How much house is too much house in Michigan? 50 cent is only half of a dollar.

Today the FDIC Board will vote on a credit risk-retention proposal that is required under the Dodd-Frank bill. A joint release yesterday from the Federal Reserve, HUD, FDIC, FHA, OCC and SEC said all the agencies this week "are considering for approval a notice of proposed rulemaking that addresses section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act." If all the agencies approve, the proposal will be published in the Federal Register for public comment. Look for the proposed thresholds on banks retaining 5% of mortgages unless excluded by being "Qualified": purchase with at least 20% down, no cash out refi with 25% down, cash out refi with 30% down, with minimum income standards and no borrower who fell two months behind within the previous two years could get a qualified mortgage. Just conjecture...

How is the jumbo market doing out there? In the 4th quarter of 2010 roughly $33 billion of jumbo mortgages were funded. This is higher than 2009's fourth quarter by 57% according to survey figures compiled by National Mortgage News' Quarterly Data Report. The industry is hoping more and more of the production goes into well-received securities...

When I speak to different groups, occasionally I am asked a pretty simple question, but one that has important implications: "Do rates tend to go up both on inflation and fears of inflation?" Remember that the real interest rate includes both inflation and the nominal rate of interest. In the case of a loan, it is this real interest that the lender receives as income. If the lender is receiving 3.5% percent from a loan and inflation is at 3.5% percent, then the real rate of interest is zero because nominal interest and inflation are equal.

But what is more important, the actual inflation rate, or what people perceive is the actual inflation rate? The predominant view at the Federal Reserve remains that the underlying rate of inflation is not on the verge of a dangerous acceleration, but mounting public concern about inflation has increased markedly, and yes, this can cause rates to creep higher in a preemptive fashion. The Fed is more attuned to high unemployment (although it is not the Fed's responsibility to increase jobs), a depressed housing market, relatively sluggish economic growth and weak wage growth. Many are quick to point out that conducting monetary policy when the economy is sluggish is difficult. But when inflation, or fears of inflation, begins to pick up is very difficult - the futures market believes that the odds of the Fed leaving overnight rates near 0% through August are higher than 90%. One can look for continued Fed pronouncements that the risk of inflation is low... until it is not.

So is the borrower really better off now? An originator from San Jose writes, "To be honest and I hate to admit it but the bottom line was when these changes were implemented it made it even more difficult for the consumer to shop me. Lenders are still confused by the paperwork and calculations - think of how bad it is for borrowers! LO's will all figure out how to make the most money on each transaction as usual, only this time the government is giving us the tools to veil the consumers' view of the actual cost.  Take a consumer from 2005 and one from right now and see who understands the cost of the transaction by translating the GFE and rate fluctuation and who doesn't, Mr. 2005 will BUT he had the benefit of shopping around because it is easy to understand a column of numbers and not the new 3 pages of numbers shoved together that have been shoved down their throat by Barney Frank and Chris Dodd. Heck, who wouldn't prefer to rent with all of this going on?"

Walter Investment Management, a mortgage servicer and investor based in Florida, is purchasing GTCS Holdings (Green Tree of MN) from Centerbridge Capital Partners LLC for $745 million as it expands loan servicing. The entire transaction, including debt, is valued at $1.065 billion. Green Tree provides services such as billing and collection on a $37 billion portfolio, including residential mortgages, manufactured housing loans and consumer loans.

In the last week, Wells Fargo's wholesale group has been busy. It has come out with announcements and changes on the Home Affordable Refinance Program (HARP) being extended into next year, a Verbal Verification of Employment (VVOE) clarification for FHA and VA Loans, a CEMA process change, a reminder that wholesale reverse mortgage loans ended on 3/26, a  Home Equity Appraisal Independence clarification, timelines for the new compensation and anti-steering rules, a handy-dandy alphabetical, 3 page sheet on new compensation terms, and update on Wells' incomplete GFE policy, a note to brokers reminding them of the 4/18 appraisal requirements on FHA Loans with Case Numbers six or more months old, and requirements for submitting compliant TIL's for various broker types. Also, starting 5/23, Wells Fargo Funding will begin doing business as Wells Fargo Funding, a division of Wells Fargo Bank, N.A. (rather than Wells Fargo Funding, Inc.). Phew!

