So now we are done with the Fed's MBS purchase program. The N.Y. Fed's trading desk purchased $6.074 billion in agency MBS over the past week, bringing its total net purchase to $1.250 trillion.

On the first day post-Fed, current coupon mortgage securities only widened 3 basis points (invisible to any originator) vs. Treasury securities, although they widened 8 basis points over the last two days. Traders estimate that origination yesterday was about $2.5 billion, and believe that banks, flush with cash, appear to be in the best position to fill in the Fed's void but are dealing with "quarter-end issues". But rates in general have become somewhat more volatile.

Today is not a Federal Holiday, the stock markets are closed, and the bond market has a short day. If you don't think that the economy is doing better, look at the price of oil. Oil hit a 2010 high yesterday, and is up over $4 per barrel just this week. Next week we have a new round of 3, 10, and 30-yr Treasury auctions to compete with institutions buying mortgage-backed securities. This morning Non-farm payrolls showed a gain of 162,000 jobs, the unemployment rates came in at 9.7%, but average hourly earnings declined 0.1%. January & February had revisions of +40k jobs. After the news the 10-yr is up to 3.92%, as you would expect with an expanding economy, the dollar is rallying, and mortgage prices are following Treasuries lower with prices worse by .250-.50 depending on coupon.

The FDIC announced that it has sold about $491 million in troubled residential mortgage loans from 19 failed banks. The winning bidder was Roundpoint Mortgage Servicing (NC) which paid $34.4 million for a 50% stake in a new company set up to hold the home mortgage loans. The FDIC has the other 50%. About half the loans are 30 or more days delinquent, the FDIC said, and 80% of the loans are in AZ, FL (so flat that you could stand on a can of tuna an watch your dog run away for 3 days), and GA.

Freddie Mac announced that it will be selling off hundreds of foreclosed homes in Las Vegas and Southern California this month through foreclosed property marketing firm New Vista. Freddie Mac said buyers may qualify for the assistance under the U.S.'s Neighborhood Stabilization Program (with NSP homebuyers are eligible for closing costs and down payment assistance when they buy distressed homes in designated areas) and the first-time homebuyer $8,000 tax credit deadline of April 30.

Several major banks, including Citigroup Inc., GMAC Inc. and Wells Fargo & Co. have sold portfolios of nonperforming residential loans in the past three months, and apparently there are buyers. (Of course, economics dictate that at some price, buyers and sellers will transact, and the price of these pools will be based on origination year, location, borrower, payment history, expected home appreciation, etc.) In these recent cases, prices are more realistic and the huge, "10 cents on the dollar", discount prices seem to be going away. Banks that have been recapitalized through the government's TARP are selling off legacy loans with the intent of rebuilding their mortgage businesses with a cleaner slate. Most banks had a very good 2009, and have more of a cash cushion to absorb some hits by selling these loans.

There are more flood insurance directives. FEMA has issued guidance for this lapse on authority, which can be found at Keep in mind that FEMA may not issue new policies, increase coverage on existing policies, or issue renewal policies. Fannie Mae's policy, retroactive to 3/29, is that it will purchase loans secured by properties located in Special Flood Hazard Areas that do not have an active flood insurance policy as long as until evidence of active flood insurance is obtained, a lender delivers a mortgage loan to Fannie Mae on the condition that the borrower can provide acceptable evidence of a completed application for flood insurance and a copy of a check or the final HUD-1 Settlement Statement reflecting payment of the initial premium, or the assignment of an existing flood insurance policy from the property seller to the purchaser. As a lender, you must "have a process in place to identify mortgaged properties securing loans sold to Fannie Mae that do not have proper evidence of active flood insurance, take all steps (insofar as permitted by applicable law) necessary to facilitate the issuance of coverage once the NFIP insurance authority is renewed, and retain documentation to support acceptable evidence of flood insurance."

"FHA will continue to insure single family mortgages on homes where flood insurance is normally required but was not secured during this lapse in flood insurance coverage authority.  However, FHA-approved lenders should have an appropriate flood insurance policy application on file and collect and remit premiums pursuant to FEMA's guidance when an insured mortgage is being closed.  Lenders and mortgage servicers are reminded that, if at any time during the life of the FHA-insured mortgage, it is determined that the property is in a special flood hazard area flood insurance must be obtained when available under the NFIP.  As a reminder, mortgagees are responsible for flood damage in the event that a mortgage insurance claim is filed to FHA."

