The U.S. Census Bureau projected that on Jan. 1, 2014, the United States population was 317,297,938. This represents an increase of 2,218,622, or 0.7 percent, from NY Day 2013. In January 2014, one birth is expected to occur every 8 seconds in the United States and one death every 12 seconds. The projected world population on Jan. 1, 2014, is 7,137,577,750, an increase of 77,630,563, or 1.1 percent from New Year's Day 2013. In January 2014, 4.3 births and 1.8 deaths are expected worldwide every second. India added 15.6 million people over the one-year period, which led all countries, followed by China, Nigeria, Pakistan Ethiopia, and North Dakota (just seeing if you're reading this).
"Rob, I know that FHA announced loan limit changes, but what about VA?" You're right - VA is sometimes left out of the big agency news. But here is a link that should answer any loan amount changes for 2014.
Remember TARP? Well, we're almost done with it. "To date, Treasury has recouped $432.8 billion on all TARP investments - including the disposition of Treasury's remaining investment in AIG - compared to $421.9 billion disbursed."
Everyone likes to think their voice is being heard. Here are two surveys you might want to check out. The first deals with flood insurance. NAMB is compiling data in an effort to couple mortgage professionals together with consumers and share their stories with their representatives regarding the NFIP issues.
And Hammerhouse, LLC has launched its 4th Annual Survey for Leaders and Producers in mortgage. The 25 questions are centered on the Six Core Components of business (Leadership, Culture, Business Model, Operations, Technology, and Geography). Hammerhouse is gathering new data for year over year trends relative to the needs and wants of Leadership and Production and what creates a Model-Match for long term success and retention. The poll is free, responders have a chance to win an iPad, and here is the link. Hammerhouse publishes the results on its website for all to see.
Hey, remember when the southern half of Europe was on the ropes? Everyone thought that PIGS (Portugal, Italy, Greece, and Spain) were heading toward bankruptcy? Don't give it a second thought - now bonds backed by Italian mortgages are the "investment du jour."
Speaking of Europe, concerns over Basel are not dead. Although things have been pretty quiet in the last few weeks due to the holidays, a few weeks ago the European Union's top banking regulator said the way lenders calculate how much capital to hold against residential mortgage losses is inconsistent. The European Banking Authority found that banks calculated the expected losses from their mortgage portfolios differently because they didn't weigh the risk of default the same, varying between 4 percent and 41 percent of their capital requirements, the EBA said. Loans to small businesses had even wider variations, with allocated risk weights between 14 percent and 177 percent. Banks' ability to reduce their capital requirements by changing how they measure the risk of losses on their assets has prompted regulatory reviews and calls from some supervisors for more reliance on capital rules that aren't risk sensitive. The Basel Committee on Banking Supervision said this week it is examining options including tougher disclosure rules and restrictions on how many different risk models banks can use. The EBA may make recommendations to "foster convergence and harmonization in supervisory practices," the London-based agency said in a report published on its website today.
Why should we care about Basel? International standards set by the Basel committee require banks to meet minimum capital requirements, calculated as a percentage of their assets. The amount of capital that must be held is linked to the riskiness of the banks' investments. Bank of England Governor Mark Carney, in his capacity as chairman of the international Financial Stability Board, has also warned of "worryingly large differences" in the results produced by different banks' risk models. Here in the United States, banks tend to be huge producers and owners of agency, and non-agency, mortgages and MBS. U.S. bankers have said that flexible implementation of previous versions of Basel capital rules in the EU has allowed European lenders to hold less capital against some assets than their U.S. counterparts. And that is not fair.
Let's see what investors and lenders are up to in order to catch some trends heading into 2014.
First, a correction. Last week I noted that, "Affiliated is now underwriting and guaranteeing VA loans, expanding opportunities for lenders without VA Automatic Authority, LAPP approval, and an on-staff Staff Appraisal Reviewer. To get approved for the program, complete the VA Underwriting and Guaranty Agreement and the VA Sponsorship Approval Request to Toni Donovan at firstname.lastname@example.org." The correct spelling is Toni Donavan: email@example.com.
Freedom Mortgage, ahead of the curve, is rolling out QM on Monday. It is a work in progress, and look for fine tuning as clients adapt to it.
In spite of the broker channel accounting for a small portion of overall residential orginations, that doesn't stop lenders pursuing the business channel. Equity Loans announced its new wholesale channel.
United Wholesale Mortgage, per Mortgagestats.com, has become the number one wholesale lender in the country in origination volume in the 3rd quarter.
Bexil American Mortgage Inc. announced a strategic partnership with Big Moat REIT, a private mortgage real estate trust focused on investment in residential mortgage assets, and the appointment of Alex B. Rozek to the position of Executive Chairman of the Bexil American Board of Directors. (Bexil American owns Castle Mortgage Corporation, a full-service residential mortgage originator and servicer in 24 states.)
