A man rushed into a busy doctor's office and shouted, "Doctor!  I think I'm shrinking!"  The doctor calmly responded, "Now, settle down. You'll just have to be a little patient."

Lock desks around the nation will have to be a little more patient, as the MBA released its weekly application figures showing that apps were down 12.2% last week. Purchases (-5.7%) hit a 13-year low, and down 35% from only a month ago. Refi apps were down over 14% but still make up more than 72% of applications. Given that 30-yr residential rates are 0.5% below where they were in April, the tax credit issue is obviously a concern; agents have a sense that most "refinanceable" clients - credit-wise and property-wise - have already done refinanced.

All over the United States kids are picking up their yearbooks. If I was a betting man, who after having spent 20+ years in capital markets I am not, I'd say that 95% of students immediately flip through and try to find their picture. Think of the disappointment if it is not there. As an adult we become a little more accustomed to it: checking into a hotel and our name is not on the reservation list, checking into a mortgage conference and there is no name badge for us.

MI companies (some would say embattled MI companies) not only compete with one another, but also against the U.S. government. FHA loan volume has skyrocketed, and touted as the "new subprime" has taken high-LTV loan market share away from the agencies, and with them the MI companies. With an eye on 80-95% LTV loans made to HIGH FICO borrowers, MI companies such as Radian, MGIC, PMI, and RMIC have rolled out the marketing machine. FHA loans require both upfront and monthly MI premium payments, whereas private MI offers either monthly split, or single premium plans. Generally, private MI products allow far more flexible underwriting processes than the FHA, including delegated and contract underwriting.

Radian, for example, offers its Single Premium Program where the Lender Paid MI is included in the rate and price of the original mortgage, and usually results in a lower payment due to the lower MI cost. The borrower, often a high FICO, high LTV client, can qualify for a larger loan amount with no MI closing costs.

MGIC offers a discounted monthly MI, and suggests lenders recommend taking the cash being used to buy out the MI to buy down the rate (a permanent benefit for the borrower) instead of either financing the MI or having a big up front premium. MGIC is offering new pricing in response to the discount benefit on some premium types, and points out that monthly MI can be canceled.

With PMI, the lender may pay the MI premium so there are no MI expenses for the borrower and the borrower's total monthly payments are lower. Or the borrower may qualify for a larger loan amount with a lower LTV (because the loan amount is not increased to finance an upfront premium); borrowers have more equity, which provides more options when selling or refinancing versus FHA loans. PMI also offers discounted risk based pricing for the Super Single Premium, and discounted monthly rates for borrowers with a score above 700. The borrower, seller or rebate pricing can be used to pay the one time premium, and may be eligible for a refund later under the HomeOwners protection act. RMIC opts for the borrower paid MI execution instead of the LPMI, given that the LPMI cannot be canceled since it is part of the interest rate.

Keep in mind that not all investors accept all kinds of mortgage insurance. The FHA operates under a mandate from Congress to expand home ownership, so it is able to offer less restrictive guidelines than mortgage insurers in some instances. However, for the majority of borrowers with good credit and some equity, MI companies say that they will provide a lower monthly payment without the operational red tape of doing an FHA loan.

There are many points for originators to consider with lender paid MI, including splits, one time payments, LTV, etc., etc., and most MI firms offer calculators.


PMI offers a calculator specifically to compare FHA versus MI costs over 5 years: HERE 


Radian's is HERE 

Freddie & Fannie, under the direction of FHFA, have completed the first key milestone of the Uniform Mortgage Data Program. What does that mean? Well, it "defines the loan delivery dataset and the technical framework for developing the loan delivery file that will be required for all loans delivered to either GSE on or after September 1, 2011." The goal is increase the data accuracy of funded loans, which in turn will help liquidity and pricing in the secondary markets. READ MORE

Put very simply, no investor wants to think they are purchasing one type of loan, only to have another kind show up in the pool. HERE IS FREDDIE'S GUIDANCE...HERE IS FANNIE'S GUIDANCE 

Bank of America, echoing Freddie & Fannie's changes for IO loans & qualifying ARM rates, alerted correspondent clients that effective with case files submitted to DU 8.1 on or after June 19 IO loans are no longer eligible for cash out refi's, flexible mortgages, MyCommunityMortgage loans, investment properties, and 2-4 unit properties. (The final date to lock loans under existing guidelines with BofA will be 6/18, and the final date to purchase loans under existing guidelines is 7/23.) BofA, due to Fannie, is changing the qualifying rate for 3/1 and 5/1 ARMs with locks after 6/19. Borrowers must qualify using the greater of the note rate plus 2%, or the fully indexed rate.

