Richmond Approves Eminent Domain; Lender Updates: Goodbye Overlays, Hello TICs, 125s, and Non-QM Loans
The MBA numbers this morning confirmed that business is slowing even more. Lock desks knew it but the MBA confirmed it: the Mortgage Bankers Association said its index of mortgage application activity sank 13.5% in the week ended Sept. 6. In numbers, apps are back to where they were in late 2008 - and what was your home office staffing then? The refinancing index slumped over 20%, off 71% since its 2013 high in May and now at its lowest since June 2009.
Residential lenders out there continue to wonder what the combination of higher rates in the secondary markets, restrictions in the primary markets, and now lower loan limits will do to their production. Gosh, if jumbo rates are lower than Fannie & Freddie's, that's one thing, but that may not last. It is helpful to take a quick look at the old days: just how were loan limits set? Turning on the "Way Back Machine," the national conforming loan limit for mortgages that finance single-family one-unit properties increased from $33,000 in the early 1970s to $417,000 in 2006. And limits were/are 50% higher for four statutorily-designated high cost areas: Alaska, Hawaii, Guam, and the U.S. Virgin Islands.
In the old days, there was no "high balance conforming." But keep in mind that while some of the legislative initiatives established temporary limits for loans originated in select time periods, a permanent formula was established under the Housing and Economic Recovery Act of 2008 (HERA). The conforming loan limit is set annually by Fannie Mae's and Freddie Mac's federal regulator, The Office of Federal Housing Enterprise Oversight (OFHEO). OFHEO uses the October to October percentage increase/decrease in the average house price in the monthly interest rate survey of the Federal Housing Finance Board (FHFB) to adjust the conforming loan limits for the subsequent year. But maybe we don't pay attention to that anymore...
Well, this ought to be interesting. "Richmond can now invoke eminent domain if trusts for more than 620 delinquent and performing "underwater" mortgages reject offers made by the city to buy the loans at deep discount pegged to their properties' current appraised prices to refinance them and reduce their principal." Let's see what the investors do to their pricing for loans originated in this MSA, and the possible resulting lawsuits.
There's a lot going on, but let's catch up, somewhat, on some relatively recent lender, investor, agency, and vendor news - for complete details read the actual bulletins, but this will give us a sense of the trends. And some of them are interesting.
California's JMAC Lending announced that it has changed JMAC's short sale requirement to be more in line with FNMA. We will now accept 2 years from date of recording, with AUS approval and max LTV of 80%. Four years will still be required if LTV is greater than 80% subject to MI and AUS approval.
Regarding Nationstar, Thomson Reuter's resident sage Adam Quinones reported, in an interesting editorial, "I've gotten enough inquiries regarding Nationstar to bring this up. Their pricing is awesome but desks report long purchase timelines. Sounds like growing pains to me. Anyone else experiencing this?"
Freedom Mortgage has aligned its Conventional purchase derogatory credit guidelines with those of FNMA, along with its maximum loan amounts limits which now employ with the current Fannie Conforming loan limits and high balance county loan limits and replace the previous $1 million maximum. For all one-unit purchases of Standard Conforming Fannie Mae investment properties, the maximum LTV has been increased from 80 to 85%, and the 95% LTV Program has been expanded to allow limited cash-out refinances and FMC Fannie Mae eligible down payment sources as acceptable sources of funds. Non-arms' length transactions are now permitted for second homes and investment properties apart from new construction transactions, and the rent loss coverage requirements have been removed for 2-4 unit primary residences and 1-4 unit investment properties.
With regards to appraisal requirements for Conventional purchase transactions, Freedom is now allowing appraisal transfers and re-certifications for appraisals older than 120 days in cases where the property is not designated as being in a declining area, and investment properties valued at $100,000 or less will only require one appraisal.
Freedom has updated its DU Refi Plus product to allow transactions that require mortgage insurance and is now accepting appraisals per DU when PIWs are not offered. The maximum LTV has also been increased from 115% to 150% for 2-4 unit primary residences, second homes, and investment properties.
Velocity Commercial Capital is out advertising "Stated borrower income, 1-4 family non-owner... No limit on number of properties owned, No tax returns required, Loans to $1 million, Up to 70% LTV, 650 fico...With our common-sense underwriting approach, Velocity Commercial Capital continues to portfolio loans others can't in the under-served niche between banks and hard money lenders. We understand that your borrowers deserve better options and we are proud to offer our unique solution." Don't take my word for it - the old days are back! Here you go: www.velocitycommercial.com.
(This program prompted attorney Rachel Dollar to comment, "It is just for investment properties, which are exempt from QM. Of course, if you think about the last financial crisis, everybody lied and said they weren't investment properties so that they could get lower interest rates. Now, everyone will lie and say they ARE investment properties so that they can avoid QM - and get lower interest rates. Hmmmm ..... What a tangled web we create - when first we start to regulate...")