Flagstar, which may be becoming the #1 warehouse lender in the US, announced an FHA funding request deadline (the published 24-hour turn time for funding approval will be enforced on all FHA loans at the end of the month), starting 4/4 Flagstar is lowering the minimum credit score requirements for FHA transactions to 600, noted some changes to excessive lender and/or seller credits, reminded sellers that the Freddie Mac Home Possible Program is being suspended, recognized that the Federal Reserve issued its final rule amending Regulation Z providing a separate higher rate threshold (2.5 percentage points) for coverage of the escrow requirement for jumbo loans (but Flagstar Bank will continue to require escrows for any HPML loan exceeding the published APOR in excess of 1.5 percentage points). Flagstar also noted that electronic signatures from DocuSign can now be accepted on purchase agreements for conventional loans, and rolled out its "Advantage Select Program" (not eligible for the delegated UW channel).

360 Mortgage told its brokers that it considers an online 360 TIL generation as a valid mortgage application. The company also announced a new lock policy: "When locking loans after April 1 that are not subject to the LO Comp Rule, brokers must use Borrower rates locks are allowed prior to 360 MG receiving an application. For all loans subject to the FRB Comp Rule, the following amended Lock Policy will apply: All loans will have a 30 day lock period available only. Should an extension be necessary, a free 15 day extension will be granted automatically." (After that it goes to market.) "Brokers may select compensation levels from an amount as low as .50% to a high of 3.00% in .25% increments...Brokers will be able to establish their compensation level on a monthly basis," and given a 7-day period to establish their new compensation plan for the following month...brokers will have the ability to choose between Lender Paid and Borrower Paid compensation for each loan. The selection will be made at time of rate lock for each transaction. If Lender-Paid is selected, the plan that will be used is the plan in effect at time the application was received by 360 MG." 360 Mortgage Group also has a series of Webinars to discuss 360 MG's policies to meet the requirements of the FRB Loan Originator Compensation Rule this week.

EverBank rolled out a couple new programs for its "Preferred Non-Conforming Fixed Rate" and LIBOR ARM product.  A 6 Month LIBOR ARM product is now available for new originations where the margin is variable depending on the pricing selected from the daily pricing options. It has an initial IO period of 10 years and full amortization over a 30 year term, no initial or annual rate adjustment caps, and a lifetime rate cap of 12%.

NAR came out with its Pending Home Sales Index yesterday, viewed by some as a leading indicator for the housing sector since it measures sales activity based on sales of units where contracts have been signed but the transactions have not closed. Nationwide the number was +2.1% month over month, but down over 8% versus a year ago. We also learned that Personal consumer spending rose by 0.7% in February, and Personal Income increased 0.3%.  Inflation is increasing as the overall PCE price index went up 1.6% from February 2010, compared with a 1.2% gain in the 12 months ended in January.  The Fed's preferred price measure is core PCE, which excludes food and fuel, rose 0.2% for a second month, and was up 0.9% from a year earlier. 

But the recent improvement in US Treasury prices, and the corresponding drop in rates, has been erased as we are now at March 10 levels - the same as prior to the Japanese earthquake. The 10-yr closed at 3.45%, and MBS prices closed flat to 3 ticks higher, respectively, on 5s down through 3.5s, while 5.5s and 6s were a plus to a tick lower on relatively light trading volume. REITs are steadily emerging as a key source of levered demand for agency MBS, which is helping to keep mortgage rates low relative to Treasury rates (spread).

A duck walks into a post office and asks the postal clerk, "Got any 4.5% 30-yr mortgages?"

The clerk replies, "No, this is a post office; loans aren't done here."

The duck walks out, but this brief dialogue is repeated daily for several weeks. Finally, the clerk snaps: "If you ask for a loan one more time, I'll nail your beak to the ceiling!"

The next day the duck asks, "Got any nails?"

The clerk is fuming. "NO!"

The duck pauses. "Got any 4.5% 30-yr mortgages?"