I didn't plan on yesterday's "Real words from a real agent" to incite such a firestorm of e-mails. But first, some "GFE chatter". The grace period of the new GFE is set forth pretty clearly. But lenders are finding out that what HUD allows and what investors actually do can be two different things.


The new Good Faith Estimate is still a problem for agents out in the field, along with title companies, ops staffs, and investors.

One experienced agent in California wrote, "We had a loan close that was initiated on the new GFE. We did not disclose the seller's county transfer tax to the buyer on the new GFE. The seller's county transfer tax in every county is paid by the seller. Although the city transfer tax is usually split 50/50, this property was not located in a city that has a transfer tax. When the official GFE is issued, it comes from our company, they did not know at that time that the seller's transfer tax needs to be on the buyer's GFE either. When we initially asked title for the fees, the seller's transfer tax wasn't on their estimate as well. The doc's go to title and bam the funder tells us "We are going to hit you for $737 for a tolerance cure."

I responded:

"What about HUD's 120 day leniency policy?"

They responded:

"Sorry, the investor is not following the HUD leniency policy" we are told. To add insult to injury our $737 went to the SELLER. We were not given an opportunity to re-disclose, which if you think about it is so ridiculous because the re-disclosure would not have effected a change in cost for the borrower. This is an illogical disclosure requirement in that the seller does not receive the GFE. Is this what the government really had in mind? The new GFE is absurd."

Another producer wrote, "I just had an investor that wouldn't allow me to collect for a 3rd party credit report unless I could verify I had paid the bill. We are a small company pulling between 50-100 reports per month. The cost is charged directly to my Amex card at the end of each month as a lump charge. I can go pull an invoice per client but it has never reflected that the item was paid. So basically, RESPA allows us to charge for 3rd party charges. Nowhere in RESPA does it indicate we have to justify our business practices. If I don't pay my bills, I'll get cut off. This is really spiraling out of control."

"We are having to guarantee fees we often have no control over. We just did a loan with an investor we haven't used in a few years, as it was in the client's best interest. I ordered the appraisal on their blind website. I have no idea about the charge. Here's a thought. The GFE has to be out within 3 days of application. The appraisal can't be ordered until 4 days. How do you guarantee a fee for an appraisal you haven't ordered."

Regarding yesterday's "Real words from a real agent", one wrote, "My response is "boo (expletive) hoo." Yes, there's more work to do but it puts us closer to the process and requires more contact with the borrower. This is a good thing. Getting more familiar with borrowers helps us develop the relationship more which could lead to continuing the relationship which could lead to keeping in touch with clients which could lead to more referrals. Hello! Isn't this what we need? So to those who have to work more and don't like it, I say "buh-bye." Find another career and leave originating to those of us who will work harder."

Another wrote, "'Real Words from a Real Agent' could have been me writing. Truer words have never been spoken. That's exactly what happens now and as an 18 year originator I find nothing sadder than this. It's a total shame. The truth is this hurts the lending clients the most and the long time originators who have spent their entire career doing it right are right behind them! The problem is, I don't see a good fix in sight." Another wrote, "This is a sign that our industry is cleaning up. This non-professional needs to go back to selling cars. He is crying because he has to do his job.  How absurd that a loan officer should have to actually key in correct information into a 1003. I say good riddance to these folks who dimensioned the value of the great loan officers out there."

Someone else wrote, "My American dream is to spend a long weekend with Carmen Electra, but nobody appears to care about that.....maybe I'd get a little more help if they could make 1 point doing it, uh?!? Seriously. Only a loan agent would complain about having to actually do some work after spending 26 years in the business doing virtually nothing but returning phone calls. Tell them 'it was a good run, and that Reagan is out of office now.'" Lastly, "Just wait until John Q. Public gets a load of loans not tied to commission compensation!!!  The American public and Barney Frank deserve what they are about to get for expecting everything for free (except for their services of course... THAT costs!) and boy are they going to see how expensive and frustrating 'free' is going to be!"

The administration's Making Home Affordable Program (HAMP) is "gaining traction" based on figures released by the Treasury Department and HUD. As of the end of January, over 116,000 permanent loan modifications had been signed, nearly double the 66,000 reported at the end of December, and an additional 76,000 had been extended permanent modification offers but had not yet returned the paperwork.  830,000 borrowers are still in some stage of the required three month trial period required by the program guidelines. Mortgage News Daily pointed out, however, that over 57.4% of loan modifications have been borrowers who are out of work or are underemployed. If those borrowers are unable to get work, those loans might end up defaulting anyway.

