Lenders Prepare For Tax Credit Deadline; Fin Reg Compromise Done; Appraisal Issues; SAFE Act Update
There sure seems to suddenly be a lot of confusion and unanswered questions out there. Unfortunately it seems every answer lies in the halls of Congress - and it appears this morning they've reached some agreement.
When will the USDA Rural Program be reinstated? When will the flood insurance program be extended? Will Congress eliminate YSP, and thumb their noses at the basics of bond mathematics? Will the June 30th deadline for the approval of loans for the First Time Home Buyer Tax Credit be extended? Will HVCC be eliminated, with the comment, "It had good intentions, but poor execution", and will appraisals be portable? Will securitizers be required to keep 5% of MBS volume in reserves as risk retention? I will temporarily put on a Libertarian hat here, and say that it is really a travesty when every bill, in order to pass, seems to have to have dozens of amendments tacked on in order to appease the opposition. Everything freezes. And everyone involved is negatively impacted - not the least of which is the borrower. And aren't we in this business to help folks buy homes? HERE is a good summary and HERE is another
What difference does it make that mortgage rates are as low as they were in the 1940's if appraisals are frozen? As one experienced agent wrote, "I have one lender that will do a $75 desk review prior to the full appraisal (and if they move forward this gets applied to the appraisal cost of course) to get a ballpark, but only one lender. I've told a few other lenders that if they would implement this they'd see a spike in business. But I've seen too many clients lose $300 or $400. I had one loan depending on a property value of $1.2 million, but the appraisal came in at $910,000. How did I get the appraiser who didn't do any comp work before going out to do the appraisal, and didn't know it'd be 75% of expected value?"
All of this tends to make investors hope for the best but prepare for the worst. As an example, Wells Fargo told its brokers that any conditions for Homebuyer Tax Credit eligible loans must be submitted by today. "Any loans eligible for the first-time homebuyer or the repeat homebuyer tax credits must close by June 30, 2010. To meet that deadline, please submit all of your conditions for any purchase loans with a close date of June 30 that are "approved with conditions" by close of business tomorrow, June 25.
Note: Congress is considering a bill to extend the deadline for closing to Sept. 30, 2010, but the bill has not yet passed the Senate. READ MORE
Another experienced loan officer wrote, "We were going to do an FHA streamline refinance (no appraisal required) lowering the borrower's rate ½ of a percent and there were no recurring closing costs that the borrower was paying. The only thing they were paying for upfront was the money necessary to re-establish their impound accounts - when they pay off their existing loan most of the impound money goes back to the customer. They would lower their rate by .5, but it wasn't costing them any money nor were they using equity to pay for the refinance. In addition, the borrowers were going to keep this house a long time and it made sense to us and them, but not to our government. We fell into a booby-trap, an FHA streamline refi requires a 5% reduction from the current PITI to the new PITI. One work around is not to go streamline and get an appraisal. Normally this would work except in cases where the value has decreased from the date of purchase to the date of the refinance. OK, we will not forget the 5% rule."
Commercial real estate mortgages held in commercial mortgage backed securities (CMBS) have had their delinquencies skyrocket in the past year and have reached an all time high according to the Mortgage Bankers Association of America. According to the MBAA, between the fourth quarter 2009 and first quarter 2010, the 30+ day delinquency rate on loans held in CMBS's rose 1.54% from 5.70% to 7.24%, and over the last year it has gone up almost 4-fold. READ MORE
Wells Fargo told its brokers if Loan Correspondents and Approved Mortgagees were approved as of May 20th, "a loan correspondent (Mini Eagle) already approved by FHA and in good standing as of May 20 will maintain its approval through Dec. 31, 2010, and may therefore continue to originate mortgage loans insured by FHA through the end of the calendar year. Non-approved originators, including previously approved loan correspondents whose approval has expired, will be permitted to participate in FHA programs through sponsorship by an FHA-approved Direct Endorsement mortgagee like Wells Fargo. Underwriting and loan approval must be performed by Wells Fargo for all loans originated by a loan correspondent. Once approved by Wells Fargo, the loan must close in Wells Fargo's name."
With the changes, many lenders are offering FHA sponsorships to brokers, and accepting applications for sponsorships, and will begin accepting loans from "Sponsored Brokers" starting July 1. Of course, the requirements and application process can take some time, so best be on it if one is interested in that course of action!
