The official announcement by the Federal Government will come today, but the details came out yesterday about funding & requiring lenders to temporarily slash or eliminate monthly mortgage payments for many borrowers who are unemployed. Banks and other lenders would have to reduce the payments to no more than 31% of a borrower's income, which would typically be the amount of unemployment insurance, for three to six months. In some cases, administration officials said, a lender could allow a borrower to skip payments altogether. And for borrowers who owe more than their home is worth, the US government, with its big budget surplus (right?) will be offering financial incentives for the first time to lenders to cut the loan balances of such distressed homeowners.

Are the people who are responsible about making their payments subsidizing those that don't make their payments? (Like the Greek debt issue in Europe, perhaps?) That is a huge argument of course, but those who are still current on their mortgages could get the chance to refinance on better terms into loans backed by the Federal Housing Administration. Officials said the new initiatives will take effect over the next six months and be funded out of $50 billion previously allocated for foreclosure relief in the emergency bailout program for the financial system. No new taxpayer funds will be needed, the officials said. READ MORE

Under RESPA, if a borrower applies for a $50,000 loan and the 1% origination fee is disclosed, and then the loan amount changes to $300,000, is the broker "stuck" with the $500 origination fee? The YSP credit will still be a percentage of the loan but can brokers exceed the dollar amount disclosed?

The answer to this question (can the broker charge more if the loan amount goes up?) apparently depends on the investor, although HUD seems very clear about "changed circumstances" under RESPA. Most investors think that a loan amount that is changed falls under "Information particular to the borrower or transaction that was relied on in providing the GFE and that changes or is found to be inaccurate after the GFE has been provided, which information may include information about the credit quality of the borrower, the amount of the loan, the estimated value of the property, or any other information that was used in providing the GFE." HERE is HUDs guidance.

As best I can tell, Wells Fargo's wholesale apparently believes otherwise, and released a GFE-related Newsflash the other day confirming existing Wells' policies. Wells Fargo will continue to hold Block 1 of the GFE to the last disclosed value when the loan amount changes; "even in instances where a fee included in the total of Block 1 is based on a percentage of the loan amount. This means that if a Block 1 fee on the GFE is based on a percent, Wells Fargo's policy will not allow the dollar amount of that fee to increase if the loan amount increases. This policy does not affect a broker's disclosure of compensation as a percentage of the loan amount on other documents disclosed to the borrower. A key benefit of this policy: Broker and lender compensation will be clearer for the borrower as fewer GFEs will be re-disclosed due to loan amount increases. Note: The GFE must be redisclosed if a loan amount change increases the cost to the borrower in other Blocks on the GFE. Block 1 may only increase under limited circumstances, such as changes to: Loan type, i.e. conventional to FHA Loan purpose, i.e. rate/term to cash-out Loan program."

What are your experiences?

I continue to receive my share of e-mails from folks asking to change their contact from a work e-mail address to a personal one. But companies are definitely still hiring out there. One example is Stearns Lending, recently in the news for planning to enter correspondent lending, which is currently recruiting wholesale account executives for their northwest office (covering OR, WA, ID and MT) - anyone interested can contact Dusty Ferschweiler at Another example is Castle & Cooke Mortgage out of Utah, trying to expand, and companies like California Mortgage Advisors and Bay Equity out of Northern California are searching for DE underwriters.

In Caleeefornia Governor Schwarzenegger signed the Homebuyer Tax Credit into law. AB 183 will provide $200 million for home buyer tax credits, allocating $100 million for qualified first-time home buyers of existing homes and $100 million for purchasers of new, or previously unoccupied, homes. Between May and December of this year the eligible taxpayer who purchases a qualified personal residence, or who purchases a "qualified principal residence" on and after Dec. 31, 2010, and before Aug. 1, 2011, pursuant to an enforceable contract executed on or before Dec. 31, 2010, will be able to take the allowed tax credit. The credit is equal to the lesser of 5% of the purchase price or $10,000, in equal installments over three consecutive years. Under AB 183, purchasers will be required to live in the home for at least two years or forfeit the credit (i.e., repay it to the state).

