The free markets are a wonderful thing. Where else could we find a banana slicer? Page down a couple times for the comments - just as good as any comedy writer could come up with.

The IRS has ventured forth to answer tax-related questions about modifications: "IRS Provides Guidance on Mortgage Modifications." Here you go. (Hey - who says I only read People Magazine?)

Making a case for the terrible times in mortgage lending is becoming harder every day. (And look - we have a new kind of subprime loan.) Not only are margins at record levels, and loan officers making more now than prior to LO comp changes, but we learn that mortgage origination volume for 2012 was up 34% versus 2011! Lender Processing Services reports that at 8.6 million units, we experienced the best year since 2007 (9.1 million units). It was hard to ignore refinancing (if a borrower could qualify) with 30-yr rates below 4%. LPS reports that the share of government-backed originations was 84%, which while very high, is down from 91% three years earlier. For those lenders who have built their livelihoods and future around refinancing, LPS believes an additional 2.6 million loans may be eligible for HARP under current guidelines (we're at about 2 million so far). Throw in some appreciation, perhaps a new government refi program, falling delinquencies and foreclosures, continued decent rates, and 2013 might be just fine. Finally, LPS noted that at least 2% of 2012 originations would have been designated as "non-QM," compared to 23% back in 2005.

Regarding volumes, I received this note: "I like how you bring up the MBA and others expecting a decrease in volume for 2013 vs. 2012 and no companies out there feeling their business will decrease. With many of our two dozen clients, the growth they are forecasting will come from attracting new LOs into existing branches (more revenue for an existing fixed expense) and also strategically expanding into new markets. The two ways you can grow are to get more production out of the existing team and to add new folks with production - it should be an interesting year! Operations departments play a major role in this too, and many of our clients are growing operations in tandem with production and there is definitely a symbiotic relationship between the two." So observed Steve Rennie with Hammerhouse, LLC.

Things change. Remember the "old days" when there were Airfones on the backs of airline seats? You could run your credit card, or yell at your kids for playing with them. You don't see those anymore. (Instead you can pay for internet access for your laptop.) What doesn't seem to change is the perceived superiority of the NAR's lobbying efforts. Tim F. wrote, "Ask the LO who commented on the realtors having a stronger PAC how much he personally has given to MORPAC in the past 10 years? The reason realtors have a strong pack is that all realtors give PAC donations while only a few loan officers do."

Kevin Conte, a partner in the accounting firm Plante Moran and whose primary role is in the Assurance (audit) practice, wrote, "Regarding the comment about 1099 comp for real estate agents v. loan originators. The lobbying comment is spot on. But not just for Realtor compared to MBA. For this issue, it is Realtor v. EVERYONE ELSE. Just to be clear, this is a tax issue, not a regulatory one (compensation limits are a regulatory issue). The Internal Revenue Code (IRC) contains two provisions that dictate the rules for when any would-be employer can treat someone who provides services as a 1099 independent contractor instead of a W-2 employee. First, the code provision covers EVERYBODY - To put it simply, there are approximately 20 questions which must be answered in a specific way for the individual to NOT be considered an employee - a pretty rigorous test, you might say. And many times folks who provide services to a number of different companies (e.g. office janitorial services), will meet these tests and qualify as an independent contractor. LOs are not going to meet this test. By now, I'm sure you know where this is going. Yes, the other provision in the IRC specifically defines real estate sales agents as independent contractors. A specific exemption written into the tax code - not a bad lobbying effort."

And the concern over QM's potential impact on affiliated relationships continues, although it is not set in stone, and here is a note from Michael Pavlica questioning the efficiency of builders tied in to other services. "Rob, here is abridged verbiage from an executed contract on a purchase of a new built home (I left out the company name reference): '...Buyer Chooses not to use xxxbuilders mortgage companyxxxx and the builder's title company and buyer acknowledged that buyer will not receive the incentive.  Buyer has the right to use any lender, issuer of title insurance, and closing services company of Buyer's choice at Buyers' sole expense...By not choosing the above builder affiliated companies, builder/seller will not pay the Owner's title policy..." How is that "...efficiency....and fair...and in the interest of the consumer" when the builder holds the buyer a hostage to the incentives offered?  Builder 'management of the process for the efficiency sake' seems like a cartel. The buyer is going with us as the rates are lower and the fees are lower (in very many cases). If a Realtor or others do a referral to a mortgage lender (other than the builder), it is not under the premise that the buyer will get the incentives the seller is offering and if they go elsewhere, they will not.  They are referred to us because we can get the job done at a fair price and in a fair days work. This 'ability' of the builders not to offer incentives, if their affiliates are not used, needs to be addressed. On a side note, some of the most severely affected areas during the recent down turn were homes built in the new subdivisions (where builders offered upgrade and cost subsidy incentives).  I would be curious to see if there is a study out there that reviewed the relationship of price declines in the newly built subdivisions vs. declines for the resales in established areas in the same geographical locations as the newly built subdivisions."

