Here is an interesting note I received from a capital markets VP in Florida: "Rob, I have nicknamed my company's sales staff the 'If only's.' It seems that practically every conversation I am having includes a 'If only I had a (fill in the blank)'. You name it, they're suddenly asking for it: government loans with no appraisals required, extended locks, construction to perm product, one time close, portfolio ARM products, and the list goes on. Are you seeing this with other capital markets departments?" Yes I am. Yes, volumes have dropped, for a variety of reasons: the old locks have moved through the pipeline and not been replaced with new locks, higher loan level price adjustments, higher origination costs, higher rates, everyone being on vacation, and so on. The tendency is for originators to look for new products or outlets when this happens. So yes, you are not alone out there.
Let me think about this... how much success does a mortgage plan if the MBA, HUD, the securities industry, and the FHFA are aligned against it? Perhaps not much. In this case, the eminent domain process, led by Steve Gluckstern, John Vlahoplus, Graham Williams, and others, was dealt another blow when HUD questioned whether the new loans would be eligible.
And we're definitely heading toward a world where QM = QRM. This is one of those things where if we have to have it, this minimizes the amount of further restriction on the lending industry. We'd all like the actual QRM news to be a non-event.
Berkshire Hathaway (Warren Buffett) apparently likes Wells Fargo. It upped its stake in Wells by 1.1%.
No one is too old to learn about compliance, right? Today is a webinar titled, "What Every Loan Officer Should Know about Compliance." It is today from 2-3PM EDT. This commentary wrote about the event last month, and the links are already set and user-specific. But if you want to listen in, call +1 (415) 655-0057, Access Code: 932-355-526.
"Rob, once the Fed stops its QE program and buying $85 billion a month of Treasury securities (yes, one part of Washington D.C. buying what another part issues) does mean rates will automatically go up?" Good question, especially as earlier this week the San Francisco Federal Reserve released a paper estimating that asset purchases, also known as quantitative easing, add only "a moderate boost" to economic growth. And that boost itself is dicey, as it really depends on the central bank promising not to raise short-term interest rates, the study found. Between November, 2010 and June, 2011 the Fed bought $600 billion of paper (QE2), but the guys in SF said the purchases added about 0.13 percentage point to real GDP growth. And without the guidance from the Fed that rates would be held close to zero, QE2 would only have added 0.04 percentage points to growth, the economists found. The study fits with the view of some monetary policy experts who argue that asset purchases are really just "earnest money," or a signal to markets that the Fed is going to keep interest rates low for longer: while the Fed is buying assets, it won't be raising rates. Psychologically, once the Fed starts to taper asset purchases, the market will quickly turn its attention to when the Fed will hike rates. So it is almost as if tapering is priced in to the market, and traders are wondering when rate hikes will commence.
By the way, Native Americans used beads, the Dutch monetized their tulips, and in the '00's we Americans had an affinity for real estate (hey, they 'aint makin any more of it, I'm sure you've heard a time or three). At some point, someone must have pointed out the absurdity of using a flower bulb to store wealth, and it was at that tipping point that a guy with a warehouse full of Burning Hearts thought, "I wonder if I'll be able to send my kids to college now". The point being, all markets reach an apex, and maybe it's an example of how far the real estate markets have come since then, but I've occasionally started hearing about this "housing bubble" we're in. A couple weeks ago Pro Teck Valuation Services has an interesting article on why the current rise in home prices is not necessarily anything to worry about.
Let's take a look at some recent agency, vendor, and investor updates.
Fannie Mae updated its Servicer Disaster Assistance Policies. On August 7, Fannie Mae issued Servicing Guide SVC-2013-16 which updates assistance policies for borrowers affected by earthquakes, floods, hurricanes, or other catastrophes caused by a person or event beyond the borrower's control. The announcement provides a table of new pre-approved forbearance terms for borrowers affected by a disaster. Fannie Mae reminds servicers that while they have discretion to determine the appropriate duration of forbearance, any forbearance that exceeds the set terms must be approved in writing by Fannie Mae. The announcement also (i) updates requirements for insurance claim settlements, (ii) requires that income documentation be no more than 180 days old at the time of the post-disaster foreclosure prevention alternative evaluation, (iii) directs servicers to suspend credit reporting for a disaster-impacted borrower during a repayment plan or Trial Period Plan if the borrower is making the required payments, (iv) reduces eligibility requirements for streamlined modifications for borrowers completing a disaster-related forbearance plan in a FEMA-declared disaster area, (v) introduces a new modification, the Cap and Extended Modification for Disaster Relief, and (vi) addresses escrow analysis requirements prior to offering a Trial Period Plan for certain disaster-related modifications. All of these policy changes took effect immediately.
