Homebuyer Tax Credit Closing Deadline Looms; Why Borrowers Can't Refinance; Advice From an Appraiser; Lenders Who Buy 203(K) Product
Say what you want about current housing market conditions and the U.S. being eliminated from World Cup play, there is definitely a certain portion of mortgage bankers who are downright optimistic - and it's good to see.
"I need to raise my hand as a 20-yr mortgage originator and say it's not all doom and gloom in mortgage origination land. In fact, I could argue it's never been better. So with all the negatives being thrown around about HVCC and compensation capping let me reassure everyone that there are a lot of great things available and working well. With mortgage rates the lowest on record I feel a lot of originators are missing golden opportunities by focusing on the negatives and ignoring all the positives."
It's pretty easy to focus on the negatives though. Last week MND updated folks on the extension of the homebuyer tax credit closing deadline.
Here's an excerpt:
"The June 30 closing deadline has not been extended...but it was accepted as an amendment to the Tax Extenders Bill. Under the amendment, borrowers who signed purchase contracts by April 30 would be given three extra months to close their loan and still qualify for the homebuyer tax credit. The new deadline would be September 30, 2010....The homebuyer tax credit closing deadline extension proposed by Senate Majority Leader Harry Reid would stand if the Senate agrees on the reworked version of the proposal. This only applies to the Senate. The House would still need to reconcile."
Well. The Tax Extenders Bill, which also contains legislation to extend unemployment benefits for out of work Americans, has been repeatedly voted down by Senators who refuse to add more debt to the budget deficit, and now it appears the bill will not be revisited until after the 4th of July recess. The closing date deadline for homebuyers looking to take advantage of the tax credit is on Wednesday!
One reader wrote in and said:
"It is no wonder folks want to vote the existing politicians out of office - we're just ending up with a bunch of mediocre, compromised laws that are poorly thought out, and then left up to regulators to enforce. I heard the Senate voted down the extension of the closing date to 9/30 for the first time buyer tax credit, because it was bundled in the same bill as the one extending long term unemployment benefits. What does one have to do with the other? And the flood insurance program, what a debacle. And why is it that they are only trying to extend that to 9/30, what good is that?? By the time they finally extend it, it will have expired again."
It is one thing to pass financial reform, and other to actually
implement and enforce it. That may be what faces the mortgage industry
after the Dodd-Frank (nicknamed "Frank 'n Dodd") reform bill passes.
Votes on flood insurance and the extension of loans funding under the
First Time Home Buyer Tax Credit are due this week. Due to opposition
from the Treasury Department an amendment that would allow covered bonds
to get a start in the U.S. mortgage market was blocked. Federal
regulators will oversee appraisal management companies that are
affiliated with federally insured banks under the Dodd-Frank regulatory
reform bill. READ MORE
appears that "private lenders" will be required to keep at least a 5%
stake in loans they package and sell as a form of risk retention. This
would affect credit-card debt, auto loans, mortgages and other
securitized debt. But originators of long-term, fixed-interest-rate
mortgages would be among those that would not be required to retain
risk. The exemption would not apply to mortgages with risky features
such as negative amortization, interest-only payments and balloon
payments. In addition, FHA, VA, and USDA loans don't fall into this
bucket. But loans guaranteed by Fannie Mae and Freddie Mac, the mortgage
companies taken over by the government, are not specifically exempted
in the legislation.
