Don't forget to wear a little green today. Everyone here in Chicago knows that St. Patrick is best known for introducing Christianity to Ireland in the 5th century, right?
Yesterday I mentioned several free services for loan originators to quickly and (hopefully) reliably gauge the value of a property. Here are three more that readers sent in: Cyberhomes Sawbuck and EAppraisal.
Here's a handy-dandy state-specific guide to NMLS "Mortgage Call Report Requirements by Jurisdiction": NMLSStatebyState
It is NCAA basketball time, with many folks around the nation both filling out their pool picks and approving loans. Both tasks involve a strategy involving maximizing your returns. Good loan pricing, underwriting, and pool picking take into account return, the probability of an outcome, and the expected amount of such outcome should it occur. Whether you are managing loan pricing or NCAA brackets, understanding the probability of winning (or losing) and the expected amount associated with each decision, should help drive your choices. In spite of being boring and predictable, most NCAA pool participants pick all the #1 and #2 seeds to win the first round. This is similar to finding an "express" approval process for certain loans with strong debt service coverage. After you have part of the first round of the NCAA brackets picked, start in the center by picking the Final Four and working outwards. These are the highest probability plays and are rarely wrong - similar to underwriting loans where the lower credit risk loans and the higher credit risk loans get approved or rejected with very little increase in resources. Like the NCAA, the difference between success and failure in banking is what you do in the middle. Now that you have the lowest ranked teams thrown out and your teams in the Final Four, it is time to spend the bulk of your time & energy on the rest of the loans, or team choices, using probabilities, ratings, win/loss records, credit factors, or Vegas odds. Have fun!
The ability for a borrower to refinance is determined by several factors: current rates, credit quality, and collateral value being primary. Lenders know that higher fees have a negative impact on refinancing volumes going forward as FHLMC, FNMA and the FHA have all recently increased costs for certain borrowers. Loan Level Price Adjustment changes by Fannie & Freddie, and the increase in FHA's MIP fees, make home purchases more expensive and raise the refinancing bar. But for a very long time mortgage applications show that over 60% of loans are refinances. Who & why are these borrowers refinancing? On the retail side, lower rates can be found for high quality borrowers with pre-existing relationships with the lending institutions. Otherwise, borrower's with lots of equity, government loans because of LTV, borrowers who paid cash for their home and are now taking money out, and borrowers converting from ARM's to fixed-rate mortgages are refinancing. In addition, lenders report that there are still borrowers out there with higher note rates that can still refi into a lower rate, those taking advantage in some areas of the $729,750 loan amount while it exists, or even borrowers in divorce situations help make up the refinancing pool.
Sometimes originators wonder what happens to loans after they fund and are sold to investors. Merrill Lynch/Banc of America is rolling out a product that helps shed some light on this: an Excess Servicing IO (Interest Only) security. "Servicers collect payments from underlying homeowners in MBS loans, and they forward these payments to the relevant Agency (Fannie, Freddie, Ginnie). In return, servicers are allowed to collect an IO strip (the servicing spread between the loan gross coupon - GWAC - vs. the pass-through rate). Specifically, excess servicing can be defined as: Interest Rate on a mortgage loan, less the Pass-thru Rate on the MBS backed by the loan, less the Guarantee Fee, less the minimum Servicing Fee ( currently 25 basis points), less any MI premiums, less any net amount from the lender buying up or buying down the rate. Voila! If you're a servicer interested in hearing more, or selling some of this, contact Steve Harris at email@example.com. AQ commented on how this is impacting mortgage rates HERE
Fannie & Freddie were in the subprime business?The SEC is checking into it: FF
Late last week I mentioned a note
from an LO warning, "Don't sign a contract to purchase a foreclosed
property until you know all the paperwork involved with the foreclosure is
accounted for. As an originator, doesn't even start the process for your
clients until you know the foreclosure paperwork is ALL accounted
for." One reader wrote, "One slight problem: REO & short
sale negotiator departments won't even activate a file until they have a
buyer's signed offer. It is a 'chicken & egg' situation, where the
buyer always has to take the risk and at present, the lenders still just don't
seem to care that much."
