Here is an interesting question for any home gardener, or Realtor: "Do you own the rain that falls on your roof?" WaterRights 

There are many things from the past that impact the present. For example, rotary dial telephones meant that high-population areas received low number area codes - it took less time for the dial to turn back around and was more efficient for larger numbers of people. So in the 1940's when area codes were created, New York received 212, Chicago, 312, Los Angeles 213, etc. There are many people in the business who argue that the government's insistence on lowering lending standards in the past, in order to increase home ownership, especially to those who weren't credit worthy in the past, accounted for a good chunk of the credit issues that we're dealing with now. There is obviously a fine line between encouraging home ownership for those who can afford it, and accepting the fact that not everyone can qualify for a home loan, for whatever reason. With that in mind...

The FDIC Advisory Committee on Economic Inclusion (ComE-IN) will meet on Wednesday "to discuss principles for low- and moderate-income (LMI) mortgage lending, and supporting financial education.Committee members will discuss responsible ways to restore LMI mortgage lending and sustainable homeownership in the wake of the mortgage and housing crisis... borrowers' opportunities for homeownership have diminished as the availability of mortgage credit has contracted. The market disruptions have been particularly difficult for lower-income borrowers, who have been disproportionately affected." The meeting will be open to the general public and the media in Washington DC, and on the web: FDIC 

Fannie reported a loss of $2.1 billion in the fourth quarter, while Freddie checked in with a loss of "only" $113 million. Freddie's loss for 2010 was $14 billion, versus 2009's loss of over $21 billion. "Freddie Mac also said Donald J. Bisenius, executive vice president of the single-family credit guarantee business, received a "Wells notice," which indicates the SEC is considering filing a civil lawsuit against him. Credit-loss provisions at Freddie were $3.1 billion, down from $7.1 billion a year earlier and $3.73 billion in the third quarter. Down the street, Fannie is asking for an additional $2.6 billion in federal aid. For the year Fannie lost $21.7 billion. Both company's performance includes billions paid to the government in dividends.

How about making the banks hold 5% of whatever they originate? Obviously originators are watching the QRM (Qualified Residential Mortgage) story closely. Even my kids know that requiring a lender to retain, on their books, $50,000 for every $1 million in mortgages it originates would be the death knell for many. Here is the latest on the QRM saga: QRM 

A servicing "settlement", mentioned yesterday, certainly has the industry roiled - especially BofA and Wells Fargo, who together service nearly $4 trillion in residential mortgages. Pulling together state attorneys general, regulators such as the CFPB, SEC, OCC, and the mortgage servicers would be difficult, at best. The OCC's examination concluded only a "small number" of borrowers were improperly foreclosed upon, and banks have argued that any settlement should reflect that fact. Other federal agencies and state officials disagree, and the administration's proposed settlement has banks bearing the cost of all write-downs rather than passing them on to other investors. It is certainly no wonder why banks are tending to sit on huge amounts of capital, given the potential liabilities ahead. Many analysts feel that the cost of the settlement will lead to lenders tightening underwriting criteria even further.

I lose track of the lawsuits flying around, but apparently Bank of America has a new one to worry about, as it was sued by investors in mortgage-backed bonds who are seeking to force the bank to buy back loans underlying their securities. The complaint filed in New York State Supreme Court alleges that Bank of America's Countrywide Financial unit breached representations and warranties about the loans, which it originated. This is on top of the $47 billion lawsuit in which a separate group of mortgage-bond investors (including the Federal Reserve Bank of New York and PIMCO) is fighting with Bank of America over, which is oriented toward declaring Bank of America in default of its loan-servicing duties.