The bill creates two huge government
entities: the Consumer Financial Protection Bureau and the Systemic Risk
Council, which will have unprecedented power and authority to regulate
the financial services industry in the years ahead. Also the conference
agreed on a version of the "Volcker Rule" which bars proprietary
trading, but provides numerous exemptions. It also permits banks to
invest up to 3% of Tier 1 capital rather than 3% of tangible common
equity in hedge funds and private equity funds. Expect a vote from the
Appraisal stories continue to reflect a system, although well intentioned, is broken. I received this from a friend, outside of the mortgage business. "I tried to refi and after over 90 days of jumping through hula hoops with a bone in my mouth for the large money-center lender I decided that even a 0% mortgage wasn't worth this aggravation. The appraiser seemed naive, was in my house for less than 5 minutes, and then in the final appraisal sent to the underwriter attached photos from another house. This is a loan which 9 months earlier had a 60% LTV and my income could have qualified me for a loan at least twice the size. It was a joke." READ MORE
And this from a long-time appraiser in Northern California. "I would counsel the mortgage brokers to tell the clients what their loan to value ratio is and what their loan amount is and then tell the appraiser when the borrower meets them. I ask every borrower those two questions, and I would say that 75% have no idea. I the appraiser am not allowed to talk to the mortgage broker about this but I can talk with the borrower and I do. It certainly helps if I know that the loan amount is and the loan to value ratio as I will try to hit that value and make the deal go through when I can. I certainly don't want to the blow the deal by $5k but most of the time I am in the dark because the borrower really doesn't know what the loan amount is or they tell me the loan amount is $500k but forget to mention the $200 line of equity."
There was a story in the Wall Street Journal wondering "But if rates are so low, why isn't demand for new loans picking up?
For one, most borrowers who could refinance probably did so last year, when rates fell below 5% in March, August, and December. Many borrowers with an incentive to refinance can't qualify with today's tougher lending standards or don't think it's worth paying the closing costs on a new loan. Credit Suisse estimates that around 61% of all borrowers with a 30-year fixed rate mortgage could lower their mortgage rate by 0.75 percentage point at current rates. But analysts estimate that only 38% of those borrowers could actually qualify at current standards. More borrowers can't qualify because they don't have enough equity in their homes, their credit scores have taken a hit, or they've seen their income reduced."
Friday I mentioned that I didn't want to threaten the Scotsmen's position, but my mention of 203(K) loans incited a fair number of e-mails. In no particular order:
"If you're in the Midwest, you should look at Towne Mortgage for both Full and Streamline."
"Freedom Mortgage (streamline and full) or Plaza Mortgage (streamline only) is who we use."
"Lots of midsize lenders do 203(K)'s - Guild, Home Savings of America, First Guaranty Mortgage and M&T Bank as a quick example."
On Friday, the FDIC said Peninsula Bank (FL) was closed, and taken over by Premier American Bank (also of Florida). First National Bank (GA) was shuttered and taken over by National Association Bank (GA). And in New Mexico, regulators closed High Desert State Bank and First American Bank will assume its deposits. The newest failures on Friday were expected to cost the FDIC's insurance fund a combined total of $284.6 million.
On to mundane things, like our economy. Friday we learned that GDP grew by 2.7% in the first quarter, less than previously reported. Conversely, the University of Michigan Consumer Sentiment increased to 76, the highest since January 2008, from 73.6 in May. After this news we had a nice rally (again) toward lower rates and investor price improvements. There is no Fed meeting in July, and the futures market is pricing in a 75% chance that the Fed keeps rates at .25% through November so don't look for higher rates soon unless investors become nervous about the amount of debt in the US... Mortgage rates are low because investors, nervous about global economic stability and a volatile stock market are plowing their money into Treasury debt and mortgage securities, assets that investors perceive to be relatively safe bets.
The data calendar is full this week with the main highlight being the June employment report on Friday. This morning one can expect May personal income to rise 0.4% and for personal spending to be up 0.2%; the core PCE deflator is projected to come in at 0.1%. And so for economic news - today we have the Chicago Fed numbers, along with Personal Consumption and Income. Tomorrow we have the S&P/Case-Shiller Home Price Indexes, and the Conference Board's Consumer Confidence stats. Wednesday some ISM numbers, Thursday Jobless Claims, ISM Manufacturing, and Pending Home Sales, but the biggest economic event next week will be the important Employment report on Friday. Early estimates are for a decrease of about 70K jobs in June.
(Since I am in West Yellowstone, I figured this would be topical.)
There were three Indian squaws. One slept on a deer skin, one slept on an elk skin, and the third slept on a hippopotamus skin. All three became pregnant. The first two each had a baby boy. The one who slept on the hippopotamus skin had twin boys. This just goes to prove that the squaw of the hippopotamus is equal to the sons of the squaws of the other two hides.