“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.

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“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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“What if the mightiest word is love, love beyond marital, filial, national.
Love that casts a widening pool of light. Love with no need to preempt grievance.
In today’s sharp sparkle, this winter air, anything can be made, any sentence begun.
On the brink, on the brim, on the cusp — praise song for walking forward in that light.”

~ Elizabeth Alexander, 2009 Inaugural Poem

 

JPMorgan Chase has posted a surprise profit for 2008. Wall Street was shocked by the bank’s radical business plan that included not paying $100 million bonuses to failed executives and only lending money to people who could pay it back.

 

Yesterday Fifth Third Bancorp, Ohio’s second largest bank, announced that they had lost $2.1 billion in the 4th quarter, they’re third consecutive quarterly loss. They have suspended bonuses, cut the quarterly dividend to 1 cent (so as to not force selling of its shares by funds required to own dividend paying institutions) and sold $3.4 billion in preferred shares to the U.S. government’s TARP. Their stock closed below $4 per share, an 18-yr low, and has lost 80% of its value in the last year.

 

And while we’re speaking of Ohio banks, KeyCorp also announced their third straight quarterly loss, losing $524 million. Like Fifth Third, KeyCorp cut its dividend, has $2.5 billion of capital from TARP, and its shares are down 72% in the last year.

 

What is up with banks around the world? Analysts are questioning their viability. If a bank has $100 million in assets and $90 million in liabilities, giving it a net worth of $10 million, but the assets include more than $10 million of bad mortgages, or can’t even be priced, and suddenly the net worth is negative. What are their options? Banks can stay in business and hope for a bailout or other government intervention, hope for a merger or takeover with a stronger bank, hope they muddle through, or go out of business. Some variation of the “Good Bank, Bad Bank” plan continues to gain momentum, which is what happened to the S&L business in the 1980’s. Shareholders were wiped out (the big fear now) and the assets were transferred to the Resolution Trust Corporation.

 

Tuesday this all reared its ugly head, with many big banks losing 20% of their value, and although yesterday financial stocks rallied (can our largest banks really have no value in the market?) the banks and government are still dealing with this issue. Until the Obama plan is unveiled, investors appear to be bracing for the worst-case scenario, and bank stocks may continue downward. Policy makers are now looking for alternatives to preferred-share investments to help banks build up their equity to give them confidence to begin lending again. What about the 12 regional Federal Home-Loan Banks? They are a big source of funding for thousands of commercial banks, thrifts and credit unions across the country. But several of the home-loan banks have suspended their dividends or warned that they may fall short of capital requirements, which in turn would slow down or stop their lending.

 

GMAC Bank’s Correspondent group, as expected, implemented negative adjustments for higher loan balances on the Government products. A 1.5 point hit is now in place for 1 Unit >$417,000, 2 Unit >$533,850, 3 Unit >$645,300, and 4 Unit >$801,950.

 

The New York Fed continues to buy mortgage-backed securities, although today’s amount is not known. Origination still appears to be in the $1-2 billion/day range. Certainly this has helped keep conventional mortgage rates somewhat low, although the market wonders if they government is the only buyer out there. Mortgage security prices are back to where they were two weeks ago, at best, but investors have changed margins to slow down lock volumes, or make up some profit ground for losses suffered in 2008. As one Wall Street firm put it, “The current MBS market is not about convexity or extension issues.  It’s about the Fed’s commitment to keep the 30yr mortgage rate as close to 4.50-5.00% as possible for as long as possible…if Treasury rates climb, the Fed will be forced to buy $10-12BB a couple days in a row vs. their recent pace of $3-5BB per day.”

 

The US Mortgage Applications Index dropped by -9.8% last week, with refinance activity -12.0% and purchases -2.5%. Interestingly, many companies seem fine with this as they are grappling with huge lock volumes from previous weeks. We also had the weekly Jobless Claims, which shot up, and Housing Starts and Building Permits, which shot down. Initial Jobless Claims hit 589,000, higher than expected, and continuing jobless claims also rose, which both point to a weak jobs number in early February. Housing Starts were -15.5% in December, Building Permits were -10.7% in December, hitting their lowest levels in the 50 years of tracking these statistics. Building contractors, and mortgage brokers, would be doing themselves a disservice if they ignored these numbers, or thought that everything was “rosy”. These numbers reminded everyone that the economy stinks, and the 10-yr is chopping around 2.50% and mortgages are better by .250.

