Are you really back at work, reading this? It is kind of hard to get back in the swing of let's start with some estimates of the future from our very own Census Bureau. The U.S. population will be considerably older and more racially and ethnically diverse by 2060. No big surprise there, but look for the U.S. to become a "plurality nation" where the non-Hispanic white population remains the largest single group, but no group is in the majority. Furthermore, the population is projected to grow much more slowly over the next several decades, compared with the last set of projections released in 2008 and 2009. That is because the projected levels of births and net international migration are lower in the projections released today, reflecting more recent trends in fertility and international migration.  According to the projections, the population age 65 and older is expected to more than double between 2012 and 2060, from 43.1 million to 92.0 million. The non-Hispanic white population is projected to peak in 2024 at 199.6 million. Meanwhile, the Hispanic population would more than double, from 53.3 million in 2012 to 128.8 million in 2060. Consequently, by the end of the period, nearly one in three U.S. residents would be Hispanic, up from about one in six today. The black population is expected to increase from 41.2 million to 61.8 million over the same period. Its share of the total population would rise slightly, from 13% in 2012 to 15% in 2060.

Last week the commentary mentioned LO education for borrowers, but how about LO education itself? I received some thoughtful notes on the subject. "For the past year I have been helping loan officers prepare to pass the federal and state test. The potential MLO's are new, and a large percentage are from the banking side of the industry. The 80 loan officers I have worked with shows me that the loan officer coming from the banking side are not understanding of the laws and are having a very difficult time passing the test. In some cases it is like deer in headlights. So to hear the banking industry claim their loan officers are better trained, and understand the system, is not even close. In my opinion that at the least they should be required to take the 8 hours of CE each year. Ultimately it should be an even playing field, but that probably isn't going to happen, too bad. The consumers are the only ones that are being hurt."

And another from a highly placed source. "'The SAFE Act has ensured that all salespeople, brokered or banked, now receive an adequate base of training in order to get licensed.' Interestingly - only non-supervised institutions have to pass the NMLS testing process. I have files of cases of LO's who failed the test and ended up working for a bank (Wells, Chase, etc.) who are exempted. Only independent mortgage bankers are obligated to be tested. SAFE simply registers the bank employee but does not insure they are 'trained.' If our industry wants to be able to guarantee to all consumers that the LO they meet with has been tested to the same standard, the only way to get there is to require the testing of all LO's, not just non-bank ones."

And this note on current underwriting standards:  "I can't help but shake my head at how we, as an industry, have become effete whiners who never miss an opportunity to find a cloud in every silver lining. The cries about 'tight lending' or 'borrower brutalization' are comical. I can only imagine the folks who voice that opinion haven't looked at a loan file in 20 years. Are they aware that a person can buy a home with only 5% down (less for FHA and VA) and much less when one considers seller concessions? Are they aware that a person can qualify for a loan with a total debt load of 45% of their gross income (much more with FHA)? Are they aware a person can get a mortgage with a 620 credit score (often less with FHA depending on a lender's takeouts)? Have they looked at the credit report of a person with a 640 FICO? Have the documentation and compliance requirements of the secondary markets really exploded in the last few years? Increased, yes, but exploded? No. Aren't these folks really decrying their own ability to process and close loans efficiently and effectively? Aren't these folks really still longing for the days when they could throw a few documents into a bag on a stated income, 100% LTV, 600 FICO loan, ship it to someone and earn a tasty fee? Are loans cleaner than they've been in a while? Yes. BUT - I promise you that if you looked at many of your FHA loans and many of your higher LTV, lower FICO agency loans you'd say to yourself, 'I wouldn't make that loan if it were my money.' Lending isn't tight now. Lending is rational now. Is it perfect? No. Problems still exist with getting homes appraised reasonably. The agency rules around condominiums are comically stupid. But, in general, well qualified borrowers are not being excluded from purchasing and refinancing homes. If there are a plethora of 'great' loans out there that aren't being made because of supposed tight guidelines - here's an idea: Stop the insipid complaining and make a market. Money is made when supply meets demand..."

And speaking of supply and demand, and reminding us that statistics have to be believed only with skepticism, according to Zillow, several recent analyses that report the discount associated with foreclosure sales but these use the median sale price of foreclosures compared to the median sale price of non-foreclosures. A significant pitfall with this approach is that the typical foreclosure property is likely quite different than the typical non-foreclosure property. The homes may be different in size, location or a variety of other attributes that affect property value beyond simply their status as either foreclosure or non-foreclosure homes. For example, in the Detroit metro area there was a 59% difference in the median values of foreclosures and non-foreclosures ($47K/$113K); an indication that cheaper homes are more likely to be in foreclosure than more expensive homes, whereas many buyers likely interpret this figure as the discount they might expect on a foreclosure relative to the fair market value of the home (which it distinctly is not).

