Sometimes I wish that I could use swear words in this commentary, but they wouldn't pass e-mail filters. But if I could, I'd use them here. Why is Congress still “jerking around” with flood insurance? If Congress is concerned enough with protecting borrowers to ram Dodd Frank through and put the CFPB in place, why can't they even come to an agreement on flood insurance? Instead the can is kicked down the proverbial road: Congress has given itself two more months to come up with long-term solutions for the program. The last full-scale reauthorization of the NFIP, a wing of the Federal Emergency Management Agency, occurred in 2004. Since 2008 the insurance provider has stayed alive through a series of 16 short-term extensions while lawmakers debate how to restore its fiscal soundness.

This time around, a voice vote in the House extended the life of the National Flood Insurance Program for 60 days. Last year the House passed a five-year extension that allowed for increased premiums and ended some subsidies, but the Senate has been unable to get a companion bill to the floor for a vote. The Senate last week passed the 60-day extension after adding a provision by Sen. Tom Coburn, R-Okla., that would gradually eliminate premium rate subsidies for people buying second homes and vacation homes in flood-prone areas. Coburn said that could save the program $2.7 billion over 10 years. I am done ranting, and there is a back story, of course, and that is that the NFIP was largely self-financing until it was overwhelmed by claims from hurricanes Katrina and Rita in 2005. It now owes nearly $18 billion to the Treasury. But still, should ordinary borrowers suffer again due to Congress’ inability to come to a conclusion?

MBA president Dave Stevens, ex-World Savings, ex-Freddie Mac, ex-Wells Fargo, ex-Long and Foster, ex-HUD/FHA, announced that he will soon be ex-MBA.  Dave will be leaving the organization effective June 30, to join SunTrust Bank as president of SunTrust Mortgage. Anyone interested in the vacated spot can send their resume to Michael Young at the MBA…

But here is a different type of opportunity. An experienced, well-financed mortgage banking group is actively pursuing opportunities to purchase controlling or full interest in an established mortgage bank with current annual production in the $50 million to $300 million range. In 2013, the minimum liquid capital requirement will be $2.5 for many types of business. “Our group will provide a minimum of $5 million injection of equity while building a national platform. The mortgage banker MUST have minimum of a New York state license - multi-state license preferred – and must be Direct Endorsed FHA lender and preferably have seller/servicer approval from Fannie and/or Freddie. We would like Chase and/or Wells (preferably both) to be current approved investors, of course other investors are a positive. Our offer will be based on number of state licenses as well criteria mentioned above. All inquiries will be strictly confidential.” Please contact Mr. Kalin at mk@buildaforce .com to discuss further.

Remember HARP 3? I received this note yesterday from New Jersey: "If it is truly the objective of government to protect the masses and offer a fair and balanced unwinding of the mortgage situation, HARP 3 is necessary. At some point, whether it’s a HARP 3, 4 or 5, the basic economics are going to dictate that the ability to refinance into a lower interest rate should be afforded to all Americans. I don’t know if it needs to be a 28th Amendment, but since Congress can’t remember how to build a budget I’d rather not consider the war over a new Amendment. The Real Estate sector accounts almost 19% of the US Economy. Considering how beaten down our economy has been in recent years perhaps something radical is required. HARP 3 needs to be a unified refinance program. Perhaps the FHA or Fannie/Freddie is not the solution, as has been rumored, but the US Government owns another source of funding: the USDA.  Since USDA is exempt from many state laws it’s foreclose process is simpler, thus making it more attractive in the MBS markets – and no MIP, simple and complete.”

Speaking of HARP III, here's Part II of a little write up, near the top right corner:

How do Ops and compliance folks keep up with things? Here are some somewhat recent investor/agency updates. As always, it is best to read the actual bulletin, but this will give one a flavor for what is happening out there. In no particular order…

The FHA has issued a few reminders about the source reference and data elements for 203(k) transactions in FHA Connection for insuring.  The values in “Est. Value of Property” (line C3 on the conditional commitment section of the 203kWS); FHAC, Appraised Value; and FHAC, Escrow Amount should be used to obtain the correct LTV at the time of insuring for Purchases or Refinances.  For more 203(k) loan program resources, there’s an online reference guide at

Freddie Mac announced that, beginning November 26, the GSEs’ respective electronic delivery systems will deliver a fatal or critical edit when the data for ULDD Sort IDs 525 (appraisers’ state license), 627 (loan origination company), and 634 (loan originator) is not delivered.  Freddie has also issued a reminder that, under Dodd-Frank, the GSEs are all required to publicly disclose information on ABS loan repurchase requests, including the identity of whoever is funding the applicable mortgage.  As such, lenders will need to supply ULDD data points Sort IDs 641.1 (“NotePayTo”) and 641.2 (the name of the entity funding the mortgage as listed on the note).

