2.95%, but mortgages are roughly unchanged from Monday afternoon.

 

Today there is no substantive scheduled news, although many are waiting for tomorrow’s clarification of the Homeowner Affordability and Stability plan. Business Week did a fine story on Vallejo’s woes: http://www.businessweek.com/magazine/content/09_10/b4122052964412.htm

 

Citigroup is doing what it can to help newly unemployed homeowners to temporarily reduce payments on their mortgages. Citi will lower payments for three months to an average of $500 per month for certain borrowers who lost their jobs and are at least 60 days delinquent, and after that it will work on a case-by-case with borrowers who are still unemployed after that time. As one would expect, the program is limited to people who have mortgages that are owned and serviced by CitiMortgage, which does not include the 4.3 million mortgages that Citigroup services but does not own. Qualified borrowers must live in their homes and the loans must be $417,500 or less.

 

Chase Correspondent is increasing their fees. They announced that, “For all loans locked, relocked, or extended on or after March 16, 2009, the administrative fee will increase from $110 to $175.” Fee income is one of the leading line items for many mortgage banks, so why not make hay while the sun shines and try to cover the additional overhead added in processing this glut of loans? Small to mid-sized lenders will in turn either increase the fees to their borrowers or eat the difference.

 

Good Afternoon.  I have attached a document entitled First-Time Homebuyer Tax Credit.  It outlines the changes to the tax credit under the new stimulus plan for first time home buyers.  Use it to reconnect with your database and send to the people you know who are renting.  I have also attached a document entitled Four Ways the 2009 Economic Stimulus Plan Benefits Home Owners and Buyers.  Make sure to read the information in this email about appraisal ordering changes coming very soon.  As a mortgage bank we have the best of all worlds.  We are closing loans in 30 days or less and purchases with 20% down we can still offer 15 day closes.  We are closing FHA loans in 30 days and some times less if we have them pre approved prior.  We still are set up to sell our loans direct to all the major banks but we control everything from approval to closing the file in our name.  Our realtors and clients love us right now so make sure to keep us in mind for your referrals.  Make it a great day and we will talk to you soon. 

 

 

“Men who have worked together to reach the stars are not likely to descend together into the depths of war and desolation.”

~ Lyndon B. Johnson

 

 

Yes, a new SISA had been rolled out: “Substantiated Income – Substantiated Appraisal”. Ha! Don’t hold your breath waiting for the old one to come back.

 

We have a new plan. There has been little done to help the actual borrower in the present situation since it is near-impossible to find a solution will satisfy both the borrower and the investor. Certainly many steps have been taken, with the Fed buying MBS’s and lower mortgage rates probably being the most help. Principal reductions may help many stay in their homes but it is not going to make the economy turn around since it doesn’t create wealth.

 

If you were a mortgage servicer like Wells or Chase, and you have been buying 5.5% mortgages at a 2 or 3 point premium above par, thinking that you might have them on your books a while, would you be excited about “Homeowner Affordability and Stability Plan” announced yesterday? The jury is still out since prepayments might increase, but banks, money managers and hedge funds were selling their higher rate mortgage pools and selling 4 and 4.5% MBS’s, which would include 4.25 – 5.125% mortgage rates.

 

The Homeowner Affordability and Stability Plan may assist as many as 9 million homeowners, but will it help the mid-size mortgage banker? Many hope so. The plan applies to primary residences, and only to loans that don’t exceed Freddie Mac/Fannie Mae conforming loan limits. Homeowners who have conforming loans owned or guaranteed by Freddie Mac and Fannie Mae will be allowed to refinance their homes, even if they do not have 20 percent equity. If homeowners are actually underwater, but not necessarily delinquent, the “Homeowner Stability Initiative” takes over and lenders, servicers, and the government will work together to share in the cost of the modification which reduces the monthly payments to not exceed a 38% DTI. (Servicers would receive an up-front fee of $1,000 for every eligible modification meeting the initiative’s guidelines. Guidelines Mortgage holders will receive an incentive payment of $1,500, and servicers $500, for modifications made on loans that are current but at risk of imminent default.) And lastly, and this should help smaller mortgage companies, the Treasury Dept. plans to increase their Preferred Stock Purchase Agreements with both Fannie Mae and Freddie Mac, and will continue to purchase Fannie Mae and Freddie Mac mortgage-back securities in order to help promote stability and liquidity in the marketplace.

