Let me add a clarification to the Ops Manager job listing from yesterday. The company is merely shifting responsibilities as they grow, and the current manager is fully aware of the situation. I apologize if the confidential listing made scores of operation managers in California nervous!

Banks are flush with cash. Is it helping mortgage lending? Not really: HoldingCash

 For the most part, the industry is glad to see Freddie and Fannie's efforts toward clean data and accurate appraisals. (What investor wants to buy a pool of loans that has dubious collateral?) Both agencies sent notes out updating the news on UCDP: "As we continue to develop the Uniform Collateral Data Portal, a single portal for the electronic submission of appraisal data files, Fannie Mae and Freddie Mac (the GSEs) are announcing the portal's availability date and introducing resources to assist lenders in preparing to access and use UCDP. UCDP will be available for submitting appraisal data files starting on June 27, 2011. To help ensure a smooth transition to electronic submission of appraisal data files, lenders are encouraged to begin using UCDP for their live production as soon as it is available. Fannie posted FHFAUCDP as did Freddie, and they both posted a list of frequently asked questions: UCDPFAQ

Arguing over these two institutions will be in the news for quite some time. Last week a reader wrote to me, "Why do we need a Fannie AND a Freddie?  There was a day when we could all delude ourselves into believing that they provided 'competition' to each other which had some sort of benefit (it didn't).  But today - they are both puppets of the same regulator and they are both owned by the taxpayer (the conservatorship is fiction to keep Fannie and Freddie's eviscerated balance sheets out of sight of angry voters).  There is zero value to having two broken governmental monopolies. And why is the taxpayer paying for their sales force - what are they selling? How many sales people does FHA have?"

But another commented, "Should we really rid ourselves of Freddie & Fannie? Over the past few years, even during the toughest times, conventional mortgages have remained available and affordable. Like it or not, the agencies play a role in the global markets - investors around the world know Freddie Mac and Fannie Mae, and borrowers have access to affordable mortgage funding in any environment and in all geographic markets. What series of private companies is going to be able to benefit borrowers as they are doing now - or would those calling for their elimination be happy with mortgage rates in the US 4% higher than where they are now due to liquidity issues?"

Yesterday I mentioned the upcoming FHA MI changes, and had a brief explanation of private mortgage insurance. "Usually MI covers mortgage payments for periods of between 12 months and 5 years, though terms between three and five years are increasingly difficult to find. Insurance usually kicks in when the borrower is unable to meet their mortgage payment obligations because of sickness, injury or unemployment - MI does not cover fraud." A  National Accounts rep for an MI company clarified, "What you describe is more like 'Involuntary Unemployment Insurance' which does kick in if a borrower loses their job. Some MI companies offer 'IUI.'  PMI (Private Mtg. Insurance) protects lenders if a mortgage loan goes into default on LTVs above 80%. By helping mitigate the lender's risk, borrowers can get into homes with lower down payments."

With the MI increase Monday, FHA's market share is expected to drop. It is interesting to note the difference of how people in the industry look at the same FHA/VA loans. Originators look at them one way, which is generally a high LTV loan with decent rates but being hurt by higher MIP fees. But when you pool FHA/VA loans, how do investors look at them? The outstanding balance of GNMA MBS's has risen significantly over the past three years and is now more than $1 trillion. The $1 trillion is in CMO's (collateralized mortgage obligations) - $300 billion, owned by the Fed - $96 billion, banks and savings institutions, overseas accounts - $250 billion, and others. And there is $80-90 billion of current production that is liquid.

The $80-90 billion of "trade-able" securities are divided between two different markets: "Ginnie I's" and "Ginnie II's." And then each has 3-4 coupons, or buckets that the loans go into, with buy down loans or odd coupons historically going into Ginnie II's. And it is further divided into 15-year securities, as well as ARM pools. $80-90 billion sounds like a lot, but Wall Street traders, and hedging firms, do their best not to be caught short any of this product. For example, only $5 billion of Ginnie 3.5's (containing 4% mortgages) were issued - not very liquid at all. And the increase in MIP fees leads to a drop in production. With liquidity an issue, even when you're talking billions and trillions, companies often use Fannie or Freddie securities to hedge FHA/VA production, which then leads to closely monitoring the spread between Ginnie & Fannie security prices.

