A veteran banker once told me, "I've never seen a luggage rack on a hearse." Many "experts," perhaps wishing to make a name for themselves, called the housing industry dead and lending on life support. And in fact, according to the Census Bureau, the home ownership rate hit a 15-year low in the first quarter, falling to 65.4% from its 2004 peak of 69.2%. Many can argue that it was too high anyway. But rental properties had a vacancy rate of 8.8% in Q1, the lowest level in about 10 years. And the Fed's April Senior Loan Officer survey showed Commercial and Industrial loan demand increased last month, as more businesses requested credit lines for inventory, accounts receivable financing, M&A and infrastructure growth. In addition, consumer mortgage demand increased, while other consumer lines were stable.

(In fact, banks were asked to indicate what factors were currently impeding their ability to originate residential real estate loans. Most survey respondents cited periods during which the high volume of residential loan applications exceeded their application processing capacity, difficulty in completing timely and accurate underwriting or in completing timely and accurate appraisals or in hiring sufficient servicing or loan processing staff as important factors.)

And yes, residential lending in some sectors continues to grow. iServe Residential Lending is searching for local branches and MLO's in strategic markets throughout the U.S. The company is licensed in 20 states, and has just announced its GNMA issuer approval. (Quite a feat according to many!) iServe is a direct lender, with a complete product mix of conventional, government, and jumbo products, including the unlimited Harp 2.  For more information, go to www.joiniserve .com or email joiniserve@iservelending .com.

And in Southern California, for something a little off the beaten job path, the Ventura County Community Development Corporation is seeking a Senior Underwriter to underwrite first mortgage loans in accordance with Fannie Mae Underwriting Guidelines. It is a non-profit direct lender that assists first-time homebuyers with first mortgage and subordinate financing. The Senior Underwriter will work, at least initially, as an independent contractor, paid for each loan underwritten, after which the position may grow into a full-time employee position depending on VCCDC's growth in production and revenue.  The successful applicant must have at least five years of experience as a senior underwriter responsible for underwriting loans to be sold to Fannie Mae.  EOE.  If you know someone who might be interested, they should send a resume to bgarcia@cabrilloedc .org. And for more information, visit www.cabrilloedc .org.

Last week's applications were flat, per the MBA, or, in the parlance of lock desks, "same ol' same ol'." Purchases were up 2.9% and refi's were -0.7%, dropping to 72.6% of overall applications.

"When you take a bath, you come out clean," as one old saying goes, and some would argue it pertains to foreclosures: get them out of the way and let's get on with some price appreciation! CoreLogic has released its National Foreclosure Report for March 2012 (READ: CoreLogic Notes Most Foreclosure Activity Down Year-over-Year) , showing 69,000 completed foreclosures in March 2012 compared to 85,000 in March 2011 and 66,000 in February 2012. Through the first quarter of 2012, there were 198,000 completed foreclosures compared to 232,000 through the first quarter of 2011. Since the start of the financial crisis in September 2008, there have been approximately 3.5 million completed foreclosures.

The industry frets about foreclosures, as it does chatter about principal forgiveness. The FHFA has postponed a decision on principal forgiveness for Fannie Mae and Freddie Mac-owned mortgage loans until possibly late May, but that doesn't stop the pressure in discussions with the U.S. Treasury. FHFA Acting (when can we drop the "acting"?) Director Edward DeMarco had said April 10 in a speech at the Brookings Institute that he would consider principal forgiveness as part of the HAMP program, after the Treasury upped the ante by tripling the incentive amount it would offer, to up to 63 cents for every dollar the enterprises would write down on qualified mortgages. But he has said that such a program would encourage strategic defaults and cost taxpayers more than a forbearance program. The FHFA has a state policy that forbearance of principal is preferable to a permanent forgiveness of principal in modifying loans belonging to or guaranteed by Fannie Mae and Freddie Mac.  Both the Treasury Department and Democratic members of Congress have been pressuring FHFA to allow principal reduction, a process that is used in modifications of non-GSE loans under the Home Affordable Modification Program (HAMP.) And two Congressmen sent a publicized letter to DeMarco, citing Fannie Mae documents that show that Fannie Mae officials concluded as far back as 2009 that reducing principal on its mortgages could save taxpayer money by avoiding foreclosures. The plot thickens (READ: Principal Reduction Conflict Escalates Between Congress, FHFA)

But other plans are out there. Here's one, claiming to be a "Win-Win" Principal Reduction plan. "As a first step in any modification, an appraisal will establish the property's present value: the new "Interest Bearing Principal Balance". The difference between this assessment and the loan balance, which includes loan amount plus arrearages at the time of modification, is divided equally. 50% is written off as principle forgiveness and the other 50% becomes non-interest bearing "Deferred Principal Balance" due on sale of the property or in 30 years at loan maturity. As an example, take a $500,000 loan with $20,000 in arrears and appraised value of $300,000. In this scenario $110,000 of the loan is forgiven. The bank has $110,000 Deferred Principle Balance and $300,000 Interest Bearing Principle Balance. It is a win-win situation for everybody. This strategy is a path forward from a moratorium or massive foreclosures. It can offer shared benefits to both homeowners and lenders. It can prevent foreclosures and help underwater home-owners who are in danger of foreclosure or who might consider walking away from an underwater mortgage as their best option in a crumbling or stagnant market." If you care to comment, write to John Frangoulis (Realtech Financial Services) at John@rfn .net.

