On a serious note, and besides a decent Johnny Cash soundtrack, here is something to spend 1 minute and 50 seconds watching, and not only see what Nashville is dealing with, but also what lenders in that area are dealing with: WATCH THIS VIDEO
I'm always slightly terrified when I exit out of Word and it asks me if I want to save any changes made to my ten-page commentary - which I swear I did not make any changes to. Pressing an errant key on a computer's keyboard can lead to all kinds of issues, and yesterday that supposedly happened. Media reported that someone, or something, at a bank (CitiBank is most often mentioned) in what was supposed to be a $16 million sale on an S&P 500 futures-linked contract turned into a $16 billion sale. Darn those zeros. Once computers within the automatic trading systems saw that amount of selling, more selling kicked in, leading to a vicious cycle.
Within seconds Procter & Gamble, because P&G is one of the single largest components of the S&P 500 average, dropped about 10 points (from the low $60's to the low $50's), but by the close of trading it was back into the low $60's again. Given the crisis in Greece, will people really be buying fewer paper towels and Crest? Anyway, the issue is under investigation, but the Dow Jones Industrial average dropped 990 points (almost 10%) at its low point - was the biggest intraday point drop in its history of the Dow Jones industrial average. The major averages all closed down more than 3%. US investors lost, and then gained, more than $1 trillion in net worth.
Fortunately for borrowers waiting to lock, or thinking about refinancing, and unfortunately for anyone dealing with rate locks during the last few weeks, fixed-income prices soared as investors dumped stocks and "risky" assets. The US 30-yr bond hit 4.06%, and the 10-yr note dropped to 3.39% (down from 3.55% on Wednesday). As one would expect, mortgage prices did not improve lock-step with Treasury prices, but definitely improved and rates are near the lows of 2010.
In this country, the U.S. Senate voted to reject a Republican proposal that would have weakened a plan to set up a financial consumer watchdog, a key part of a landmark Wall Street reform bill backed by Democrats. The scope of the various reform proposals is very large, and includes an amendment that challenges secrecy at the U.S. Federal Reserve, giving small banks a break on government deposit insurance premiums versus larger banks, etc.
Investor changes continue on, despite the excitement in the stock and bond markets. ING announced changes to its policy on prepayments. Starting on the 19th, ING's rate sheets will show that "All loans, regardless of price/rebate, will have a one-year prepay penalty equal to 1% of the principal balance at the time of payoff (reduced from 3%), and that the prepay penalty will be waived if the borrower obtains a new loan (refinance or purchase) with us at the time of payoff (softer restrictions)."
GMAC has posted an update to its rate sheet which applies to its Jumbo product lines.
US Bank National Correspondent has posted an update to its guidelines which applies to its non-conforming & 2nd mortgage product lines.
In the midst of all this, HUD issued Mortgagee Letter 2010-17 which was meant for all FHA roster appraisers and addressed HUD REO lead-based paint appraisal reporting requirements. "The amendment will affect how appraisers disclose defective paint in HUD's real estate owned (REO) properties. This change is effective on all appraisals performed on HUD REO properties with an effective date on or after June 1, 2010." Check it out: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/
PMI's research and underwriting department gave us some good news, in that out of the United States' 384 MSA's (Metropolitan Statistical Area), 356 had a declining Risk Score, with only one showing an increase and the remainder unchanged. In addition, the number of MSAs in the riskiest category (90 - 100) fell by 26.4% during the fourth quarter, while those in the least risky (0 - 10) shot up by 79%. And the number of MSA's that have better than even odds of higher housing prices in the next two years increased 26.5% to 186 from 147 in the prior quarter. PMI's forecast does provide encouraging signs for moderating probabilities of price declines for the remainder of 2010 and into 2011 among the largest MSAs. HERE is the research
Soon summer will be here, and Fannie Mae's new quality-control requirements take effect. Will the measures help reduce loan purchase requests? No one wants to see more repurchases, so heading them off early in the origination process is a good thing rather than dealing with issues after the loan has funded and been sold. But some lenders are saying that the changes will delay closings and reduce originations without much improving loan quality. Starting June 1, lenders will be required to confirm 10 basic data elements for every loan, such as a borrower's identity and Social Security number, and updating the credit profile. Updating the credit profile, which some believe will required pulling a new credit report, may lead to a new underwrite if the borrower has added more debt and increased the DTI. In July, lenders will audit loans with high-risk characteristics before and after funding, and provide monthly "defect" reports to their senior management which should result in a written "action plan" to stop them from recurring. Many argue that current fraud statistics focus on loans originated in prior years, and that currently lenders are double- and triple-checking loan files for fraud.