Along those lines, Orange County's CashCall has brought back 125's. So they aren't extinct, and CashCall, which offers both personal and mortgage loans, is back on the street with non-HARP 125% second mortgages. This is a bona fide "no equity home loan." It certainly proves that money is like water - it will find a way to flow over, under, or around whatever damn is out there.
MSI is now accepting Conventional transactions where the borrower has a mortgage credit showing no more than one delinquent payment in the last 12 months provided that the loan has received an Approve/Eligible from the relevant AUS. The previous requirement of no late payments still applies for DU Refi Plus, LP Relief Refinance, Homepath, and High Balance products, and guidelines remain unchanged for FHA, VA, and USDA programs.
Effective immediately for all products, MSI is requiring that any loan with a Fair and Accurate Credit Transactions Act Alert on the credit report be cleared to fully comply with the Fair Credit Reporting Act.
MSI has rolled out a VA 100% Cash-Out product, which will be offered for loan amounts of $417,000 or less, including the VA Funding Fee. Note that VA High Balance transactions will not be eligible.
SunWest Mortgage spread the word that it has done away with overlays for both wholesale and correspondent customers.
MGIC has streamlined its overlays for Accept/Eligible DU- and LP-underwritten loans, which, so long as they conform to the maximum LTV/CLTV of 97/105%, the minimum credit score of 620, and maximum cash-out of $150,000, are eligible for mortgage insurance. For additional details, register for the upcoming short webinar here.
Capital markets and financial advisory firm MountainView Capital Holdings has announced that it has appointed Joseph Mevorah, formerly of Houlihan Lokey and Gleacher & Company, as Managing Director of Investment Banking at Denver-based MountainView Capital Group.
Some Fifth Third wholesale AEs let their clients know, "Although this has not been finalized yet, we just received word that the below changes will most likely be taking effect with all locks effective 8:30am on 9/12. The plus side is that overall base pricing will improve. The down side is that loan amounts above $417K will be negatively impacted. To avoid this impact, please lock prior to end of business tomorrow." The bulletin reads, "Base Pricing - Fixed Rate Products. The following loan amount price adjustments will be applicable to all loans locked, relocked or floated down after 8:30 am EST on Thursday September 12, 2013. Fifth Third Wholesale Lending has adjusted base pricing on Fixed and ARM non-portfolio products in concert with other pricing adjustments listed below to better align our pricing relative to competitive positions with other lenders. Loan Size Adjusters: Effective Thursday, September 12, 2013, Fifth Third Wholesale Lending loan size price adjusters are as follows: Loan Amount $225,000-$417,000 Adjuster -0.25, Non Agency Jumbo > $1MM 0.25, Fixed FHA > $417,000 Base 1.25."
Bank of San Francisco announced the launch of a suite of programs tailored to meet the needs of those clients looking to purchase or refinance TIC (Tenancies-in-Common) and Co-op (Co-operative) residential units in the Bay Area. "Currently, if you own or are looking to purchase a residential unit within a building classified as a TIC or Co-op, financing options remain very limited. We view TICs and Co-ops as vital components within the San Francisco/Bay Area housing market and believe that owners of those units should be provided with competitive loan programs that will meet their needs. Our team of highly experienced Residential Lending Consultants is ready to provide you with a step-by-step guide to making a TIC/Co-op refinance or purchase a success. We believe in a high-touch client service experience, working closely with all parties to the transaction, so your financing will be prompt and complete. To receive more information about our portfolio residential loan programs, please contact Dilan Desai, NMLS# 870236, at firstname.lastname@example.org."
First Community Mortgage is pleased to announce its adoption of the split premium mortgage insurance program. Further details can be found in Wholesale Product & Pricing Bulletin 2013-09a SPLIT PREMIUM MORTGAGE INSURANCE.
What are the fixed income markets watching these days? Hopefully not Miley Cyrus' new "Wrecking Ball" video. Strong data from China, reduced expectations for a US military strike on Syria, continued conjecture about the disappointing jobs report, decreased MBS supply (look at last week's app numbers!), and so on. Yesterday the focus was on the removal of the "flight to quality" bid in bonds - so prices dropped and rates moved higher. There are rumblings out there, however, that the odds have strengthened among some participants that the Fed will taper less due to the weaker than expected employment news. But are rates going back to where they were six months ago? It is highly unlikely.
By the time the dust settled Tuesday, agency MBS prices were worse about .250-.375 and the yield on the 10-year's yield was around 2.95%. Today the markets don't have much scheduled news to chew on, aside from a $21 billion 10-yr note auction. Rates are a shade better this morning (2.94% on the 10-yr. MBS prices better by maybe .125) - but are rates really the focus right now?