"Teach your children about taxes: eat 30% of their ice cream." They'll also learn something about percentages. If 30% of cities have rebounded to pre-2007 levels, even I can deduce that 70% have not, but...is this late breaking news? "Higher mortgage rates, tight lending standards and price increases driven by a limited supply of homes for sale are discouraging some prospective buyers." Apparently.


"Rob, will the government shut down Fannie & Freddie this year? And is it true they are doing loans above 43% DTI?" I will stick my neck out and say "no" to the first question. Actually, there isn't a lot of sticking out: it is an election year, which tends to freeze things up somewhat, F&F are buying nearly two-thirds of current production, the industry is recognizing their place in standardizing processing, underwriting, and servicing, and, last but not least, they're both making huge sums of money. Why kill the Golden Goose? Here is some conjecturing.



Regarding the second question, yes, QM rolls out Friday, and any company still scrambling should have had better planning - we've known about it for several months. I have written about this before, but was asked three times Monday about agency DTI levels. To the best of my knowledge, neither Freddie or Fannie have changed DTI requirements in LP or DU, and both underwriting engines accept some loans with DTIs greater than 43%. Both agencies have been granted an exemption from "pure" QM requirements for seven years or until they come out from under conservatorship.




I have no idea how underwriters keep track of all the investor and lender changes going on out there - hats off to them! Let's check in with some.



California's Western Bancorp alerted clients to "Relief for Self Employed borrowers." Western recently announced a 5/1 ARM for self-employed borrowers using Alternative Income Verification (AIV). The program also offers an interest-only option, non-owner occupied, and options for first time borrowers, with loan amounts from $200,000 to $2,500,000. Income is verified using bank statements to support the borrower's income, with no tax returns, no P&L, and no 4506T requirement. Western Bancorp lends in California, Washington, Idaho and Montana. Contact a rep for details on availability in your area.



Union Bank wholesale reminded brokers that it will continue to offer "non QM" interest-only jumbo loans in its current footprint (CA, OR, WA). (Union Bank originated approximately $2.99 billion in interest only jumbo loans in 2013, and anticipates doing the same or more in 2014. "The quality /performance of these loans has been outstanding and we remain committed to the product line.")



Mortgage Harmony Corp., the provider of Loan Retention Software (LRS) and the HarmonyLoan, announced yesterday that PenFed (Pentagon Federal Credit Union), the third largest credit union in the U.S., has added Mortgage Harmony's "one click" Rate Reset Protection software to its online mortgage application experience on select mortgage products. "The software solution enhancement will add ease, convenience, and faster processing times to the PenFed mortgage user experience."



With the implementation of QM and ATR, Freddie Mac has announced that Loan Prospector will be providing new feedback messages on higher priced covered transactions 7/1 and 10/1 ARMs, higher priced covered Relief Refinance mortgages, and Home Possible  mortgages with terms over 30 years.  The LC message code will require the seller to qualify the 7/1 or 10/1 ARM at the higher of the note rate or fully indexed rate, while the LB code will require the seller to manually enter the DTI and FICO in accordance with the respective 45 maximum and 620 minimum, regardless of the Debt Ratio and Indicator Score on the LP Feedback Certificate.  The LD message code will stipulate that mortgages with original maturities over 30 years must have Application Received dates prior to January 10, 2014 and Settlement dates prior to July 31, 2014.



Here's something a little off the beaten path, but good for residential folks to know about. It's amazing what learns by reading the National Enquirer. America First Multifamily Investors, L.P. announced its most recent investment activity. "As a result of this investment activity, the Company was able to achieve the full deployment of the proceeds from its recent follow-on public offering of shares which closed on December 2, 2013. Four mortgage revenue bonds secured by two properties were acquired at par on December 20, 2013. The bond purchases were as follows: a senior $6.1 million par value and a subordinate $2.1 million par value mortgage revenue bonds secured by Tyler Park, an 88 unit multifamily apartment complex in Greenfield, California; and a senior $4.0 million par value and a subordinate $1.4 million par value mortgage revenue bonds secured by Westside Village, an 81 unit multifamily apartment complex in Shafter, California. A $20.2 million par value Series A mortgage revenue bond with a stated interest rate of 6.25% secured by The Palms at Premier Park Apartments, a 240 unit multifamily complex in Columbia, South Carolina. A $35.8 million par value Series A mortgage revenue bond with a stated interest rate of 6.25% secured by The Suites on Paseo, a 384 bed student housing project in San Diego, California. The Company executed a securitization of this mortgage revenue bond which financed $25.8 million of this bond purchase. A $5.2 million par value Series A mortgage revenue bond with a stated interest rate of 6.25% secured by Copper Gate Apartments, a 128 unit multifamily complex in Lafayette, Indiana. The Company expects and believes the interest income from each of the mortgage revenue bonds described above is exempt from income for federal income tax purposes."



