According to splashdata the top five list of worst passwords is: 1) 123456, 2) Password, 3) 12345678, 4) QWERTY, and 5) abc123. Hey, how do they know? Since password cracking software usually rely on root dictionary words as source, the best passwords are usually in a foreign language, contain alpha-numerical sequences, or contain symbols such as £ or ¥. And according to in an article titled, "Oh Man, I Have to Create Another One?" (which sums up how I feel periodically), "Most consumers know that it's important to create a variety of strong, original passwords to protect their identity online. The problem however lies in trying to come up with different logins for a myriad of different sites...and actually remember them all. Nearly 3 in 5 (58%) of adults have 5 or more unique online passwords, 30% have 10 or more passwords, and almost one in 10 people (8%) has a whopping 21 or more individual passwords. Recalling their complicated passwords when needed is where people seem to run into trouble. Nearly 2 in 5 (37%) have to ask for assistance on their user name or password for at least one website per month."

Huh? SunTrust began offering super jumbo loans at nearly 89% LTV again? Well, I am sure there are extenuating circumstances.

Today I am in Las Vegas speaking to, and meeting with, a lender for their annual sales conference. So this is probably the wrong time, since I won't be looking at e-mails often, to "take a swipe at the hornet's nest" on this subject, but here goes...  Capital Markets love to talk to LOs about early payoff penalties. One must wonder, in this environment, whether rates have really dropped enough versus last autumn to call this into question, especially given loan level price hits, the cost of appraisals and processing, and the time required to complete a loan. Regardless... Do the LOs think that investors don't charge them? That can't be it, because they sure do. Maybe that the Capital Markets group uses the penalty to make money? No, that can't be it either.

If I bought a car that completely broke after 3 months, I'd want my money back from whoever sold it to me, right? If I pay $103,000 for a $100,000 bond, and it pays off in two months and I receive a check for $100,000, I just lost $3,000. Are LOs saying that I should know that risk, and only have paid $100,000 for the bond? That's fine - but in mortgage lending, do all the LOs want their price capped at 100 (par)? As an investor, I am not going to pay an extra two points to earn .250% for a couple months. And QM loans forbid prepayment penalties of any type. Ask any correspondent lender, and they will tell you in certain rate environments, the number of loans paying off within 30 days after their EPO period ends spikes dramatically.

I received plenty of stories from LOs who had loans pay off a few days early, or were financed elsewhere, and were assessed the penalty, or suggesting alternatives. An LO wrote, "I read with interest your piece regarding EPOs and I think that you missed the point. I think any of us LOs understand that if we refinance a loan prior to the six-month deadline, we would incur a penalty. The problem with the current EPO arrangement is that there are a multitude of events outside our control which can trigger the penalty. I personally had two this year, both from clients who had job transfers out of town that were not on the horizon when we refinanced their loans. The penalties on these loans were over $10,000 just to me, and additional funds to my company. I have heard, but not experienced personally, of an EPO being triggered when a client was solicited by their new servicer. This is another case where the broker should not be held accountable for the payoff. I believe the EPO contracts should have exceptions for cases like this. The word 'Investment' implies that there are risks to the proposition, and one of the risks in lending is that the borrower's life could change in six months, and the loan could pay off. As a loan officer, I can't control that, and I should not bear the risk of the 'investment.'"

I received this note from the SVP of Investor Management at a major correspondent lender. "In regards to GSE EPOs, both charge.  See below for the appropriate section from their Seller / Servicer guides accessible to the public on the internet.  GSEs is only 120 days, however it is from day of acquisition from the lender thus why a lender would stretch out to their customers to 180 days so that it allows the lender 60 days to deliver to the GSEs." "Freddie Mac 8.13: Recapture of premiums and reimbursement of buyup proceeds (07/23/12) For any Mortgage that is paid off (whether because of a refinance, a prepay or any other reason) within 120 days of the Freddie Mac Funding Date or Settlement Date, Freddie Mac may at its sole discretion require the Seller/Servicer to reimburse Freddie Mac for: With respect to a Mortgage delivery through the Cash program, any premium paid for the Mortgage calculated as the amount by which the purchase price exceeded the par price, multiplied by the outstanding unpaid principal balance (UPB) of the particular Mortgage on the Funding Date. With respect to a Mortgage delivery through the Guarantor or MultiLender Swap program, any premium (expressed as a percentage) that was or would have been applicable to the PC Pool comprising the particular Mortgage, based on market conditions existing on the Settlement Date of such Mortgage as determined by Freddie Mac, multiplied by the outstanding UPB of the particular Mortgage on the date of the pay off. Any buyup proceeds paid by Freddie Mac to the Seller in connection with the delivery of a Mortgage through the Guarantor or MultiLender Swap program, and/or any loss, damage or expense, including court costs and reasonable attorney fees, as incurred by Freddie Mac in connection with its purchase, ownership and/or resale to the Seller of its participation interest in the Mortgage. The amount of any such premiums and/or buyup proceeds will appear on the Seller account activity statement described in Section 17.2(e) and will be drafted from the Seller's Automated Clearing House Account (ACH) account in accordance with Section 17.2(g)."

