Regarding loan production, what does the MBA think is going to happen next year? The MBA thinks that production volume will drop about 30% from about $1.4 trillion this year to about $1 trillion in 2011. Basically the sluggish economy, existing credit guidelines, and expectations that rates will creep higher during 2011 are the factors behind the forecast. Yesterday's loan application data suggests perhaps some clouds on the horizon. Apps were up about 3%, but the refinance share is still above 82%. The data is a week old, but it's not hard to see that if any company is barely scraping by while depending on refinances, any move up in rate can be debilitating. READ MORE

Economists at Deutsche Bank "are not worried about further declines in home prices". Better housing affordability, easier lending standards, and modest jobs gains should keep home prices near current levels, if not ultimately begin to push prices higher over time, assuming of course the labor market gains more traction." They even point to the American Institute of Architects (AIA), residential architectural billings - up sharply from its all-time low - highly correlated to housing starts with a lag time of 4 months. Earlier this week we learned that Existing Home Sales were up 10%, and yesterday's New Home Sales were up over 6% - stronger than expected. But year over year, new-home sales in September were down by 21.5% and at the current sales pace it would take 8 months to sell the nation's inventory of 204,000 new homes. 

Information in this mortgage environment, or any environment, is always a good thing. Anyone near Washington State may want to check out the Washington Association of Mortgage Professionals conference on the new GFE (past, present and future), the myth of the brokers' demise, loan originator compensation, and new DFI reporting requirements. "Many of the new industry topics and challenges including the new RESPA rule. Laura Gipe - Compliance Officer on Staff from HUD will be here to speak on November 5th. Hear from the agency experts on how to operate under the new requirements. You will have the opportunity to ask your questions to her directly during the session." Any questions should be directed to the WAMP site at or call 866-425-7250 and ask for Dana Murphy-Love, Executive Director.

A few states down, amidst the World Series excitement, the monthly conference call of the California Mortgage Bankers Association's Mortgage Quality and Compliance Committee is happening today at 11AM PST. It is free to any and all, in and out of state, and covers a wide range of topics although today's will also include a presentation on the topic of "What to Expect in a DRE Audit" by Dan Sandri (Acting Chief Auditor of the DRE). The dial in number is (800) 240-3895, Passcode 22936#, but for materials you should contact Committee Chair Susan DeMars at or 916-446-7100.

In Freddie Mac's world, about 33% of homeowners who refinanced their mortgage terms in the third quarter lowered their principal balance by putting in additional cash. It was the second-highest total in 25 years. (During the 2nd quarter it was 23 %.) With rates looking very attractive, the median interest-rate reduction was about 1%. Only 18% of the refi's went to cash-out borrowers, or those that increased their loan balance by at least 5%, represented 18% of all refinanced loans -- the lowest since Freddie began tracking. It is no surprise that the main causes of the decline in cash-out refinancing were lower home prices and tighter underwriting standards.

The "FHA Outlook for September" was just released, and it shows a spike in FHA-to-FHA refinancing which jumped by 71% to 96,446 applications. This is the fourth consecutive month that FHA- to-FHA applications have risen. The FHA-to-FHA jump is primarily attributed to the rule changes beginning 10/4: FICO limits were set by FHA where applicants with FICO scores less than 580 are limited to a current LTV of 90%, and applicants below 500 do not qualify for FHA financing, and the annual mortgage insurance premium rose. Conventional-to-FHA refinancing did not change meaningfully at about 52,000 applications. Investors view this trend as ending, especially since investors have their own overlays anyway at this point and the pool of "refinanceable" applicants is slowing.

Wells Fargo joined the crowd and conceded yesterday that it had discovered some flaws in its foreclosure documents.  Wells Fargo said it is submitting additional affidavits for roughly 55,000 foreclosures pending in 23 states, but said it does not have any plans to halt foreclosure sales. The bank does not "believe that any of these instances led to foreclosures which should not have otherwise occurred," it said in a statement. Wells said the problems related to the "final step" in filing foreclosure affidavits, including the final review.

