Yesterday the commentary noted how jumbo lending was alive and well, at least for depository banks. Zillow recently analyzed what areas would be more likely to require a jumbo mortgage and created an interactive map showing jumbo business. In their analysis, Zillow assumed that each home is purchased with a 25 percent down payment and looked at each zip code within the major metro areas. For example, in zip code 98039 encompassing Medina, a city just outside of Seattle, more than 99 percent of homes are likely to require a jumbo loan, whereas in zip code 98108 covering Beacon Hill and Georgetown - the more modest Seattle neighborhoods- only 1.3 percent would require a jumbo mortgage.
Fannie Mae has announced DU changes for government loans beginning the weekend of September 12th to include the implementation of the October 2014 changes and changes to comply with FHA's new Single Family Housing Policy Handbook. After the October 2014 DU for Government Loans release, the previous code was to be reversed due to FHA total scorecard issues. These changes will now be re-implemented, including updates to how Gift Funds should be inputted. Other changes to DU will be made to include omitting FHA installment liabilities that are less than 10 months and in aggregate are less than 5 percent of all income on the loan, the calculation on whether seller contributions apply will be updated to be based off of the purchase price and simple refinances should be entered as Rate and Term (No-Cash-Out) refinances in DU as MI amounts shown on the findings will not be correct and will need to be verified.
Fannie Mae Collateral UnderwriterTM (CUTM) Version 3.0, coming in September, will make the appraisal data and CU findings (CU risk score, flags, and messages) available in the CU web-based application within 10 minutes of the submission of an appraisal to Fannie Mae in the Uniform Collateral Data Portal® (UCDP®). This update, based on lender feedback, enhances lenders' ability to use CU near real-time in their workflows to support appraisal quality control. View Fannie Mae's CU 3.0 September release notes.
Take advantage of Freddie's access to the Guide, a full list of its Guide forms, Guide Update Spreadsheets, as well as other Guide resources by accessing Freddie Mac website.
In order to provide additional time for Servicers to solicit eligible borrowers, and for eligible borrowers to submit the executed Dodd-Frank Certification (DFC) or Guide Form 720, Freddie Mac is extending the September 1, 2015, date to January 1, 2016. To be eligible for the incentive, borrowers must submit an executed DFC or Guide Form 720 on or before the later of: The sixth anniversary of the HAMP Trial Period Plan Effective Date, or January 1, 2016.
Freddie Mac posted a reminder that Loan Prospector® will be updated on July 19, 2015, to help streamline the underwriting process for assets and reserves. Review the April 15, 2015, Single-Family News Center article for more details on the upcoming enhancements, as well as information on available resources.
In order make doing business with Freddie Mac easier, several updates have been made to the Freddie Mac Servicer Performance Profile, including single sign-on functionality. You can log into the Servicer Performance Profile one time and then freely navigate to the Manager Series and Freddie Mac Servicer Success Scorecard (Scorecard) without having to log in again. Other enhancements include adjustments to a timely calculation on REO Notifications based on holidays, quarter-to-date results for Alternatives to Foreclosure criteria, new denominator loan-level reports available by contacting your account manager or Customer Support (800-FREDDIE) and updates to the calculation of Percent of Ending Hard Rejects to Total Loans in Portfolio.
And don't forget conventional adjustable rate mortgages. Plaza Home Mortgage updated its Conforming Arm to include if the subject property is a second home or investment property, the borrower may have up to six financed properties when the loan is underwritten with LP as the AUS. Its Super Conforming Arm now allows if the subject property is a second home or investment property, the borrower may have up to six financed properties when the loan is underwritten with LP as the AUS. Plaza's update to its Super Conforming Fixed reads if the subject property is a second home or investment property, the borrower may have up to six financed properties. Affordable Seconds are now eligible forms of subordinate financing.
"Rob, are you hearing that US Bank is tearing up the market with its home equity products?" Yup - at least it was earlier this year. I was speaking recently with an appraiser who still says he lives off the stuff even though US Bank started buying up the market earlier this year. Interestingly enough, plenty of borrowers took out equity lines many years ago, and the end of their interest-only phase is in sight. What to do?
Even in the spring earlier this year lenders reported seeing a big increase in home equity lines of credit - the most popular way to turn equity into cash. This should be no surprise to anyone, given a) the appreciating markets, and b) the low interest rate fixed-rate loans millions of borrowers have. HELOC's from ten or more years ago were mostly priced at Prime (currently 3.25%) plus a very small margin, say one-half percent (0.5%) or less and many had a negative margin (like Prime minus one-half percent).
All the chatter about the Fed raising short term rates has the home equity herd spooked, however. Banks set their Prime rate based on what they are able to pay when they borrow from the Fed, so if the Fed bumps its rate one-quarter of one percent (0.25%) then chances are very high the Prime rate will go from 3.25% to 3.5%. And the second issue that most HELOC holders have to contend with is, depending on the term of the note they agreed to and signed, the end of the interest only payment period on their HELOC.
Most HELOCs funded prior to the market melt downs in 2007-09 were 20 year loans with a 10 year interest only period. At the end of the 10 year period the loan becomes fully amortized, meaning no more interest-only payments. As LOs are telling clients, the primary factors for options for many borrowers are their current debt to income ratio (DTI), the combined amount of their 1st and their HELOC, and the value of their home.
