Earnest Hemingway was born in the comfortable Midwestern suburb of Oak Park, Illinois, a place he described as full of, "wide lawns and narrow minds." But at least it is affordable - unlike out west where the San Francisco Bay Area, relative to other parts of the nation, is literally ballooning in property values. Try explaining that to an underwriter in Nashville or Des Moines reviewing an appraisal from San Francisco.

Hey, I know I mentioned this yesterday, but I continue to hear from smart folks around the nation that this HUD action impacts nearly every FHA lender out there. On July 9th HUD Office of Inspector General issued an Audit of Nova Home Loans in Arizona. This audit appears to make down payment assistance from IDA Bond loans and many HFA loans like California's CalHFA, Nebraska's NIFA and Utah's Utah housing programs ineligible. Here is the link to the Nova audit. Many of these programs offer FHA 1st mortgages at higher than market rates in exchange for down payment assistance grants, gifts or second mortgages and now appear to be ineligible for FHA financing.

Innovation is alive and well in the primary markets. MBA's Chairman Bill Cosgrove is also the CEO of Union Home Loan, the owner of vLoan, and he spoke up for vLoan. "Think of vLoan as the eHarmony of the mortgage business," the company's release states.

What if you could have your mortgage paid for? CUNA Mutual Group has launched its new mortgage payment protection product for credit unions and members that covers mortgage payments due to a borrower's death, disability or involuntary unemployment. CUNA has decided to offer this product in order to protect families and individuals when the unexpected happens. Currently, there are about 60 percent of Americans who are not prepared for financial emergencies and more than 30 percent say they have no emergency savings, with 6 in 10 households having experienced financial shock in recent years.

There is also innovation in the secondary markets, and don't forget about Stonegate. Stonegate Mortgage Corp. rolled out a new system that it says will give home-loan investors greater ability to handpick the debt they want to buy. TPO Connect offers detailed information about the more than 1,000 brokers and lenders from which the company acquires mortgages, including the performance of their debt, and will enable buyers to bid on individual loans. Seventeen institutional investors, including hedge funds, real estate investment trusts and banks, have signed up, CEO Jim Cutillo said. The system represents a twist on the more common practice of middleman companies pooling mortgages from smaller originators and selling them in bulk. Stonegate still will acquire the loans before reselling them to investors, while providing some of its normal vetting of the underwriting and more limited contractual promises about its quality, he said. "From the time of application all the way through closing, investors can come in and look at what they want to buy and bid on it...Our belief is that to bring private capital back into the market the investor is going to want more transparency." TPO Connect will offer access to loans that can qualify for government-backed programs, as well as bigger jumbo prime mortgages that don't carry federal guarantees.

How about a summary of the fabled private label market this year? Most banks are still perfectly happy to put plenty of jumbo and non-QM onto their own books - why pay for the cost of securitization?

And Fannie has been running its PE (Pricing & Execution) program for a while for whole loans. Whole Loan (PE - Whole Loan) combines whole loan committing for both mandatory (previously eCommitting) and best efforts (previously eCommitONE) executions on a single platform.

And let's not forget that the FHFA, Fannie Mae, Freddie Mac, Common Securitization Solutions, SIFMA, and other industry groups are working together to develop a single mortgage-backed security issued by the government-sponsored entities. The group also plans to work on the Common Securitization Platform.

Fitch Ratings said another strong quarter of issuance positions new U.S. prime jumbo residential mortgage-backed securities to well outpace last year's levels. Fitch's quarterly U.S. Prime Jumbo RMBS Trends report said eight RMBS deals came to market in the second quarter 2015; despite a slight decline in volume from the first quarter, the number of newly issued transactions added to what turned an already strong first half of the year ($7.1 billion). This year will certainly beat 2014's $8.3 billion and the 2013 total of $13.1 billion.

Yet it was just a couple months ago that American Banker reported that the trading of securities backed by Fannie, Freddie and Ginnie is down sharply since the beginning of the year. Bankers' concerns about capital and rates are among the reasons, and the problem may ultimately make the underlying market for mortgages less liquid.

"Weak first quarter, but growth expected to recover," wrote MBA's own Joel Kan in a recent edition of MBA Economic and Mortgage Finance Commentary. While the economy keeps-on-keeping-on, and as I see fewer and fewer people milling about outside Starbucks on a Tuesday mid-day, it would appear labor and jobs are gaining some sort of parity. However I'm not an economist, and as most know underemployment, coupled with discouraged labor (which is about 99% of the labor I know, by the way), coupled with stagnant wages, is a key factor moving forward. But moving forward, Mr. Kan writes, "Because rates have been low for most of 2015 until recently, we revised our refinance originations estimate upward for both the first and second quarters due to higher than expected MBS issuance data and strong refinance applications in the months of February, March, and April. Refinances are expected to be $551 billion in 2015, compared to a previously estimated $510 billion. We now estimate a total of $1.28 trillion in mortgage originations for 2015, compared to $1.12 trillion in 2014.  Purchase originations are expected to increase to $730 billion in 2015 from $638 billion in 2014." 

Certainly there are changes in the secondary markets. Back in April Fannie Mae began auctioning defaulted home loans to investors.  "These transactions are intended to reduce the number of seriously delinquent loans that Fannie Mae owns, to help stabilize neighborhoods and to offer borrowers access to additional foreclosure prevention options," Fannie Mae Senior Vice President Joy Cianci said last week. "Our goal is to market these loans to a diverse range of buyers."

