Economists are carefully watching the impact of falling oil prices on the Texas (and other oil states) economy. For single adults making the federal minimum wage of $7.25 per hour, it may be impossible to find a place to live that won't cost more than the common rule of thumb that annual housing costs should not exceed 30% of one's annual income. To determine the amount of income needed to live in a particular area, Zillow analyzed median rents and the income necessary to afford them in more than 15,000 cities nationwide. Zillow's analysis found that a single worker making the federal minimum wage could not afford rent for a typical property in any of the 15,000 cities and towns Zillow researched, without exceeding the 30% threshold. Households with at least two workers earning the federal minimum wage could afford the average rent in only 135 cities across the U.S. which were largely located in the Midwest and South and were less than 1% of all communities Zillow analyzed. Use Zillow's interactive map to find out what income is necessary to afford the median apartment in a particular metro area.

The Community Home Lenders Association (CHLA) sent a letter to the CFPB urging them to enforce bank mortgage originators to meet the basic testing and continuing education requirements as licensed loan originators. Currently, these standards apply to only non-bank mortgage originators that require them to pass the SAFE Act test, undergo a background check prior to employment and complete at least 8 hours of continuing education each year.  The letter states, "We believe that it is important-both for the integrity of the profession of mortgage originators and for the consumers that they serve-to have high uniform standards that apply to all mortgage originators, regardless of whom they work for..." The letter also identifies that there are 1,415 registered mortgaged originators working at banks and other depository institutions that failed and never passed the SAFE Act test and should not be considered as "qualified" originators. The letter also pointed out that if registered bank mortgage originators were forced to take the exam, anywhere from 36,000 to 120,000 may fail it.  All other individuals in the real estate and mortgage industry including real estate brokers, appraisers, home inspectors, and nonbank mortgage originators are all subject to licensing, testing and continuing education, which make bank employees an exception to the rule.

Speaking of originators, in the December 26, 2014, issue of the Texas Register (Volume 39 Number 52), the Finance Commission of Texas and the Texas Credit Union Commission jointly adopted amendments to the following home equity lending interpretations in the Texas Administrative Code (7 TAC Chapter 153) without changes to the proposed amendments published for comment in the July 4, 2014, issue of the Texas Register (Volume 39 Number 27). The text of the adopted amended interpretations is set out below. The Finance Commission of Texas proposed amendments to 7 TAC §2.104, concerning Application and Renewal Fees for residential mortgage loan originators applying for licensure with the Office of Consumer Credit Commissioner (OCCC) under the Secure and Fair Enforcement for Mortgage Licensing Act.

At the Federal level, the securities industry is very interested in the "Final Rule" regarding Residential Mortgage-Backed Securities and keeping 5% "skin in the game". The Federal Register does not mention that term, but notes that, "The Commission understands that sponsors of non-agency RMBS historically did not generally retain a portion of credit risk in the form and at a level consistent with the rule being adopted. I will save you the effort of going through 166 pages and tell you to go to page 116, or perhaps a few before, to see the nitty-gritty.

Skin in the game is important for originators. Currently the Fed owns about 52-53% of all 30-year FN/FH passthroughs alone at the moment. Considering that the 30-year Fannie & Freddie passthrough market is the most liquid part of the MBS market and is widely used for hedging purposes, the reduced float in this sector could keep MBS spread volatility (versus Treasury prices) very high for a long time.

Although the Federal Reserve is not out using new cash to buy securities, it is still using the money from early payoffs to buy MBS. The outlook for the reinvestment of pay-downs received by the Fed is the most important theme for MBS spreads from a long-term perspective while the volatility in the rates market around the end of the QE 3 program is the most important theme from a short-term perspective.

And what about the impact of lower rates on early payoffs, and therefore reinvestment by the Fed? It costs more than ever to do a loan, so refinancing is somewhat dampened. Analysts estimate that the 30-year mortgage rate has to settle down below 4.00% in 2H'15 (or 10-year Treasury yield to be below 2.25%) for long-term supply/demand technicals to work against the MBS basis. Considering the current state of the US economy and the end of the QE 3 program several months ago, it seems reasonable to expect that 30-year mortgage rate will average higher than 4.0% in 2H'15 and MBS spreads are unlikely to widen meaningfully from a long-term perspective (as excess supply will be absorbed by money managers to cover their underweights). For this positive supply/demand technicals backdrop for agency MBS to change, securitization rate of MBS by originators has to increase to 2013 levels again!

The period from Christmas until New Years is always an interesting time in the financial markets. Volumes are normally down, staffs are usually light, and anything worth doing can be put off until the first week of January....but as someone sang once, the times they are a changin'. The coming year will probably contain more interest rate "talk" than the prior three; the Fed will enter a period tightening which hasn't happened since June '06, and everyone's attention will be on the yield curve again. Wells Fargo writes, "Our expectation for this tightening cycle is for a much flatter yield curve. This curve flattening could again have the effect of not fully pricing in actual Fed actions given how much flatter we expect the curve to become. In anticipation of the upcoming tightening cycle, we expect that there will once again be mismatches between short-term yields and the actual pace of Fed tightening behavior." A year from now many believe Fed Funds will be 75bps higher, barring any systemic change to the economy at-large.

What have lenders and investors been up to lately?