If you're doing an ARM loan with Chase, and need an index, fetch it yourself. For correspondents, Chase previously published ARM indices for informational purposes on the rate sheets but now the indices have been removed. "Correspondents are responsible for identifying the correct index value to be applied to the pricing of the transaction. Correspondents should utilize industry resources commonly available through the internet or subscription services for this information." Also, Chase correspondents are no longer required to verify the existence of HOA project level master hazard insurance on Detached PUDs when Rep and Warranting Detached PUDs or submitting Detached PUDs to Chase for review with a few exceptions.

RMIC (and probably other MI companies) is notifying customers of a change to the premium assessment for properties located in Florida. The "Florida Premium Assessment", which was instituted three years ago to replenish the "Hurricane Catastrophe Fund", is going from 1% to 1.3% after January 1st. "The assessment increase is not retroactive; therefore, loans with applications received between January 1, 2007 and December 31, 2010, will continue to be assessed 1%."

AmTrust Mortgage Banking is now requiring "that all appraisals be ordered and received in a method that is compliant with the recently announced Fannie Mae and Freddie Mac Appraiser Independence Requirements. The Appraiser Independence Requirements replace and have no significant changes from the previous HVCC requirements." For table-funded transactions, AmTrust requires an appraisal ordered and received through its Gemstone Appraisal Process. "To ensure compliance with the Appraiser Independence requirements, AmTrust Mortgage Banking does not allow the Client to contact the appraiser under any circumstance. All communication regarding the valuation, including status of order, must be directed to the assigned Appraisal Management Company."

U.S. Bank Home Mortgage Wholesale Division will follow Freddie Mac guidelines for all conventional loans where a borrower is purchasing a new primary residence and converting their current primary residence to an investment property. In order to use the anticipated investment property income from the current residence being converted to an investment property (75% of the gross rental income), USBHM will require several items including documented two years history of managing 1-4 unit investment property, an appraisal with at least an exterior-only inspection dated no more than 60 days prior to the Note Date, the documented equity in the current primary residence must be greater than or equal to 30%, etc. "If any of the above items cannot be documented, no rental income from the primary residence that is being converted to investment property will be allowed and the full PITI payment on both properties must be included in the underwriting analysis."

Additionally, USBHM, starting November 8, "for all applications (Conventional / FHA / VA) submitted for underwriting, a written explanation from all borrowers will be required for all inquiries shown on the credit report for the last 120 days."

Yesterday's $35 billion 5-yr auction was "decent", better than Tuesday's but not as good as it could have been. But the Treasury market is under continued pressure and we have now seen rates back up by as much 35 bps in 10s from the low yields three weeks ago. Mortgage selling was about average - $2.3 billion - but MBS prices finished worse between .250-.375.

Traders have lots of sayings. One is "Buy the rumor, sell the news". That appears to be what is occurring now with rates. The Fed has made it clear that it is poised to restart quantitative easing (QE2) soon, but the markets have already reacted. Stock, bond and commodity prices have been improving for over a month, but now that conjecture is increasing that the stimulus is not what was expected, both stocks and bonds are languishing. The markets have bought the rumor (QE2 large stimulation signaled at the last FOMC) and are now selling the rumor (QE2 will be much less than expected). Can the FOMC afford to disappoint the market? Perhaps not, and there are rumors that the FOMC is polling traders about measures that could be taken.

The only economic news today was Weekly Jobless Claims, which dropped 21k to 434,000 from a revised 455,000. The moving average dropped 5,500. In general, the economy is gradually improving at best - wallowing might be a better term. But the press seems to have dropped the "double dip" headline talk. We also have a $29 billion 7-yr note auction today. We're seeing a slight bounce in stocks and bonds, with the 10-yr yield down to 2.70% and mortgages better between .125-.250.

Two brooms were hanging in the closet and after a while they got to know each other so well, they decided to get married.

One broom was, of course, the bride broom, the other the groom broom.

The bride broom looked very beautiful in her white dress. The groom broom was handsome and suave in his tuxedo. The wedding was lovely.

After the wedding, at the wedding dinner, the bride-broom leaned over and said to the groom-broom, "I think I am going to have a little whisk broom!"

"IMPOSSIBLE!" said the groom broom.