Orange Alert for FHA Program? Who Will Buy HARP 2.0 Loans? Loan Amount Debate Winds Down
nothing to do with mortgage banking or real estate, but it is definitely worth 30 seconds for anyone
who drives or has a pet.
In Sacramento, Sierra Pacific Mortgage
is searching for a VP of Capital Markets. SPM originates loans nationwide,
being licensed in 47 states, and has been in business 25 years. The candidate
should have extensive experience in pipeline hedging, product development,
daily price sheet maintenance, post-closing oversight and investor relations.
This position will be an integral part of the Sierra Pacific Mortgage Senior
Management leadership group as well as the Sierra Pacific Mortgage Credit
Committee. Although it is headquartered in Northern California, SPM has
regional fulfillment centers across the country (the position is located at the
corporate office in Folsom, CA). Interested Cap Markets folks should send a
resume to CFO Paul Hubbard at Paulh@spm1.com.
folks who'd like to work for a company headquartered in Southern California,
there is more hiring. Carrington Mortgage Services, a retail and wholesale
lender, is looking to staff up in order to handle its rapidly-growing wholesale
lending business. Carrington is looking
for operations personnel as well as sales managers and AE's in the 37 states
in which it is licensed to do business. Interested parties should contact
Carrington's recruiting department at RobCresponce@carringtonms.com.
And for those that don't know much about Carrington, it now includes more than
80 local real estate, mortgage lending and servicing, property management and
property preservation offices nationwide. The Mortgage Services website is www.carringtonhomeloans.com.
When it comes to loan amounts,
should the "average American support millionaires" as some claim?
Here is the latest from DC.
The story above includes information
on FHA loans, and there is a growing "stage orange alert" about FHA loans and
about the entire FHA program.
"...those loans with the highest likelihood of default are those in which
down payment size, FICO, and DTI, are "layered," or present in combination. While
the FHA has slightly tightened up on layering, the report claims it is still at
risk. While the private sector has mitigated such risk by imposing stricter
guidelines for low down payment loans, FHA continues to qualify such borrowers
for mortgage financing, putting it at risk of being selected against."
This is included in a new report which can be seen here.
study shows that the FHA insurance
program is materially undercapitalized and will require a capital infusion of
$50 billion to $100 billion in the next few years - even if housing markets
do not deteriorate any further. The study was written by Joseph Gyourko at the
University of Pennsylvania Wharton School, and is titled "Is the FHA the
Next Housing Bailout?" Describing the FHA present state as precarious,
Gyourko says for the past two years the nation's 77-year old insurer has been
in violation of its capital reserve regulation. The reserve is supposed to hold
sufficient reserves against unexpected future losses on the insurance it has
issued. To comply with this rule would require a $12 billion capital infusion
in fiscal year 2010, his research found, and that presumes that future losses
are not being underestimated by FHA.
And last year New York University and the New York Federal Reserve issued a
paper warning of the growing likelihood the FHA would need a taxpayer bailout.
to prove that I obtain my news from sources other than People Magazine, when
things get really slow, I check out the Middle East North Africa Financial
Network's view of companies like Redwood
Deutsche Bank and Citigroup have
agreed to pay the US National Credit Union Administration a combined $165
million to settle
allegations the banks misled five failed credit unions over their purchase of
mortgage bonds, which, per the WSJ, is the first federal recovery of
mortgage-bond losses incurred by collapsed financial institutions. Deutsche
will pony up $145 million, Citi $20.5 million. Neither Deutsche nor Citi
admitted wrongdoing. "The five failed lenders, which served smaller credit
unions by providing services such as check clearing, suffered about $30 billion in losses from poor mortgage
investments, said Debbie Matz, NCUA chairman." "Our investigation indicated
there was systemic disregard of underwriting standards," said John Ianno,
NCUA's associate general counsel for enforcement and litigation, of Wall
Street's mortgage practices.
Bob Corker (R-TN) has announced the introduction of the Residential Mortgage Market Privatization and Standardization Act to
responsibly unwind Fannie & Freddie "and end dependence on the government
for housing finance." The Act would gradually reduce the portfolio of
mortgage-related assets guaranteed by Fannie Mae and Freddie Mac and take steps
to bring uniformity and transparency to the housing market so that private
capital can begin to replace the GSE's. Corker noted, "We are no closer to
transitioning Fannie Mae and Freddie Mac off government life support than the
day the firms were taken under direct government control in 2008."
