Flood Bill Primer; Cash Out Refi Trends; Fairway Independent and ValueQuest Do Some Good
I don't know if this short video says more about the strength of the
bridge, or the IQ & preparation of those truck drivers.
Speaking of preparation, here's a note I received that is worth tucking
away in the back of your mind: "Rob - I just looked at the calendar.
We're nearly in the middle of November! Monday is a holiday, we have two days
at Thanksgiving, Christmas Eve is on a Monday, Christmas Day is on a Tuesday,
and New Year's Eve is the following Monday. When you throw in some end of year
vacations with everyone, LO's had better get their rate locks & files lined
up sooner than later, and expectations and schedules should be communicated
clearly. Staff at headquarters, branches, closing officers - staffing will
wane. And the last thing this industry needs is a bunch of upset borrowers
during the holidays due to rate lock extensions or loans failing to close."
The mortgage industry is filled with well-meaning individuals and companies,
continuing to take the high road and therefore overcome the negative
perceptions that much of the public and press have of our industry. There are
plenty of examples, but one is Fairway Independent Mortgage:
"Fairway Independent Mortgage Partners To Present Purple Heart Recipient
With Mortgage-Free Home At Military Celebration In Louisiana." The lender
is headquartered in Texas, the event was in Louisiana, and here is the story
from California. [READ: Fairway Mortgage puts Boots on the Ground and Keys in the Pockets of Wounded Vets]
And after Sandy, lenders need to obtain disaster inspection reports for
all the properties in declared disaster areas. A Norcom Mortgage exec
wrote that, "The head of the new ValueQuest AMC, Eli Pascon, made a
decision to complete disaster inspection reports at cost to the company - an
effort on their part that strains their time and resources so it really is
great they can save money for those borrowers when they could be charging."
The bulletin said, "We have decided since counties in southern Connecticut
were deemed disaster zones we would do our part to help out. Knowing that
appraisers were busy, we put together a task force to visit each property that
had an appraisal done in the last 60 days (prior to the storm). Our task force
was down in southern CT the day after the storm and took pictures of the
properties to confirm if any damage was sustained from Hurricane Sandy.
ValueQuest chose to not charge the borrowers for this service since most had
suffered losses already. Under any other Appraisal Management Company, the
lender would have had to order a Disaster Inspection Report from the appraiser
at the borrower's expense and be subjected to waiting for the appraiser to fit
it into their schedule. We at ValueQuest understand that 'time is of the
essence' and any delay in the closing may end up costing the borrower
more." (For more information on this AMC visit www.valuequestamc.com.)
Hey, if someone is earning less than .5% on their cash in the bank, but
paying 4% on their mortgage, why not refi? (The flip side, of course, if a bank
is paying 0% to its depositors, but earning 4% on the mortgage portfolio, why
encourage anyone to refi?) The latest figures certainly bear this out, with
Freddie producing figures that showed U.S. homeowners who refinanced in the
third quarter lowered their principal balance in 29% of the new loans. In
the quarter, 83% of those refinancing their first-lien mortgage either kept the
loan amount the same (54%) or reduced it (29%).The average reduction in
interest rate came to 1.7 percentage points, "or a savings of about 31
percent in interest rate," Freddie Mac said. Here are the nitty-gritty
In this government-heavy environment, here's yet another department we
need to follow. The U.S. Department of Homeland Security issued a Service
Bulletin regarding the National Flood Insurance Program (NFIP). The
memorandum outlines the provisions for homeowners to quality for an extension
of the grace period for payment of National Flood Insurance renewal
premiums. Did you know that the Department of Homeland Security, through
FEMA, leads the federal response to Hurricane Sandy? I didn't - shows how up on
things I am. But here is the site: http://www.dhs.gov/sandy.
And let's not forget the Biggert-Waters Flood Insurance Reform Act of
2012, signed in July. The Act increases access to the NFIP for some
residents whose homes were impacted by flooding from federal land that resulted
from wildfire. The Act authorizes the NFIP and it's financing through September
2017. The Act impacts lenders in many areas. For example, it requires
that lenders provide to all purchasers a disclosure of the availability of
flood insurance under the Real Estate Settlement Procedures Act (RESPA). The
Act increased penalties for lenders that fail to ensure that properties
required to have flood coverage purchase such coverage. Penalties were
increased from $350 to $2000 per violation, and there is no limit on annual
penalties. The Act requires lending institutions to create escrow accounts for
the payment of flood insurance premiums.
But wait, there's more! Termination of force-placed Insurance: within 30
days of receipt by a lender or servicer of confirmation of a borrower's
existing flood insurance coverage, the lender or servicer shall terminate any
force-placed insurance and refund all force-placed insurance premiums and fees
charged to the borrower during any period of coverage overlap. For confirmation
of coverage, a lender or servicer shall accept the borrower's insurance policy
declarations page that includes the flood policy number and the insurance
company. The Act increased the annual limitation on premium increase from 10%
to 20%, and permits lending institutions to accept a private primary flood
insurance policy in lieu of a NFIP flood policy to satisfy the mandatory
purchase requirements. Lastly, it clarified that condominium owners with flood
insurance policies should receive claims payments regardless of the adequacy of
flood insurance coverage of the condominium association and other condominium
On to some other somewhat recent agency, investor, and MI updates, along with
the usual disclaimer that it is best to read the bulletin for full details, but
this will give you a flavor for current trends.