 

I enjoy making forecasts, except when they’re about the future. Speaking at the National Press Club, Bernanke announced that the FOMC’s forecasts will include a set of projections for a longer-term (5- to 6-year) horizon, the inflation components of which “may be interpreted…as the rate of inflation that FOMC participants see as most consistent with the dual mandate.”  He continues to maintain that Fed actions have helped credit markets, and the credit risk to the Fed from the various actions they have taken is low.  Importantly, he does not mention purchases of longer-term Treasury securities in what has now become a fairly standard three-part description of the Fed’s tool kit for extraordinary circumstances (the three being provision of liquidity, facilities targeted to specific credit markets, and purchases of longer-term assets). And 5-6 years ago we knew this all was going to happen?

 

Taylor, Bean & Whitaker followed other lenders with restrictions on TPO business for MI purposes. “Any Third Party Originated Loan Over 80% LTV, Minimum FICO 740, Maximum DTI 38, Maximum LTV 90, 1 Unit Primary Residence only.” This mirrors the restrictions that MI companies have put on business coming through their own doors.

 

May 1 will be here before we know it, and supposedly on that date mortgage brokers can no longer order appraisals instead using a designated pool of appraisers of unknown quality and efficiency. The New Home Valuation Protection Code, used by Fannie & Freddie, created requirements governing appraisal selection, solicitation, compensation, conflicts of interest and corporate independence. As we all know, mortgage brokers will be prohibited from selecting appraisers, lenders are prohibited from using in-house staff appraisers to conduct initial appraisals, and lenders are prohibited from using appraisal management that they own or control. Appraisers, good and bad, are scrambling to sign up with management companies who have placed them on rotating lists, typically at a cost to the appraiser. Interestingly, the code mandates that mortgage brokers adhere to the rules of using a management company’s pool of appraisers, but mortgage bankers are not.

 

Wells already does it and Citi’s brokers will soon. They sent an announcement saying, “Please note that Appraisals for conventional loan files registered on or after 3/01/09 must be ordered through the CitiMortgage Wholesale Lending website at https://broker.citimortgage.com. For Appraisals ordered on the CitiMortgage Wholesale Lending website, CitiMortgage will obtain the Appraisal report directly from RealTrans.”

 

For scheduled news today, we had Jobless Claims remain unchanged from the previous week at 627,000, still near a 26-year high and slightly higher than the 620,000 forecast. U.S. producer prices climbed more than forecast in January, +0.8%, also higher than projected and which followed a 1.9 percent drop in December. The core rate, excluding food and fuel, was +0.4%, also more than anticipated. Later, at 7AM PST, we will see Leading Economic Indicators, expected about unchanged, and the Philly Fed survey. Unfortunately rates have moved higher this morning, both before and after this news. Maybe focused on the supply issue of $97 billion of debt to be sold next week to support the government’s spending? The 10-yr is back to 2.85% and mortgages are worse by .250-.375 in price.

 

 

NINE WORDS WOMEN USE

“Fine”: This is the word women use to end an argument when they are right and you need to shut up.

“Five Minutes”: If she is getting dressed, this means a half an hour. Five minutes is only five minutes if you have just been given five more minutes to watch the game before helping around the house.

“Nothing”: This is the calm before the storm. This means something, and you should be on your toes. Arguments that begin with “nothing” usually end in “fine”.

“Go ahead”: This is a dare, not permission. So don’t do it!

“Loud Sigh”: This is actually a word, but is a non-verbal statement often misunderstood by men. A loud sigh means she thinks you are an idiot and wonders why she is wasting her time standing here and arguing with you about nothing. (Refer back to # 3 for the meaning of “nothing”.)

“That’s Okay”: This is one of the most dangerous statements a women can make to a man. “That’s okay” means she wants to think long and hard before deciding how and when you will pay for your mistake. And you will indeed pay.

“Thanks”: A woman is thanking you, do not question, or faint. Just say, “You’re welcome”. Unless she says “Thanks a lot”, which is pure sarcasm.

“Whatever”: A woman’s way of saying  —- you!

“Don’t worry about it, I got it”: Another dangerous statement, meaning this is something that a woman has told a man to do several times, but is now doing it herself. This will later result in a man asking, “What’s wrong?” For the woman’s response refer to “Nothing”.

 

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