"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.
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
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.
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
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
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
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.
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
Older Woman: Bet the liar told you I was speeding, too!!!!
(Don't Mess With Old Ladies.)