Yesterday the commentary discussed rotary phones and mobile phone banking. And last week the Federal Reserve Board launched its Twitter channel, @federalreserve, upon which it will tweet links to press releases, speeches, testimony, reports to Congress, the monthly Report on Credit and Liquidity Programs and the Balance Sheet, and the balance sheet itself, all of which will be available in full via the website (www.federalreserve.gov). Look out for educational FAQs and video links as well.
There is a lot going on with investors recently, so let's delve in!
Citibank's Ineligible Originator List has been updated to include those brokers, correspondents, and various other originators whose role in any transaction renders it unfit for purchase. The full list is updated often and can be viewed by going through the correspondent site.
GMAC's correspondent group is informally spreading the word that its systems will not be updated for HARP 2.0 until this weekend and a bulletin will be released Monday. Most expect GMAC to limit the LTV's on non-GM to GM to 95% and the DTI to 45 due to performance-related issues on mortgages outside of that band. Overall, investors are not "chompin' at the bit" to take on the problems of other servicers in spite of a borrower reducing their payment, especially if the loan is in an area that is still soft, price-wise. (GMAC has discontinued its FHA 7/1 ARM products.)
360 Mortgage announced it is accepting HARP 2.0 loans: the application date must be after 12/1/2011, EA I, II, and III are eligible, unlimited LTV/CLTV, existing MI transfers accepted, all occupancy types are eligible, no appraisals required on loans receiving a Property Fieldwork Waiver, no limit for the number of financed properties a borrower owns, and no minimum FICO.
Fortress Investment Group is reportedly in talks to pay more than $1 billion to acquire assets from Ally Financial's mortgage unit, ResCap. ResCap, just like any mortgage operation, has various parts that are worth more than other parts, one of which just might be the servicing piece. Fortress' name seems to come up whenever something is for sale - BofA's correspondent group, MetLife, and so on, and with the help of its mortgage company Nationstar (which went public recently) has been adding servicing in leaps and bounds. And on its side, ResCap has been rumored to be near bankruptcy for quite some time. It had $16.8 billion in assets at year-end, including mortgage-servicing rights valued at $1.2 billion.
lenders are trying to shove loans through the door prior to the increase in FHA premiums.
Originators know that the FHA announced that it will increase FHA Up-Front and
Annual mortgage insurance premiums by 10 bps, while the Up-Front Mortgage
Insurance Premium (UFMIP) for Forward Mortgages will increase by 75 bps
regardless of term or LTV. These changes will affect all relevant case numbers
assigned on or after April 9th. For loans exceeding $625,000 with case
numbers assigned on or after June 11th, the MIP will be subject to increases
ranging from 35 to 60 bps. Annual MIP and UFMIP for Streamline Refis
endorsed on or before May 31, 2009 with case numbers assigned on or after June
11, 2012 will be reduced from 1% to .01% (why bother?).
HUD has released guidance on a number of underwriting issues that will affect all loans with case numbers dated April 1st or thereafter. If it has been more than one calendar year since a self-employed borrower has filed a fiscal-year end tax return, the transaction will require P&L and Balance Sheets. Lenders must comply with HUD protocol when reviewing income documentation and analyze the borrower's business to determine its financial strength and the general economic outlook for its sector. Regarding identity of interest transactions, HUD has upgraded the list of relations that are considered to be family members of a borrower. This now comprises children, parents, grandparents, spouses, legal adoptees, foster children, brothers, sisters, stepbrothers, stepsisters, uncles or aunts.
The National Mortgage Licensing System
the word "mortgage." This will make the NMLS available to a wider variety
of non-depository financial services industries, including state
regulators. The CFPB will be listed as a federal regulatory user, and
recent regulation passed by states will be available to the public.
For borrowers who want to subordinate a Wells Fargo Home Equity second mortgage behind a first non-Wells home mortgage, the previous subordination fee has been increased to $195. If the new first mortgage is with Wells Fargo, the fee remains $150. Wells also told its brokers that now they will be able to purchase rate lock extension using Wells Fargo's Broker's First website, negating the need to call Priceline to make the arrangements. Wells lenders are reminded that a subordination agreement must be in place if there is existing subordinate financing remaining on a refinance transaction, regardless of property type or geographic location. And lastly for Wells, all loans with applications dated on or after April 9th will be required to comply with Wells flood insurance requirements, which dictate that lenders must provide borrowers with a Notice of Special Flood Hazards at least one day prior to closing if the property is located within a Special Flood Hazards Area. Note that the seller should inform the buyer of the flood risks of the property as soon as possible (ideally more than one day before closing). Regardless of whether or not their licensing or regulator requires them to comply with federal flood requirements, borrowers must comply with Wells Fargo's requirements.
Starting April 1st, US Bank will require all credit reports to include summary information so that this can be reported in compliance with the new Fair Lending Act. The "Summary" section should include the number of 30, 60, and 90-day mortgage delinquencies; the number of credit inquires; and the trade line counts for both the applicant and co-applicant, if necessary. USBHM has decreed that the length of time a borrower has owned a non-built up lot no longer factors into the calculation of LTV rations on construction to permanent end loans. These transactions can now use the completed appraised value to calculate the LTV rations of FHLMC and FNMA Agency loans instead of the lesser of cost or appraised value used previously.
Turning to the markets, yesterday we learned that Housing Starts fell in February slid by 1.1%, but permits for future construction jumped to their highest level since October 2008, up over 5%. And compared to February last year, residential construction was up almost 35%! There were 457,000 single-family housing starts in February - who says housing is dead? Certainly not builders - their confidence has been growing, and many are reporting increasing activity.
But watch those mortgage applications: the MBA reported apps fell by over 7% last week, with the biggest hit coming in refi's (down over 9%) versus purchases (-1%). It is just as one would expect, given the rate movement last week. But any originator who only does refi's must be concerned: the refinance share of total mortgage activity fell to about 73% of applications from 75% the prior week, with the MBA's Jay Brinkmann noting that the refinance share was at its lowest level since last July. (MBA: "Sand States" Becoming "HARP States" as Program Popularity Grows)
The markets are being reminded that increased economic activity can lead to higher rates. No one is talking "double dip" anymore, and the inflation word is creeping back into vocabularies given the price of gasoline. The U.S. T-note closed at 2.36%, nearly unchanged, as did mortgage prices. MBS prices are improved over Tuesday's closing levels.
Here are the answers from yesterday's quiz.
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? Johnny.
is a clerk at the butcher shop, he is five feet ten inches tall, and he
wears size 13 sneakers. What does he weigh? Meat.
3. Before Mt. Everest was discovered, what was the highest mountain in the world? Mt. Everest - it just wasn't discovered yet.
much dirt is there in a hole that measures two feet by three feet by
four feet? There is no dirt in a hole.
5. What word in the English Language is always spelled incorrectly? Incorrectly.
was born on December 28th, yet her birthday is always in the summer. How
is this possible? Billy lives in the Southern Hemisphere.
7. In California, you cannot take a picture of a man with a wooden leg. Why not? You can't take pictures with a wooden leg.
8. What was the President's Name in 1975? Same as is it now - Barack Obama.
9. If you
were running a race, and you passed the person in 2nd place, what place
would you be in now? You would be in 2nd.
10. Which is correct to say, "The yolk of the egg are white" or "The yolk of the egg is white"? Neither, the yolk of the egg is yellow.
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? One big stack.