Here in Denver the city is preparing for next Wednesday's presidential debate. And what would an election be without a Chia Pet in the shape of your favorite candidate. (Although Newt looks like someone's grandma.)
For today's trivia, the last time a Republican was elected president without a Nixon or Bush on the ticket was 1928!! There are 41 days until the election, and it seems like the nation has been watching the campaign and the primaries for years. At this point many polls have President Obama ahead. Presidential debates have the potential to tip the scales for undecided voters, so we'll see what happens. One thing we know, however, is Mitt Romney unveiled a housing white paper on Friday. It proposes a return of private capital to the secondary mortgage market, devolution for Fannie and Freddie Mac, and places a strong emphasis on the 12 million jobs the Romney administration pledges to create. We all know, however, that Fannie & Freddie's fate hangs with not only the president but also with Congress - and what will replace them, if anything? [READ: Romney vs. Obama: An Overview of the Candidates Housing Views]
AllRegs is looking for account executives to cover the states of Minnesota, Michigan and California for AllRegs Education and Mortgage Products divisions. Many know the company as a "leader in compliance, education and risk management solutions for the mortgage and banking industry for the last 20 years." Duties will include selling AllRegs solutions to new and existing customers, meeting specific goals and targets for new sales and maintaining relationships with multiple contacts in each account on various business matters. The ideal candidate will have a good working knowledge of mortgage banking and relationships in their state territory that can be leveraged. Confidential resumes should be directed to Linda Bomar, National Sales Manager & Team Leader, at lbomar@allregs .com.
Returning to things politically related, back in March this commentary discussed the urban myth about the 3.8% real estate sales tax, and I figured it was worth a repeat. "Yesterday, for the 'umpteenth' time, I received an e-mail which included, 'Due to Obamacare, did you know that if you sell your house after 2012 you will pay a 3.8% sales tax on it? That's $3,800 on a $100,000 home, etc. When did this happen? It's in the health care bill and goes into effect in 2013. Why 2013? Could it be to come to light AFTER the 2012 elections? So, this is 'change you can believe in'? Under the new health care bill all real estate transactions will be subject to a 3.8% Sales Tax.' As a fiscally conservative, socially liberal Republican, I had to figure out if this was true. It is not true - in 2013 there will be no "sales tax" on real estate. Congress did approve, however, and the president did sign, a bill authorizing a 3.8% tax on the capital gains (unearned income) on real estate transactions over the existing $500,000 exemption for married couples ($250,000 for singles). Couples have to make more than $250,000 in adjusted gross income for the tax to apply to them (singles more than $200,000). And it isn't very common these days to find married couples in most parts of the nation making more than $250,000 a year, who then also made more than $500,000 in profits on their house sale. See for yourself on page 946."
We have all kinds of industry stats: you can't improve what you can't measure! Mortgage News Daily summed up Ellie Mae's latest "Origination Insight Report" (covering 20% of mortgage originations and coming through a 33% sample of Ellie's platform) showing that "the time needed to close a mortgage loan has increased by almost 25 percent over the last year, from an average of 40 days to 49 and it was refinances that drove the change. The time needed to close a loan for purchase increased from 43 days in August 2011 to 47 days in August 2012 while during the same period the average time required to close a refinancing increased by two full weeks to 51 days. 61% of loans closed in August were for the purpose of refinancing compared to 58% in July." Interestingly "the 61%/39% refinancing/purchase split in August was identical to that of one year earlier. FHA loans represented 21% of all loans closed in August and conventional loans had a 70% share." Pipeline hedgers were especially interested in the closing rates: 48% versus 46% in July 2012. The closing rate for refinancing was 41% and for purchases 60%. For more fun with numbers: ARM's were less than 3% of fundings in August, the average closed loan had a FICO score of 750, LTV of 79%, and a DTI of ratio of 23/34. One year earlier those numbers were 741, 79, and 25/36. At the same time, denied loans had an average FICO score of 708 in August, an LTV of 88, and a DTI of 27/43 where one year earlier those numbers were 696, 82, and 29/45. Lastly, "The percentage of refinances at 95%-plus LTV dropped for the third consecutive month, from 10.2% in June and 8.7% in July to 7.74% in August, a possible sign that HARP 2.0 continues to be cooling off."
Secondary and management folks with whom I have spoken believe that the increased closing percentages are a result of more purchase transactions and timely/ easier short sale approvals from the banks. But as the president of one mid-sized lender told me, "The processing time is crippling the industry. Increased scrutiny coupled with current volumes is causing infrastructure stress. I'm sure an unintended consequence of this is more restrictive access to credit for many. I am concerned the industry is getting too comfortable feasting on high credit quality - this will create a big imbalance at some point."
Talking about volumes and bottlenecks, according to the MBA the level of commercial and multifamily mortgage debt outstanding decreased by $10.4 billion, or 0.4 percent, in the second quarter of 2012. The measure comes from the balance of loans in CMBS, CDO and other ABS issues. "The $2.37 trillion in outstanding commercial/multifamily mortgage debt was $10.4 billion lower than the first quarter 2012 figure. Multifamily mortgage debt outstanding rose to $826 billion, an increase of $5.4 billion or 0.7 percent from the first quarter of 2012. MBA's analysis is based on data from the Federal Reserve Board's Flow of Funds Account of the United States and the Federal Deposit Insurance Corporation's Quarterly Banking Profile." "CMBS loans paid-off, paid-down and were liquidated at a far faster pace than new CMBS loans were originated during the quarter," said Jamie Woodwell, MBA's VP of commercial real estate research. "The drop in CMBS balances more than offset the increases in holdings by Fannie Mae, Freddie Mac and FHA, banks and life insurance companies." Commercial banks continue to hold the largest share of commercial/multifamily mortgages. All the stats you'd ever want can be found here.