How about some somewhat recent lender/investor/agency/MI updates? As always, it is best to read the actual bulletin, but this will give one a flavor for what is happening out there. In no particular order...

First, a clarification for Flagstar. Yesterday noted some information regarding the payoff statement for refinances, that it "cannot reduce the loan payoff by the amount of the escrow balance" and so on. To clarify, this policy applies to all FHA refinances, including refinances of conventional, VA and USDA loans, so any refi from a conventional, USDA or VA into an FHA loan...this policy would apply. (Flagstar still allows escrow funds to reduce the payoff for conventional loans.)

Lenders looking to obtain FHA approval can look forward to an online application process, which HUD plans to implement in the near future.  As the transition period approaches, lenders who are currently in the process of completing the application or who plan to do so should submit their applications to the Lender Approval & Recertification Division at OLA@hud.gov to avoid delays.  The subject line should read "New Applicant," and a contact name and phone number should be listed in the body of the email.  Lenders should not pay through pay.gov until they've spoken to a Lender Approval representative.  For lenders who are already FHA-approved and seeking to add Title I or II approval, a paper application is still protocol.

The FHA allows HUD-approved nonprofit agencies to act as mortgagors for 203B and 203K mortgagees using FHA insurance.  Provided that the properties are resold to low- and moderate-income families, such agencies may finance these mortgages with the same terms and conditions as an owner-occupant, which include a 3.5% down payment requirement.
HUD has entered a loan servicing contract with Deval, LLC, which will handle Assigned Home Equity Conversion, Secretary-Held Title II, Partial Claim Subordinate, Home Equity Conversion Subordinate, Section 235 Subordinate, Nehemiah Subordinate, Emergency Homeowners Loan Program Subordinate, Asset Control Area, Hope for Homeowners Subordinate, and Good Neighbor Next Door Subordinate mortgages.

If you're interested in working for HUD, there are vacancies for a PUD Single Family Appraiser in Philadelphia and a Program Support Assistant in Denver.  More information is available at www.usajobs.gov.

Due to home price declines and lingering unemployment, the Rural Housing Service is launching its Rural Refinance Pilot to assist Section 502 borrowers in Hardest Hit states, which include Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, New Mexico, the Carolinas, Ohio, Oregon, Rhode Island, South Carolina, and Tennessee.  The pilot program is being offered for a two-year period and will let borrowers refinance at lower interest rates and monthly payments without new credit reports, appraisals, or property inspections.

The RHS has clarified the refinancing guidelines of the Single Family Housing Guaranteed Loan Program (also known as the ever-catchy SFHGLP).  Current Section 402 Direct and Guaranteed borrowers are no longer subject to the requirement that their properties continue to meet the guidelines in HUD Handbooks 4150.2 and 4905.1.

Chapter 6G of GMAC's Client Guide ("Assets") has been amended to include clarification on Trade Equity (G604) and Employment and Income Analysis and Documentation (6I).  The latter includes clarification on Stability and Continuance and Income (I601), Income Types (I604), and Other Sources of Income (I607).  Chapter 7 ("VA Eligibility") has been divided into three sections, which include Eligibility, Transactions, and Financing.  The guide now defines Permanent Disability and Temporary Leave as two different types of disability income, and additional guidance is available in cases where the borrower will not be returning to work before the first mortgage payment is due.

GMAC has modified its policy on accepting electronic signatures for FHA programs such that they are only permitted on third party documents, which the FHA defines as originated and signed outside of the mortgagee's control.  Wet signatures from the borrowers and other parties involved in the transaction are required for all other documents in the mortgage application and Endorsement Binder.

Effective April 20th, GMAC has revised its Jumbo price adjustments.  The charge for cash out on Fixed rates has increased for loans with LTV for 70 or less but over 65, as have certain Fixed rate incentives.  The purchase loan incentive for Jumbo loans with LTV of 75 or less has increased for both Fixed and ARM products.

Speaking of price changes, we saw a few late yesterday from lenders due to a slight market move. Traders reported that the sales of mortgage-backed securities picked up a little, although generally the MBS price movement was about the same as for Treasuries. (On the trading desk, we would say, "prices got tired of going up, so they went down a little.") Later this morning we'll have the always-of-questionable-predictability-for-Friday's-number ADP number, measuring private payrolls, and then at 7AM PST we'll have March Factory Orders. In the early going the 10-year is back down to 1.94% and MBS a shade improved.

What is the purpose of a house? Let's ask George Carlin.