MSI is no longer requiring appraisals for VA IRRRL loans so long as they comply with all guidelines and use the applicable 307100 product code. Note that this is not available in all states; for the full list of states see the daily rate sheet.
Effective immediately, MSI is no longer closing or purchasing loans where the borrower claims two primary residences within a 12-month period unless the current servicer can provide a written statement that the first primary residence has been changed to a second home or investment property.
As part of its long-term effort to clarify underwriting requirements for the purpose of complying with ability to repay and QM, MSI is requiring that borrowers using funds from IRA/402(k) or Keogh Retirement Accounts provide documentation that they have unrestricted access without penalty along with confirmation that the income is expected to continue for at least three years following the loan's closing. In cases where the borrower is at least 59.9 years of age and the assets are in the form of stocks, bonds, or mutual funds, MSI will allow 70% of the current value to be used as income, which is calculated after any withdrawal of funds to complete the loan transaction. Foster care income guidelines have also been clarified and now state that MSI requires evidence of a two-year history of having received the income and current copies of the contract or agreement with the relevant government agency.
M&T is one of the banks that has chosen not to affect the State of New York's order to exclude the FHA MIP increase from the APR calculation; as such, it will not accept loans that exceed the state's subprime threshold inclusive of the increased FHA MIPs. This is subject to change if a subsequent order is published with a longer duration, in which case loans could be evaluated on a case-by-case basis.
To accommodate weekend home shopping, Cole Taylor Mortgage is allowing loans to be locked through 11.59pm every Saturday, replacing the previous cutoff time of 11.59PM on Fridays.
Cole Taylor has updated its lock extension policy for Jumbo loans has also been updated such that the maximum extension time allowed is now 30 days; in cases where additional days are required the loan will be subject to worse case pricing, effective for all new extension requests and new locks. The maximum allowable net price for Government fixed rate products has also been revised so that it has increased to 105.000.
Carrington Mortgage is now offering USDA loans through its retail and wholesale lending channels in addition to its FHA and VA purchase options. With the new products, borrowers with DTIs of 41 or less and FICO scores as low as 580 can receive up to 100% financing on purchase, rate/term refinance, and Streamline refinance transactions.
United Wholesale Mortgage has rolled out its new UWM Connect service, which monitors borrower credit pulls for activity and transmits the information for brokers that have previously worked with them for potential leads. UWM also provides the broker's contact information to borrowers, and account executives keep in regular contact to alert brokers of credit pulls so that they have the option of reaching out to former borrowers themselves.
Mortgage Harmony and Denver-based LenderLive have entered into an agreement whereby the former will begin servicing the latter's loans. In addition, LenderLive will offer the HarmonyLoan product, a consumer-initiated interest rate-resetting mortgage with a recurring LO comp structure, to its borrowers. Full details here.
Residential mortgage special servicer Statebridge has signed an agreement to enter a strategic partnership with Denver-based FrontRange Capital Partners. Proceeds from FrontRange's investment will be used to repurchase the entirety of Integrated Asset Services' current ownership share, buff up Statebridge's balance sheet with the intention of qualifying for GSE servicing, and upgrade it's operational and IT platforms.
Let's move to the markets! After Tuesday's selloff, the fixed-income markets were pretty quiet Wednesday. The Producer Price Index numbers were below expectations which should have helped. It also lent a bit of support as it could mean a slower pace to the Fed's tapering when it begins. Traders reported that flows in MBS were generally balanced (supply and demand) with most selling happening in 30-yr 3.5 and 4% coupons (containing 3.75% and above 30-yr fixed-rate mortgages). The 10-yr closed out around 2.71% - with higher rates partially attributed to the pickup in Europe.
Today is a new day, of course. We've had July's Consumer Price Index (core expected unchanged at +0.2, the headline +.2% as expected and the core rate was +.2%); August's Empire State Manufacturing Survey (+10 versus 9.46 previously; 8.24 actual) and Initial Jobless Claims (+335k versus +333k, was down from a revised 335k down to 320k). This morning we'll also have the Industrial Production and Capacity Utilization duo for July, projected to be little changed from the prior month at +0.3 and 77.9, respectively. Winding it up at 10AM EDT are August's Philly Fed Index (+15.5 from 19.8) and the National Association of Home Builders Housing Market Index for August. After the strong Jobless Claims number, rates have moved higher, and the 10-yr is sitting at 2.79% and MBS prices are worse about .250.
Okay, here is five minutes of commercials to watch. But just not any commercials - Ameriquest did a great & funny job on them:. Even the first 40 seconds is classic.