This is 70 seconds of "head shaking, jaw dropping," why one should never bet on cards.

Many of us enjoyed a little BBQ grub yesterday. For the meat eaters, there is almost a 1 in 3 chance that the hot dogs and pork sausages consumed on the Fourth of July originated in Iowa. The Hawkeye State is home for nearly 20 million hogs and pigs - almost one-third of the nation's estimated total. North Carolina (8.6 million) and Minnesota (7.6 million) were also homes to large numbers of pigs. And Texas accounts for about one-sixth of the nation's total production of beef hot dogs, steaks, and burgers. (Nebraska is #2 and Kansas #3, per the USDA.) For chicken, the lion's share (food humor) comes from six states: Georgia, Arkansas, North Carolina, Alabama, Mississippi, and Texas. And let's not forget the lowly potato: approximately half of the nation's spuds were produced in Idaho or Washington in 2011.

The industry, and servicing values in the state of California, waits to see if the governor signs into law the "Homeowner's Bill of Rights." Among other things, "The bills also create an overly-complicated approach to prohibiting dual-tracking, lack clarity around critical definitions, and fail to address many industry concerns, including that a new 'right' to modification is being created." Here is the latest effort to stop it.

Nearly 20 financial services trade groups issued a joint letter protesting a plan in California to use eminent domain to seize mortgages from private investors. [Read: Proposal to Seize Underwater Mortgages via Eminent Domain not Well Received] These groups see this as a serious threat to the mortgage market as it offers a way to restructure mortgages without costing taxpayers a dime. If the program in California is successful, there is a fear it would be implemented across the United States, meaning mortgages in most states are at a prepayment risk. It also could impose losses on whoever holds the credit risk on the mortgages. The success of the program could cause much higher risk premium going forward the market as there is massive prepayment risk whenever a loan is underwater; thus, higher mortgage interest rates and a strain on the housing recovery. Previous permits to restructure mortgages without incurring losses for taxpayers have run into Constitutional problems or needed taxpayer funding. Under the Constitution, the government must pay the fair value for property seized under eminent domain. The courts have previously said this power extends to the seizure of mortgages. This means the holder of the credit risk would suffer a loss on the underwater portion of the loan. The government can then restructure the loan so the borrower is no longer underwater. The Supreme Court has long held that states cannot tax the federal government. There are potential losses through eminent domain as similar enough to keep investors from trying it. Whether this could apply to loans backed by Fannie and Freddie is a more open question as these entities are now under conservatorship and the federal government has pledged to ensure they have positive capital positions. But they are also private companies. Not surprisingly the financial sector objects to the use of eminent domain, arguing it would do more harm than good by drying up the supply of credit and further depressing home prices. 

Switching topics, though it hasn't issued any written guidance on the matter, the FHA has mandated that loans are not considered eligible for FHA financing if existing tax liens haven't been paid off or the borrower isn't in a repayment plan.  Unless a fully executed payment arrangement and proof of 12 months' timely payments can be provided, tax liens should be paid in full before closing.  Satisfied tax liens should be removed before closing, and for cash-out refinances, outstanding liens may be paid off using proceeds if an underwriter approves the decision.

In the wake of its decision to rescind previously issued guidance on collections and disputed accounts, the FHA has decreed that the current guidelines remain in effect.  As per this guidance, judgments must be paid off, but collection accounts are not required to do so.  Disputed credit accounts or derogatory credit on public records discerned through a credit report must be referred to an underwriter, though for accounts of less than $500 and more than two years old, AUS approval will suffice.  The FHA also clarified that only eligible borrowers who sign the Note and their legal spouses are allowed to take title to VA properties at closing and that income-based repayment student loan payments must be included in debt ratios.  IBR payments of over $100 require the actual payment amount to be included.  Cases where the payment is less than $100 and 1% of the total loan balance is more than $100 will require a minimum of $100 to be included.

Game-changing investor & agency updates continue. Remember that it is best to read the actual bulletin, but this will give you a flavor for what is going on out there.

Wells Fargo Funding is requiring sellers to follow the standard Disaster Policy with regards to any properties affected by the wildfires in Colorado.  Properties located within seven zip codes of El Paso County and five zip codes of Larimer County must be re-inspected for damage from fire, smoke, heat, and ash.

Flagstar is imposing a minimum FICO score requirement for all FHA streamline refinances that are registered on or after July 6th.  Such loans that aren't serviced by Flagstar will require the borrower to have a credit score of at least 680; note that FHA DE Delegated loans are exempt and that there are no ARM products available for these types of loans.  Clients should register and lock non-Flagstar serviced loans using the correct product name ending in "other servicer," which allows the loan to be priced accurately.

Those based in New York should be aware that Fifth Third is working with the state government on licensing requirements and should watch for communications on any changes.  For the time being, Fifth Third will continue to accept new applications, registrations, and locks for New York properties.

Affiliated Mortgage, who had announced that it will no longer lock, re-lock, or extend any FHA Streamline Refinance transactions as of June 18th, reminded clients that all such loans should be delivered in fundable condition prior to July 11, 2012 and purchased by AMC before July 18, 2012.  All FHA Streamline Refinance transactions registered before June 15th are subject to a -2.0 pricing adjustment.