Chase announced a "Special Approval Designation for Established Florida Condominium Projects" which are ineligible for delivery to Chase. Although in Lender Letter 2010-01, Fannie Mae announced the availability of a Special Approval Designation for certain established Florida condominium projects, Chase notified correspondents that "Special Approval Designation project approvals" are not eligible for delivery to Chase at this time, including on DU Refi Plus and LP Open Access transactions. The investor reminded customers that "Chase does not purchase loans on condominiums in the state of Florida, with the exception of eligible DU Refi Plus and LP Open Access transactions that are not located in Special Approval Designation projects."

Yesterday I published the first half of a good list that CitiMortgage provided clients: a list of tips for processing FHA loans. It is a long list, so I put in about half yesterday with the next half today:

Qualifying Ratios

  • Document compensating factors to justify the loan approval for borrowers with high ratios on the Loan Underwriting and Transmittal Summary.
  • Use factors accepted by HUD and include supporting documentation.

Income and Employment Documentation

  • Verify the borrower's employment for the most recent two full years, and explain any employment gaps.
  • Income must be separated and entered accurately-self-employed, commission, over-time, rental, retirement, etc.
  • AUS PITI should include the taxes, insurance and HOA fees, as applicable. Include even if not escrowed.
  • If less than two years at current position, verify past employment for two years.
  • Document all income sources and the likelihood of continuance.
  • Obtain required documentation for self-employed borrowers - tax returns, profit and loss statements.

Maximum Mortgage Amounts

  • Calculate the loan amount and ensure that it is within the product guidelines.
  • Look for seller concessions in excess of 6% and other inducements to purchase which require dollar-for-dollar reductions in the sales price.
  • Seller paid closing cost & prepaids must be detailed on the HUD-1 and may not be applied as a lump sum credit.
  • Cash back to borrower for repairs to be completed after closing is not acceptable

General Data Integrity

  • Analyze all file documentation to ensure consistency.
  • Question and document the resolution of any inconsistencies.
  • Double-check accuracy of AUS information

Fully Insurable Loans

  • Deliver a complete case binder to FHA in a timely manner
  • Follow through to make sure the loan is fully insured within 60 days of origination as required by HUD.

As the fixed-income markets worsened yesterday, dealers continued to see heavy selling days by originators. As usual, the only substantive buying has come from the FED (lighter than Wednesday apparently) and a little from servicers and money managers. The lack of interest in mortgages led to them "widening out" a little versus Treasury prices. The 10-yr hit 3.80%, and Fannie 4.5's (4.75-5.125% mortgages) were worse by over a half a point in price in spite of Jobless Claims going up. But stocks were rallying, inflation was stronger than expected, Leading Economic Indicators and the Philly Fed survey were stronger than expected, there are continued worries about the Fed exiting buying securities, and we have another $118 billion in Treasury auctions next week (2's, 5's, and 7 year instruments).

But thirty minutes after the stock markets closed here in the US yesterday, the Fed raised its discount rate by a quarter percentage point to 0.75%, which was a bit of surprise. (It is the rate of interest set by the Federal Reserve that member banks are charged when they borrow funds through the Federal Reserve System.) One analyst said, "Even though the Fed wanted to say this has no real implications for monetary policy it is a relatively clear signal that the Fed is scaling back quantitative easing and it's happening faster than perceived in the markets." READ MORE

The only news out this morning was the Consumer Price Index, which showed that consumer prices rose less than expected in January: +.2%. The core rate, excluding food and energy, was -.1%, falling for the first time since 1982. (Energy costs were +2.8% last month, and food prices were +.2%.) After the news the 10-yr is basically unchanged at 3.80% and mortgage prices are worse by about .125 from yesterday afternoon.

In the small Texas town of Mount Vernon, Drummond's Bar began construction on a new building to increase their business in the town.

The local Baptist church started a campaign to block the bar from opening with petitions and prayers.

Work progressed right up till the week before opening when lightning struck the bar and it burned to the ground.

The church folks were rather smug in their outlook after that, until the bar owner sued the church on the grounds that the church was ultimately responsible for the demise of his building, either through direct or indirect actions or means.

The church vehemently denied all responsibility or any connection to the building's demise in its reply to the court.  As the case made its way into court, the judge looked over the paperwork.

At the hearing he commented, "I don't know how I'm going to decide this case, but as it appears from the paperwork, we have a bar owner who 'believes in the power of prayer,' and an entire church congregation that does not."