JPMorgan Chase's stock is pointing to a higher opening this morning after reporting its 1st quarter numbers that beat expectations. JPM said profit rose 67% to a record with 1st quarter net income climbed to $5.56 billion. The announcement is full of various metrics and numbers that are best seen by looking at the actual announcement, but focusing on some of them are worthwhile and indicative of large bank's current mortgage division performance. JPM reported a $1.1 billion pretax loss from mortgage servicing rights asset adjustment for increased costs, and a $650 million pretax expense for estimated costs of foreclosure-related matters. "While delinquency trends and net charge-offs improved compared with both prior periods, the current-quarter provision continued to reflect elevated losses in the mortgage and home equity portfolios." "Mortgage banking net revenue was a loss of $114 million, compared with net revenue of $962 million in the prior year, and included $271 million of net interest income and $104 million of other noninterest revenue, offset by a loss of $489 million for mortgage fees and related income. Mortgage fees and related income comprised $259 million of net production revenue, $489 million of servicing operating revenue and a $1.2 billion MSR risk management loss. Production revenue, excluding repurchase losses, was $679 million, an increase of $246 million, reflecting higher mortgage origination volumes and wider margins. Total production revenue was reduced by $420 million of repurchase losses, compared with repurchase losses of $432 million in the prior year. Servicing operating revenue declined 3% from the prior year. MSR risk management revenue declined by $1.4 billion from the prior year, reflecting a $1.1 billion decrease in the fair value of the MSR asset for the estimated impact of increased servicing costs."

Speaking of Chase, its correspondent group saw the Distressed Market designations for its non-agency product line updated.

Affiliated rolled out its Rural Housing program, designed for properties in towns removed from urban areas and having less than 20,000 residents. Like Detroit. Seriously, Affiliated notes, "For qualified borrowers, a Rural Housing loan can provide up to 100% financing, no monthly MI required, 30-year fixed rate term, no cash contribution or reserves required from qualified applicants," etc.

Now the compensation issue has been put to rest, we can get on with the... comp issue. Investors and lenders are issuing bulletins "right and left" clarifying compensation calculations. (I still keep wondering if this really helping the borrower.)

ING, for example, has begun sending out a series, with yesterday's "Loan Originator Compensation Rule Bulletin #1" leading off. It addressed the pricing and disclosure of Lender-paid Compensation transactions. (The ING Broker Gateway correctly presents the rate and price options on both Borrower-paid and Lender-paid loans, except for Lender-paid loans in which the maximum or minimum amount applies.)

Provident Funding sent brokers a reminder saying, "Confused about loan pricing or preparing your GFE under the TILA compensation rule? Simply check out our Pricing Matrix Calculator on pfloans.com under the rate sheet!"

NYCB has discontinued its Conforming Fixed Rate products with 40 year terms.

Fifth Third has been busy lately. In recent weeks its brokers have received updates on FHA refinance guidelines for borrower occupancy of a former investment property, three and four unit properties for FHA refinances, net tangible benefit clarifications, maximum insurable loan balances for FHA non-credit qualifying streamline refi's, a reminder of the FHA MIP increase, clarification on the age of credit documents along with registering agency and jumbo loans under the new comp system, and rolling out a Texas Equity Program that allows for LTV ratios up to 80%.

Yesterday we saw a decent market for fixed-income securities right out of the gate. We had a renewed flight to quality move in part off of Japan's news of the escalating nuclear disaster, stocks were down, and oil prices were down. The $32 billion 3-yr note auction went well, and the 10-yr (which will see a new issue auctioned off today) closed better by more than .5 and at a yield of 3.50%. One trader wrote, "Technicals are certainly in MBS' favor for this with barely a pulse in mortgage banker selling, including today, at between $1 and $1.5 billion per day." For you traders out there, check out MND to see a write up of market activity from yesterday.

But today is a new day. The MBA reported what lock desks already knew: last week's apps decreased 6.7% from one week earlier. Refi's were down almost 8%, and purchases were down about 5%. Overall, refi's are down to about 60% of all apps, and ARM share steady at about 6% of total applications (but over 10% of the dollar volume).

This morning we had Retail Sales, which through last month was up for 8 straight months and certainly helps the GDP figures. Estimates called for consumer spending to increase by .5-1%, depending on who you asked, indicating a slower annual pace than in the 4th quarter. Retail Sales actually came in at +.4%, less than expected, with it being +.8% ex-auto.


Scientists have released a report on the adverse effects of different alcoholic beverages have on the organs of the human body.

Vodka + Ice........ Damages the kidney!
Rum + Ice........... Damages the liver!
Whisky + Ice...... Damages the heart!
Gin + Ice.............Damages the brain!

Conclusion:  It seems that ice ruins everything!