As of July 2nd, Franklin American ceased to allow FHA streamline refinances on 2-4 unit or investment property transactions. Franklin American also revised its pricing adjustment for USDA loans with FICO scores over 720 to +0.250.  For loans with FICO scores between 640-679, the adjuster has been updated from -0.250 to -0.500.


Clearpoint Funding has updated its offerings to include a non-credit qualified FHA Streamline Refi loan that will allow current FHA borrowers to refinance without an appraisal and less in the way of documentation.  In order to be eligible for the non-credit qualifying loan, homeowners must have a mortgage-only credit report from all three repositories with a minimum score of 660 and 12 months' payment history, while the credit qualifying loan requires a minimum score of 640 and six months' payment history.  The maximum cap for all FHA Streamline Refinances has been updated and is now 4.25%.

Mortgage Harmony Corp., home of the borrower initiated interest rate reset feature trademarked as the "HarmonyLoan" has been busy recently. They just launched a web based portfolio retention solution, called HarmonyLoan Conversion Software, which portfolio lenders can use to immediately free up sorely needed back office personnel.  In less time than it takes to process, underwrite, and close 1 loan, they deliver a solution to retain thousands of loans at the "click" of a button. For additional information, please contact Kevin Ziolkowski at kziolkowski@mortgageharmony .com or see Kevin at the California Mortgage Banking Conference in San Francisco, July 9-12th, 2012.

US Bank has revised its submission requirements such that applications should include the updated version of the broker's specific office or company form, the Title Company Fee Sheet, a signed and dated Fannie 1003 form, the Borrower's Authorization Form, a fully completed Mortgage Loan Origination Agreement, and Anti-Steering Disclosure.  For HELOCs, the Title Company Fee Sheet and Anti-Steering Disclosure aren't necessary.

Fifth Third has clarified its Property Fieldwork Waiver policy for DU Refi Plus loans.  If either Fifth Third or the correspondent seller has obtained an appraisal on a subject property in the last six months, the appraised value must be entered into the property value field in DU. If a PFW is not returned, the appraisal should be underwritten as per the DU findings.

United Guaranty issued a reminder that borrowers should be designated as "self-employed" when they own 25% or more of a business and the positive income from the self-employment is being used to qualify them.  Borrowers must fulfill both criteria to be considered self-employed, while borrowers who own less than 25% of a business or who aren't using the self-employment income for qualification do not need to be indicated as being self-employed.  When verifying borrowers' self-employment, UG requires a verbal verification to be obtained within 30 calendar days prior to the note date; for regular employment, the verbal verification should be obtained within 10 business days prior to the note date. 

GMAC reminds correspondent clients that all loans submitted for purchase on and after March 7, 2011 will mandate a Closing Protection Letter.  The letter should include the names and addresses of the borrower and closing agent and all of the necessary signatures.  In addition, the Title Underwriter issuing the letter must be the same as the Title Commitment Issuer.  Loans that don't include this letter will be suspended until it is received by GMAC.

Stearns Lending launched its Initial Disclosure Portal, a system that lets brokers more easily request Initial Disclosure documents and create a TIL program.  The IDP is accessible via SNAP and will be available for loans that are in the process of locking or registering with Stearns; loans pre-locked through Quick Pricer will not produce this option.

Weststar has updated the FICO adjusters on all FHA, VA, and USDA loans with credit scores in the 620-639 and 640-679 ranges.  For the former, the previous -1 adjuster has been revised to -1.5, while for the latter the previous -0.250 has been revised to -0.500. A reminder has been issued by Weststar that electronic signatures may not be used for FHA initial disclosures, final applications, final disclosures, and closing documents.  They are, however, permitted on FHA third party documents and Fannie, VA, and USDA forms.

Turning to the markets, Tuesday, with the early close in the fixed-income markets, MBS prices finished down/worse by about .125 - better than the US 10-yr note which was down about .375 and closed at 1.62%. But that was then, this is now. This morning's ADP came in better than estimates by 75% - +176k. And Jobless Claims dropped 14k to 374k, lower than forecast.

And the MBA reported what lock desks everywhere already knew: last week's applications dropped almost 7%, with refi's down over 8% and purchases up almost 1%. It is the third straight week of declines. The refinance share of total mortgage activity slipped to 78 percent of applications from over 79 percent the week before. The government refi index had declined by 21%.

At 10AM EST is the ISM Non-Manufacturing Index for June, called lower, and at 11AM is the Treasury's announcement of the details of next week's auctions of 3- and 10-year notes and 30-year bonds - estimated unchanged at $66 billion. But tomorrow is the big day for news with the 5:30AM PST employment reports. But in the early going, MBS prices are better than Tuesday afternoon by about .125 and the 10-yr yield is at 1.59%.

Very punny, part 1 of 2:
52 cards = 1 decacards
1 kilogram of falling figs = 1 FigNewton
1000 milliliters of wet socks = 1 literhosen
1 millionth of a fish = 1 microfiche
1 trillion pins = 1 terrapin
10 rations = 1 decoration
100 rations = 1 C-ration
2 monograms = 1 diagram
4 nickels = 2 paradigms
2.4 statute miles of intravenous surgical tubing at Yale University Hospital = 1 IV League
100 Senators = Not 1 decision