Does a decline in foreclosures mean that the improving job market is helping folks make payments, or that the servicers are so backlogged it is holding things up? CNBC
The question about whether or not Freddie or Fannie accepts e-signatures occasionally comes up. For example, Fannie answers the question at FannieE-Sig But this appears to be for the note and e-delivery to Fannie only. But FHA issued a Mortgagee Letter concerning what documents it would accept electronic signatures on (such as initial 1003, disclosures, purchase contracts), but, according to one reader, Fannie has not issued guidance on this. "Our private investors only want to accept e-signatures per FHA's guidance, and don't want to extend the policy to conventional loans because Fannie doesn't make any specifications. Freddie Mac believes that authentic electronic signatures from duly authorized individuals that comply with E-SIGN and UETA are as enforceable as authentic pen and ink signatures from duly authorized individuals that comply with applicable law. In either case, a signature (pen & ink or electronic) must be capable of being legally attributable to the signer. The conventional agencies don't give much further guidance, as most of their e-Mortgage guidance refers to the mortgage documents not ancillary documents." If anyone is listening...
MetLife gave brokers their updated mortgage insurance information, along with a reminder that MetLife will order the MI for them. The MI guidelines included MGIC, Radian, RMIC, UG, PMI, and Genworth. The usual options apply: Up front Single Premium MI, Financed Single Premium MI, and Split Premium Plans. Though banking regulators are advancing a proposal mandating that loans receiving an exemption from new regulations have a 20% down payment, loans sold to government-controlled mortgage giants Fannie Mae and Freddie Mac are likely to be exempt as long as they are under federal conservatorship, the Journal has reported.
For its correspondent channel Chase approved Essent Guaranty as a MI company.
(Speaking of MI companies, it seems that they may no longer have to worry about being "squeezed out of the market" due to the Dodd-Frank provisions. Nothing is set in stone, but recent reports hint that the requirement that banks retain 5% of the risk of a loan - "skin in the game" - may not apply to agency loans while in conservatorship. Non-agency loans are still a big question mark, as are any loans done that have more than an 80% LTV. Six federal agencies - the Federal Reserve, the FDIC, the OCC, HUD, the SEC, and FHFA - must sign off on the proposal before it is released for comment.)
ICBA Mortgage Solutions, a firm that offers mortgage lending programs to member banks through a central platform, announced that it has hired seven regional account managers. It is an affiliate of ICBA Mortgage and a subsidiary of LenderLive Network, Inc. For the story go to ICBA
I continue to hear few complaints about rates - obviously lenders have other things to worry about. In the markets, Japan, Europe, and the Middle East continue to dominate the news, and this uncertainty has helped the "safety" bid on Treasuries. Yesterday the 10-yr hit a low of 3.15% but closed around 3.21%, its lowest level in months as the markets seemed driven by rumors of rumors. Over in the mortgage camp, as might be expected, the higher prices and lower yields kept many investors near the sidelines or taking profits, particularly in higher coupons. There was servicer buying in the lower coupons to add duration, and by the end of the day current coupon agency MBS prices were better by about .5.
How much of this is transferred to better rate-sheet pricing that LO's benefit from remains to be seen. Barclays notes that primary-secondary spreads have held above 80 basis points over the past three months and has been pretty steady due to capacity constraints at the mortgage bankers, increased g-fees, reduced competition, and other costs associated with originating and servicing loans. If rates continue lower, however, watch for rate sheets to improve nicely, especially if the supply of new mortgages slides.
Today we have a slew of economic data. Last month we learned that the previous month's Consumer Price Index (CPI) rose 0.4% in January, mostly due to gasoline and food costs. But clothing (cotton) and airfare prices were also on the rise. Today's CPI was expected to also be +.4% and came out at +.5% with the core rate, for those who don't drive or eat, at +.2%. Initial Jobless Claims were 385k, down 16k from the prior month with the 4-week moving average (smoothing out the volatility) is down 7k. So far rates have drifted higher with the 10-yr yield at 3.26% and MBS prices worse by about .250.
An Irishman by the name of O'Malley proposed to his girl on St. Patrick's Day. He gave her a ring with a synthetic diamond.
The excited young lass showed it to her father, a jeweler. He took one look at it and saw it wasn't real.
The young lass stormed out the door and threw it back at her future husband. She protested vehemently about his cheapness.
"It was in honor of St. Patrick's Day," he smiled.
"I gave you a sham rock."