The parent of Marie Callender's restaurants (around since 1964), who also owns Perkins Restaurants & Bakeries, has filed for bankruptcy protection and closed 31 locations nationwide. Wendy's/Arby's Group has cut a deal to "unload" most of its Arby's chain on private-equity firm Roark Capital Group in a deal valued at $430 million. There are 3,600 Arby's (the name coming from "America's Roast Beef Yes Sir"). And "the roof's caving in on Bank of America"? Read about it in the NY Post. Meanwhile, Facebook, according to CNBC, is likely to go public by the first quarter of 2012 at a valuation that could be pegged at north of $100 billion. People don't have to eat, but they have to socialize on-line?

Thousands of text books have been written about why interest rates go up and down. Yes, an expanding economy often pushes rates higher, but often rates move based on supply and demand. Just like how the lack of demand for a purple Ford Pinto forces the price lower, if the demand for US securities drops, that may push prices down, and thus rates higher. The story may be coming to a theater near you this summer: DebtDemand

World economies are struggling, debt in the US is mounting, mortgage bankers are grappling with disclosure, buyback, and volume issues, banks are holding huge amounts of cash reserves in case the "worst case scenario" hits, and...NMLS is reminding everyone that "the NMLS Approved Course Provider logo will no longer be authorized for use after July 1, 2011.  Providers who are currently using the logo on their web site and/or are using it in marketing materials should begin the process to remove it. We are currently finalizing the new approved course logo and anticipate starting to send the updated logo to providers the first week of July.  To deter unauthorized use, the new logo design incorporates the unique course ID number and a digital watermark."

Life is tough when even the agency set up to regulate you seems to not only take the credit for your improved performance, but then indicates it would rather you went away: FHFA

Yesterday the commentary mentioned a report stating that broker business was down to about 7% of total originations. Say what you will about how mortgage production statistics are tabulated, broker business is down. What is the "investor chatter" out there with regard to broker business? Barclays released a piece reminding us that for brokers, "The new loan compensation guidelines, which went into effect on April 1, have several key provisions that limit the types of compensation that they can receive. Yield spread premiums are prohibited. Compensation based on loan characteristics or terms is prohibited, other than the loan balance. Only the borrower or the lender, but not both, may compensate the loan originator for making a loan. A broker can no longer receive fees from both parties. Overall, these changes seek to eliminate the incentives for originators' steering borrowers into riskier loans for financial gain. While correspondents, and retail lenders are somewhat affected by these rules, they substantially restrict the previously existing business model for brokers."

The piece goes on. "The pullback in wholesale lending has already reduced the broker share in recent years, and the change in originator compensation rules looks to do more of the same. Under the new guidelines, most of the economics for brokers are permanently impaired and, consequently, should result in further shrinkage of the broker channel. As third-party origination in general looks to decline with these changes, it suggests that overall prepayments could be somewhat less, all else being held equal. As broker and correspondent originated loans tend to be more reactive to rates, their declining share should somewhat temper the refinancing response. With most other profit channels shut off, we expect brokers and correspondents to increase their focus on high balance loans. While they have done so in the past, the new regulations suggest that the loan size prepayment gradient for TPO collateral could steepen sharply."

The term "girding your loins" is a little dramatic, but investors everywhere are setting up for the loan limit changes. PHH (#5 in originations in the first quarter of 2011 - where did they come from?) reminded clients that, "The current Conforming Plus and FHA maximum mortgage limits apply to loans closed within the government's current fiscal year which ends on September 30, 2011. Loans that are closed with a Note Date that is on or after October 1, 2011 will be subject to new loan limits which will be lower in many areas...PHH will rely on the correspondent to verify a loan is within allowable limits. Any loan not meeting GSE or FHA limits will be ineligible for delivery/purchase." And high balance loans underwritten on its system after 7/1 will receive a warning, "Maximum loan amounts are established by federal law and are subject to change on 10/01/11. Correspondent must insure a loan is within these mandated limits based on property location and closing/note date as required by the GSEs/HUD."

In preparation for the loan amount changes, PHH ended its 120 lock option on June 3rd for loans above a certain balance in its Conforming Plus and FHA sectors. "As September 30th approaches, PHH will continue to modify the available lock lengths. However, to maximize lock option availability, the 30-90 day options will be handled differently. Availability will be based on the limits FHFA and HUD have established for loans closed between October 1, 2011 and December 31, 2011. 30-90 day lock options will remain available for loans within the new limits."

PHH has also been busy in other areas. About a month ago it announced a change in the process for delivery of collateral documents ("Complete collateral document packages must be delivered to PHH's document custodian, Bank of New York Mellon"). PHH also delivered an extensive closed loan checklist to its clients, and recently announced the introduction of its 5/1 VA ARM and new suite of "conforming plus" products: 7/1 ARM, 7/1 ARM IO, 10/1 ARM and 10/1 ARM IO.

Over at Fifth Third (#13 in the industry in the first quarter in originations), with the decrease in rates, the wholesale float down policy is being revised starting today. "The intent of this policy is to assist brokers in the event a borrower demands a lower rate and is not intended to solely improve pricing to the borrower." Brokers were provided with the e-mail and fax for the request, and the transaction must meet certain terms. "The rate must be lowered at least an .125 with the execution of a float down, the loan must be conditionally or fully approved status, 15 day and 30 day float down option is available (15 day float down is only available on a Fully Approved loan, while a 30 day float down is available on a Conditionally Approved loan), and so forth. Brokers can only do it once, and program changes can be made. "Broker income cannot improve through float down execution on Borrower Paid compensation option and cannot change on Lender Paid compensation option...All pricing improvement will be credited to the borrower, the compensation option (Lender or Borrower Paid) cannot be changed after float down execution."

Bank of America issued a note on the signature requirements for "Non-Titled Spouse Notice of Right to Cancel (NRTC)." BofA also issued disaster updates for Alabama and Tennessee.

CitiMortgage spread the word to brokers on "Common Reasons for Declined Loans." It was good to see, although none were a shock. "Reasons Related to Insufficient Income/Funds - Insufficient income for mortgage obligations and for total obligations, insufficient funds to close the loan, insufficient stability of income, lack of cash reserves." Also listed were Citi's underwriters unable to verify income, assets, residence or occupancy, or credit references. Lastly, additional common reasons for declining loans were an incomplete credit application, the CLTV/HCLTV exceeds maximum allowed, unable to verify employment, and ineligible property type(s).

Turning to the markets, yesterday MBS prices were unchanged although traders reported higher-than-average volumes. "J.P. Morgan anticipates that buying from banks and REITs will more than offset the dealer positions, while a new quarter and month will bring in some balance sheet space." The 10-yr ended at 2.99% with no substantive news.


A blonde calls Delta Airlines and asks, "Can you tell me how long it'll take to fly from San Francisco to New York City?"

The agent replies, "Just a minute."

"Thank you," the blonde says, and hangs up.