The M&A and agency updates have been a deluge in September. As always, it is best to read the actual bulletin, and "good luck" if you're looking for less documentation, lower net worth requirements, or easier processing.
Publicly held Crescent Financial Bancshares will be merging with
publicly held ECB Bancorp. This is the second recent merger announcement
for Crescent Financial Bancshares (Crescent State Bank): last month Crescent
State Bank and VantageSouth Bank announced that they had entered into a
definitive merger agreement. And in North Carolina CapStone Bank will buy
Patriot State Bank for about $10.6mm in cash and stock.
As a reminder, the FHA has revised its policy on qualifying income such that any income from the Social Security Administration may be used provided that it is verified and likely to continue for at least three years following the date on the mortgage application. This includes Supplemental Security income, Social Security income, and Social Security disability insurance. Lenders are permitted to verify these income types using federal tax returns, a Proof of Income Letter from the SSA, a copy of the borrower's Social Security Benefit Statement, or the most recent bank statement, assuming it discloses receipt of SSA income. Borrowers must also provide a copy of the most recent Notice of Award letter stating the SSA's confirmation of their eligibility for SSA income or any equivalent document establishing their award benefits. If the Notice of Award or corresponding document doesn't have a defined expiration, the lender may consider the income effective and likely to continue.
The FHA has reissued the waiver for borrowers with manufactured homes in FEMA-designated flood areas, available here. The waiver is good for one year from the date of its original issuance, July 24, 2012.
As a reminder, the VA has ceased to require the VA certificate for IRRRLs.
With the signing of Honoring America's Veterans and Caring for Camp Lejeune Families Act into law, the maximum guaranty limits for VA loans are subject to increases for the next few months. The relevant county limits should be used to calculate the VA's maximum guaranty amount for all loans closed through December 31, 2012. Once the FHFA provides median price data in November, the VA will publish the loan limits for the 2013 calendar year. In cases where a county's 2013 limit decreases, the VA will guarantee loans using the previous higher limit when provided with evidence of a pre-approval based on a sales contract or URLA completed prior to December 31, 2012. For all the counties not listed here, the current loan limit is $417,000.
All non-bank residential mortgage lenders and originators are reminded that they should have established anti-money laundering and suspicious activity reporting programs as per FinCEN's requirement under the Bank Secrecy Act. The official deadline was August 13th, but those who require additional guidance can consult FinCEN's official communications on the matter and the Anti-Money Laundering Examination Manual.
The USDA Up-Front and Annual fee structure will be changing on the first of October with the arrival of the new fiscal year. For purchase and refinance transactions, the Up-Front Guarantee fee will be 2% (an increase from the previous 1.5% for refinances) and the Annual fee 0.40%. As funding for refinances was exhausted by the end of August, all new refinance commitments dated August 22, 2012 or after are being issued under the FY 2013 fee structure.
Switching to the markets, is everyone thinking that QE3 (QE Unlimited) is the best thing since sliced bread? It is important to note that while QE3 is already in full force with the Fed buying agency MBS with "newly printed money," the money will not reach the economy for a couple of months. Many critics argue that instead of sparking economic growth and lower unemployment that QE3 will devalue the U.S. dollar, raise commodity and asset prices (like stocks), and heighten inflation fears. They argue that there is a limit to what monetary policy can do, especially on the labor market front, and that lenders refinancing the same borrowers they did six months ago will have little real impact. More easy money doesn't necessarily inspire someone to make an investment, take risk, and hire folks. If the Fed wants inflation they may get it and hopefully not too much of it. But be careful what you wish for: when inflation rises, rates must rise with it.
We are seeing a little inflation in certain housing markets. Both the July House Price Index released by the Federal Housing Finance Agency (FHFA), and the S&P/Case-Shiller report showed increases in housing prices nationally. However, unlike Case-Shiller which showed improvement across all cities in its universe two months ago, the FHFA numbers indicate continued weakness in three census divisions (East South Central, New England, and the Middle Atlantic).
We also found out from the Conference Board that Consumer Confidence Index rose nine points this month, far better than expected. In spite of that, fixed-income markets rallied, and 30-year FNMA 3.0%, 3.5%, 4.0%, 4.5% and 5.5% coupons all set historical highs - up about .250 in price. The Fed buying more loans than are being produced certainly helps prices, but even the 10-yr T-note was up about .250 and closed at 1.68%. And mortgage lenders certainly seemed willing to sell into the rally, with Tradeweb reporting volumes at 122% of the 30-day moving average. (It is important to remember that Tradeweb does not include many regional dealers who are buying MBS.)
Today we'll have more housing news with New Home Sales for August at 10AM EST, and a $35 billion 5-yr note auction at 1PM EST. We've already had mortgage applications from the MBA: up almost 3% with refi's accounting for more than 81% of the apps. In the early going the 10-yr is down to 1.63% and MBS prices are about .25 better.
Okay, here is something totally non-mortgage related and not really a joke, but is pretty cool and is about 2 minutes long. Out in California, an Aptos dad found 2 minutes of YouTube fame with the launch of his son's toy train into the stratosphere, and it has a happy ending.