News on MERS goes 'round and 'round. A California appeals court ruled that MERS has the right to foreclose on defaulted borrowers in California. "Under California law MERS may initiate a foreclosure as the nominee, or agent, of the note holder," wrote the judge last week. Earlier this month, an Oregon bankruptcy court allowed a MERS "Wrongful Foreclosure Claim" to proceed, based in part on plaintiff's allegation that not every transfer of the loan was recorded in the land records. This may in part be due to Oregon's judicial foreclosure statute allowing for foreclosures where not every transfer has been recorded. In McCoy v. BNC Mortgage, the plaintiff received a mortgage loan secured by a deed of trust naming MERS as the "Beneficiary." According to the allegations in plaintiff's complaint, the beneficial interest in the loan was sold several times, and was eventually securitized into a mortgage-backed security. According to plaintiff, none of the transfers was recorded in the county land records. Plaintiff eventually defaulted on the loan and, after the substitute trustee issued a notice of default, filed a chapter 7 bankruptcy petition. It goes on from there, and the case can be seen at BuckleySandler's MERS

On the other hand, a judge in the United States Bankruptcy Court for the Eastern District of New York concluded that MERS lacks authority under New York law to assign interests in mortgages among its members. The details of the case are beyond reproducing in this simple commentary - interested readers can go to MERSNY 

And the investor & lender news continues to roll along. Fifth Third, starting on 3/1, told brokers that, "When a mortgage being refinanced is a purchase money transaction, the mortgage being refinanced must have a Note Date at least 120 days prior to the Note Date of the new Rate/Term refinance transaction."

Plaza Home Mortgage spread the word of a policy change for Florida property loans, listing the information required for the broker to provide to the borrower 3 days prior to closing. (It is best to check the announcement for specific details.)

Flagstar is offering video/live training to its broker clients. They can visit Flagstar to sign up. Flagstar also sent an update out focused on its review of all "rates and fees charged on every loan sold to Flagstar. Going forward we will be increasing the frequency of these reviews to quarterly under our updated Revenue Per Loan Policy." The investor also announced that "Florida new construction condominiums are now eligible" for FHA and conventional financing, given certain restrictions.

Franklin American sent out an extensive reminder to its clients. Items include issuing reps and warrants that the borrower has not received any additional credit beyond what is disclosed on the credit report. "Payoff statements are required to be in each loan file on all refinance transactions, regardless of the AUS findings." The bulletin goes on to describe changes and reminders for rental income and bedroom count documentation requirements, qualifying rental income, revolving debt, verbal VOE's, etc.

Guild Mortgage also sent out a lengthy memo that only an underwriter would love (or hate) detailing updates in the refinance process, subordinate lien policy, Streamline Refinances, acceptable payment history for cash out refinances, occupancy of former investment properties, refinancing multi-unit properties, future changes in net tangible benefits, etc., etc., etc. Check the bulletin for all the information far too lengthy to reproduce here.

Higher oil prices... are they inflationary? Many would say "yes," although from the Fed's point of view, higher oil prices actually cause people to spend less on other items and instead put their money into the gas tank. Either way, the oil market is all over the press, and we are reminded of it every time we drive by a gas station - prices are easily back up to 2008 levels. And rumors of Gaddafi being shot, Saudi Arabia making up any shortfalls, or the reminder that the US has huge amounts of untapped reserves just creates more volatility. Yesterday, and today, the turmoil continued to impact the financial markets. We also had a better-than expected Jobless Claims number, and a disappointing Durable Good figure. MBS volumes were less than the recent averages, and MBS prices finished the day better by about .250 in price with the 10-yr around 3.44%.

Wednesday we had one housing price index, yesterday we had another. The FHFA House Price Index declined 0.3% in December versus a projected 0.1% dip. On top of that, New Home Sales in January declined a more than expected 12.6% to 284k from a downwardly revised 325k that was previously reported at 329k. In terms of supply, at this pace we have a 7.9-month supply. FULL STORY

(Warning: parental discretion advised.)

A dog lover, whose dog was a female and "in heat', agreed to keep her neighbor's male dog whilst they were away on vacation.

She had a large house and believed that she could keep the dogs apart. But as she was drifting off to sleep she heard awful howling and moaning sounds, rushed downstairs and found the dogs locked together, in obvious pain and unable to disengage as so frequently happens when they mate.

Unable to separate them and perplexed as to what to do next, although it was late, she called the vet, who answered in a very grumpy voice.

Having explained the problem to him, the vet said "Hang up the phone and place it down alongside the dogs. I will then call you back and the noise of the ringing will make the male lose his desire and be able to withdraw."

"Do you think that will work?" she asked

"It just worked for me," he replied