Zillow decided to compare the sale price of foreclosure resales to the estimated full fair market value of the home. In the analysis, a foreclosure resale is defined as essentially an REO sale (a sale to a private party by a lender or equivalent institution that is immediately subsequent to a foreclosure liquidation) Nationally, the median discount is only -7.7% even though the median sale price of foreclosures is 41% less than the median sale price of non-foreclosures because foreclosures are more likely to be cheaper homes than non-foreclosures, not because the discount is this high. The greatest discount is found in Pittsburgh (-27%) and the least discount is found in Las Vegas and Phoenix, both of which have no discernible discount between foreclosure and non-foreclosure sales. Looking historically at the foreclosure discount since 2004, nationally, the true foreclosure discount reached its greatest level, -24%, in mid-2009 after REOs reached their highest share of overall sales earlier that same year. Thereafter, the discount became increasingly less, possibly because buyers became more familiar with buying foreclosures leading to higher demand for the product, and/or because the quality of foreclosures improved as a higher volume of relatively new homes entering into foreclosure simply because of negative equity. This is important to home buyers who may form unrealistic expectations about the discounts they will find when shopping for foreclosures. The phrasing "below market value" implies that a buyer could expect to realize this discount on any foreclosed home relative to a non-foreclosed price on the same home. In practice, the actual discount will be considerably less. The fact that the true discount is less than commonly reported also matters for the implications analysts draw from the continued flow of foreclosures into the market over the next few years, as it wouldn't be surprising to see the foreclosure discount decrease even more. Thank you Zillow!

How about some recent bank and investor updates?

CertusBank ($1.7B, SC) will buy mortgage lender Resource Financial Services (SC) for an undisclosed sum.

And Michigan's Capitol Bancorp ($1.8 billion in assets) has sold their 54% interest in Oregon's High Desert Bank ($30mm) to a group of investors. The group also infused the bank with $1.4mm in new capital.

Effective immediately, Flagstar is no longer requiring the use of an approved settlement agent in restricted counties for New York transactions.  Loans closing under Fannie's Cooperative Property Program must engage one of the designated law firms on the list of Approved Settlement Agents for Cooperatives; if you have a login see here for details.

Flagstar is now reviewing the Information Government Monitoring Purposes section of the 1003 to ensure compliance with Regulation C of the Home Mortgage Disclosure Act.  Loans for which the 1003 is not completed accurately will held in Submission Review and have a condition added. Clients can see the updated Conventional Submission Review Checklist and the Government Submission Review Checklist for details.

US Bank rolled out a new 10/1 ARM product subject to the same guidelines, adjustment and lifetime CAPS, margins, and underwriting requirements as the Elite 7/1 ARM but allows LTVs up to 80% and financing up to $2 million on 1-unite properties.  Purchases, rate/term refinances, and cash-out refinances are all eligible.

In conjunction with the FHA's announcement that it would be extending its current anti-flipping policy through the end of the year, US Bank reminds lenders that it only allows FHA loans where the resale price is less than 20% above the seller's acquisition cost.  Any loans that exceed the 20% limit will be considered ineligible.

GMAC has updated its Jumbo fixed-rate rate sheet for all loans under $1 million, FICO over 750, and LTV over 70, which are now subject to a pricing adjuster of .0375.

What is up with the fixed-income markets? Well, they're not doing much in the early going (equities aren't doing much either). There is no real market-moving news that is new since Friday, even with the president slated to cut his vacation and fly back due to the fiscal cliff deadline. Can they really do anything in the next 18 hours that they couldn't do in the last 18 months? Perhaps, but as many are beginning to believe, the changes that will take place might not be so bad in the long run. Two big events could occur in the next few days. The first is that the Treasury will declare it has officially run out of borrowing capacity, although emergency measures could buy it a few more months (so the end of Feb is the real crucial date). But this warning may be enough for the rating agencies (in particular Moody's) to at least warn of a downgrade. The second is that the IRS will publish formal withholding guidance for 2013. Technically it could allow companies to keep the 2012 rates in place into next year if the expectations for a deal are high - but expectations for a "large deal" are quickly fading and now the best that can be hoped for is a fiscal cliff avoidance plan accomplished in stages over the coming weeks

So we can call focus on closing loans rather than worrying about rate swings when locking in new ones! The 10-yr T-note closed Monday at 1.77% and this morning we're around 1.78%, and MBS prices are nearly unchanged.

Did you ever wonder why there are no dead penguins on the ice in Antarctica? Where do they go?

Wonder no more!
It is a known fact that the penguin is a very ritualistic bird which lives an extremely ordered and complex life. The penguin is very committed to its family and will mate for life, as well as maintain a form of compassionate contact with its offspring throughout its life.
If a penguin is found dead on the ice surface, other members of the family and social circle have been known to dig holes in the ice, using their vestigial wings and beaks, until the hole is deep enough for the dead bird to be rolled into, and buried.
The male penguins then gather in a circle around the fresh grave and sing:
"Freeze a jolly good fellow."
"Freeze a jolly good fellow."