I have decided to take matters into my own hands. I am in the Washington DC area today for the Mid-Atlantic Lender Conference, and I plan on telling Congress to be sure to wait until the last minute before making a deal, with the deal being to kick the proverbial can down the road to after the next election and causing the most turmoil because that is what we really need right now. We'll see if they take my advice.
There are plenty of lenders revising down 2013 estimates and planning for a stark 1st quarter for 2014. Investment bank FBR's third-quarter mortgage originations estimate is $349 billion, a 29 percent decline over the quarter. Not only are refis down, but the last and first quarters of any year are usually the low points of the purchase market, leaving lenders wondering if they've cut enough staff for volumes during the next six months. FBR estimates a 46 percent decline in refinances in the third quarter and a 2 percent rise in purchase originations.
FHFA has been in the news this week. First, the Supreme Court ruled this week that banks sued by the Federal Housing Finance Agency cannot seek the review of a ruling by a New York-based 2nd U.S. Circuit Court of Appeals decision. The case stems from a 2011 lawsuit brought by the agency against 18 banks relating to alleged misrepresentation of certain mortgage-backed securities. On top of that, as mentioned earlier this week in the commentary, the Federal Housing Finance Agency announced the creation of the Common Securitization Solutions company, an entity designed to consolidate some of the work related to home loan securitization, which is currently done by Fannie Mae and Freddie Mac.
What's up with the private MI biz lately? One indication is the monthly reports issued by the mortgage insurance companies. MGIC reported operating statistics for September: new default notices increased 0.7% from the prior month (compared to a 5% drop the prior month) and the ending delinquent inventory declined 1.5%. The cure ratio fell to 87% from 93% in August. New insurance written was down 14% M/M to $2.5 billion. Paid claims, always of interest to lenders, declined 4% month-over-month versus a decrease of 3.5% last month and an increase of 0.2% in September 2012.
And Radian released its monthly operating statistics for September 2013. New default notices increased 14% from August and the ending delinquent inventory declined 0.6%. Including the impact of the August settlement agreement with Freddie Mac, the delinquent inventory was down 17% from the 2nd quarter. September new insurance written was down 18% M/M, but for the quarter, NIW was up 2.6%. Paid claims declined 17% month-over-month versus a decrease of 18% last month and 38% in September 2012. Total paid claims for the quarter were down 24 percent.
Mortgage Partnership Finance (think Federal Home Loan Bank of Chicago) announced that, "Effective October 16, PFIs may deliver mortgages where the mortgage insurer is National MI as follows: MPF Xtra Product: All mortgages, MPF Portfolio Products: PFIs should contact their MPF Bank to determine if National MI is approved for their district. If a mortgage insured by National MI is delivered under an MPF Portfolio product to an MPF Bank that has not approved National MI as an eligible mortgage insurer, the mortgage may be subject to repurchase by the PFI." By all accounts National MI is on the move. Cenlar approved the company on Monday, as did Nationstar.
Cole Taylor Mortgage "shared our strategically chosen mortgage insurance (MI) partners with you as part of our ongoing effort to provide you with superior products and service. Beginning with new submissions on Monday, October 7, CTM will make the selection of MI from one of these three (3) companies: Essent Guaranty - essent.us, Genworth Financial - mortgageinsurance.genworth.com, and MGIC - mgic.com. As mentioned in Bulletin MCO-093013, we strongly believe that internalizing the MI selection process allows us to obtain the best possible service level for your transactions, as well as provide you with additional tools and benefits as an originator."
And over in the United Guaranty camp, as the government shutdown drags on AIG's mortgage insurer is trying to lure borrowers away from Federal Housing Administration insurance with the promise of fewer hold-ups. "With the current government shutdown and FHA's request of funds to subsidize their capital requirements, we understand there is some confusion about FHA's continued ability to do business as usual," United Guaranty said in a statement Monday. "Also, depending on the length of the shutdown, there may ultimately be delays with the closing of your loans." Unlike the USDA, FHA biz is delayed but not shut down. UG says it will underwrite any fully documented FHA loan that meets its requirements and will turn around most submissions in 24 hours or less. It's also temporarily waiving some of its underwriting requirements for furloughed government employees: .
Speaking of you-know-what, where is the VA regarding the shutdown? Here is the latest.
Video usage by the lending industry is increasing. Here is one of the latest - on HR 1077 and S949. But let's face it - videos are everywhere. Another one came from FEMA on its recent flood map changes.
Although by most accounts Congress is frozen, that is not stopping maneuvering on bills. For example, the Community Mortgage Lenders of America is urging Senate Banking Committee leaders to beware of "too big to fail" banks in crafting a GSE reform bill. Independent mortgage banking firms are concerned the TBTF banks will dominate the primary and secondary mortgage markets and small lenders will be "price-squeezed into irrelevance," according to a CMLA letter. Here is the link.
Let's continue on with some relatively recent lender, investor, and agency updates.
