In the old days, when rotary dial telephones roamed the earth, and it took more time to dial a 8 or 9 or 0 than it did a 1 or 2 or 3, area codes were set up accordingly. (That is why the big cities in the 1940's, population density-wise, all had the small numbers like 213, 312, 212, 214, etc. - it took less time to dial.) Rotary dial telephones are pretty much gone, and technology marches on: the results from the latest Fed study show that one in five Americans with mobile phones used their mobile phone to access financial accounts last year, and mobile banking is poised to expand further over the next year with usage possibly increasing to one in three mobile phone users by 2013. Here is the study, which certainly has ramifications for mortgage bankers and Realtors.

"Rob, when are you going to write about how the management personnel drain from Freddie continues, which doesn't help that agency, and while there are ways around the comp cap at the agencies, who in their right mind would want a job where they are the targets of the press and Congress, their destiny is not in their own hands, and their pay is capped? But the compensation changes at the agencies that were supposed to be a maximum of $500k also, I've heard, includes allowing $2 million in deferred comp." (Editor's note: I can't really address compensation specifics, or personnel rumors, but it is well known in the industry that anyone from Fannie whose sole job was to focus on the Bank of America relationship is...well, things have changed.)

Yes, investors are doing things that are not necessarily HARP 2.0-related. Here are some recent underwriting happenings:

Guidelines on HARP 2.0 have been released by Fannie Mae; these will affect applications dated January 1, 2011 and after for the refinance of loans delivered before June 1, 2009.  DU was updated last weekend to reflect the expansion of HARP and Property Inspection Waiver offerings. Fannie has updated policies on lender-placed insurance, including use, coverage requirements, deductibles, carrier eligibility, and allowable reimbursable expenses.  Additional guidance is available regarding submitting property insurance claims to the insurance provider and remitting outstanding insurance funds to Fannie after a mortgage is liquidated on account of either a foreclosure sale or a deed-in-lieu of foreclosure.

As mentioned yesterday, lenders are reminded that appraisal forms for all conventional mortgage loans delivered from here on are required to be submitted through the Uniform Collateral Data Portal and subsequently deemed "successful."

Freddie Mac is cracking down: the GSE will begin charging fees for submissions of poor quality data, late reporting, and general noncompliance with the standard servicing procedures starting on June 1st.  If called upon by a servicer to assist with data research and reconstruction, Freddie will charge a per loan amount, an hourly rate, or (if a third party is engaged) the actual costs, depending on the circumstances.  Failure to take the precautions necessary to prevent an REO rollback will result in a $1,000 fee for each rollback that occurs.  As of September 1st, it will levy a Reporting Noncompliance Fee of anywhere from $5,000 to $15,000 on servicers who don't report at least 75% of the loans they're servicing for Freddie by the fifth business day after the accounting cycle cutoff.  To help whip servicers into shape, Freddie has introduced the Servicer Success File Review, a review of delinquent loan files designed to help pinpoint weaknesses in servicing performance.  The Servicer Success Scorecard has also been expanded to more effectively assess servicers and provide useful feedback.

Chapter 26 of Freddie's Single Family Servicer/Seller Guide, which details requirements for borrower funds, has been updated and renamed "Borrower Funds."  It now gives definitions of "borrower personal funds," outlines eligible sources of borrow funds, provides additional options for sources of borrower funds, and specifies that cash-out proceeds are not eligible to be considered reserves in the underwriting process.  In light of the changes to funding sources, the Alt 97® Mortgage is being retired.  Other changes cover requirements for Cash deliveries of fixed-rate super conforming products; the revised Forms 16SF, 1107SF, and 1034A; the Party Role Identifier ULDD data points; and post settlement delivery fees.  You can view the updates in full here.

Yesterday the commentary noted, when discussing HARP 2.0, "Not all MI companies will take this product." But Evie Fass, the manager of HARP Initiatives for PMI, wrote, "To my knowledge all of the MI's are allowing new servicer loans with no LTV cap." Thank you.

Along those lines, MGIC announced, "If it meets Fannie Mae and Freddie Mac's guidelines, it meets MGIC's guidelines" and put out a series of new 30 minute webinars on the topic. They start next week and go into early April - all the details can be seen at

Yes, HARP 2.0 is not always straightforward, but plenty of investors (both correspondent and wholesale) are doing them at .75% above standard rates. (Hey, you didn't think a 150% LTV loan would be priced the same as a 60% LTV deal, did you?) As I've said in the past, this is not the Scotsman Guide, and there is no desire to publish the name of every lender doing them. CMG Financial (which does the EA products, along with Freddie's), Interbank, EverBank wholesale, Guild, Stearns, Wells, Flagstar, the list goes on. A few large correspondents are noticeably absent, and are still developing their programs. GMAC Bank's systems "currently reflect a maximum LTV of 105%, an update will be effective on March 26, 2012 and will contain the following overlays revisions: Non - GM to GM transactions (Max 95% LTV / Max 45% debt ratio). GM to GM transactions will follow FNMA's guidelines."

