When will someone buy THIS HOUSE? Anyone? Anyone? 

I don't envision picket lines in the future, but the Mortgage Bankers Association filed suit against the U.S. Department of Labor under the Administrative Procedure Act which seeks to "set aside DOL's Wage and Hour Division Administrator's Interpretation No. 2010-1 that reversed and withdrew a 2006 opinion letter from DOL to MBA. The 2006 opinion letter interpreted DOL's own regulations and concluded that typical loan officers were exempt from Fair Labor Standards Act (FLSA) requirements for overtime payments under the 'administrative exemption'." If you're interested, check out THE FULL STORY

I mentioned a drop in reverse mortgage business yesterday, and received, "I think one of the major reasons there was such a huge drop in the reverse mortgage product is simply a lot of people use this product to stop the monthly payments on the existing mortgage(s).  If there is not enough equity to pay off the existing loans, there is no reason for the reverse mortgage.  I have tried to help a lot of people with that product in Arizona, and about half don't have the equity to make it work.  The drop in reverse volume is not reflected in desire, but more the property values."

Here is some good news: Ginnie Mae announced it is increasing the net worth requirements and starting to accept new issuers again. Unfortunately for many would-be issuers, they must have a minimum net worth of $5 million plus an additional one percent of the aggregate amount of the outstanding remaining principal balance, any commitment authority available to issue securities, and liquid assets of 20% of the agency's net worth requirement.  Existing HMBS issuers will have until October 1 to meet the new requirements, which are a change from the $1 million in net worth plus other criteria. READ MORE ABOUT GINNIE NET WORTH REQUIREMENTS

I also received a fair amount of mail focused on the Bank of Internet's programs and viability in the market place. "Let me see - the borrower has a 720 FICO and 20 years of PITI in the bank and the LTV is 70% or less.  On the other hand the US government allows us to lend to the 96.5% LTV borrower with a 620 score, no assets, a job (today), 40 DTI, and the property was recently flipped. I know where I would put my money."

In fact the CEO of the Bank spent some time walking me through the source of the confusion - the use of assets depletion income. Specifically, BOI's guidelines state "If a borrower has an investment portfolio but only draws the income necessary to meet monthly obligations but additional income could be derived from that source the underwriter may use a depletion of assets calculation to offset the monthly debt. Any required reserves or down payment would first be deducted from the asset balance. "These guidelines are nearly identical to the Thornburg's guidelines on this issue, which many believe is a reasonable way to approach thinking about the value of assets for wealthy individuals in a common sense fashion.

Another wrote, "Dodd Frank does not currently attempt to completely regulate or define what can or cannot be construed as income. The product is relatively safe and secure: hard cash and cash-equivalent liquid assets in the borrower's verified accounts, or the borrower's verified income from last week/last month/last year. Why is qualifying based on income derived from employment that could go away the day after the loan closes deemed to be superior to using cash flow based on withdrawals from verified cash assets? Let's be honest, not all limited-income-doc loans blew up, and many of them were good loans to good borrowers.  A one-size-fits-all approach to underwriting will squeeze many potential good borrowers out of the market, which is not good for anyone."

Lastly, the income verification verbiage from The Frank-Dodd legislation: "A creditor making a residential mortgage loan shall verify amounts of income or assets that such creditor relies on to determine repayment ability, including expected income or assets, by reviewing the consumer's Internal Revenue Service Form W-2, tax returns, payroll receipts, financial institution records, or other third-party documents that provide reasonably reliable evidence of the consumer's income or assets." Notice the "income or assets."

And compensation is, and will be, a continuing issue. Glen Corso from the Community Mortgage Banking Project wrote, "If a loan originator is compensated by the creditor they cannot be compensated by the borrower. The opposite is true as well. For purposes of the rule if YSP is used to compensate the loan originator then the rule considers the lender to be the source of payment of the compensation, not the borrower. Therefore the compensation is subject to the rule. If the borrower pays the loan originator's compensation out of his/her pocket, or from loan proceeds, then that is considered a direct payment from the borrower and is not subject to the rule that prohibits the loan originator's compensation to vary with the terms and conditions of the loan. When we questioned the Federal Reserve staff on this issue and pointed out that at a loan closing a typical borrower will have a number of charges and credits listed on their loan closing statement, we were told that the way to determine if the borrower is paying the loan originator's compensation directly is to see if compensation being paid to the originator is equal to or less than the amount of cash the borrower pays out of pocket, or from loan proceeds, towards the loan closing costs. If it is, then under the Federal Reserve rule it will be treated as compensation being paid directly by the borrower."