Fannie Mae has a similar clause. "Fannie Mae Pricing Recapture. With respect to any mortgage loan that pays off within 120 days from the whole loan purchase date or the MBS issue date, Fannie Mae in its sole discretion may require reimbursement by the lender for any premium paid in connection with the purchase of the mortgage loan. For a whole loan, the premium is the amount that the purchase price exceeded the par price (100% of the face value) multiplied by the unpaid principal balance of the mortgage loan at the time of purchase. In the case of a mortgage delivered for MBS, the premium is the percentage amount above a par price that would have been applicable to the related MBS on the actual settlement date multiplied by the unpaid principal balance of the mortgage loan on the issue date. For mortgage loans repurchased by a lender, Fannie Mae in its sole discretion may require reimbursement by the lender for any premium paid in connection with the purchase of the related repurchased mortgage loan without regard to the 120-day limitation. Note: Fannie Mae may require this reimbursement on a mortgage loan in an MBS regardless of the MBS investor."  More on the EPO topic tomorrow!

Let's play catch up with some recent company news.

From Hamilton, Bermuda, Arch Capital Group Ltd. announced that its U.S.-based subsidiaries (Arch U.S. MI) have completed the acquisition of CMG Mortgage Insurance Company (CMG MI) and the mortgage insurance operating platform of PMI Mortgage Insurance Co. (PMI). As part of the transaction, CMG MI, which will be renamed "Arch Mortgage Insurance Company," has obtained approval as an eligible mortgage insurer from Fannie Mae and Freddie Mac, subject to maintaining certain ongoing requirements. The completion of the transaction enables Arch U.S. MI to enter the U.S. mortgage insurance marketplace immediately and allows the Company to serve all lenders nationwide, including CMG MI's existing credit union customers. The acquisition provides Arch U.S. MI with mortgage insurance licenses across the United States and a comprehensive mortgage insurance operating platform.

Some LOs are very interested in non-warrantable condominium financing. There are options available.

Compliance is the name of the game, and here is yet another resource for folks: A compliance library from the privately held Lenders Compliance Group.

New Penn Financial launched its New FHA and VA Programs for mini-correspondent and correspondent partners. National lender New Penn Financial LLC announced it has expanded its guidelines to allow Mini Correspondent and Correspondent partners to accelerate their government loan business. (New Penn already offers these programs in their Wholesale Division, both standard and streamline, so for the first time they are now accepting FHA and VA to meet the needs of their third-party-originator partners, no matter how they choose to do business.) Additionally, New Penn offers Agency and Jumbo portfolio products which expand their client's capabilities. Mortgage bankers interested in becoming a correspondent with New Penn Financial can visit this page; those interested in becoming a Mini-Correspondent with New Penn Financial can visit this page.

Why did rates improve so much yesterday? For lack of a better reason, analysts attributed the move to a weak ISM (Institute of Supply Managers) number - normally a second, if not third tier economic number in terms of moving the entire Treasury market. But traders reported buying from banks and hedge funds, and we had the usual Fed activity buying more than originators produced. Today in the U.S. we only have 10AM's December Factor Orders, which are expected lower from the prior +1.8% increase. Things were relatively quiet overnight, and the 10-yr. (which closed at a yield of 2.58%) is opening around 2.61%. Agency MBS prices are a smidge (technical term) lower/worse in price.

(Read More: Bond Markets Much Stronger after Manufacturing Data)