In training and events news...



Join the MBA St. Louis on January 9th, to hear Economist William R. Emmon's perspective on what 2014 holds. "After a disappointing performance in 2013, the economy is likely to grow somewhat faster during 2014. Ongoing corrections in housing markets and commercial real estate will continue to hold back recovery in many markets, contributing to a disappointingly slow decline in unemployment. The biggest risks to the economy in 2014 are likely to be turmoil outside the U.S., such as the European sovereign debt crisis, and possible political tremors at home. The St. Louis-area economy is likely to track national trends again next year." (I hope I didn't steal any thunder by saying that!) Register here.


But the MBA St. Louis follows this up with an Educational Seminar on January 14th "designed to help you adapt to the changing market with a new perspective.  The changing market and its participants will require a new focus in 2014; those driving sales and production '...must be willing to do something you've never done' to achieve results and stand out." The seminar will focus on "IQ - Expand your Intelligence Quotient by exploring the market, environment, government and products, and EQ - Understand your Emotional Quotient by discovering tools and techniques regarding the five parts of EQ: self-awareness, self-regulation, motivation, social skill, and empathy." Steve Richman from Genworth heads it up - always interesting.  Register here.



In conjunction with the MBA, the Colorado Mortgage Bankers Association has opened enrollment for its Compliance Essentials program, which sample policies and procedures, compliance checklists and charts, legal analysis from industry experts, and periodic updates as the rules evolve.  More info.


SNL Knowledge Center will be hosting an "Understanding the Debt Capital Markets" conference from March 19-20th in New York, NY.  The program will discuss how the debt market works, definitions and functions of debt instruments, and how instruments are used by corporations and financial institutions. Check it out.



We saw a nice little improvement in rates Monday, with the 10-yr yield heading down to 2.96%. The ISM Non-Manufacturing Index decreased to a six-month low of 53 in December from 53.9 in November (although anything above 50 means "growth"). New orders decreased to 49.4 last month, the lowest since May 2009, from 56.4 in November. But we had some uncertainty removed from the markets with the swearing in of Mel Watt as FHFA Director, and Janet Yellen confirmed by the Senate to take over for Ben Bernanke later this month.



I head to Colorado early this morning for the remainder of the week, and it is too early to know where the market is. But later we'll have November's International Trade balance at 3:30AM HST (Hawaii), and at 1PM EST the Treasury auctions US$30 billion three-year notes in the first of three auctions out through Thursday's long bond sales.






An older lady gets pulled over for speeding...


Older Woman: Is there a problem, Officer?


Officer: Ma'am, you were speeding.


Older Woman: Oh, I see.


Officer: Can I see your license please?


Older Woman: I'd give it to you but I don't have one.


Officer: Don't have one?


Older Woman: Lost it, 4 years ago for drunk driving.


Officer: I see...Can I see your vehicle registration papers please.


Older Woman: I can't do that.


Officer: Why not?


Older Woman: I stole this car.


Officer: Stole it?


Older Woman: Yes, and I killed and hacked up the owner.


Officer: You what?


Older Woman: His body parts are in plastic bags in the trunk if you want to see


The Officer looks at the woman and slowly backs away to his car and calls for back up. Within minutes 5 police cars circle the car. A senior officer slowly approaches the car, clasping his half drawn gun.


Officer 2: Ma'am, could you step out of your vehicle please! The woman steps out of her vehicle.


Older woman: Is there a problem sir?


Officer 2: One of my officers told me that you have stolen this car and murdered the owner.


Older Woman: Murdered the owner?


Officer 2: Yes, could you please open the trunk of your car, please.


The woman opens the trunk, revealing nothing but an empty trunk.


Officer 2: Is this your car, ma'am?


Older Woman: Yes, here are the registration papers.


The officer is quite stunned.


Officer 2: One of my officers claims that you do not have a driving license.


The woman digs into her handbag and pulls out a clutch purse and hands it to the officer.


The officer examines the license. He looks quite puzzled.


Officer 2: Thank you ma'am, one of my officers told me you didn't have a license, that you stole this car, and that you murdered and hacked up the owner.


Older Woman: Bet the liar told you I was speeding, too!!!!


(Don't Mess With Old Ladies.)