(Speaking of partnerships - they are certainly not "dead." About three weeks ago, Adams Homes, a homebuilder in the Southeastern United States, announced that it has entered into a preferred lending relationship with Stonegate Mortgage Corporation. "As a Preferred Lender, Stonegate will offer a wide array of financing options and mortgage loan products to homebuyers at all Adams Homes communities nationwide. Adams Homes is one of the largest privately-held home builders in the U.S., with a top 25 ranking and new homes offered in more than 250 communities across the southeastern United States.")
Wells Fargo is now allowing delayed financing on Conventional Conforming and High Balance loans where the property was purchased with cash and has been owned for less than six months provided that the subject property is a primary residence, the transaction is arm's length, and the loan amount is less than the actual investment to purchase the property (excluding closing costs). The LTV/TLTV/CLTV must be based on the appraisal value, and if this has increased by more than 10%, Wells underwriting may review and reduce the loan amount in order to ensure that the value is supported. The borrower must pay the closing costs, the source of funds used for purchase must be fully documented, a copy of the HUD-1 must be included in the loan fie, and the preliminary title for the refinance must confirm that the borrower is in the title and show that there are no liens. Loan amounts that exceed 80% of the purchase price for the transaction being refinanced are required to be submitted for prior approval, and the loan must meet all of the other applicable cash-out eligibility guidelines.
Wells has improved its Conforming cash-out adjustors for all FICO scores between 660 and 739, effective immediately for all LTVs through 85%.
Per QM and ATR, EverBank has updated its Fixed-Rate and ARM policies to no longer allow transactions with total DTIs over 43 on a variance basis, and Asset-Based Income will no longer be an eligible income source. Variances and exceptions will no longer be made on any of the Fixed Rate product guidelines, while these may be requested for ARMs after January 10th to be evaluated on a case-by-case basis.
US Bank has enhanced its Conventional Non-Conforming, Elite LIBOR ARM, and Elite Treasury ARM programs to allow LTVs up to 80% on loan amounts from $1 million to $1.5 million, replacing the previous 75% maximum. This option is available for purchase and rater/term refis for all property types apart from condos and 2-4 units and is not applicable for transactions in CA, FL, NJ, NV, or NY.
Redwood Trust has made several program updates that will go into effect for loans locked on and after January 10th. Terms of 25, 20, and 10 years will be offered for fully amortizing fixed rate loans and ARMs with the note rate as the qualifying rate (for 7/1 and 10/1 LIBOR ARMs, the qualifying rate has been changed to the greater of the fully indexed or note rate). Guidelines have also been updated to no longer permit the grossing up of non-taxable by 125%; the percentage of non-taxable income that may be added cannot exceed the appropriate tax rate for the income amount and additional allowances for dependents will not be eligible. The age of documentation requirements have been clarified to permit no more than 90 or 120 days before the date on which the note is signed, depending on the document type, and verbiage has been included to reflect the RESPA; MDIA; QM Points and Fees, and Rebuttable Presumption; and TILA requirements that will take effect for loans with applications made on or after January 10th. The Social Security income documentation requirements have been amended to align with Appendix Q of Dodd-Frank, which states that this income must be verified via SSA benefit verification or Award letter. The guide has also been updated to include the RRAC's requirement that the appraisal discourse and borrower's right to receive a copy of the appraisal be contained in the loan file per the ECOA, effective for applications dated January 18th and after.
First Mortgage Corp is no longer wiring Grant funds under its Platinum Grant program to the close table and will instead require that lenders advance the funds (the same process as for CHF Access and NHF First Down). Once FMC has received the associated FHA or VA first, it will wire funds for the first and Grant per the bailee instructions in a single wire.
Turning to the markets, Janet Yellen is scheduled to be formally confirmed in the Senate on Monday January 6. Minutes from the 12/17-18 FOMC meeting will be published next Wednesday. At the moment, markets are very comfortable w/the near-term policy outlook although it will be interesting to hear how much appetite there is for additional ZIRP strengthening measures ("zero interest rate policy": inflation floor, lower UR threshold, IOER rate cut, etc.) and whether the majority of the Fed are on board for a steady and linear tapering schedule (so purchases conclude by the end of 2014). The next Fed decision won't come until January 29th.
Looking at the numbers, besides the fact that it is forecast to be 85 degrees in Los Angeles today, U.S. 10-yr yields started the year at 1.75% and finished at 3.03%. Ahead of Jobless Claims, we're slightly better this morning, with the 10-yr back to 3.01% and agency MBS prices better by a shade. But experts say there is no way we're heading back to rates anywhere near where they were six months ago - so get used to them.