HVCC's Future in Doubt?; FHA Getting Ahead of Defaults; CRA Changes; Reverse Mortgage Issues; MGIC Update
Here is some late breaking news. In the early days of Kansas, buffalo bone hauling was the chief occupation and the principal source of revenue. Indeed, it was about the only thing the early settlers could do to make money. Once the crops were planted or harvested, the farmers had plenty of time on their hands, and by gathering up these bones that were left by hunters the early settlers earned a very nice income. Buffalo bones were legal tender in those days, and the bones were hauled to the railroad where carloads of bones were shipped east to be transformed into fertilizer.
Unlike the supply of buffalo bones, fortunately for loan originators there seems to be a somewhat steady stream of mortgage supply. Yes, each loan is "three times the work and one third the pay" as one agent told me. What is surprising is the "price action" of mortgages. Yesterday was yet another improvement, with lower coupon (current production) prices doing the best. At the close of business yesterday, the spread between a Fannie 4.5% security and a Fannie 5.0% security was 2.5 points. (So 0.5 in rate equates to 2.5 points, or about .625 points for every .125% move.) As it turns out, apparently some dealers are actually quoting Fannie 30-yr 3.5% security prices. Although when a new security starts trading, it is very illiquid, but the price drop is about 3 points from a Fannie 4.0% security, or .75 in price for every .125%.
Some people like the Home Valuation Code of Conduct, others don't. Regardless, and regardless of the fact that the USDA Rural and the flood insurance programs are in limbo, an amendment to the Wall Street Reform Bill being debated in Congress would eliminate the HVCC. It's been over a year since FHFA implemented the program in an attempt to improve the independence of appraisers by prohibiting lenders and third parties from influencing values, limiting the interactions between the appraisers and originators and creating the rise in appraisal management companies (AMCs). Also up for grabs is the risk retention question addressing if and how much capital securitizing lenders will keep in reserve, and for what type of product. This will affect both banker and broker loan pricing. READ MORE
Today the FOMC wraps up its two-day meeting. Looking at the big picture, the economy is projected to expand 3.2% this year and slightly less in 2011, with the jobless rate staying above 9% for the foreseeable future. With no inflation, housing and employment scraping by, and European problems, there is no need for overnight rate hikes by the Fed. Many feel that although many areas are stable or improving housing-wise, but in many there are signs of some renewed weakening in home prices. Foreclosures continue (although 70% of them are concentrated in 11 states), bank repossessions hit a record monthly high for the second month in a row in May, and existing home inventories are increasing - none of which help home prices. On the flip side, housing starts are down. Of course, why build more when there are plenty of "used" houses around?
Kenneth Harney wrote a story addressed to federally insured reverse mortgage borrowers: "If you don't pay your local property taxes or hazard-insurance premiums, the risk of losing your house to foreclosure is about to increase." The FHA, who has the lion's share of the reverse mortgage program, owns the program that "ran into a $798 million estimated budget shortfall in the last fiscal year -- its first loss ever -- in part because of widespread declines in the value of homes that secure its insured loans." It has cut maximum borrowing amounts available to seniors by 10 percent already and is looking for other ways to bring the program back into profitability in an era of low home-appreciation rates. Fannie Mae also has begun instructing the companies who service its large portfolio of FHA reverse mortgages to toughen up on tax and insurance delinquencies.
If you are interested in bidding on the process of reviewing FHA loans to head-off defaults, now is your chance. In an article in American Banker by Kate Berry, the FHA is looking for outside help to prevent defaults in its $760 billion single-family mortgage portfolio. Per the article, the FHA's reviews "lack the detail necessary to swiftly and efficiently identify loans that have the potential to result in delinquency, default and/or foreclosure" and it plans to "hire a third-party contractor to find and fix deficiencies in its systems, and improve the agency's detection of fraud and monitoring of the risk at counterparties, not least of all lenders." The FHA said it also needs assistance in identifying what data fields it should be receiving from its lenders, and ensuring its accuracy.
If your company does CRA loans, it behooves you to possibly comment on a proposed change to the CRA. The change is due to the need to stabilize communities affected by high levels of foreclosures, and would encourage depository institutions covered by the act to support the Neighborhood Stabilization Program (NSP) administered by the U.S. Department of Housing and Urban Development (HUD). The change would increase bank incentives to invest in or facilitate NSP-eligible activities in approved target areas. Due to space limitations I can't really delve into the nitty gritty, but you can do your own research HERE.
MGIC notified clients of a change impacting anyone doing business in Virginia, Ohio, and Missouri. After August 1st, MGIC's Credit-Tiered rates will replace its existing rate plans in those states. "Customers who have chosen not to use Credit-Tiered rates will not have that option for Borrower-Paid MI where the property is located in MO, OH or VA, or Lender-Paid MI where the customer is located in MO, OH or VA.
Yesterday Existing Home Sales from NAR unexpectedly dropped 2.2% in May, although the median price is up 2.7% versus a year ago. Sales increased in the West and South, were flat in the Midwest, and lower in the Northeast. The number of previously owned homes on the market is a little over 8 months of inventory at current sales levels, but there is some feeling out there that hundreds of thousands of buyers may not be able to finalize the sale by the end of June due to delays in the mortgage process, particularly for short sales, or in the interruption in the National Flood Insurance Program. READ MORE. SEE CHARTS
A guy calls a company and orders their 5-day, 10 pound weight loss program.
The next day, there's a knock on the door and there stands before him a voluptuous, athletic, 19 year old babe dressed in nothing but a pair of Nike running shoes and a sign around her neck.
She introduces herself as a representative of the weight loss company. The sign reads, "If you can catch me, you can have me.
Without a second thought, he takes off after her. A few miles later huffing and puffing, he finally gives up.
The same girl shows up for the next four days and the same thing happens.
On the fifth day, he weighs himself and is delighted to find he has lost 10 pounds as promised.
He calls the company and orders their 5-day/20 pound program.
The next day there's a knock at the door and there stands the most stunning, beautiful, sexy woman he has ever seen in his life. She is wearing nothing but Reebok running shoes and a sign around her neck that reads,
"If you catch me you can have me".
Well, he's out the door after her like a shot. This girl is in excellent shape and he does his best, but no such luck. So for the next four days, the same routine happens with him gradually getting in better and better shape.
Much to his delight on the fifth day when he weighs himself, he discovers that he has lost another 20 lbs. as promised. He decides to go for broke and calls the company to order the 7-day/50 pound program. 'Are you sure?' asks the representative on the phone. "This is our most rigorous program."
"Absolutely," he replies, "I haven't felt this good in years."
The next day there's a knock at the door; and when he opens it he finds a huge muscular guy standing there wearing nothing but pink running shoes and a sign around his neck that reads, "If I catch you, you're mine."
He lost 63 pounds that week.