Monday, October 11 is Columbus Day and a federal holiday. Therefore, many banks and the U.S. Postal Service will not be open for business, but many investors such as GMAC will be open. "Holidays" like this always seem to be a problem for mortgage companies - sometimes companies take locks, but can't hedge them because the bond markets are closed, or vice versa. Columbus Day is not included in the rescission period for refinances, as it is not a business day - this date cannot be included in counting the seven business day waiting period from when the initial TIL was provided. When redisclosure of the TIL is required, this date also cannot be included in counting the three business day period from when a revised TIL was provided to a borrower to consummation. I am sure glad that I am not in a compliance department somewhere...

What are mortgages like in other countries, and do they result in higher default rates? FULL STORY

With all of the housing demand metrics and housing price stats that are thrown our way every month, sometimes it's interesting to take a step back and look at the big picture. Over the very long run, the U.S. builds just over 1.5 million housing units per year, which equates to 1.3 million new households formed plus 250,000 units that are demolished.  Overbuilding in the boom years, however, led to an overhang of 2.0-2.5 million units, and household formation tends to be depressed during recessions - people live with friends or family. READ MORE

Deutsche Bank reports that according to the Census Bureau, the entire US housing stock consisted of about 131 million units as of 2009. This includes single-family, multi-family, mobile homes and apartments. The government data also show total year-round vacancies excluding seasonal rentals of about 14 million units, giving us a national home vacancy rate of 11%, well above the historical average of roughly 7.7% from 1965 to 2005. How long it will take to bring the vacancy rate in line with its long term average? On the supply side, if housing starts remain at their year to date average of 600,000 per year, and on the demand side household formations stay at about 1% per year, then 1.1 million housing units need to be created every year just to meet population growth. Throw in some dilapidation 250,000, and economists come up with net new housing starts equal to 300,000.

With population growth lifting starts by another 1.1 million units, the annual absorption rate is 0.8M units (1.1M units less 0.3M net new housing starts). So smarter folks than me estimate that it will take until mid-2012 for the current absorption rate to bring the vacancy rate down to 7.7% from 10.9% currently. In absolute terms, there are currently 4 million units of excess housing inventory that need to be worked off. Of course, if the labor market improves more noticeably, and household formations accelerate-they have actually averaged 1.6% over the long term-then supply could more quickly be absorbed, possibly by late next year. VACANCY RATES

Under the heading "better safe than sorry", Fannie Mae officials are urging mortgage lenders start implementing new processes to ensure their loans meet the 400 or so eligibility criteria before federal mandates take effect in November 2011. This is out of total of about 500 data points within Fannie's new Uniform Loan Delivery Dataset. Apparently there are 97 required data points for all loans to be delivered to a GSE and lenders need to update their systems to account for new points that may not be included currently. There are 182 conditional requirements, 101 conditionally independent requirements, and 120 optional requirements that may eventually become mandates. Watch for more developments on this in November, 2010. FANNIE MAE GUIDANCE

Portfolio lenders can only lend out so much of their capital to jumbo and Alt-A production. Since the ability to securitize this product is very slow right now, big banks know this, and in the absence of being able to securitize their production, they tend to focus their origination efforts on retail branches rather than wholesale or correspondent lending.

Unfortunately for Alt-A and jumbo specialists, the FDIC approved a proposal that would require lenders to keep 5% of the credit risk for securitized debt if they want protection from new accounting rules governing failed-bank assets. Agency MBS's (FHA, VA, Fannie, Freddie) are exempt from this requirement, set to begin 1/1/11, but "private label" securities are not. Financial Accounting Standards Board rules completed last year require banks to bring most securitizations onto their balance sheets. The Dodd-Frank Act, includes a provision that requires most lenders to hold at least a 5 percent stake in debt they package or sell, in theory making them more attractive to outside investors ("the issuer has skin in the game"). As we know, however, the FDIC's action will not only keep the government involved in the MBS market but seriously harm a bank's ability to sponsor a new securitization, and/or push future securitizations outside of a regulated structure - and is that what we want? MORE INFO

Last Friday CitiMortgage sent out an 8-page bulletin to its correspondent clients. Eight pages are too much to sum up here, and its clients have seen the details. The changes include debt payoff-consolidation (paying down debt to less than 10 months to avoid including the debt in the total debt ratio is not permitted (and applies to both installment loans and revolving/open accounts, and also applies as an overlay to loans approved via DU and LP), gift funds (a fully executed gift letter is required to explain the source of funds whenever funds come from a gift - documenting the source on the application is not an acceptable alternative), documentation requirements for all income types were clarified and sometimes updated, provided a new chart identifying the various types of assets, the eligibility of the asset and what the asset can be used for, etc. etc. After December "lenders must provide credit reports that show the previous 120 days of credit inquiries; this is an extension from the current 90 days. If the credit report indicates that a creditor has made an inquiry within the previous 120-day period, then the Lender must determine whether additional credit was granted as a result of the borrower's request." Clients should read the updated sections carefully as there are other minor changes that are not highlighted above.

U.S. Bank Home Mortgage Wholesale Division announced a change to the underwriting policy for all loan products USB offers including FHA, VA and Conventional starting 10/4. Collections, charge-offs, judgments, garnishments, liens, and delinquent credit (if the total balance is greater than $1k) must be paid off at or prior to closing. This includes taxes, judgments, collections, charged-off accounts, tax liens, mechanics' liens, and liens that have the potential to affect our lien position or diminish the borrower's equity. And clients should include documentation of the satisfaction of these liabilities, along with verification that there were funds sufficient to satisfy these obligations. "Collection accounts or charged-off accounts that exceed the above $1,000 limit in combined balances do not have to be paid off at or prior to closing, provided all of the following are documented: a strong credit profile, meaningful financial reserves, and evidence that the accounts pose no threat to our first mortgage lien.

Yesterday was a good day for interest rates. There was little news, but a decent 2-yr note auction with a bid-to-cover ratio that was the highest/best since mid-2007. With the rally, only $1.2 billion of agency MBS's were bought and sold, with the lion's share being Fannie 3.5's (containing 3.75-4.125% 30-yr mortgages). MBS's finished the day better by .375 which resulted in numerous investor price changes, while the 10-year Treasury note was better by about .75 in price.

(Warning: Parental Discretion Advised, nor is this an actual incident.)

Last week, I checked into the Four Seasons in Palm Beach and was a bit lonely. I thought, "I'll call one of those women you see advertised in phone books for escorts and other things."

I looked through the phone book, found a full page ad for a gal calling herself Samantha Foxx - a very cute gal with assorted physical skills displayed in the photo. She had all the right curves in all the right places, thick wavy hair, long powerful legs, dazzling smile, six pack abs and I felt quite certain I could bounce a quarter off her get the picture. I figured, what the heck, I'll give her a call. 

"Hello, how may I help you?" Oh my, she sounded so sexy!  

Afraid I would lose my nerve if I hesitated, I rushed right in. "Hi, I hear you give a great massage, I'd like you to come to my room and give me one. No, wait, I should be straight with you. I'm in town all alone and what I really want is to have some adult fun - all night long. With implements, toys, rubber, leather, whips, everything you've got in your bag of tricks. Tie me up, cover me in chocolate syrup and whipped cream, anything and everything baby. Now how does that sound?"

"Oh my God - that sounds fantastic, but you need to press "9" for an outside line."