But if all of this leads to a reduction in repurchase requests, and employee hours spent in battling buy-backs, isn't it worth it? Or course, loan agents typically focus on processing and originating loans, rather than battling repurchase requests. And the measures that take affect over the next few months will shift additional burden on the front end of the loan process and away from the back end. The prefunding audits could, at least initially, cut origination volumes, but would the loans that are weeded out be the same loans that might cause recurring and labor intensive problems down the line? COULD THIS HELP JUMPSTART THE NONAGENCY MORTGAGE MARKET?
Today we had the always important US employment numbers. Interestingly, plus or minus 20 or 30 thousand jobs pales in comparison to a banking crisis in Europe, or a trading error in our stock market that caused a decline of $1 trillion in worth in a matter of minutes. If the Euro system is collapsing, does hourly earnings going up or down a few cents really matter? Spain is often mentioned as the next country to be in dire straits, and even though the Greek parliament approved a harsh austerity plan in the face of violent unrest. At this point Europe is viewed as a fiscal drag on the global economy. Spain and Portugal have agreed to lend money to Greece at rate lower than which they themselves can borrow it - will it be enough?
Returning to the markets, this morning Non-farm Payroll came in at +290,000, the Unemployment Rate came in at 9.9%, and Hourly Earnings were unchanged. It is a strong gain for payrolls, along with some upward revisions in prior months. But as I mentioned, does it matter compared to the problems in Europe? Just like a spring, markets tend to bounce or retract a little after a big move. READ MORE ABOUT THE JOBS REPORT
An Irish golfer hooked his drive into the woods. Looking for his ball, he found a little Leprechaun flat on his back, a big bump on his head and the ball beside him. Horrified, the golfer got his water bottle from the cart and poured it over the little guy, reviving him.
"Arrgh! What happened?" the Leprechaun asked.
"I'm afraid I hit you with my golf ball," the golfer says.
"Oh, I see. Well, ye got me fair and square. Ye get three wishes, so whaddya want?"
"Thank God you're all right!" the golfer answers in relief. "I don't want anything, I'm just glad you're OK, and I apologize." And then the golfer walked off.
"What a nice guy," the Leprechaun says to himself. "I have to do something for him. I'll give him the three things I think he would want: a great golf game, all the money he ever needs, and a fantastic sex life."
A year goes by and the golfer is back. On the same hole, he again hits a bad drive into the woods and the Leprechaun is there waiting for him.
"Twas me that made ye hit the ball here," the little guy says. "I just want to ask ye, how's yer golf game?"
"My game is fantastic!" the golfer answers. "No one has beaten me in a year." He adds, "By the way, it's good to see you're all right."
"Oh, I'm fine now, thank ye. I did that fer yer golf game, you know. And tell me, how's yer money situation?"
'Why, it's just wonderful!' the golfer states. "When I need cash, I just reach in my pocket and pull out a 100 Euros I didn't even know were there!"
"I did that fer ye also. And tell me, how's yer sex life?"
The golfer blushes, turns his head away in embarrassment, and says shyly, "It's OK."
"C'mon, c'mon now," urged the Leprechaun. "I'm wanting to know if I did a good job. How many times a week?"
Blushing even more, the golfer looks around then whispers, "Once, sometimes twice a week."
"What??" responds the Leprechaun in shock. "That's all - only once or twice a week?"
"Well," says the golfer, "I figure that's not bad for a Catholic priest in a small parish."