"Be good to your neighbor - they know where you live!" The Pilgrims did
not have many neighbors, but in the in the fall of 1621 they held a three-day
feast to celebrate a bountiful harvest, an event many regard as the nation's
first Thanksgiving. Historians have also recorded ceremonies of thanks among
other groups of European settlers in North America, including British colonists
in Virginia in 1619. The legacy of thanks and the feast have survived the
centuries, as the event became a national holiday in 1863 when President
Abraham Lincoln proclaimed the last Thursday of November as a national day of
thanksgiving. Later, President Franklin Roosevelt clarified that Thanksgiving
should always be celebrated on the fourth Thursday of the month to encourage
earlier holiday shopping, never on the occasional fifth Thursday.
And what would Thanksgiving be without some numbers from our Census
Bureau? 115 million households in the U.S. could potentially celebrate, with
most buying groceries at the 64,000 grocery stores around the country. Wisconsin
led the nation in cranberry production with 450 million pounds; 768 million
pounds were produced this year. North Carolina led in sweet potato production
with 1.3 billion pounds out of a total of 2.7 billion pounds, and Illinois
led pumpkin production with 502 million pounds out of 1.1 billion. (But California,
Pennsylvania and Ohio also provided lots of pumpkins: each state produced at
least 100 million pounds.)
Speaking of Illinois, Home State Bank has a newly created Underwriting
& Risk Manager opening. Home State is a profitable, seven-branch,
100-yr-old federally-chartered community bank headquartered in Crystal Lake
that has created this position in order to accommodate the ongoing mortgage
division growth. The candidate will be a highly-visible member of the
management team charged with supervising multiple underwriters with hands-on
risk management authority, and will work from the "state-of-the-art" Ops Center
in Crystal Lake (so local candidates only, please). For more information
and/or to apply online, visit homestbk.com
and resumes may also be sent directly to Dave Impey at dimpey@homestateonline .com.
The market is still ruminating on the poor FHA news formally announced on
Friday. Many had been expecting it, as well as expecting the changes in the
iconic program due to the shortfall - primarily the 10 basis point increase
in the annual cost of the FHA MIP (mortgage insurance premium).
But Ted R. writes, "I was shocked, however, to see that they are
eliminating MIP removal on case #'s taken out after the changes hit this spring.
New loans will pay MIP for the life of the loan rather than only until borrower
reaches 22% equity and a minimum of 5 years in the loan. Basically, HUD
is eliminating any logical possibility for current FHA borrowers (whose MIP
will someday fall off) to refinance (once the guidelines change), as they would
go from MIP that will fall off on old loan, to MIP that never falls off on new
loan! Here's link to the release, see pages 53 and 54.
Buried elsewhere in the voluminous report is the volume for FHA refinancing.
Suffice to say that volume will soon tumble to miniscule levels! How
eliminating FHA refinances will help the public is beyond me. HUD does
state that they basically want to lower market share dramatically, and I could
perhaps see doing life of loan MIP for new purchases, but trapping current
borrowers in their current loans (especially those who haven't done anything
about their 4%+ rates) seems draconian. Once again, one side of the
government doesn't seem to know what the other side is trying to accomplish:
the Administration is doing all they can to promote refinancing as a stealth
stimulus for the teetering economy and HUD eliminates FHA refinances for their
entire existing portfolio! It sounds a little disjointed if you ask me!" In other words, it will prevent all new mortgagors (going forward) to cancel their MI policy even if the loan-to-value ratio improves during the life of the loan.
Another originator wrote, "The FHA is going in the same direction as
the post office. They will continue to charge more and more, but
receive less and less. And the loans that go their way will be worse in
quality. As housing turns wouldn't it make more sense to lower the fees to obtain
more revenue for the highest quality of loans the industry has ever
originated? Instead they are raising the cost and will continue to be
adversely selected. It makes more sense for the higher FICO's to go
conventional with MI. The FHA wanted less market share, which equals less
revenue, why is this news surprising?"
Of course, historically some of the wonderful features of an FHA loan are
a low down payment, truly blended ratios, and no risk-based pricing matrix
(like a conventional loan). But what about investment properties for borrowers
who want to put as little down as possible? Unfortunately FHA does not do
non-owner occupied properties (some cases of HUD repo aside). So although
FHA does allow a true blend of ratios, they will only blend ratios on a single
And speaking of HUD repo's, let's not forget that HUD has plenty of
places for sale.
And late last week the CFPB announced the delay in the implementation
of some of its mortgage disclosure requirements. The CFPB announced that it
is providing a temporary exemption from the mortgage disclosure requirements in
title XIV of the Dodd-Frank Act, including new disclosures regarding (i)
cancellation of escrow accounts, (ii) a consumer's liability for debt payment
after foreclosure, and (iii) the creditor's policy for accepting partial
payment. The Federal Reserve Board proposed a rule in March 2011 to implement
these requirements, but did not finalize the rule prior to July 21, 2011, when
authority transferred to the CFPB. Subsequently, the CFPB issued a
proposal to integrate the TILA and RESPA disclosures and create new disclosure
forms, which, as proposed, include many of the additional disclosures required
by title XIV. In light of the overlap in the two rulemakings, and given that
the title XIV requirements are required by statute to take effect on January
21, 2013, the CFPB effectively agreed to delay the compliance date pending
completion of the TILA/RESPA disclosures proposal. Here is the CFPB's press
into recent agency and investor news...