Franklin American Mortgage Company had no change to its flood insurance policy for loans done in March. For purchase transactions with settlement dates 3/29/10 or later, FAMC's normal flood insurance requirements and policies still apply, however "FAMC will not purchase any loan whose property lies within a flood zone until such time that Congress re-authorizes the NFIP. Any rate lock extensions or re-locks will be the responsibility of the lender." For refi's, "FAMC's normal flood insurance requirements and policies still apply. However for any loan on which the property is determined to be in a flood zone and has an existing flood insurance policy in effect, the policy must be of sufficient amount to provide the required coverage for the new loan amount, and that policy's expiration date must be no sooner than 30 days from FAMC's Purchase Date. Loans with a flood policy expiration date sooner than 30 days will be ineligible for purchase until such time that Congress re-authorizes the NFIP."

HUD issued Mortgagee Letter 2010-13 concerning "Appraisal Update and/or Completion Report (Fannie Mae Form 1004D/Freddie Mac Form 442/March 2005)." The letter provides two additional prohibitions on use of the Appraisal Update Report, clarifies that the Market Conditions Form must be completed in conjunction with the Appraisal Update Form, and defines the validity periods for appraisals with and without an Appraisal Update Report. Check it out:

Freddie delivered some good news to Florida condominium lenders. The agency is waiving its condominium project requirements and warranties for new purchase transaction mortgages secured by units in Florida if Freddie Mac owns the existing mortgage on the condominium unit being purchased - be prepared to document it. Sellers may not use Fannie Mae's Special Approval Designation for Established Florida Condominium Projects to determine eligibility of condominium unit mortgages for sale to Freddie Mac.

Flagstar echoed the FHA's requirement that lenders to remit up-front mortgage insurance premiums within ten calendar days of loan disbursement and VA requires lenders to remit funding fees within 15 calendar days of loan closing. When the premiums are not paid within the required time frame (delivering loans within 4 calendar days of the loan's disbursement), both FHA and VA charges a late fee in the amount of 4% of the up-front mortgage insurance premium or funding fee. So if Flagstar is charged a late payment penalty by FHA or VA, it will passed on to the seller at the time of purchase. Neither DE Delegated nor VA Automatic correspondents are subject to the four-day loan delivery requirement.

And after May 1, Flagstar is changing requirements for VA loans with automated underwriting "approve" or "accept" responses and a DTI that exceeds 60%: all borrowers must have a minimum credit score of 640, the borrowers must have two months' un-gifted reserves after loan closing, and remember that the VA requires borrowers who exceed a debt-to-income ratio of 41% to have at least 20% more residual income than the VA requirement for the household size, loan amount and property location. All other VA guidelines and requirements apply.

Lastly, for Flagstar, a copy of the note for all 2nd liens must be obtained on all loans with subordinate financing in place at the time of closing. For existing subordinate financing, a copy of the note must be provided prior to closing. If new subordinate financing will be obtained, the terms and conditions must be documented prior to closing and a copy of the note provided at closing.

Sometimes I wish that I was a DE underwriter. OK, I don't, but they continue to be in demand. First Priority Financial, in Northern California, is the latest company to be looking for DE underwriters. E-mail Steve Weaver at if you are interested.

A man owned a small ranch in Montana.  The Montana Work Force Department claimed he was not paying proper wages to his help and sent an agent out to interview the rancher.

"I need a list of your employees and how much you pay them," demanded the agent.

"Well," replied the farmer, "there's my farm hand who's been with me for 3 years. I pay him $200 a week plus free room and board.

"The cook has been here for 18 months, and I pay her $150 per week plus free room and board.

"Then there's the half-wit. He works about 18 hours every day and does about 90% of all the work around here. He makes about $10 per week, pays his own room and board, and I buy him a bottle of bourbon every Saturday night. He also sleeps with my wife occasionally."

"That's the guy I want to talk to ... the half-wit," says the agent.

"That would be me," replied the rancher.