Wells Fargo, following HUD, told correspondent clients that due to HUD's acceptance of electronic signatures Wells will accept them but that approval is required to deliver electronic signatures and documents to Wells Fargo Funding. Wells permits eSignatures by sellers approved to deliver loans using electronic technology, on the initial Uniform Residential Loan Application (Form 1003), initial disclosures, appraisal and purchase agreement. Clients had best check with "The Stage Coach" to make sure they comply with the various rules, regulations, and necessary paperwork. Wells also reminds their correspondent clients that "Wells Fargo Funding requires all borrowers, regardless of citizenship, to have a valid Social Security Number (SSN). An Individual Taxpayer Identification Number (ITIN) is not permitted in lieu of a Social Security Number."

Wells Fargo wholesale group sent a bulletin out to its brokers. Too long to give the list of issues contained in the bulletin any kind of substance, topics included were, "Updated Mortgage Broker/Originator Fee Disclosures, VA IRRRLs Automated Valuation Models Order Enhancement to RESDirect, Conventional and FHA Borrower Appraisal Disclosure Forms, Updated CHARM Booklets, Additional Requirements for FHA Appraisals, Three Mortgage Insurance Enhancements (95% LTV Allowed on SFD and PUDs Located on the Conforming Market Classification List, 90% LTV Allowed on Condos and Co-ops Located on the Conforming Market Classification List, 700 Loan Score Allowed for Primary Residences with LTV Greater Than 80%), New Guidance for Non-occupant Co-borrowers, and State Specific: Wells Fargo Disaster Policy Not Required for FEMA Declared Disaster Areas in Oklahoma." Whew!

Does the world need another correspondent buyer of loans? Perhaps. Gateway Funding, out of Pennsylvania, has begun buying loans from lenders, bankers and financial institutions in the Mid-Atlantic States.

Yesterday the U.S. Treasury sold $36 billion of 3-yr notes to solid demand, being sold at a yield of 1.22%. It will reopen the 10- and 30-yr issues it originally sold in May today and tomorrow. The problems in Europe are still there, will be there for a long time, but aren't quite grabbing the headlines they were a few weeks ago. (The public's attention span is pretty short.) "European Union finance ministers said they must do more to restrain spending and contain a debt crisis that threatens to spread to countries that do not use the euro such as Hungary and Britain. But as they discussed how to reduce swollen budget deficits, Spanish public service workers staged a one-day strike which underlined the problems governments face implementing austerity measures such as spending cuts that will bring down wages." Today we find the S&P up almost 1.00%, the 10-yr yield at 3.23% and mortgage prices worse by about .250.

(Please note that there will be no commentary on Friday- I am volunteering for the 3AM clean-up shift at a high school graduation party, then flying to Alaska. Things are planned to resume Monday morning.)

A teacher gave her class of 11 year olds an assignment: Get their parent to tell them a story with a moral at the end of it.

The next day the kids came back and one by one began to tell their stories.

Ashley said, "My father's a farmer and we have a lot of egg-laying hens. One time we were taking our eggs to market in a basket on the front seat of the car when we hit a big bump in the road and all the eggs got broken."

"What's the moral of that story?" asked the teacher.

"Don't put all your eggs in one basket!"

"Very good," said the teacher.

Next little Sarah raised her hand and said, "Our family are farmers too. But we raise chickens for the meat market. One day we had a dozen eggs, but when they hatched we only got ten live chicks, and the moral to this story is, 'Don't count your chickens before they're hatched'."

"That was a fine story Sarah."

"Michael, do you have a story to share?"

"Yes. My daddy told me this story about my Aunty Sharon. Aunty Sharon was a flight engineer on a plane in the Gulf War and her plane got hit. She had to bail out over enemy territory and all she had was a bottle of whisky, a machine gun and a machete. She drank the whiskey on the way down so it wouldn't break and then she landed right in the middle of 100 enemy troops.

She killed seventy of them with the machine gun until she ran out of bullets. Then she killed twenty more with the machete until the blade broke. And then she killed the last ten with her bare hands."

"Good heavens," said the horrified teacher, "what kind of moral did your daddy tell you from that horrible story?"

"Stay the heck away from Aunty Sharon when she's been drinking!!!!!!"