LOs are telling most clients that they have four basic options with their home equity line. The first is that if they have funds available in savings/investments the borrower may wish to just pay off the remaining balance. If a borrower is able make the fully amortized payments, they could pay down as much as they can while the borrower can leverage the current lower rate - thus reducing future mandatory payments with higher rates while being fully amortized. Third, they could refinance the HELOC, which will depend on the LTV limits of the lender. Lastly, the borrower could refinance their current primary mortgage and HELOC into one 30 (or 15) year fixed rate mortgage, thus locking in their rate at today's low levels.
Experienced LOs know that the Agencies take a special interest in that last choice - lumping the two together and refinancing the whole kit & caboodle. Fannie Mae and Freddie Mac consider paying of a HELOC as part of a new first mortgage transaction to be considered "cash-out." But some lenders do not consider the transaction to be "cash-out" if the equity line has not been used in the prior twelve months. I don't have the time, space, or energy to go through the dozens of lenders and bank's programs, but suffice it to say that cash-out or non-cash-out refinances have different criteria for LTV and pricing, and often depend on the balance of the 1st being refinanced.
How many times have you told your kids that in today's economy and competitive era, it is continuously getting harder and harder to find jobs? Well, I'm here to tell you the one thing people of any age hate to hear more than anything else: you're wrong. Well, that may be a little extreme, but I got your attention didn't I? While it may not be easy as pie to get a job, the recent Job Openings and Labor Turnover Survey (JOLTS) continued to show and improving labor market with hiring increasing during the month. WHOOPIE the kids may get out of the house. Other things that moved rates last week included retail sales, which continued to climb with auto sales keeping up with that trend; business inventories surging in June which will help boost the already-reported second quarter real GDP reading.
This is all great news as the Fed has said over and over that it needs to see an improving economy and labor market to raise short term interest rates. Not everything is good, however: the renewed drop in oil prices, which is now at a six-year low, likely will keep the rate of inflation low. But the Fed only needs to be "reasonably confident" that the rate of inflation will reach its explicit target of 2 percent and it typically sees fluctuations in commodity prices as "transitory". However, the recent devaluation of the Chinese yuan and overall slow global growth reopened the door to another round of economic uncertainty that once again rattled financial markets and could push the rate hike to December. I'll end on some good housing news: Housing starts surged 9.8% in June and existing home sales rose 3.2% while single-family home sales rose 2.8 percent, condo sales jumped 6.6 percent for the month.
Flipping over to rates, fixed-income securities sold off yesterday, although agency MBS prices did a little better than Treasuries. I heard no real reason for the price movement, aside from good ol' supply & demand so I won't waste your time trying to make something up. In somewhat interesting news, outgoing Dallas Fed President Richard Fisher will be replaced by Robert Steven Kaplan, who led both Goldman Sachs' investment banking and investment management units before leaving for Harvard Business School in 2006. I guess making a zillion dollars a year isn't the end-all goal for some.
This morning we've already seen the MBA application numbers for last week (apps were +3.6% with refis up over 7% and purchases -1.1%). We've also had the Consumer Price Index numbers: +.1%, core +.1%, with year-over-year numbers well below the Fed target. Later are the FOMC Minutes for the July meeting - don't look for any fireworks but hey, who knows!? We closed out the 10-year T-note Tuesday at 2.20%, and we're sitting around 2.19% with agency MBS prices unchanged.
Jobs and Announcements
In the correspondent channel, the Correspondent Lending Division of Banc Home Loans provides delegated and non-delegated correspondent customers with "exceptional service and a full range of lending products, supported by the resources of a $6.5 billion, tier one bank. Banc Home Loans Correspondent Lending helps customers grow their business with 48-hour underwriting turn times, rapid response to loan scenarios, minimal overlays to all agency guidelines, and 100% financing from Banc of California's Warehouse Lending division. Banc Home Loans is a division of Banc of California N.A. (NYSE: BANC) and also offers comprehensive Renovation Lending solutions for 203(k) and FNMA HomeStyle, and an expansive non-agency Jumbo Loan offering (to $5M; $1M cash-out, $85LTV to $2M, and investment properties). To learn more about how Banc Home Loans can help open doors and grow your business, or to schedule a meeting at the MBA Annual Convention, Oct 18-20 in San Diego, please contact Larry Maitlin.
And on the retail side, congratulations to Patrick Mullen. Service First Mortgage based in Dallas, Texas, a "purchase-driven company with an outstanding reputation, announced that Patrick has joined the company in the position of National Recruiter. Patrick brings with him passion and proven success in talent acquisition that is a great fit for Service First's collaborative team approach to mortgage lending. Patrick's brings with him over 12 years in leadership roles and development in talent acquisition and he will be the Service First ambassador spreading the word on our unique approach to business built on our S3 platform of Speed, Service and Synergy. If you are an experienced purchase, referral based loan officer or branch manager interested in joining a company where your voice is heard, check out Service First (ServiceFirstmtg.com) or email careers@joinservicefirst. com or call 800-321-2320 ext. 800."