The fortunes of MBIA, a bond insurance company, go up and down depending on what day it is. Probably the only ones who can keep track are all the attorneys involved with its actions. Did MBIA underestimate the risks involved in the mortgages backing the securities? Or did the banks lie to it about the mortgages, in which case they owe the MBIA billions of dollars? Any savvy investor in either company would want to know the real answer. To complicate things, many of the same banks being sued by MBIA are trying to persuade a judge that the company is now and has been insolvent for a couple of years. The trial has been postponed.

Standard & Poor's downgraded MBIA's bond rating to the lower regions of junk, warning that the company's "capital adequacy is very weak," although it did have enough assets to meet all claims for at least a few years. Then the stock went up 35% over five trading days after it was learned that JPMorgan Chase, Barclays and Royal Bank of Canada had withdrawn from the suit challenging the insurance department approval of the MBIA reorganization. It seems unlikely that that it, by itself, would be very important, since the other banks seem committed to pursuing the case. The banks are not seeking damages, just a reversal of the reorganization, so the number of plaintiffs is important only in determining who shares the costs of the case. But there also is speculation that MBIA and the banks that withdrew from the suit reached other deals that could bolster MBIA's position. Maybe the New York Times can keep track of all this STORY

"'Knowledge' is knowing a tomato is a fruit - 'wisdom' is not putting it in a fruit salad." Well said. With the slow-down in locks and pipelines, many originators use the time to gain some knowledge and for some training. This one from Originator Success Academy crossed my desk, where the training is held in several local markets. It is "progressive training" over 4 half days (9AM - 1PM) so you can learn in the morning and implement in the afternoon "2 for 1 special pricing, taught by mortgage industry trainer Ron Vaimberg and focuses on generating leads, building a referral network, and using social networking. Check it out at www.originatorsuccessacademy.com. (And nope, this is not a paid announcement.)

Turning to rates, once again we had little scheduled news yesterday and MBS prices finished the day flat. Given that prices started off the day being worse than Tuesday's close, some investors issued price improvements, especially after the Fed's Beige Book showed continued economic weakness - especially in housing. One trader wrote, "We are going to look to get 'long' mortgages outright as we approach the long bond auction tomorrow with 3.5s and 4s our favorite coupons to express the long in." Mortgage-backed security volume picked up a little, although it was still below "normal," and the 10-yr, after hitting a high of 3.42% and the auction, closed the day around 3.36%.

Turning for a moment to the Fed's latest Beige Book report on the recent state of the economy across the 12 districts, it generally was as expected. The report will be used for the next Fed meeting during the last week of January. There are signs of further expansion in the economy and even labor markets since the last report (which led stocks higher), but the real estate sector remained weak across all the Districts with a few reporting further weakness.

For today's excitement, we've already had Jobless Claims, which were up 35k to 445k, continuing claims dropped, and the 4-week moving average was +5,500. December's PPI came in at +1.1%, about as expected, and ex-food & energy it was +.2%. (Year-over-year this number is up 4%, relatively strong.) Lastly the Trade Balance figures came in at $38.3 billon. Later we have the $13 billion 30-yr auction. All of that has led to...not much. The 10-yr yield is still at 3.36% and MBS prices are roughly unchanged.

Tony had just finished reading a new book entitled, "You Can Be THE Man of Your House." He stormed to his wife in the kitchen and announced, "From now on, you need to know that I am the man of this house and my word is Law. You will prepare me a gourmet meal tonight, and when I'm finished eating my meal, you will serve me a sumptuous dessert. After dinner, you are going to go upstairs with me and we will have the kind of sex that I want. Afterwards, you are going to draw me a bath so I can relax. You will wash my back and towel me dry and bring me my robe. Then, you will massage my feet and hands. Then tomorrow, guess who's going to dress me and comb my hair?"

His Sicilian wife Gina replied, "The funeral director would be my first guess."