Mortgage rates are steady near the lowest they've been all year - is your production heading higher? Probably not, so why isn't mortgage production per agent picking up? Analysts point out that mortgage spreads have not done much, and even if Treasury rates drop, mortgage rates may not follow. On the other hand, many lenders believe that the majority of borrowers who can refinance already have done so, and that until appreciation or guideline loosening appear, things will be slow.

Every loan is a battle and borrowers appear to be in no hurry whatsoever. If your staff is busy, you are bucking the trend, and it seems companies have begun to cut profit margins. Mortgage traders continue to report low volumes being sold to them of about $1 billion a day. Although this is not good for the overall industry, it is good for mortgage prices relative to Treasury prices: the laws of supply and demand should help mortgage rates stay low relative to benchmark Treasuries.

What is the good word from the broker trenches on "steering borrowers toward higher interest rate subprime loans" so the originator could earn a higher fee? One producer wrote, "It would stand to reason that at least part of what prompted the originators to do this was laziness. Some time ago, investors would pay a price of 104 for an FHA loan, but most of the sub-prime loans were capped at 102-103 so in reality if the originator was trying to make the most premium, then they would have steered the borrower to an FHA loan."

I heard from a few MI folks yesterday about the performance of purchase loans versus that of rate & term refi's. Their experience seems to be that conventional R&T refi's (above 80% LTV so needing MI) perform much worse in states saddled with large amounts of depreciation. Some MI companies have gone from discounting rate and term refi's to charging an add-on. The agencies may avoid this on new production if LTV's are lower to start with, or we're done with the bulk of price depreciation in key states.

The news continues to pour in from Capitol Hill. Besides the update on YSP (the amendment that prohibits direct and indirect compensation - YSPs and overages - to mortgage originators based on the terms of a loan that would include its rate and establishes new minimum underwriting standards for residential mortgage loans) one item of importance that actually went well for mortgage bankers is that the dreaded "5% risk retention provision" (where a securitizer would be required to keep 5% in reserves for securitized mortgages, effectively shutting down that avenue) was denied for qualified mortgages that meet underwriting and product standards. The amendment directs regulators to establish a category of well-underwritten single family mortgage loans ("qualified residential mortgages" - pretty much full doc Fannie, Freddie, FHA/VA) that would be exempt from the bill's risk retention requirements.

The Merkley amendment that passed (but is not law yet), while prohibiting compensation based on the terms of a loan, would allow compensation to an originator based on the principal amount of the loan. It allows compensation to an originator, other than compensation based on the terms of the loan, would be financed through the loan's rate as long as the originator does not receive any other compensation from the consumer (or anyone else), other than the compensation financed through the rate. Also compensation to the originator through the rate would not be permitted if there is also upfront payment of discount points, or origination points, or fees however denominated, other than third party settlement charges. There is no presumption of compliance where the total points and fees (defined under TILA) payable in connection with the loan exceed three percent of the loan amount. For purposes of computing the three percent, the points and fees for mortgage guarantee insurance under a state or federal program in excess of one percent of the loan amount are excluded.

Bank of America's correspondent group alerted lenders that it will be retiring several programs after today. Gone are its conforming 40-yr, 30-yr Fixed Rate IO and 15-yr IO, 6-month ARM, 1-year ARM, and Flex 97 IO Fixed Rate 15 year IO. Also gone is the MyCommunity 15-yr fixed rate product and the FHA 1-yr ARM. "Loans in the pipeline must fund/close within the rate lock commitment period or July 14, whichever comes first. Lock extensions/re-locks are not allowed."

Chase printed a change to its redemption period which will interest Ops folks. Previously it would purchase loans with an unexpired redemption period as long as the lender's title insurance policy fully protects the lender against loss in the event the property is redeemed. Going forward,  Chase "will not purchase loans with an unexpired redemption period, regardless if the risk is covered by an insurance policy, redemption policy, redemption bond, or other risk mitigant. Loans sold to Chase must have clear, marketable title."

Wells Fargo's wholesale broker clients recently received word that the Fannie Mae HomePath is now an option for REO financing in addition to the previous existing Wells Fargo products and programs. Starting Monday, the HomePath Mortgage is available in all states - although standard limitations on property types will apply. Only properties listed on the HomePath website are eligible, since these properties are owned by Fannie (who'd prefer not to own them). Standard pricing and adjusters will apply, along with Fannie Mae's Homepath Mortgage adjusters. Brokers were also notified about an adjustment to the Freddie Mac Relief Refinance Mortgage transactions, whereby new income documentation requirements will be put in place for the Home Affordable Refinance Program, with P&I on the new loan more than 20% higher than the P&I on the existing loan.

Wells Fargo correspondents learned that Wells, following Freddie's elimination of IO mortgages, wants IO loans to be delivered by July 1. "Wells Fargo requires all LP Loans with an Interest-Only payment feature to be purchased by Wells Fargo Funding on or before Thursday, July 15, 2010."

Pinnacle Mortgage also told its brokers that its underwriting guidelines have been updated to reflect property eligibility when repairs are required on the Purchase Contract under the HomePath program. "If there are repairs required to be completed per the purchase contract or addendums to the purchase contract, the subject property is not eligible for a PCM HomePath Mortgage." Properties for Fannie can be found at - be sure to follow all the documentation and eligibility requirements.

Although Greece still has issues some of the focus is now on other countries. Whether or not the people go along with them, the Portuguese leaders have agreed to tough austerity measures (pay cuts, increase in various taxes), but Spanish unions are talking about a general strike. In Portugal the goal is to cut the deficit to 7.3 percent of GDP this year and 4.6 percent in 2011. (Last year it was 9.4%, compared to about 11% here in the US.)

Two little boys, ages 8 and 10, were excessively mischievous. They were always getting into trouble and their parents knew all about it. If any mischief occurred in their town, the two boys were probably involved.

The boys' mother heard that a preacher in town had been successful in disciplining children, so she asked if he would speak with her boys.

The preacher agreed, but he asked to see them individually. So the mother sent the 8 year old first, in the morning, with the older boy to see the preacher in the afternoon.

The preacher, a huge man with a booming voice, sat the younger boy down and asked him sternly, "Do you know where God is, son?"

The boy's mouth dropped open, but he made no response, sitting there wide-eyed with his mouth hanging open.

So the preacher repeated the question in an even sterner tone, "Where is God?"

Again, the boy made no attempt to answer. The preacher raised his voice even more and shook his finger in the boy's face and bellowed, "Where is God?"

The boy screamed and bolted from the room, ran directly home and dove into his closet, slamming the door behind him.

When his older brother found him in the closet, he asked, "What happened?"

The younger brother, gasping for breath, replied, "We are in BIG trouble this time...GOD is missing, and they think we did it!"