In October DU 9.0 was rolled out. I don't have the attention span or mental
capacity to be an underwriter, but as I understand it (and this question comes
up once in a while) , borrowers have no more freeloading on the divorce and
child support, as it is going in their DTI! "Court assigned debt" is
now included by Fannie Mae in a borrower's liabilities. There is no
exclusion of any court assigned debts, co-signed debt, or mortgage assumptions
for Fannie. As one person wrote, "Even if they have a divorce decree where
the court has transferred the liability, it is a 'no go' under Fannie.
Originators should go with LP (if the loan balance fits) or perhaps a jumbo
Bank M&A continued with Ohio's Incenta Federal Credit Union acquiring
St. Luke Federal Credit Union.
Oh, and save that orange paraphernalia: Capital One Financial will change
the name of ING Direct (which is purchased earlier this year) to Capital One
360 and will change its color scheme from orange to red and blue. (How
Last month, in response the FHFA's fee increase announcement, Guild
implemented a temporary extension fee increase for all conforming fixed-rate
Fannie and Freddie loans that were locked before September 9, 2012. Any
such loans that require extensions to lock or re-lock after October 31st are
subject to an additional 50bps on top of the standard fees, while loans with
expiration dates before the 31st are exempt from the increase. Loans
locked before September 9th that have original expiration dates after October
31st are also exempt provided that they close within the original lock
term. The extension fee increase doesn't affect government, Rural
Housing, or non-conforming loans.
Bank updated its appraisal fees so that appraisers can be fairly compensated
for their services. Increased fees will impact appraisals in the states of AL,
AK, AR, CA, CO, FL, GA, ID, IL, IN, MA, MD, ME, MI, MN, NC, ND, NH, NJ, NY, OH,
RI, TX, UT, VA and WA. Fees will decrease in DE, IA, KS, MS, MT, NV, OR, SD,
TN, VT, WI and WY. Fees will remain unchanged in the following states:
AZ, CT, DC, KY, LA, MO, NE, NM, OK, PA, SC and WV.
pre-sale requirements for new condominium projects under Freddie Mac
condominium warranties, eliminated of the Fannie Mae "T" PUD Classification
Delivery Code, and updated the Key Loan Program product description to
incorporate current qualifying income and documentation requirements for the
following income types: rental income, retirement income, social security
income, and Veteran Administration (VA) benefits. SunTrust, of course,
incorporated the Fannie DU 9.0 changes, and also published a revised Government
Credit Overlay Matrix.
additional LTV/CLTV reductions to Agency Conforming Amortizing ARM Investment
transactions, clarified minimum FICO's for 2 Unit High Balance ARM transactions,
clarified when an exterior appraisal is acceptable, and incorporated DU 9.0. In
conjunction with recent Agency announcements, Chase Correspondent revised the
following products and credit policies: Agency ARM maximum LTV/CLTVs, MyCommunityMortgage
ARM maximum LTV/CLTVs, retirement of Fannie Neighbors, elimination of appraisal
forms 2075, 1075, 2095 and 2055, limited project review maximum LTV/CLTV or
primary residence, income documentation changes, DU Refi Plus and LP Open
Access updates, other income sources, charge account policy changes, and reserve
requirements for 2-4 units. (Note: These changes apply to Agency and Non-Agency
loan transactions only, as specifically outlined in this bulletin, and do not
apply to FHA and VA transactions.)
Flipping over to the markets, those who follow the securities markets
know that even though most mortgages have 30 year maturities, most don't last
that long, and are paid off much sooner. And thus 30-yr MBS markets don't
exactly track 30-yr bond prices, and traders will often use 5-yr to 10-yr
maturities as a proxy. But Thursday was "all about the long end." In the
morning and early afternoon the sector traded "heavy" over concern about the $16
billion 30-year bond auction. But not to worry, as the auction went very, very
well, after which prices did well and rates dropped with the 30-yr closing at
2.75%, the 10-yr at 1.63%, and current coupon MBS better by .125. And mortgage
rates should do just fine well into the foreseeable future: the latest figures
show that with the increase in prepayments, the Fed is on pace to continue to buy
nearly $80 billion a month of agency MBS.
Don't forget - the bond markets are closed Monday, so watch for
conservative pricing later today and from anyone who is open Monday. Prior to
that, we've had Import Prices for October (expected flat, it was +.5, +.4 year
over year) and the preliminary November read on Consumer Sentiment will be released
at 9:55AM EST (predicted slightly higher). In the early going the 10-yr is
at 1.62%, and MBS prices are down by about .125.
If the rich could hire other people to die for them, the poor could make
a wonderful living.
The wise man, even when he holds his tongue, says more than the fool when he
What you don't see with your eyes, don't invent with your mouth.
A hero is someone who can keep his mouth shut when he is right.
One old friend is better than two new ones.
One of life's greatest mysteries is how the boy who wasn't good enough to marry
your daughter can be the father of the smartest grandchild in the world.
A wise man hears one word and understands two.
"Don't be so humble - you are not that great." (Golda Meir
(1898-1978) to a visiting diplomat)
Pessimism is a luxury that a Jew can never allow himself. (Golda Meir)
Any intelligent fool can make things bigger and more complex. It takes a touch
of genius - and a lot of courage to move in the opposite direction. (Albert
Life is like riding a bicycle. To keep your balance you must keep moving.
Intellectuals solve problems; geniuses prevent them. (Albert Einstein)
You can't control the wind, but you can adjust your sails.
I don't want to become immortal through my work. I want to become immortal through
Imagination is more important than knowledge. (Sign hanging in Einstein's
office at Princeton.)
We can't solve problems by using the same kind of thinking we used when we created