Chase clarified when it is acceptable to provide an HO-3 "Comprehensive" policy in lieu of an HO-6 "Walls In" policy for Conventional and FHA PUD transactions. Chase has revised the passive income documentation requirements for Agency loan transactions submitted to ZiPPY and all Non-Agency loan transactions.

Loan officers know that the Federal Reserve has announced that they will raise interest rates in 2014 at the earliest, but that doesn't mean another two years of 4% mortgage rates, however - and we're seeing that now. The Fed doesn't set mortgage rates, or the yield on Treasury securities - we're not under that kind of government control yet. External factors like inflation and the global economy also have an influence.  Rising rates are certainly a possibility, then, for a variety of reasons. And LO's are always having to remind their borrowers that rates naturally fluctuate; in fact, it's the one thing that's remained constant over the past fifty years, with 1-1.5% annual changes as the norm.  With little room to fall, rates, analysts believe, have nowhere to eventually go but up. Also keep in mind that though the Federal Funds rate sets the lowest lending rate available, mortgage rates can both rise and fall even when the Fed Funds rate remains unchanged. Other factors to consider are an outperforming economy, which would increase demand for lending capital, and increased demand for mortgages (a somewhat ironic consequence of HARP 2.0, perhaps).  All this, of course, makes the exact timing of any mortgage rate increase difficult to forecast.

While it was very similar to the last statement, the latest Fed announcement reflected some degree of improvement in the economy. This caused investors to reduce expectations for further Fed easing through purchases of mortgage-backed securities (MBS). The chance that the Fed would produce enormous additional demand had helped propel MBS prices to their recent highs, so this news caused investors to sell mortgage-backed securities. The statement also acknowledged that rising energy prices will lead to higher short-term inflation. Investor concern that this will produce higher long-term inflation caused MBS prices to fall and mortgage rates to rise.

The Economist's headline is poignant: "U.S. economic recovery is uninspiring but real." Many parts of the U.S. economy are showing signs of life, while others have stopped worsening. A few sectors, such as exports, are weakening. "But economic recovery doesn't have to wait for all of America's imbalances to be corrected," the magazine notes. "It only needs the process to advance far enough for the normal cyclical forces of employment, income and spending to take hold - it now seems that, at last, they have."

And Wells Fargo's economics department notes that, "The sluggish income growth associated with the current cycle has prompted a debate as to whether weak income gains are related to the composition and pay of the jobs that have been added in recent years or simply due to excess slack in the labor market. Our analysis finds that while certain low-wage subsectors have indeed experienced a relatively strong recovery, when subsectors are aggregated into broader earnings quintiles, there is less support for the hypothesis that job gains have been mostly concentrated at the low end of the earnings distribution. Our findings therefore suggest that, rather than the quality of job growth, labor market slack is likely the overriding factor accounting for the sluggish income growth witnessed in recent years."

Yesterday's market certainly continued last week's move, with the U.S. 10-yr back up to 2.38%. Volatility is high, pushing up mortgage company hedge costs as these companies are selling production into the worsening market. We saw many lenders worsening prices yesterday afternoon, and by the end of the day MBS prices were worse about .5.

Today we'll have February's Housing Starts, expected fractionally higher, and Building Permits also expected higher. In the early going rates are a shade better with the 10-yr down to 2.34% and MBS prices better by about .125.

Here are some easy puzzles. Answers tomorrow - don't write asking for hints or answers.
1.  Johnny's mother had three children. The first child was named April. The second child was named May. What was the third child's name?
2.  There is a clerk at the butcher shop, he is five feet ten inches tall and he wears size 13 sneakers. What does he weigh?
3.  Before Mt.  Everest was discovered, what was the highest mountain in the world?
4. How much dirt is there in a hole that measures two feet by three feet by four feet?
5. What word in the English Language is always spelled incorrectly?
6. Billy was born on December 28th, yet his birthday is always in the summer. How is this possible?
7. In California, you cannot take a picture of a man with a wooden leg. Why not?
8. What was the President's Name in 1975?
9. If you were running a race, and you passed the person in 2nd place, what place would you be in now?
10. Which is correct to say, "The yolk of the egg are white" or "The yolk of the egg is white"?
11. If a farmer has 5 haystacks in one field and 4 haystacks in the other field, how many haystacks would he have if he combined them all in another field?