Wells Fargo Watching Renegotiated Home Sale Prices; RESPA Influence: Flagstar Shortens Loan Delivery Period; VA IRRRL Update
According to a recent report, due to the recession, Americans are eating cheap, unhealthy, fatty foods. Apparently, the recession started in 1957. (I write this as I munch on my Doritos...)
Speaking of food and recessions, Tavern on the Green is going out of business - once America's highest-grossing restaurant. Their last meal in Central Park will be served New Year's Eve, compared to only three years ago when it was plating more than 700,000 meals annually, bringing in more than $38 million.
There's no recession for Lenders One. They reported that for 2009, through November, they had officially delivered $20 billion to "Preferred Investors". Impressive.
Wells Fargo reports that it has seen an increase in "purchase transactions where the sales price was re-negotiated and subsequently increased after the original appraisal was completed. This is a clear indication the buyer/borrower may be attempting to acquire the property with less out-of-pocket expense and there is likely money being passed from the seller to the buyer/borrower that is not appropriately reflected on the HUD-1."
Starting January 25, Wells Fargo will not accept re-negotiated purchase agreements that increase the sales price after the original appraisal has been completed if: the appraised value is higher than the contracted sales price provided to the appraiser, and the new purchase agreement and/or addendum used to modify the sales price is dated after the appraisal is received, and the only change to the purchase agreement is an increase in sales price. If the purchase agreement is re-negotiated subsequent to the completion of the appraisal, the loan-to value will be based on the lower of the original purchase price or the appraised value, unless: a re-negotiation of only seller paid closing costs and/or pre-paids occurs where seller paid closing costs/pre-paids are common and customary for the market and supported by the comparables.
Flagstar turned some heads yesterday when they announced that "In conjunction with RESPA rules effective January 1, 2010, Flagstar is changing the loan delivery period. Effective with loans closed on or after January 4, 2010, the loan delivery period is being reduced from 30 days to 15 days. Loans must be delivered to Flagstar no later than 15 days after the closing date in order for it to be eligible for purchase." Apparently the gist of what they meant was that Flagstar has 30 days from funding to support restitution, which may create compliance issues, and is trying their best to avoid any compliance issues between the old and new GFE and HUD.
How is the FDIC dealing with Texas banks, and any issues down there? Texas has had their share of failures, but the FDIC is using its retired agents to help out. READ MORE
Starting January 11, GMAC Bank Correspondent Funding Approved Correspondents know that tax transcripts will be required for all loan transactions, with the exception of VA IRRLs. The IRS Form 4506-T must be processed and tax transcripts obtained to validate against the borrower's tax returns and/or W-2s/1099sfor the two-year period preceding the loan application date. GMAC's note went on to explain what they want - and it is thorough.
It is tough to make predictions, especially about the future. And how often does anyone go back to previous predictions to check their accuracy. I have seen a number of forecasts for 2010. Most seem to think that "negative headlines on performance will likely persist" for pools for mortgages, regardless of original credit quality. One noteworthy analyst wrote, "The biggest risks for non-agency valuations are unexpected developments on the legislative and modification fronts." The same analyst, from Merrill Lynch thinks that "Monetary tightening, whether in the form of liquidity withdrawal or fed funds rate hikes (not until the second half), should be gradual and is not expected to disrupt securitized markets...Our forecast calls for home prices to drop 8% from current levels, before stabilizing in Q2 10. We expect the macro effect of this decline to be muted."
I am a big believer in market psychology, and how, in spite of economic news to the contrary, the public's perception can nudge the economy one way or the other. Yesterday the Conference Board reported that its Consumer Confidence Index rose to 52.9, up from a revised 50.6 in November. The reading is still far short of the 90 that would signify a solid economy, but it is well above the historic low of 25.3 in February.
Yesterday's $42 billion 5-yr Note auction went pretty well, given the skeleton staffs present at many investment banks. It helps that these yields are the highest they've been since August. The bid/cover ratio was 2.59 compared to 2.33 for 2009, and "Indirect bidders" bought 44% versus 45% for 2009. Certain MBS traders use the 5-yr Note as a yardstick to measure mortgage price movements while the 7-yr auction is even more important as a measurement of investor and foreign demand. We also had the S&P/Case-Shiller home price index move up 0.4% in October, which was the 5th month in a row moving higher. Their index is still down more than 7% from October 2008, but some seasonality is creeping into the numbers - things tend to slow down in the winter. READ THE MND STORY FOR MORE ON THE SEASONAL EFFECTS
We have the December Chicago Purchasing Manager's Survey, expected at 55.1 from 56.1, and the weekly Jobless Claims number tomorrow, expected to increase by 8K to 460K with continuing claims expected a little higher. Getting back to auctions, today we have $32 billion in 7-yr notes to sell. Of some interest is the fact that the yield curve has been flattening a little lately, for a variety of reasons. Lastly, we had some improving mortgage pricing yesterday (the spring bouncing back a little?), and this morning the 10-yr is back down to 3.79% and mortgage prices are better by about .250.
The awesome power of a wife's love...
A very old man lay dying in his bed. In death's doorway, he suddenly smelled the aroma of his favorite chocolate chip cookie wafting up the stairs.
He gathered his remaining strength and lifted himself from the bed. Leaning against the wall, he slowly made his way out of the bedroom, and with even greater effort forced himself down the stairs, gripping the railing with both hands.
With labored breath, he leaned against the door frame, gazing into the kitchen. Were it not for death's agony, he would have thought himself already in heaven. There, spread out on newspapers on the kitchen table were literally hundreds of his favorite chocolate chip cookies.
Was this heaven, or was it one final act of heroic love from his devoted wife, seeing to it that he left this world a happy man?
Mustering one great final effort, he threw himself toward the table. The aged and withered hand, shaking, made its way to a cookie at the edge of the table, when he was suddenly smacked with a spatula by his wife.
"Stay out of those," she said. "They're for the funeral."
(There will be no commentary tomorrow, as I will be behind the wheel
driving back with my son to the San Francisco Bay area from Utah. Happy