The ULDD transition period, of which we’re currently in the middle, will come to an end on July 23, when the requirements of Phase I will go into effect for loan deliveries whose applications are dated December 1, 2011 or after.  Freddie encourages making the transition as soon as possible by entering the date on which the application was received along with all data required for Phase I.  All data entered for relevant loans should match the appraisal data entered into the UCDP.  Fannie’s website features a number of resources to help with the transition, including ULDD tutorials (, selling and delivery training tools (, a list of key program milestones (, and an interactive webinar on the new selling system functionality (

Wells Fargo Correspondent has updated its cooperative LTV ratios, reducing the LTV/TLTV/CLTV maximum by 5% for conforming loans on primary residences as of June 18th.  Fannie HomePath Program loans submitted to Wells will not be affected by the changes.

Correspondent clients are reminded that all loans submitted for purchase on or after June 11th must list the originating company’s main company NMLS ID on the Universal Residential Loan Application (a.k.a. Freddie Mac Form 65 and Fannie Mae Form 1003).  Submissions that only list the originating company’s Branch NMLS ID will no longer be accepted.  For companies in Delaware, Maine, and Missouri that don’t have a Company NMLS ID, the appropriate Agency Assigned Code should be used.

As per Uniform Delivery Dataset requirements, Wells is required to report the year that a property purchased with an agency loan was built, regardless of whether an appraisal was conducted for the transaction.  Conventional loans for which the appraisal or loan application doesn’t supply the year built will be suspended.  This applies to conventional Conforming and Non-Conforming loans whose applications are dated December 1, 2011 or after.

Loans received by Wells Fargo Wholesale are required to have The Record of Account (Box 6C) ticked on the 4506-T Transcript of Tax Return.  This is necessary for the loan to move to the Underwriting Department.  Clients are also reminded that the Return Transcript (Box 6A), Record of Account (Box 6C), Form W-2, the Form 1099 series, and Box 8 of the Form 1098 series must all be checked and completed as necessary.

New pricing is in effect for FHA and VA loans that locked or re-locked with Wells Wholesale on or after May 21st; loans locked prior to this should be renegotiated accordingly.  While pricing was previously based on GNMA I or II identifiers, the identifiers are no longer selectable, and there is only one government price on display.  Interest rates are now available in 0.125% increments.  Temporary Buydowns on 15-year fixed-rate FHA and VA loans, previously not allowed, are now being accepted, and the High Balance FHA Loan Program is being allowed with 15-year fixed rate, 30-year fixed rate, 5/1 and 3/1 ARM transactions.  The High Balance VA Loan Program is allowed with 15-year fixed rate and 30-year fixed rate transactions with amortization terms between 20 and 30 years, as well as 5/1 ARMs with margins of 1.75.  The relevant borrowers are required to qualify at the Note Rate apart from exceptional circumstances.

Wells Wholesale has improved the pricing adjusters for Freddie Mac Relief Refinance Mortgage 20-year fixed rate loans with LTVs over 125%.  The adjuster for primary residences has been updated from 1.625 to 1.375; for second home/investment loans, the adjuster has been changed from 3.125 to 2.875.

And rates continue to avoid being a source of complaint from anyone. Yesterday the U.S 10-yr T-note hit 1.63%. Prices on 30-year Fannie 3.0%, 3.5% and 4.0% coupons hit new price highs respectively of 102.25, 104.75, and 106.375 per Tradeweb – and when you add on a little servicing value those are some hefty premiums! And originators should remember that just because agency MBS prices rally doesn’t mean those price moves are passed on to rate sheets – most lenders are being somewhat conservative for reasons discussed a few weeks ago in this commentary. But mortgage rate sheets are almost back to where they were on May 18th – it seems that no points loans at 3.75% for 30-yr and 3% for 15-yr are where the market is. As we all know, Wednesday’s prices were driven by the ongoing crisis in Europe which will be with us for years.

At these lofty price levels, if you were a servicer, would you want to own mortgages with rates above 4.25%? If you were a borrower, would you be waiting to refinance? If you were a lender, would you be worried about the margin calls on your hedged pipeline while also being concerned about fallout/renegotiation? The answers, of course, are “no”, “no”, and “yes”. In the meantime, LO’s and well run mortgage companies can’t believe their good fortune despite all the hassles of actually moving a loan from application to funding.

Continuing with the markets, this morning we had the ADP Employment report of May, always of questionable predictive ability for tomorrow’s government unemployment data, which came in at +133k (lower than expected). And April was revised downward. We also had the weekly Initial Claims (5/26), up 10k to 383k. Other economic news consists of the preliminary reading on Q1 GDP (+1.9%, lower than expected) and at 10AM EST is the Chicago PMI index for May. In the early going the 10-yr is down to 1.60% and MBS prices are better .125-.250.

Puns (Part 3 of 4)
I got a job at a bakery because I kneaded dough.
Haunted French pancakes give me the crepes.

My Dad was a bankrupt doctor right after med school – he had no patience.
Velcro - what a rip off!
Cartoonist found dead in home. Details are sketchy.
Venison for dinner? Oh deer!
Earthquake in Washington -- obviously the government's fault.
Be kind to your dentist. He has fillings, too.
I used to think I was indecisive, but now I'm not so sure.