First off, this is an introduction of
a bill, and second, no one expects anything to happen before November 2012, but
it is interesting to see the elements.
For example, it reduces each year the percentage of newly issued MBS principal that
is guaranteed by Fannie Mae and Freddie Mac. The percentage guaranteed must be
reduced to zero within 10 years, at which point MBS will be wholly privatized.
It creates an industry-financed database that makes uniform performance and
origination data on mortgages available to the public through the FHFA. It initiates
a process for creating deliverability rules and technology necessary for the
"to-be-announced" (TBA) futures market with no government guarantee. It replaces
the QRM and risk retention with a 5% minimum down payment and full
documentation requirement. And it seeks to create a uniform pooling and
servicing agreement (PSA) and a new electronic registration system (MERS 2)
where all loans are transferred under one system regulated by the FHFA and
instructs federal regulators to develop uniform practices and streamline
scheduled to be a BIG DAY for the agencies, or at least the industry is hoping
it is, with the release of HARP 2.0's
details. And the industry hopes that the large investors out there tag
along without too many restrictions and overlays, and that Freddie & Fannie
reconcile their differences in rep & warranty requirements.
But would you buy a pool filled with HARP
2.0 loans? The
Financial Times reports that, "Officials are considering three main options to
support the new effort. Their first preference is for Fannie Mae and Freddie
Mac, the US-controlled mortgage financiers, to package these mortgages into a
new class of mortgage-backed securities for sale to private investors, if the
pricing is reasonable. If this fails, Fannie and Freddie could acquire the
loans and keep them on their balance sheets. A third idea mooted in Washington
is for the Federal Reserve to act as a back-up buyer for these mortgage
securities. Such a move is not under active consideration at the central bank. These
loans will continue to be guaranteed by Fannie and Freddie - and by extension
US taxpayers - so investors will not have any credit risk. But tax rules make
it hard to put 125 per cent loan-to-value debt into regular mortgage-backed
securities issued by the two agencies. If they are issued as a new class of
MBS, investors may demand a higher yield to reflect the illiquidity of such a
small pool of mortgages - and that cost would ultimately be passed on to
homeowners, potentially negating the benefits of the program. Remember that severely
underwater loans are not eligible to be put into Fannie and Freddie-backed
collateralized mortgage obligations. Tax rules prohibit mortgages at more than
125% LTV from being placed into CMOs or real estate mortgage investment
Impac Mortgage Holdings reported third quarter 2011 net
earnings of $3.1 million, up from less than $1 million of earnings for the
third quarter of 2010. "During the third quarter of 2011, the Company continued
to expand its mortgage lending activities increasing loan originations and loan
sales. During the three and nine months ended September 30, 2011, the Company
originated $256.6 million and $538.1 million and sold $250.3 million and $485.5
million of loans, respectively, as compared to $22.1 million of loans
originated in the first nine months of 2010. Consistent with the Company's
strategy, it also increased its servicing portfolio with an increase in sales
of servicing retained loans to Fannie Mae and increases in Ginnie Mae
markets pale in comparison to all this excitement. Yes, there is some
hand-wringing by investors over potential prepayment fluctuations based on HARP
2.0; much of this is already priced into the market for premium coupons. There
is also chatter about additional MBS purchases by the Fed. Yesterday the 10-yr
barely budged, closing at 2.04%, and rate-sheet mortgage prices hardly moved
picked up today in the U.S for economic news, but rates have not moved.
Besides, what differences does PPI coming in at -.3%, with the core rate
unchanged, when entire nations in Europe are financially unstable. Nonetheless,
we did have the PPI, and also Retail Sales (+.5%, ex-auto +.6%, slightly better
than expected), and Empire Manufacturing (+.61% for November). After the news the 10-yr is nearly
unchanged from Monday afternoon at 2.01% and MBS prices are up slightly. View MBS Prices
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interested, visit my twice-a-month blog at the STRATMOR Group web site located
at www.stratmorgroup.com. The current blog takes a look at the
impact of HARP 2.0 and the differences in the agency's programs. If you have
both the time and inclination, make a comment on what I have written, or
on other comments so that folks can learn what's going on out there from the