Anyone buying huge swaths of houses had better make sure they know what they're buying. (Meth labs? 84,000? 5%?) Here you go.

Showing my age, I grew up celebrating both Lincoln's and Washington's birthdays. Nowadays they're lumped into one, and some companies don't even take that day off (a "floating" holiday). Presidents' Day is observed on the third Monday of February, and is the official observance of George Washington's birthday (Feb. 22). Our friends at the Census Bureau took a look at its geographic database to see which last names of presidents are among the 100 most common names of places (states, towns, counties, etc.). Washington is numero uno with 127 places in the country. Lincoln is #3 (Franklin is #2), Jackson 4, Jefferson 6, Clinton 7, Madison 9...Taylor is last at 56th.

I receive a lot of questions, some very specific and others very broad reaching. These two have implications that our industry should think about:

"Are you hearing concerns from other lenders on the HUD MIP effective change date announced to go into effect this June? I wonder if the industry has adequately thought through the degree of difficulty to comply within this compressed timeframe. This change has significant impacts on the TIL/APR.  What makes this change more challenging than other MIP changes announced from HUD is that it doesn't fit into the way the systems are designed. It creates new buckets of MIP rates and drop offs and this will require more than a simple update of the factor used to calculate the MIP. The annual MIP factors are often times maintained in tables which are easily updated in systems. The change to the MIP drop offs require new system functionality and coding that then require additional systems testing. The short timeline compresses the testing timeline and thus increases the potential for defects. Have you heard any similar concerns expressed to you?"

The second question is, "If loans falling under the FNMA/FHLMC guidelines are defined as QM (and therefore have safe harbor) what happens when a loan that you intended to sell to FNMA/FHLMC gets kicked back to you due to some salability issue? FNMA/FHLMC are telling you, as the lender, that the loan does not meet guidelines and therefore as I see it, it does not fall under the safe harbor. I am trying to wrap my head around the consequences, and none of them are good. I think most people are looking at buybacks from the balance sheet / write down perspective and are not accounting for the added legal risk.  Also, if not a QM wouldn't the loan be subject to the risk retention rules?"

Many companies involved in affiliated relationships are concerned about the 3% QM cap. But there, apparently, are plenty of other compliance and regulatory concerns about affiliated relationships and joint ventures, so many that Wells Fargo is dissolving them. Yesterday we learned that Wells Fargo & Co. is dissolving Edward Jones Mortgage, a joint venture it formed with St. Louis-based investment firm Edward Jones. Wells is saying it decided to dissolve several of its joint ventures that originate, process and fund home loans "after careful analysis of market conditions and the impact of the regulatory environment on business." Most of the alliances were shuttered in the second half of 2012, it said. Inside Mortgage Finance said Wells Fargo closed down about 100 joint ventures akin to Edward Jones Mortgage last year, although many involved real estate agents. "It was a way to refer mortgage business to Wells Fargo without running afoul of anti-kickback provisions," editor Cecala said. "If you're a lender, you can't pay somebody for a loan. Now that there's this whole regulatory concern everybody is re-examining them and saying they don't make sense."

But Wells still has its correspondent business, and in fact 2102 was a very good year for this channel which actually did more business than its retail channel (roughly $253 billion versus $250 billion, with its individual top correspondent reps bringing in more volume than the entire production years for other top 10 lenders!). And other companies continue to have joint venture relationships (KB Home & Nationstar, HomeStreet and Windermere, for quick examples).  And Wells Fargo, with its CFO being quoted that residential mortgage lending here in the U.S. will shrink this year, is broadening U.K. commercial property lending as European banks are forced to retreat. Bloomberg noted, "Wells Fargo CEO John Stumpf is looking beyond the U.S. after becoming the nation's leading home-lender, biggest commercial-property servicer and owner of the largest retail-branch network. The bank is searching for revenue to extend three years of record profits amid weak loan demand and shrinking lending margins, and has purchased debt portfolios from European lenders exiting U.S. markets."

While we're yapping about industry shifts, REITs are back in the news. Wall Street research pieces indicate that they are raising capital again, and have an appetite for MBS, servicing, properties, etc. Mortgage REITs have announced $1.7 billion in new capital offerings in 2013. Higher MBS yields and rising stock prices have changed the investment landscape for REITs from announcing share buybacks just a few months ago to raising new equity for MBS purchases. There is increased leverage, preferred stock issuance and portfolio growth at attractive yields. Agency REITs increased leverage in the fourth quarter. REITs' book equity declined in Q4 '12 on lower MBS valuations, but they increased leverage to limit any reduction in portfolio holdings. So we can all expect to hear more about top REITs like Annaly Capital Management, AGNC, or ARMOUR Residential. Research suggests that favorable market conditions are inducing the modest equity raises - returns on equity are now back in the 12-16% range, making the REIT investment model modestly more attractive. And their stock prices have rebounded as dividend yields remain high and P/BV ratios are now above 1 for many REITs.

For example, this came out this week, and is indicative of a REIT announcement. "ARMOUR Residential REIT, Inc. Announces Public Offering of 65,000,000 Shares of Common Stock. ARMOUR announced today that it is commencing an underwritten public offering of 65,000,000 shares of common stock. ARMOUR expects to grant the underwriters a 30-day option to purchase up to 9,750,000 additional shares of common stock. The underwriters propose to offer the shares at prevailing market prices or otherwise from time to time through the NYSE, the over-the-counter market, negotiated transactions or otherwise. Deutsche Bank Securities Inc., BofA Merrill Lynch, Barclays Capital Inc., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC are acting as joint book-running managers of the offering. The Company intends to use the net proceeds of the offering to acquire additional agency securities as market conditions warrant and for general corporate purposes."