360 Mortgage Group spread the word that, "Starting Monday we are now accepting Manufactured Home property types on DU Refi Plus eligible loans. Essentially we've removed the property type restriction we had on HARP and will now accept all property types which are HARP eligible and receive an approve/eligible AUS finding. Additionally, we've amended our 4506-T tax return validation ("TRV") requirements. Borrowers must provide signed tax returns in lieu of a TRV from the IRS. A signed 4506T is still required (but TRV will not be pulled during the shutdown). There are some rare situations in which the TRV from the IRS will be required (i.e. more than 5 properties on the REO) but those scenarios are FNMA imposed and identified on the AUS."
Stearns Wholesale wrote to its clients saying, "We have modified our temporary policy regarding 4506-T tax transcripts effective immediately. We will continue to closely monitor the situation and will provide additional guidance if the shutdown continues for an extended period of time. We will not require transcripts prior to closing on the following programs/borrowers, however we will require an executed 4506-T: FHA/VA, FHA/VA High Balance, FHA/VA Self Employed, Conventional (where the borrower has 4 or fewer financed properties), Conventional High Balance (where the borrower has 4 or fewer financed properties), Conventional (Normal and High Balance) Self Employed (where the borrower has 4 or fewer financed properties), USDA. We will require transcripts prior to closing on the following programs/borrowers: all true Jumbo's Over the Conventional or Conventional High Balance loan limits (where applicable), and any and all borrowers who have 5 or more financed properties."
Direct Valuation Solutions Inc. announced its integration with Ellie Mae's Encompass360 mortgage management solution. Lenders using Encompass360 now have seamless access to Direct Valuation Solutions' cloud-based valuation fulfillment platform for lenders and appraisers.
"During the Government shutdown period Western Bancorp will fund loans without tax transcripts on all income types. An executed 4506T must be in file prior to closing and we require two years of Personal and Business tax returns complete with all pages. Effective immediately any file submitted to underwriting without tax transcripts will be conditioned for two years of tax returns regardless of the AUS findings. If two years tax returns are not provided the loan cannot close until tax transcripts can be obtained. For 5-10 financed properties, "We are unable to close this loan type without processed tax transcripts. Loans under the 5-10 Financed property guidelines with tax returns that cannot be validated prior to delivery are not eligible for sale to Fannie Mae." And lastly, "During the Government shutdown period Western Bancorp will fund loans without SSN validation if there is no SSN variance in the file or indicated on the AUS findings. An executed SSA Form 89 must be in the file prior to closing and a copy of the borrower(s) SSN card must be obtained. Effective immediately any file submitted to underwriting without a SSN validation will be conditioned for the SSN card. If the SSN card is not provided the loan cannot close until the SSN validation is obtained."
As a reminder, the FHA recently announced several crucial changes to its Reverse Mortgage program that eliminate the Saver and Standard HECM pricing options and essentially gives borrowers a haircut of 9-11% from an LTV standpoint from the previous Standard HECM. The new guidelines also limit disbursements at closing and/or during the 12 months following closing to 60% of the Principal Limit with the exception of those with mandatory obligations. In terms of mortgage insurance, borrowers whose disbursed funds at and following closing are 60% or less of the Principal Limit will be subject to an Upfront MIP payment of .500 of the appraised value (capped at $3,127.50) while borrowers with mandatory obligations whose disbursements exceed 60% will be subject to a payment of 2.50% of the appraised value (capped at $15,637.50). The existing annual 1.25% MIP will remain in place for all HECMs with no changes. As a reminder, the updated guidelines apply to all loans with a Case Number issued on or after September 30th.
Congrats to Janet Yellen! She was bopping around the halls of UC Berkeley way back when I was obtaining my MBA, and word was released that today President Barack Obama will nominate the Federal Reserve Vice Chair to be the next head of the U.S. central bank. Word on the street has Yellen being a forceful advocate for aggressive action to stimulate U.S. economic growth through low interest rates and large-scale bond purchases. Bernanke is with us through January, and Yellen still has to be confirmed by the Senate.
Yesterday was the eighth day of the partial government shutdown. The market is using it as an excuse to wallow around, and in spite of the jabbering from the press rates aren't doing much. (I could never be an economist - I just can't drone on when all is quiet.) Something might happen today, however, as we will see the release of the September FOMC minutes at 2PM EDT.
What is not impacted, however, is the Mortgage Bankers Association's weekly report on mortgage applications for last week, and I will have the honor of spending a few precious moments with Mike Fratantoni of the MBA this morning in Virginia at the Mid-Atlantic Lender Conference. Other scheduled events include a $21 billion (re-opened) 10-year Treasury note auction at 1PM EDT. On Tuesday the 10-yr yield ended the day at 2.64%.
Here's an easy and very entertaining way to think & talk about the debt limit and the current US Government: http://www.youtube.com/watch?v=Li0no7O9zmE. (The video is 3 minutes, but you'll see the point after 45 seconds.)