Please excuse any grammar errors this morning - I am still recovering after fainting during my visit to the gas station last night - $4.20/gallon for regular unleaded near San Francisco. Say what you want about the consumer being resilient, but money spent on gasoline is money not spent somewhere else - like in helping our economy. Most of this is due to issues surrounding Iran's naval maneuvers and then moving to Iran's nuclear program. Experts think all this will be resolved, but analysts are already seeing this recent spike put a damper on global growth. As a rule of thumb, a $10/barrel rise in oil is a 0.2% drag on global GDP and a 0.3% drag on US GDP, and combined with the recession possibilities in Europe this is not good for economies - but fine for rates. But as we all know, oil prices have gone up and down for over a hundred years.

One institution which has been around nearly a hundred years (originally chartered in 1922 as Heritage Bank), is Dallas' NexBank. NexBank is hiring wholesale AE's in Houston, San Antonio, Oklahoma, Louisiana, Arkansas and New Mexico. NexBank Wholesale was established in August 2008 but as a State Savings Bank is licensed to purchase loans nationwide. The company has Freddie Mac seller/servicer status, and offers wholesale and mini-correspondent and even warehouse lines to clients. For more information on the firm visit or; resumes should be sent to Jed Meaux at

Any time an e-mail begins with, "The Federal Reserve Board on Monday released action plans for supervised financial institutions to correct deficiencies in residential mortgage loan servicing and foreclosure processing," it makes one sit up and take notice.

One correction for the Sunday commentary: for Freddie Mac, it mistakenly said that "non-assumable Sec. 502 RHS loans with settlement dates after June 1 must be sold back to Freddie." This is not the case - the loans can be sold to Freddie Mac but must be sold with recourse.  Here's the relevant sentence from the bulletin: "With this Single Family Seller/Servicer Guide Bulletin, we are revising our requirements for non-assumable Rural Housing Service (RHS) Section 502 GRH Mortgages to require that these mortgages be sold with recourse."

As anticipated, HUD announced that mortgages backed by the FHA will become more expensive. Once again, future borrowers are paying for the problems of previous borrowers - the money will be used to bolster the sagging reserves in the FHA mortgage insurance premium fund. Hopefully any more claims that FHA is "fine" and doesn't need more capital will stop in the near future - it does need more capital. The increase in insurance premiums would bring in about $1.25 billion during the rest of 2012 and through September 2013 which will be added to about $1 billion FHA is receiving from the servicer settlement. Every little billion helps...

First, remember that the agency does not make loans, or buy loans, but instead insures mortgages that meet its guidelines. Mortgage insurance, similar to a guaranty fee, protects one party from the risks of the borrower becoming delinquent of going into foreclosure. With all this talk about FHA and compare ratios, and the removal of the streamline product from the calculations, it might be helpful to know where to find it. Anyone wishing to check it out for themselves can do so here. Click on the "Early Warnings" menu, Single Lender or general, and go from there. (And no, I don't know specific lender ID's.) If you want to see compare ratios excluding streamline refinances, they can be found through the "Analysis Menu."

FHA's guidelines are very lenient, although most lenders have overlays in order to bolster the product, and claim that borrowers with credit scores of 580 or more can put down as little as 3.5 percent. The FHA will increase its annual mortgage insurance premium by 0.10 of a percentage point for loans under $625,500, which would now cost 1.25 percent of the loan amount, up from 1.15 percent, on 4/1. And starting on 6/1 the premium for larger loans would rise more, or by 0.35 of a percentage point, bringing the total premium to 1.5 percent. This annual premium is broken down in monthly payments. The upfront mortgage premium is also increasing by 0.75 of a percentage point, bringing the premium to 1.75 percent of the loan amount, which can be financed/added into the mortgage.

I have not heard any details yet on the FHA's possible plans on some softening of the streamlined refi rules or charges for borrowers refinancing pre-Oct 2010 loans that were made under much lower annual MIPs. The expectation is that the FHA will grandfather all or a portion of the old, lower MIP. Certainly investors in Ginnie Mae MBS's are concerned about how much easing that HUD will do on streamlined refis.

As noted recently, Fannie & Freddie's big book of problem loans came from 2005-2008, but the FHA wasn't insuring many loans in the bubble years. The FHA's big exposure has come with its gain in market share after the demise of the subprime lending industry (remember LO's saying FHA loans are "the new subprime"?) And though recent production is "better" quality, they're still FHA loans, which means cum default rates well above 5%, which means that the FHA fund will continue to face financial pressures for the next several years.