Speaking of subdivisions and affiliated relationships, in spite of some great profits (up 4x) Pulte's shares got hit due to buyback concerns. (We all know Pulte due to its president and CEO Debra Stills being the chairman of the MBA.)

Keeping on with builder, vendor, and investor news, financial services law firm Smith Dollar PC announced expansion of its California footprint this week with the opening of an Orange County office. Michael R. Pfeifer, formerly of Pfeifer & de la Mora LLP, will serve as the managing partner of the office. Smith Dollar, which already has locations in Northern California, Florida, and Texas, handles enough litigation in Southern California to want a brick-and-mortar presence so its attorneys could more easily access the counties in which they practice. The Southern California area has been the hub for mortgage lending for many years, and Pfeifer, who has already done work in the area, serves as general counsel to the California MBA.

Stearns Lending, which at this point offers retail, wholesale, and correspondent business channels, announced final production numbers for 2012: approximately 49,000 loans for $11.8 billion, a company record. This was a 107% increase in volume from 2011, and certainly helped grow its servicing portfolio to nearly $9 billion. (Wholesale volume was up 82% for a total of $9 billion, while retail did $2 billion.) A billion a month ain't bad!

Affiliated Mortgage, which employs about 100 workers at its Monroe correspondent lending headquarters, has named Jason Beene president. Beene had previously been senior vice president and national sales manager for Affiliated, which is owned by Dallas-headquartered Benchmark Bank. Affiliated Mortgage "is a top 35 lender in the United States, generating about $2.5 billion in total loan volume each year," according to the company.

Kinecta is now allowing LTVs up to 75% for its Jumbo Fixed 15- and 30-year products, replacing the previous maximum of 70%.  Purchases and rate/term refinances on single-family residences, PUDs, and condos (primary residences and second homes) are eligible provided that the DTI is under 40, the loan amount is under $1.5 million, and the FICO is 720 or over.  In terms of reserves, borrowers must have the greater of the combined loan amount, including maximum credit line, less than $1 million and DTI less than 35%, or the DU finding.

New Penn Financial has started offering LP Open Access loans that allow unlimited LTV/CLTVs for primary residences and second homes for borrowers with FICOs of 680 and over.  Primary residences, second homes, and investment properties with lower LTVs are eligible with a minimum credit score of 620.  See the eligibility matrix for further details.

Affiliated Mortgage has updated its Settlement Agent List, which provides full details of the title companies and settlement agents not eligible to close transactions.  See this.

Effective immediately, Affiliated is granting online lock extensions on or before the lock expiration date at a cost ranging from -.125% for five days to -.750% for 30 days.  Locks can be extended a maximum number of two times so long as the maximum number of days extended doesn't exceed 30.  Refer to the daily rate sheet for the most accurate pricing.

PHH Mortgage has updated various VA underwriting guidelines and has clarified that lenders may use VOE only if their particular VA-approved employment verification service has been removed (Equifax's The Work Number, for example, is considered acceptable).  Appraisals are now valid for a period of 180 days and require the lender's name, lender's address, and borrower's name in the fields of the Subject section.

The Mortgage Bankers Association of Florida let me know that the 10th Annual Eastern Secondary Market Conference is coming up. Looks like a solid line-up, and they won't hit you up for an exhibit because they're sold out. To register:

Longtime LO Guy Schwartz with CMG Financial in Northern California writes, "Do you want to save your borrowers $125.00? Please make sure there are carbon monoxide detectors in the house before the appraiser gets there. We still have to order many re-inspections. This not only wastes money, more importantly it wastes precious time during a purchase transaction."

Given the unemployment data this morning, yesterday's news is so...yesterday. Nonetheless, agency MBS prices improved on higher-than-average sales volumes - nice to see. It is hard to make an airtight argument for higher rates with the Fed artificially keeping them low buy buying $3.5-4 billion a day. Prices on 30-year Fannie Mae MBS gained nearly 1/8 point on 3.0s.

But today we had the Nonfarm Payrolls and Unemployment Rate data for January. (Sometimes, when the first Friday is on the 1st, they delay the release a week, but not this time.)  It was expected at +160k (from +155k in December) with the Unemployment Rate holding at 7.8%. But it came in at +157k (from a revised +196k) and at 7.9%, and hourly earnings were up slightly. That was quite a back-month revision! Rates are ever-so-slightly lower than yesterday, with the 10-yr at 1.97%, but agency MBS prices are unchanged/slightly better.

As we head into the weekend, here is a link to clips of activities that most of us will never do