"Effective this Thursday Sierra Pacific has re-instated the $895 commitment fee in New Jersey for ALL Wholesale loans. This means that any loans received at our Regional Office between now and Wednesday December 31 Will NOT have a commitment fee yet. The loan must be RECEIVED in our office as a full file and not just REGISTERED in our system by the December 31^st deadline. There is a 'Fees Buy-out' (.20 bps) option available in our system at the time of lock but the GFE must still have the commitment fee indicated at the time of Loan Set UP review."

(The prompted one broker to write, "In NJ one of the ways to compete with the bankers was to washout the Lender Fee on the GFE by increasing the rate and using the YSp/SRP.  I could go on for an hour with the stupidity of the CFPB on this action but this washing on the GFE has worked a lot. Hopefully Sierra allows it as an option which is what many lenders are doing. Now comes the issue of a broker giving out a GFE without the fee and wanting to flip the loan to a lender charging the fee. The rules actually have a negative impact on the consumer to the benefit of the larger institutions.")

Peoples Bank posted revisions to its FHA matrix. Revisions include maximum DTI for FHA Streamline restored to 55%, and The maximum DTI for manual underwrites is properly reflected in the Purchase / Rate/Term / Cash-out sections. Additionally, a reminder of the VA requirement that limits what the Lender can charge the Veteran for originating and processing fees plus certain settlement fees has been posted.  The Lender is also required to comply with all applicable State and Federal unallowable fees as well.  Veterans may pay a maximum of one percent (1%) origination fee, plus reasonable discount points (can only be used to buy down the interest rate), as well as reasonable and customary amounts for certain itemized fees.

Charges are only counted in the 1% origination fee or unallowable fees, IF it is an origination charge OR is listed in the unallowable fees and paid for by the Guest.

U.S. Bank Bulletin 14-073 announced, effective December 13th, DU version 9.2 will reflect new lower maximum will reflect new lower maximum LTV, CLTV, and HTLTV ratios for fixed rate cash-out refinance transactions secured by a 1-Unit primary residence to a maximum ratio of 80%.  U.S. Bank Home Mortgage will not accept DU Version 9.2 findings for any new Cash-out Refinance transaction greater than 80% LTV/TLTV. Loan Prospector (LP) will be the only acceptable AUS finding on the following Agency Fixed programs for Cash-Out transactions > 80% to 85% effective Friday, December 12, 2014.

Chase offers Internet Compatibility Tips for its ChaseLoanManager. To optimize your experience in ChaseLoanManager, utilize Internet Explorer. If you are using a web browser newer than Internet Explorer 9, you will need to reset your Compatibility View Settings. To adjust your Compatibility View Settings, open Internet Explorer and go to Tools >> Compatibility View Settings and enter chase.com in Add this website field. Click Add, and then Close. Note: This may direct you back to the ChaseLoanManager homepage; but it should resolve any issues. Additionally, the Chase Ineligible Settlement Agent List is available through ChaseLoanManager Resource Center. Refer to CB14-59 for complete details.

CitiBank posted updates involving numerous topics. Updates and reminders include credit policy updates: removal of overlays, program specific credit policy updates, VA and FHA updates, clarification on property eligibility, TEXAS 50(A)(6) bona fide points, and other miscellaneous updates. To view the information in its entirety, click on the link bulletin 2014-13.

As a reminder, the documents outlined in Nationstar Mortgage's Focus Flash are required for Conventional Loan Condominium Project Approval. It is also important to note that all supporting documentation used to make the Condo Project Approval decision must be in the loan file delivered to Nationstar Mortgage. Click on the link to view its focus flash.

NYCB Mortgage Company, LLC has 90% LTV Jumbo fixed 30-year, no MI requirements (not available in all states).

Plaza will accept LTVs up to 97% for transactions that meet Plaza's Program Guidelines and the requirements outlined in Fannie Mae Selling Guide Announcement SEL-2014-15.

NewLeaf Wholesale will increase the LTV to 97% for NewLeaf 2 and NewLeaf My Community Mortgage programs for certain loans that meet eligibility requirements.

Carrington Mortgage Services has lowered the FICO requirement on its FHA, VA and USDA products to 550.

Through all of this rates have continued their downward path. The general consensus appears to be that investors are moving money into the bond market (which includes MBS) amid fears of a potential Greek exit from the euro. (Remember when we were all concerned about PIGS?) Greece's parliament failed to name a new president after three rounds of voting, meaning early elections will be held on January 25. Recent polls have suggested the anti-euro Syriza party is the favorite. And with no other news, the market may-as-well attribute any movement to Greece - most of the benefit accruing to Treasury securities. The 10-year closed at 2.21%.

For news today we'll have the S&P/Case-Shiller 20-city Index and Consumer Confidence. Until those thrilling tidbits we're looking at a 10-yr. down at 2.19% and agency MBS prices better than Monday afternoon by nearly .125.

Jobs

Fannie & Freddie seller/servicer American Capital Corp (ACC) is gearing up to increase business in its Wholesale channel. The name has changed from ACBN to ACC Wholesale, but the "feel like a big fish" offering to brokers is still in place. ACC is looking for Account Executives for the following areas: Seattle, Texas, San Diego, Pasadena/Santa Barbara. AEs have the ability to bring on Retail and Wholesale clients as well as originate themselves if they are licensed.  Please email Allen Cravello if you would like to be considered.