Every once in a while someone asks me about FHA 203(K) loans. I don't want to replace the Scotsman Guide for finding products, but Sun West Mortgage Company, out of California, offers them. Phone: (800) 453 7884
Flagstar, complying with the SAFE Act, told brokers that its loan software (Loantrac) will accept and verify that the originator of the loan "has entered his or her NMLS# into our system and that the number is associated with the user's profile. Flagstar also requires all brokers and correspondents to input the company NMLS # associated with their organization." Of course, Florida, Minnesota, Nevada, and Hawaii are not complying yet. Colorado & California are exempt through July 31, and Texas is exempt through August 31. Flagstar also reminds brokers that customers who operate under a federal license cannot currently register with the NMLS, and thus are not required to comply with the requirements listed above.
AmTrust, starting back on the 14th, told brokers that a separate loan fee disclosure is required by the Colorado Division of Real Estate for all Colorado properties. This Colorado fee disclosure must be uploaded to AmTrust with the Underwriting Package for all properties in Colorado. If you're looking up the rule on the Colorado Division of Real Estate's home page, it is 4CCR 7253: 5-1-2 Mortgage Loan Originator Disclosures.
Mortgages, which have been as hot as Betty White since the Super Bowl, stopped being so hot Thursday. Stocks also fell for the fourth day in a row - both can worsen on the same day. Jobless Claims and Durable Goods were pretty much in line with expectations. But like a spring that is stretched too far in one direction, eventually prices want to bounce the other way, in spite of decent demand and limited supply. The FNMA current-coupon mortgage bond yield fell to about 3.85% Wednesday, which is the lowest since January 2009. FNMA yields have fallen to within 72 basis points of 10- year Treasuries from this year's high of 93 basis points on May 24, up from a record low of 59 reached March 29. Fannie Mae and Freddie Mac have purchased about $200 billion of delinquent loans out of their securities, and of course the Fed took down over $1 trillion of MBS's that are now sitting on its books and earning a decent rate of return.
Thursday traders felt that everyone was selling: originators, investors, money managers, etc., especially after a strong, but sloppy, 7-yr auction. MBS volume picked up to possibly as high as $4 billion, and compared to Treasury prices mortgages did a little worse for the second day in a row. Today we have old GDP news on 1st quarter revisions, expected to be unchanged, and the final June Michigan Sentiment reading, also seen unchanged from mid-month. The press is certainly talking about a "double dip" in the economy, in spite of double-dips in output being extremely rare in modern economic history (only three double-dips in the last 160 years of US business cycles). Ahead of the day we find the 10-yr at 3.14% and mortgages about unchanged.
She spent the first day packing her belongings into boxes, crates and suitcases.
On the second day, she had the movers come and collect her things.
On the third day, she sat down for the last time at their beautiful dining room table by candle-light, put on some soft background music, and feasted on a pound of shrimp, a jar of caviar, and a bottle of spring-water.
When she had finished, she went into each and every room and deposited a few half-eaten shrimp shells dipped in caviar into the hollow of the curtain rods.
She then cleaned up the kitchen and left. When the husband returned with his new girlfriend, all was bliss for the first few days. Then slowly, the house began to smell.
They tried everything; cleaning, mopping and airing the place out. Vents were checked for dead rodents and carpets were steam cleaned. Air fresheners were hung everywhere. Exterminators were brought in to set off gas canisters, during which they had to move out for a few days and in the end they even paid to replace the expensive wool carpeting.
People stopped coming over to visit. Repairmen refused to work in the house. The maid quit.
Finally, they could not take the stench any longer and decided to move.
A month later, even though they had cut their price in half, they could not find a buyer for their stinky house. Word got out and eventually even the local realtors refused to return their calls.
Finally, they had to borrow a huge sum of money from the bank to purchase a new place.
The ex-wife called the man and asked how things were going.
He told her the saga of the rotting house. She listened politely and said that she missed her old home terribly and would be willing to reduce her divorce settlement in exchange for getting the house.
Knowing his ex-wife had no idea how bad the smell was, he agreed on a price that was about 1/10th of what the house had been worth, but only if she were to sign the papers that very day.
She agreed and within the hour his lawyers delivered the paperwork.
A week later the man and his girlfriend stood smiling as they watched the moving company pack everything to take to their new home.....
And to spite the ex-wife, they even took the curtain rods.