Music aficionados know that today is George Thorogood's birthday. He, of course, wrote the famous mortgage underwriting song with the lyrics:
"Every morning just before breakfast, I don't want no coffee or tea.
Just me and good buddy Wiser, that's all I ever need.
'Cause I underwrite loans, yeah, with nobody else.
Yeah, you know when I underwrite a loan, I prefer to be by myself."
Whoever thought that loan servicing would be so exciting? If you think that a servicer earning 25 basis points every year is earning too much if the loan is paying on time, and not enough if the loan is delinquent, you may want to scope out the ongoing servicing discussion: FULL STORY
Recent servicing exam findings will be the basis for the development of new national mortgage servicing standards. There are concerns with the adequacy of staffing in loss mitigation departments and the practice of dual tracking foreclosures and trial modifications, and that any new servicing standards should apply uniformly to all mortgage servicers irrespective of whether the loan has been securitized and be enforced by federal and state agencies, not private parties. HERE is another link to servicing news that might be useful.
And a story out of the WSJ this morning notes that, "The Obama administration is trying to push through a settlement over mortgage-servicing breakdowns that could force America's largest banks to pay for reductions in loan principal worth billions of dollars. Terms of the administration's proposal include a commitment from mortgage servicers to reduce the loan balances of troubled borrowers who owe more than their homes are worth, people familiar with the matter said. The cost of those writedowns won't be borne by investors who purchased mortgage-backed securities, these people said. If a unified settlement can be reached, some state attorneys general and federal agencies are pushing for banks to pay more than $20 billion in civil fines or to fund a comparable amount of loan modifications for distressed borrowers." FULL STORY
FHA recently raised their premiums once or twice - but is the horse already out of the barn? FHA Streamline Refi's have become the darling of the buyback crowd. And blame pricing, interest rates in general, weather, whatever, but last month the seasonally adjusted annual rate for FHA loan applications fell to its lowest level in over 3 years - an estimated 1,450,900, according to the FHA Single-Family Outlook.
According to a story that I noticed in Bloomberg, the Federal Reserve revised a rule related to home mortgage loan escrow account requirements and sought comment on a second proposed regulation change. "The Fed increased the annual percentage rate threshold for requiring a mortgage lender to create an escrow account for property taxes and insurance for so-called first-lien, "jumbo" loans. The escrow rule will apply to first-lien jumbo loans if their annual percentage rate is at least 2.5 percentage points higher than the average prime offer rate." The central bank is also proposing expanding the minimum period for mandatory escrow accounts for first-lien, higher- priced mortgages to five years from one year, the statement said. The timeframe could be longer "under certain circumstances, such as when the loan is delinquent or in default," according to the Fed. PRESS RELEASE
The compensation news keeps coming. CitiMortgage sent out a note to broker customers last week, discussing the March changes for April. Effective with loan registrations March 19 and after, brokers are expected to "have the ability to select one of the following Lender Paid Compensation levels for your company: 1.00%, 1.25%, 1.50%, 1.75% or 2.00%." Citi's "Star Performance ratings" will determine Star Performance compensation, and will be paid in addition to the compensation level selected. "The compensation selection you make will apply to your entire company or organization so if you have branches in various locations of the country, you will need to consider the amount you wish to retain on all transactions in all locations. The selected amount is not subject to change on registrations, so you must also consider any high cost implications of your selection. Lender Paid Compensation may not be reduced for any reason, and you may not credit any of your Lender Paid compensation to the borrowers closing costs."
Citi continues. "Compensation levels may be updated on a quarterly basis. If you do not opt to change your compensation level during the open enrollment period, the compensation level will default to the prior quarter's compensation level. Restrictions to your future selections may be applied based on our fair lending reviews...Compensation levels for Q2 (effective with loan registrations March 19) will need to be selected no later than March 04. On a Borrower Paid transaction, the compensation would be negotiated between you and the borrower on a transactional level. However, variations among compensation charged under each structure must not violate Fair Lending or other laws and will be carefully monitored."
Citi told its broker clients that, "In preparation for compliance with the upcoming Regulation Z compensation revisions, all loans registered on or before March 18th, 2011 must reach Full Application status no later than March 28, 2011."