If REITs are buying $1-2 billion a month, it certainly provides support to the market, but Fed purchases and overweight normalization by money managers continue to dominate the technical picture. By the way, FDIC insured institutions hold $4 trillion in loans secured by real estate and another $1.75 trillion in MBS.

On to some recent MI, conference, and investor news - as always, the full bulletin will have the full details!

United Guaranty has updated its Premium Performance RAP underwriting guidelines to align its reserve requirements with those of the Agencies, which will go into effect on February 11th.  The maximum allowable acreage for loans submitted via RAP has also been increased to 15, replacing the previous maximum of 10.

The Maryland Association of Mortgage Professionals will be hosting its annual conference on March 13th in Linthicum, MD.  Discussions on sales, market strategy, and the impact of new federal lending regulations will all feature.  To register, email mamp@assnhqtrs .com.

M&T Bank has revised its policy on FNMA loan income documentation for self-employed borrowers to require two years of individual federal tax returns and two years of business tax returns for borrowers who own more than 25% of a partnership, S-corporation, or C-corporation.  Self-employment documentation waivers are ineligible for all DU-underwritten loans; however, borrowers with LP-underwritten loans may be eligible in certain cases.  LP-underwritten borrowers are eligible for streamlined documentation, which requires one year federal tax returns and one year business tax returns for borrowers who own more than 25% of a partnership, S-corp, or C-corp.

As a reminder, the Nationwide Mortgage Licensing System will launch the Uniform State Test on April 1st, which will remove the requirements for LOs to take a state-specific test in 24 states before getting licensed.  Four additional states will remove the requirement on July 1st.

Due to Congressional pressure, the FHA will be eliminating reverse Standard Fixed HECM mortgages.  Any such loans with case numbers assigned on or before April 1st will continue to be honored; however, case numbers may not be requested until counseling and origination have been fully completed.  The Standard Adjustable HECM, Fixed Saver, and Adjustable Saver programs will all remain unchanged.

Fannie Mae and Freddie Mac have both been authorized by the FHFA to permit lender incentives for borrowers to refinance under the DU Refi Plus and Refi Plus programs in amounts up to $2000 so long as no repayment is required and the payment is reflected on the HUD-1 Settlement Statement as a lender credit.  Cash or "cash-like" incentives (e.g., gift cards) do not have to be disclosed on the HUD-1 provided that they do not exceed $500.  Because lenders are not typically party to sales transactions, these incentives aren't considered to be interested party contributions and are therefore not included in the IPC limit calculation, nor do they have to be included in the "cash back to borrower at closing" calculation.

On account of the Biggert-Waters Flood Insurance Reform Act extending the National Flood Insurance Program's authority through 2017, Fannie is now accepting flood insurance from private providers as an alternative to NFIP policies.  Private policies must provide coverage equal to that of an NFIP policy, and policy insurers must meet the Fannie rating requirements for insurance underwriters.

Fannie has announced that its new Servicer REAM Deficiency Billing System, (SRDBS), will be launched in mid-February.  The SRBDS will function as an interactive billing portal that allows Fannie to bill servicers for HOA and tax deficiencies paid at REO closings due to servicer non-compliance or non-payment and will be available via the Asset Management Network (  For the SRBDS purposes, late charges, penalties, interest charges, and legal fees associated with collection are all classified as deficiencies that represent part of the total HOA or tax bills paid by Fannie are REO closing to clear delinquent accounts.  The application will begin queuing monthly invoices for properties that disposed on or after January 1, 2013.  For information on training, email

Franklin American has clarified requirements for all conventional products to state that appraisals completed by an unlicensed or uncertified appraiser are not permitted, regardless of whether or not they've been signed by a supervisory or review advisor, and that, for the purposes of property flipping, sales within 90 days of the seller's acquisition are counted from the date the seller acquired the property to the current sales contract.  Properties acquired by the seller within 90 days preceding the current sales contract are permitted so long as the sales price does not increase more than 20%.  For FHA, VA, and USDA products, FAMC has aligned its private road maintenance agreement guidelines to align with those of the Agencies.

Plaza Mortgage will be refreshing the required tax years for processing IRS Form 4506-T to reflect the new tax year; however, there will be no changes to the policy itself.  Clients are reminded that the only exception to the rule requiring borrowers to sign the 4506-T would be for Streamline refinances and VA IRRRLs, neither of which documents any income to qualify for the loan.

Bank of the Internet has increased the maximum price on the correspondent rate sheet for the Meridian 30-Year Fixed product, which is now 102.

I wish that I be excited about this market, but frankly, there just isn't much going on. Mortgage banker selling steady, maybe a little higher than recent averages, chatter out of Europe, Congress and the sequester, and so on pushed the 10-yr up in price by nearly .5 and it closed around 2.00%. MBS prices improved about .250, resulting in some intra-day improvements. We have a little minor news today (Empire State Manufacturing, Industrial Production & Capacity Utilization, Consumer Sentiment...yawn) and we find the 10-yr still sitting at 2.00% and MBS prices pretty much unchanged.

Here's something "cute" for both guys and gals, with some patriotism thrown in for good measure. (And no, I am not going to apologize for putting this dreaded song into your head going into the weekend - it is on my cat Myrtle's play list. Support our troops!)