Put another way, what the does the change mean to borrowers? In the future, the two tiers of FHA MI change. Starting April 1 the up-front MI for loans up $729,750 will be 1.75% of loan amount (up from 1%). The annual MI for loans up to $729,750 will be 1.2% of loan amount if the down payment is 5% or more, or 1.25% of loan amount if the down payment is less than 5% starting 4/1. And the annual MI for loans $625,501 to 729,750 will be 1.45% of loan amount if the down payment is 5% or more, or 1.5% of loan amount if the down payment is less than 5% starting June 1. Borrowers had better pay attention to when they're in contract!

The HSOA news continues. David Basaleli, the SVP & Director of Operations for Guaranteed Home Mortgage Company, writes, "A number of days ago our firm was approached with an opportunity to take over all mortgage operations of the ailing Home Savings of America. After a number of meetings with the president and CEO of HSOA, a NYC investment banking firm, and a prolific specialty financial services firm, it was decided that this acquisition would take place over the course of the next 45 days. After 2 days of marathon meetings with executives of both companies and various advisers and financiers, most of the details of the transition had been worked out, and branch introductions were planned for Saturday, February 25th. Unfortunately at the last moment on Friday, it became known that the FDIC had chosen that day to cease the operations of HSOA. Since the bank no longer had the authority to sell its assets, including the mortgage company, the plans for the formal acquisition of the HSOA Mortgage by Guaranteed Home Mortgage was scrapped. Fortunately for Guaranteed and the mortgage production staff of HSOA, most details of a branch transition and soft landing had already been ironed out. I'm proud to say that most of the HSOA mortgage branches have found an opportunity to apply to, and become branches of Guaranteed Home Mortgage Company, in the coming days and weeks."

How about a sample of some upcoming events? The Colorado Mortgage Lenders Association is hosting "The Future of the Residential Real Estate Market and How to Capitalize On It!" on Thursday, 11:30 MST in Greenwood Village. For more information go to Down in New Mexico, on March 8th, the NMMLA is having a lunch at the Albuquerque Country Club to discuss the local real estate market - for more information. And in Massachusetts, the MMBA is presenting its "1st Annual Secondary Market and Loan Servicing Conference" on May 8th.

On Tuesday, March 6th, at 2PM EST, AllRegs is hosting a free webinar on "Investor Overlay Comparisons" and focused on its new product Market Clarity. ("It's the only tool in the industry allowing for product level overlay comparisons across any combination of agencies, MI companies or lenders.") Contact Linda Bomar at for details. If you want to preview Market Clarity prior to the webinar, check it out.

Turning to the markets, the decent news in housing continued yesterday with NAR's release of Pending Home Sales. In January it reached its highest level in almost two years. The Index is a forward looking indicator (basically two months) based on contracts for home purchases that have been signed but where the transaction has not closed. By the end of a relatively quiet Monday the 10-yr T-note closed around a 1.93 yield.

This morning we're asking, "Does a change in rating from a rating agency cause the market to move, or is it merely reflecting what the market already knows?" Probably the latter - Standard & Poor's, as expected, downgraded the long-term credit rating of Greece to "selective default," making it the first country in the euro zone to officially be rated in default. The move came after Greece retroactively included collective-action clauses to its bond contracts. In the U.S. Durable Goods were -4%, much worse than expected, and even ex-transportation were down 3.2%. There were some back-month revisions higher, however. Ahead of us we have the S&P/Case-Shiller 20-city index (expected down) and at 10AM is the Consumer Confidence number. In the early going the 10-yr is at 1.91% and MBS prices are about .125 better.

A burglar breaks into a house late one evening and starts to roam around the living room looking for valuables to steal.

Suddenly he hears a voice say "Jesus is watching you".

Startled, he shines his flashlight over in the corner where the voice came from and saw a parrot sitting in a cage. The burglar then says to the parrot, "Was that you?"

The parrot replies "Yes".

The burglar asks the parrot, "What is your name", to which the parrot replies, "Clarence". 

The burglar then asks the parrot, "What idiot named you Clarence?"

The parrot replied, "The same idiot that name the Rottweiler 'Jesus'".

If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at The current blog discusses the role of rating agencies in the current environment. If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what's going on out there from the other readers.