Icon Residential advised its brokers of its prospective changes under the Reg. Z upheaval that apply to "all closed-end consumer credit transactions secured by a dwelling, regardless of the lien position." Icon reminds us that, "The loan originator's compensation may not be tied to the interest rate and the compensation may not be increased by raising the borrower's interest rate. Compensation may be based on an established percentage of the principal loan amount. The loan originator may receive compensation from either the borrower or the lender but not from both. The loan originator will have the choice of borrower paid or lender paid compensation and this can be determined on a transaction-by-transaction basis." The wholesaler went on to differentiate Lender Paid Compensation versus Borrower Paid Compensation, and noted that "Icon Residential will establish minimum and maximum compensation levels that will be conveyed in a future Announcement." And don't forget those anti-steering rules whereby the borrower must be presented with a minimum of at least three options, for which they are eligible, to avoid "steering" them into a specific product."
Yesterday I mentioned a Freddie Mac statistic that showed 46% of refinances involved "cash in." Ken Sonner from EagleBank reminded me that, "the 46% number should include borrowers using a HELOC to refinance the property. It is common practice to give the borrower a 2nd to get to the conforming limit, either $417,000 or high balance. In the DC, MD, VA markets, it is rare to see borrowers using reserves to pay down the mortgage."
Fraud - in Florida? No way! Miami's highest-ranking female firefighter has been charged along with four others by a federal grand jury with taking part in an $11 million mortgage fraud scheme in which prosecutors say she acted as a straw buyer in the purchase of two luxury condominiums. She apparently used her name and credit history in 2006 to purchase a pair of million-dollar luxury condominiums. The indictment says Arthur received a payoff yet had no intention of living on the properties, which eventually went into foreclosure. MIAMI HERALD
Turning to large investor news, as a company policy, SunTrust spread the word that, "Clients must provide account statements or two-years personal individual Federal tax returns (Schedule B) for interest and dividend income. This requirement includes clients who receive a retirement distribution and they would like to use the interest the money would generate as qualifying income." Additional fees and payments apply when negotiating the purchase of a short sale property. Typically, these fees and payments are the responsibility of the seller. Fannie Mae provides guidance for the treatment of such fees and payments when paid by our borrower.
SunTrust Mortgage's Credit Management Team decided to follow Fannie Mae's guidance for Conventional and Government (traditionally underwritten and AUS processed) purchase originations, and SunTrust followed HUD's guidance saying that, "Loss of employment due to company closings or reductions in work force is not an extenuating circumstance beyond the borrower's control. Borrowers with Chapter 7 bankruptcies and foreclosures in their credit history are not eligible if their sole extenuating circumstance is loss of employment due to company closings or reductions in work force. Should the borrower lose their employment due to a long-term illness, HUD will make an extenuating circumstance exception. Another example of an allowable extenuating circumstance is death of a primary wage earner." And, with a nod toward MERS, SunTrust reminded correspondents that, "lenders must register loans with MERS. SunTrust Mortgage will validate loan registration. Correspondent lenders will no longer need to provide documentation of a loan's MERS registration."
Cash is king. The Existing Home Sales number (which jumped 2.7% in January) included data that showed all-cash sales rose to 32% last month from 29% in December. In fact, all-cash purchases are at the highest level since NAR started measuring these purchases monthly in October 2008, when they accounted for 15%. NAR's president said the median price is being dampened by "Unprecedented levels of all-cash purchases, primarily of distressed homes sold at deep discounts." Speaking of which, "distressed" homes enjoyed a 37% market share in January - about the same as last year. The overall Existing Home Sales number was up for the third straight month, and sales rose in the Midwest, South and West, but declined in the Northeast. The national median existing home price was $158.8k, down 3.7% from January 2010.
Both stocks and bonds closed in worse shape Wednesday. Oil went above $100 per barrel, the Dow was down about 100, the 10-yr T-note was down about .250 (yielding 3.49%), and MBS prices were roughly unchanged from Tuesday's close. Traders and investors, not the same animal, weighed a weak 5-yr note auction (which would push rates higher) against higher oil prices leading to an economic slowdown (which would push rates lower).
In Newfoundland, "lawn care" has a different meaning...
Two Newfies were sitting beside a road when a truck went past, loaded up with rolls of turf.
Jeremy said, "I'm gonna do dat, when I win da lottery."
"What's dat, den?"asks Mikey.
"Send me lawn out to get cut."