Fannie Mae and Freddie Mac announced new guidelines for the management of
law firms. On November 9, Fannie Mae and Freddie Mac announced new,
coordinated requirements with respect to the management of law firms for
default servicing, bankruptcies, and related litigation. Effective June 1,
2013, servicers (i) will be permitted to choose their own attorneys, create
their own processes for managing foreclosure processing, and maintain direct
relationships with their law firms, (ii) will be required to establish
procedures to manage and monitor all aspects of the law firm's performance and
compliance with applicable requirements, and (iii) upon request, will be
required to perform a due diligence review and provide Freddie Mac with the
results. Fannie provides similar details (especially keeping in mind the FHFA's
goal to merge the two agency's policies and procedures). Both Fannie Mae and
Freddie Mac will accept and respond to servicer recommendations of law firms
beginning March 1, 2013, and will begin conducting new firm training in April
2013. Law firms that are currently in the retained attorney network are not
exempt from the new selection and retention processes. Here are the bulletins: http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1225.pdf
Bank published the list of counties in Connecticut, Delaware, Maine,
Maryland, Massachusetts, New Jersey, New York, North Carolina, Rhode Island,
Virginia, and Washington, D.C. in which properties require re-inspection for
damage from Hurricane Sandy. This includes Bronx, Kings, Nassau, New
York, Richmond, Rockland, Queens, Suffolk, and Westchester Counties in New York
and Atlantic, Bergen, Cape May, Essex, Hudson, Middlesex, Monmouth, Ocean,
Somerset, and Union Counties in New Jersey, all of which were designated as
major disaster areas by FEMA. A second list of counties where
re-inspections are recommended but not mandatory has also been released.
This affects all loans registered on or after October 31st.
As per the updated subordinate financing guidelines for Fannie loans, M&T
is now permitting CLTVs up to 105% when paired with eligible Community Second
subordinate liens. The previous CLTV limit still applies to ARMs; loans
on second homes, investment properties, and co-ops; and cash-out refinances.
With immediate effect, M&T has expanded eligibility for Fannie co-ops to
allow loans on second homes under the Type I (NY) and NYC Pilot programs in
addition to the Type I (National) program.
PHH is no longer accepting registrations of non-PHH-serviced VA IRRRLs,
and all such existing Tier 6 loans must be submitted for underwriting by
November 21st, delivered by January 4, 2013, and funded/purchased on or before
January 18, 2013. The delivery and funding/purchasing guidelines apply to
Tier 7 loans as well. Tier 3, 6, and 7 VA Fixed P&I loans are now
subject to a minimum credit requirement of 640, which replaces the previous
minimum of 620.
Effective for conventional Tier 3, 6, and 7 registrations dated November 16th
and after, the PHH underwriting guidelines now require two years' tax returns,
regardless of AUS findings. This applies to both manually underwritten
and AUS-scored loans, including those with non-conforming loan amounts.
DU Refi Plus loans are not impacted.
PHH has announced plans to launch its new quality control process in
conjunction with Alerko Risk Analytics. With the implementation of the
program, Tier 7 Correspondents will receive feedback on a monthly basis and
will be required to provide responses addressing the reports.
Turning to the markets, interest rates seem pretty content where they are.
Minor fluctuations in the agency MBS market may be absorbed by lender profit
margins. Regardless, the numbers last week continued to show that our economy
is stuck in low gear, which although is fine for inflation, is not going to
result in many jobs. And as the Wells Fargo economics team points out, "Complicating
much of the data is a lack of clarity over how Hurricane Sandy has affected production
and sales and how the fiscal cliff is affecting business spending." Retail
Sales fell in October (which certainly doesn't help GDP), but, "If the slowdown
is due to Hurricane Sandy, sales will likely rebound in November and December,
but if it is due to consumers pulling back on spending ahead of the fiscal
cliff, the slowdown may weigh more heavily on consumer spending in the fourth
This is a slow week using any number of gauges, but the markets
continue to be focused on the same two macro events that it has been for the
last few weeks (US fiscal cliff and Greece). Economic news-wise, today
& tomorrow we have lots of housing news: Existing Home Sales, the NAHB
Housing Market Index, Housing Starts, and Building Permits. On Wednesday we
have a slew of news: Jobless Claims (a day early), a Michigan consumer survey
number, and Leading Economic Indicators. The "benchmark" U.S. T-note closed
Friday with a yield of 1.57% and is now 1.61%, and MBS prices are worse about
.125, primarily based on optimism about the fiscal cliff.
In this time of year of 2013 predictions, let's take a look at previous thoughts
on the future. (Part 1 of 3.)
"Man will never reach the moon regardless of all future scientific
Dr. Lee DeForest, "Father of Radio & Grandfather of
"The bomb will never go off. I speak as an expert in explosives."
Admiral William Leahy, US Atomic Bomb Project
"There is no likelihood man can ever tap the power of the atom."
Robert Millikan, Nobel Prize in Physics, 1923
"Computers in the future may weigh no more than 1.5 tons."
Popular Mechanics, forecasting the relentless march of science, 1949
"I think there is a world market for maybe five computers."
Thomas Watson, chairman of IBM, 1943
"I have traveled the length and breadth of this country and talked with
the best people, and I can assure you that data processing is a fad that won't
last out the year."
The editor in charge of business books for Prentice Hall, 1957
"But what is it good for?"
Engineer at the Advanced Computing Systems Division of IBM, 1968, commenting on
"640K ought to be enough for anybody."
Bill Gates, 1981
"This 'telephone' has too many shortcomings to be seriously considered as a
means of communication. The device is inherently of no value to us."
Western Union internal memo, 1876.