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Mortgage News Daily combines the expertise of some of the housing industry's leading minds with the power of social media to offer an always lively, constantly evolving web community. MND communicates breaking news, streams video, and provides expert opinion and commentary to a community of interested market professionals and curious consumers.MBS AFTERNOON: Revisiting the Dome Home. Mutter...
Heading into the 5pm "24 hours from now Melky Cabrera will be signing autographs at the Macy's in Herald Square" marking period...the FN 4.0 is trading +0-02 at 98-19 yielding 4.146% and the FN 4.5 is +0-02 at 101-05 yielding 4.359%. The secondary market current coupon is 4.253%.
That quote has no relevance at all to the mortgage market. More than anything I found the following Macy's sales marketing strategy very sneaky. Apparently, you can have your picture taken with Melky as long as you are one of the first 250 people to buy at least $50 in Yankees championship gear!!!
Good gimmick Macy's, good gimmick.
As you can see below, the FN 4.5 has been slowly, but steadily, losing ground into the afternoon...
[Image or graph removed from email. View full article with images]
Several lenders have already repriced for the worse...
Over on the Voice of Housing blog, Tim Rood published commentary about Fannie and Freddie's increasingly strict enforcement of reps and warrants agreements. If you've never had to deal with a loan repurchase...consider yourself lucky. If you have had to deal with one...you have likely felt the pain that lenders can bring upon you.
When a lender believes you misrepresented a loan (or if there is fraud or EPD) they can refuse to purchase it..or just request that you buy it back from them at par (can also indemnify). This basically means you have to fund the entire loan on your own or pay a fee to have the lender deal with it. Not good if you are small shop. Its really not good if you are big shop either...especially if you are introduced to the pleasant folks who man the "scratch and dent" desk . These accomodative individuals (note sarcasm) will gladly offer to take that loan off your hands for aboooout $0.80 on the dollar....no matter how well it is performing!
My biggest enemy was Countrywide. They nitpicked our appraisals to no end....although we didnt have a ton of repurchase request from CFC (because we learned our lesson the hard way), the few we did deal with were what I would consider "completely irrational". I say this because when selling a loan to CFC, we went to every extreme to ensure collateral values were sufficiently supported...however good old Landsafe was always right no matter what our local, never had a problem with in the past, independent appraisers had to say about the value. Ugh...
I do have one funny story about a loan repurchase...well it didnt end funny. Richard Early was a mentor of mine, he is what I would consider a top producer ($2 to $4 million every month..rain or shine). He called me one day and said "Buddy Boy, I have a great loan for you". I laughed, knowing that he was buttering me up for a wild goose chase. As I made all the way through the file...the borrower was all good.
But then, in the way back of the file, I found the appraisal...haha I had never seen this before...it was a DOME HOME. Covered in LATEX!!!! In the middle of NO WHERE!!!!!!!! So as you can imagine...all the comps were normal, single-family detached homes...on 15 acres of land. Ugh...
[Image or graph removed from email. View full article with images]
So I called RE back and said..."what am I supposed to do with this?"
His repsonse: "Sell it. You can do it!"
To cut to the chase...I spent three months trying to convince and investor this loan would perform. I actually had an underwriter giggle at me when she read the file. I think her exact words were "This one is going on my hall of fame DENIED board". Eventually I was able to persuade a small town bank to take the loan off my hands. Dont ask me how..lets just say I lost a few bps on the deal. But if wasnt on our books anymore. Or so I thought....
One month later I got an email stating that a mistake had been made and the loan was not being purchased. I called back to discuss this with my contact...they were no longer employed at the bank! Wonder why?
I ended up selling the deal to a scratch and dent desk in New York for an 87.000 price. Yeh...you could say we lost some money on that deal.
While its an extreme example of having to repurchase a loan...it illustrates how hard it can be to deal with a file that has been thrown back on your lap. If you experience a problem like the one I just described...it may not be your lender's fault...its Fannie and Freddie. Cross your T's and dot your I's!
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This email was sent to you by:
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Message:
YOUR MESSAGE HERE
MBS AFTERNOON: Revisiting the Dome Home. Mutter...
Heading into the 5pm "24 hours from now Melky Cabrera will be signing autographs at the Macy's in Herald Square" marking period...the FN 4.0 is trading +0-02 at 98-19 yielding 4.146% and the FN 4.5 is +0-02 at 101-05 yielding 4.359%. The secondary market current coupon is 4.253%.
That quote has no relevance at all to the mortgage market. More than anything I found the following Macy's sales marketing strategy very sneaky. Apparently, you can have your picture taken with Melky as long as you are one of the first 250 people to buy at least $50 in Yankees championship gear!!!
Good gimmick Macy's, good gimmick.
As you can see below, the FN 4.5 has been slowly, but steadily, losing ground into the afternoon...
Several lenders have already repriced for the worse...
Over on the Voice of Housing blog, Tim Rood published commentary about Fannie and Freddie's increasingly strict enforcement of reps and warrants agreements. If you've never had to deal with a loan repurchase...consider yourself lucky. If you have had to deal with one...you have likely felt the pain that lenders can bring upon you.
When a lender believes you misrepresented a loan (or if there is fraud or EPD) they can refuse to purchase it..or just request that you buy it back from them at par (can also indemnify). This basically means you have to fund the entire loan on your own or pay a fee to have the lender deal with it. Not good if you are small shop. Its really not good if you are big shop either...especially if you are introduced to the pleasant folks who man the "scratch and dent" desk . These accomodative individuals (note sarcasm) will gladly offer to take that loan off your hands for aboooout $0.80 on the dollar....no matter how well it is performing!
My biggest enemy was Countrywide. They nitpicked our appraisals to no end....although we didnt have a ton of repurchase request from CFC (because we learned our lesson the hard way), the few we did deal with were what I would consider "completely irrational". I say this because when selling a loan to CFC, we went to every extreme to ensure collateral values were sufficiently supported...however good old Landsafe was always right no matter what our local, never had a problem with in the past, independent appraisers had to say about the value. Ugh...
I do have one funny story about a loan repurchase...well it didnt end funny. Richard Early was a mentor of mine, he is what I would consider a top producer ($2 to $4 million every month..rain or shine). He called me one day and said "Buddy Boy, I have a great loan for you". I laughed, knowing that he was buttering me up for a wild goose chase. As I made all the way through the file...the borrower was all good.
But then, in the way back of the file, I found the appraisal...haha I had never seen this before...it was a DOME HOME. Covered in LATEX!!!! In the middle of NO WHERE!!!!!!!! So as you can imagine...all the comps were normal, single-family detached homes...on 15 acres of land. Ugh...
So I called RE back and said..."what am I supposed to do with this?"
His repsonse: "Sell it. You can do it!"
To cut to the chase...I spent three months trying to convince and investor this loan would perform. I actually had an underwriter giggle at me when she read the file. I think her exact words were "This one is going on my hall of fame DENIED board". Eventually I was able to persuade a small town bank to take the loan off my hands. Dont ask me how..lets just say I lost a few bps on the deal. But if wasnt on our books anymore. Or so I thought....
One month later I got an email stating that a mistake had been made and the loan was not being purchased. I called back to discuss this with my contact...they were no longer employed at the bank! Wonder why?
I ended up selling the deal to a scratch and dent desk in New York for an 87.000 price. Yeh...you could say we lost some money on that deal.
While its an extreme example of having to repurchase a loan...it illustrates how hard it can be to deal with a file that has been thrown back on your lap. If you experience a problem like the one I just described...it may not be your lender's fault...its Fannie and Freddie. Cross your T's and dot your I's!
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