“The time has come to reaffirm our enduring spirit; to choose our better history; to carry forward that precious gift, that noble idea, passed on from generation to generation: the God-given promise that all are equal, all are free, and all deserve a chance to pursue their full measure of happiness.”

~ President Barack Obama, Inaugural Address

 

 

The Detroit Auto Show opened recently, and America ‘s automakers are showing off their latest cars. Unfortunately, they didn’t get as much of the bailout as they thought, so a ticket to the auto show costs $1.3 billion.

 

Anyone who owns stocks in financial companies got whacked yesterday. Citigroup, Bank of America, Wells Fargo – no one was immune from losing a large percentage of their value in one day. Is Wells Fargo really worth 25% less than it was last Friday? The overall stock market was down about 4%, and the S&P 500 is already down 11% in the last two weeks! Is this helping interest rates? At some level, yes, although both Treasury and mortgage rates are not doing as well as one would expect given the general economic picture. In fact, this morning the 10-yr is up to 2.46% and mortgage prices are worse by about .250. Generally speaking, investors are questioning whether or not banks’ assets, which contribute toward net worth and stock price, are really worth what banks say they are.

 

Unfortunately at this point “experts” see no jumbo, or jumbo conforming, coming back into the non-bank retail market. The big bank branches are out there protecting their branches, and their retail portfolios, and focusing on their retail customers. Mortgages continue to be viewed as risky, and even if the base rate is acceptable, loan-level fees are on the rise. For example, effective April 1 Fannie Mae is raising its loan fees.  The change was announced December 19, 2008, and impacts risk-based fees known as “loan-level pricing adjustments”.  LLPAs aren’t just limited to credit score and LTV, and the new Fannie Mae guidelines impact three other loan characteristics: Condo and co-op mortgages over 75% LTV – add 0.750 percent to fee; Interest only mortgages – add 0.250 percent to fee for ARMs, 0.750 for fixed rate; Mortgages under 75% LTV with subordinate financing – add up to 0.500 percent to fee. The loan fees don’t have to be paid in the form of cash due at closing, but instead can be financed in the mortgage rate at roughly .25% for every 1 point in fee.

 

US Bank’s Correspondent Division, for example, will implement these fees beginning tomorrow in spite of Fannie not requiring them until April. Their pricing changes impact FICO/LTV fees, Cashout Refinance fees, IO ARM fees and now specific Condominium fees, and one should expect to pay more for transactions with an LTV > 60% and FICO score < 700. US Bank will charge, for Interest only ARMs with LTV > 90%, and additional .250 point in fee, and condominiums with LTV > 75% will be charged an additional .750 pt. fee.

 

James B. Lockhart, director of the Federal Housing Finance Agency (FHFA), announced that with mortgage applications taken on or after Jan. 1, 2010, Freddie Mac and Fannie Mae are required to obtain loan-level identifiers for the loan originator, loan origination company, field appraiser and supervisory appraiser. This is the result of Title V of the Housing and Economic Recovery Act of 2008, the S.A.F.E. Mortgage Licensing Act through which Congress required the creation of a nationwide mortgage Licensing system and registry. With enactment of the S.A.F.E. Mortgage Licensing Act, identifiers will now be available for each individual loan originator. http://www.mortgageorb.com/e107_plugins/content/content.php?content.2855

 

Countrywide’s wholesale group joined in the pricing manipulations. Effective today, Countrywide “is pleased to offer improved pricing on the 45-day rate lock commitment on select Conforming products.125% improvement to pricing on the 45-day rate lock commitment on purchase transactions.250% improvement to pricing on the 45-day rate lock commitment on refinance transactions. The following Pipeline Protection rules apply: The pricing will be effective on all 45-day rate lock commitments beginning Tuesday, January 20, 2009. The new adjustments will apply to all new loan submissions as well as all loans currently in the pipeline that are not locked. Any lock extension or re-lock will be subject to current lock extension/re-lock policies.”