The prices in the swap market (exchanging one type of debt or interest income for another) are creating some headlines lately. There is a massive amount of supply of new corporate debt hitting the capital markets in the U.S. and Europe currently, and the cost of exchanging interest payments for 10 years was 0.023 percentage point below low-risk Treasury yields. This implies investors see more risk in holding triple-A-rated 10-year Treasury notes than in swapping rate payments with private counterparties. At the height of the credit crisis, when investors were in panic-mode about counterparties, that cost shot up to as much as 0.780 percentage point above the 10-year Treasury yield.  Tighter swap spreads indicate investors' confidence (or complacency) about credit risk, and vice versa, but typically the spread is positive relative to Treasuries. But this time, the swaps market reflects demand to receive fixed rates as a hedge, especially by corporations issuing new bonds. That's resulted in the 10-year swap spread moving to negative 5.5 basis points. It is easy to argue that this is another sign of how far credit markets have recovered: risk premiums in the interest-rate swaps market-in which investors exchange fixed-interest payments for floating payments-turned negative on the 10-year sector for the first time on record. There is one fundamental point, however, and that is market concerns about the US budget are growing as Treasury supply increases. READ MORE

For the second to last time, the Federal Reserve today reported on their weekly purchases of agency MBS's: a gross total of $8.26 billion agency MBS's, selling $260 million for technical reasons resulting in a net total of $8.0 billion agency MBS purchases.

After Wednesday's drop, fixed-income securities saw some volatility Thursday. The bond market headed south, causing mortgage investors to worsen their prices, then bounced back, resulting in some price improvements. The $32 billion 7-yr auction coming in around 3.37% with a bid-to-cover of only 2.61 didn't help things, but then investors apparently thought, "We like these yields" and back the market came. Traders continued to see selling in 4.5% and 5.0% securities - current coupons, with hedge funds also selling, and banks selling heading into quarter-end. But in the afternoon buyers like private investors, the Fed, pension funds, and money managers started putting some of their cash to work - how exciting!

With the market well off of the lows, the treasury auctions out of the way, originator supply likely to decline, and convexity related mortgage selling finished for the time being, there is some short-term optimism about rates and bond prices. In addition, there is belief that when April rolls around, banks, with their cash, will step in and fill the void left by the Fed and helping current coupon production. Generally speaking, however, why would rates go down with the healthcare package adding to the deficit, questions about China and overseas buyers being increasingly concerned about our exploding deficits, and Bernanke stating he'd like the Fed to get their balance sheet down to its pre-crisis level. Don't look for overnight Fed Funds to move up soon, but they don't control long term rates - and many believe that although in the short term rates won't go up too much, in the long term these factors will definitely push rates higher.

Call it old news, but the 4th quarter GDP was revised to 5.6% versus 5.9%, down .3% - about as expected. After the GDP news the yield on the 10-yr is at 3.88%, and mortgage prices appear to be .125-.250 better than Thursday morning's levels.

A mortgage broker dies suddenly.   He immediately goes to visit St Peter who is sitting in front of the pearly gates.

St Peter tells the broker: "Well, you are a unique case.  You haven't been good enough to go to heaven but you haven't been bad enough to go to hell.  So, just for you, we are going to try something different.  We have decided to let you pick.   Where would you like to spend eternity, Heaven or Hell?"

Now the broker, being the typical mortgage broker, knows he should just instantly pick Heaven but the thought of being able to see Hell was too much.  The broker asked St Peter; "Well, I know I should pick Heaven but can I see both Heaven and Hell before I answer that question."

St Peter, slightly annoyed, agreed with the broker's requests.

Immediately, the broker is in Heaven. It is exactly like the stories describe.  There are white clouds, golden streets, angels with harps.....its storybook Heaven.

Next, the broker is in Hell.  It is nothing like the stories.  It is a large "man cave".  In the cave is a large wall of big screen TV's with every sports event ever recorded.  There are recliners all over the cave and Hooters girls brining everyone beer and wings.  It's amazing!

The broker is then returned to St Peter.  St Peter again asks: "Where would you like to spend eternity, Heaven or Hell?"

Now, the broker asks St Peter "Can I think about it and tell you tomorrow?"  St Peter, again annoyed, agrees.

The next day, St Peter asks the broker to choose.  The broker explains; "Well, I know I should pick Heaven.  I've lived my entire life thinking about going to Heaven.  But honestly, when I saw Hell, I just believe I will fit into that environment better.  I need to pick Hell."

With that the broker is immediately in Hell.....but this time it looks different.  It's still a cave but now the broker is chained to the wall.  There are cracks in the floor and walls, each with flames heating the cave to a literal inferno.  Across the room is an ice cold glass of water....just barely outside the brokers reach...never to be obtained.

The broker looks up and yells "Hey St Peter, what happened to the TV's and the Hooter girls?"

And St Peter yells down "You should have locked yesterday".