Per FHFA and the GSEs' (Fannie Mae & Freddie Mac) regulators; certain LLPAs were changed. Different lenders and investors are implementing the change, or will implement soon, based on rate lock periods and pooling lags. For example, as of Monday, June 29th, Banc Home Loans revised agency LLPA schedules which re reflected on the rate sheet and programmed into the online pricing engine. Click the link to view FHFA's April News Release.

June was National Homeownership Month and there have been movements in the government to provide more Americans access to affordable mortgage credit. A recent bill that was passed by the Senate Banking Committee would require the GSEs to partake in front-end risk sharing transactions, which transfers credit risk to third parties when the loan is originated. And the MI companies are out there beating the drum! Utilizing private mortgage insurance is one method to front end risk sharing. Mortgage insurance already provides safeguards against risk backed by private capital. The front end risk sharing method can be carried out in two ways. For loans with a down payment less than 20 percent, mortgage insurance covers the first losses if there is a default but mortgage insurance could provide greater protections on these loans. This would include offering the advantages of reducing risks to taxpayers while allowing the GSEs to lower their fees, which would allow for greater borrower access to mortgage credit availability, reducing borrower costs. Mortgage insurance can even provide protection on loans with down payments of 20 percent or more. Currently, these loans do not require mortgage insurance, but use of risk sharing on these loans through mortgage insurance coverage for first losses would reduce risk.

The U.S. Mortgage Insurers has created a fact sheet indicating that risk sharing with mortgage insurance can further reduce GSE exposure. The finalized Private MI Eligibility Requirements (PMIERS) would provide greater market confidence and establishes robust operational and financial standards. The PMIERS would allow for credit risk to be transferred to third parties instead of back-end risk sharing loans. Deeper MI coverage would reduce both the GSEs and taxpayers risks. Front end risk sharing with MI on down payments greater than 20 percent would also reduce risk to taxpayers and the GSEs and additionally lower costs to borrowers. The USMI suggests that an underwritten loan with 5 percent down with MI reduces taxpayer exposure compared to a loan with 20 percent down and no MI.

Switching gears to the media, Ben Slayton (publisher of Mortgage Compliance Magazine) wrote to tell me that he is launching its second publication on September 1, titled: Mortgage WOMEN Magazine. The September inaugural issue will feature the WOMEN Presidents and CEOs of the nation's independent mortgage banking companies. The publication's mission of is to "empower women who work in the mortgage industry to achieve their highest potential possible and to enable them to take advantage of the opportunities before them by providing them with educational and inspiring information of both academic and self-help information which will prepare them to achieve the highest level positions possible in the mortgage industry."

Ben wrote, "If you know of a woman who is deserving of recognition, who works in the mortgage banking industry (including vendor companies who service the mortgage industry) we want to serve women in all areas of mortgage banking and we are seeking your help in locating these mortgage women stars. Please send their information and a short write up on them as to why you think they deserve to be featured in Mortgage WOMEN Magazine."

Back to the markets: Up a little, down a little, that's the way rates go, right? Wednesday rates headed lower after the Producer Price, Industrial Production, and Capacity Utilization numbers were spat out. Some of the market move was attributed to our friend "the flight to quality" ahead of Greece's parliament vote on reforms required by creditors for bailout money.

Fed Chair Yellen said that the FOMC is on track to raise rates later this year, but did not give any details as to which meeting. Gosh, do you mean to tell me that she doesn't have a crystal ball about events in China, Greece, or Russia? The Fed's Beige Book for July showed improving growth in most regions, as expected. "Several Districts reported that residential real estate activity had increased during the reporting period"; "Home sales were reported as generally increasing across most markets in Boston, Cleveland, Atlanta, Chicago, St. Louis, Minneapolis, and Kansas City. Richmond cited improvement, and San Francisco reported continued growth in home sales"; and "Real estate lending was up in half of the Districts."

Today for thrills, after the Greek government already passed the austerity measures, are Initial Jobless Claims (-15k to 281k, lower than expected), the July Philadelphia Fed (10AM EDT), and the July NAHB Housing Market Index - usually a reflection of the economy rather than a driver of the economy. We had a 2.35% closing yield on the 10-year Wednesday and this morning we're hovering around 2.39% with agency MBS prices worse about .125.

Jobs and Announcements

If you enjoy the mountains, MegaStar Financial Corp., a FNMA and GNMA approved lender headquartered in Denver, Colorado is seeking full or part time auditors & underwriters to join its growing team. (Denver Metro area candidates preferred but will consider out of state/work from home on a case by case basis.) "Our well established, financially strong 15 year old company has branches from coast to coast and lends in 23 states.  Additionally, our advanced technological systems allow you maximum efficiency in our paperless workflow environment. If you have at least two years of experience as an auditor in either QA or QC & Compliance OR at least 4 years' experience underwriting VA & USDA (in addition to Conventional & FHA) we would like to talk to you about joining our fast paced progressive team. Please forward your confidential resume to humanresources@megastarfinancial. com and reference the position for which you would like to apply.

Speaking of jobs, SecurityNational Mortgage Company, licensed in 48 states, has tripled its size in the last 24 months. "We are expanding our branches in all areas and currently looking to fill sales positions in the Southeast markets. We have an immediate need for Branch Managers, Loan Officers, Processors, and Underwriters, in Alabama, Georgia, South Carolina, North Carolina, Mississippi and Tennessee. Join an established, publicly traded company that will support your sales efforts in every way: state of the art technology, marketing, CRM, local operations team, aggressive compensation plan, medical/dental/vision and matching 401K." SNMC's 22 year history demonstrates staying power and great leadership with its President being voted one of the top 100 Mortgage Executives and an active member of RESBOG for the MBA. For a confidential interview contact The Regional Director of Business Development David Gueterman.