A skeleton walks into a bar and says, 'Give me a beer...and a mop.'

That quip illustrates a point: plan ahead. And anyone mining their rolodex for refinance leads had better do the same.  With the lower rates come refinances (for those that can), and with refinances come "Early Pay Off" penalties from investors. After all, if an investor pays a price premium (more than par for the base price), or pays for the servicing, believing that the loan will be on its books for several months (if not years) and the loan pays off, they will ask for remuneration. An agent wrote to me, saying, "How about us poor originators getting bills for $9K after crediting a client's $4K in closing costs, and then the client refinancing with someone else 90 days later?" Investors have held this card, either on a wholesale or correspondent level, ever since I can remember.

Basically, if an agent or broker originates a loan with yield spread premium (even if it being used by the borrower), the loan has to remain on the books for a period 60, 90, 120 days, depending on the investor - read the contract! Some lenders will let originators refinance the borrower prior to deadlines if there was no YSP or premium paid out originally. Experienced brokers look at the particular investor's time guides, and then control the timing by using the lock period, or will negotiate with the investor prior to the new refinance funding.

Want some stats for that upcoming presentation? Regardless of what many think, the FDIC does more than shut down banks (and today is Friday!). It produces the Regional Economic Conditions (RECON) report that details economic information at the state, MSA (Metropolitan Statistical Area), and county levels. It is helpful in the analysis of risks facing financial institutions. "Using RECON, anyone with internet access is able to drill down to any state, MSA, or county to view standard graphs, tables, and maps depicting economic conditions and how they have changed over time. RECON contains a 'shopping cart' feature that allows the user to assemble charts and tables of interest and then print them together at the end of their session." HERE IS THE DATA

Angelo Mozilo's civil fraud case is scheduled to go to trial on Tuesday, but according to a story in the WSJ he and the SEC are in discussions to settle the case. The case focuses on Mozilo, former Countrywide President David Sambol and former Chief Financial Officer Eric Sieracki failing to disclose the true state of Countrywide's deteriorating mortgage portfolio.

The delay in foreclosures is not a good thing. Yes, foreclosures are a bad thing, but delaying it is even worse. This weekend, when you're at the Halloween craft fair (or "faire" if you live in a high income area), and someone asks you, "What's the big deal?" you can explain it like this. Those servicing companies who have put a moratorium on foreclosing on the property often times still owe the ultimate investor the scheduled monthly interest, based on their contract. And if the loan is possibly subject to a buyback situation, the originator of the loan (whoever sold it to Chase, for example) is certainly going to argue that it is not "on the hook" for interest charges that Chase voluntarily stopped making and thus owed.

The current foreclosure issues certainly increase uncertainty - and markets don't like uncertainty. Bank stocks are down, and they continue to hold on to trillions of "lendable" money because of nervousness about the future. Chase announced that it would now be reviewing 115,000 foreclosure cases in 41 states. PHH's president and CEO stated, "PHH Mortgage is actively cooperating with its regulators, is responding to such inquiries and has completed a comprehensive review of its foreclosure procedures. Based on this review, PHH Mortgage has not halted foreclosures in any states and has no plans to initiate a foreclosure moratorium."

On the title company side of things, to secure title insurance on REO sales, Bank of America has agreed to indemnify Fidelity National Financial if the title is challenged due to robo-signings and other improper foreclosure processing practices. So going forward, Fidelity will provide title insurance on the sale of foreclosed properties. Fidelity will defend the new homeowner in court if a foreclosed owner challenges the title, and BofA will cover the costs and any damages awarded to the previous owner.

Earlier this week I wrote about buybacks. The most common alleged bases for pushback are stated-income misrepresentation, appraisal misrepresentation, occupancy misrepresentation and undisclosed debts. If the lender made an error regarding the loan program or underwriting requirements that would have changed the credit decision, originators are generally accepting responsibility for the loans. "However, a large percentage of the demands that we see fall into an entirely different category: In these loans, the originating lender underwrote to the program rules and guidelines in place at the time of origination. Facts arising after the loan origination, such as job loss, new debt, etc. - or a misreading of the credit report or closing documents - are being asserted as a reason for the pushback," says Scot D. Baker of Pyramid Quality Assurance.

Rumor has it that there are 4 companies specializing in reviewing files, each going through 10,000 files a month, in Fannie's portfolio. "Last Friday, Freddie told mortgage servicers to stop sending cases to the Law Offices of David J. Stern, of Plantation, Florida, and Fannie followed suit on Monday." The law firm has been at the center of recent allegations by the Florida attorney general's office, which released a deposition of a former law-firm employee revealing files being pushed through. So stated an article from the Wall Street Journal.

Those big-hearted folks in Wells Fargo's wholesale department have operators standing by, ready to accept Bank of America wholesale appraisals. "As you know, Bank of America Home Loans announced plans to exit the wholesale mortgage channel. In order to serve you and your borrowers during this transition, Wells Fargo will accept appraisals completed by LandSafe for Bank of America if the appraisal is received on or before Dec.15, 2010. It is critical that the loan is registered with Wells Fargo prior to the appraisal being transferred. Bank of America must provide Wells Fargo with the appraisal and an HVCC compliance certificate that indicates the appraisal is being transferred. These documents may not be delivered by the broker or by LandSafe - they must be provided by Bank of America. New appraisals are required if the transferred appraisals do not meet these document age requirements: Conforming transactions may not be older than 120 days when the loan closes. Non-conforming transactions may not be older than 90 days when the loan closes."

Wells' wholesale channel is also now permitting brokers to credit a portion of their compensation to help cover any closing costs for the borrower for Reverse, or Home Equity Conversion Mortgages (HECM).

Anyone concerned about, or wanting to learn more about, Fannie's LQI is advised to check out the tutorial. "Loan Quality Initiative - Selling Guide Policy Changes and Their Impact on Loan Production Practices"

Thursday was not a good day for stocks or bonds. The primary impetus for the sell off was a poor 30-yr auction, which is somewhat unusual. Are investors growing weary/wary of owning a large amount of US debt? This was a poor week for UST supply as each auction saw "below average indirect/direct bidding, pushing dealers to buy a larger portion of each auction than they had planned. Yesterday the 10-year note lost about .5 in price, and has lost about a point in price this week with the yield hitting 2.49%. Mortgages worsened about .125 in price, and supply from mortgage bankers picked up.

We have already had a lot of economic news. The Consumer Price Index came out +.1%, and ex-food and energy it was unchanged. Retail Sales came out +.6%, ex-autos it was up .4%. (Apparently my Sky Mall purchases of the "Glow in the Dark Cat Litter Box" and "Eavesdrop on Your Office Mate Listening Device" helped.) These numbers were pretty close to expected.

All of this, however, doesn't seem quite as important as Fed Chairman Bernanke's comments on monetary policy at a Boston Fed conference. The timing of this speech is critical, because markets are largely discounting some form of QE2 at the November FOMC meeting. The text of Bernanke's speech was released already, making the actual speech more of a ceremony. The text could shift markets for the rest of the day as folks pick it apart, but the basic sentence could be, "Additional monetary stimulus may be warranted because inflation is too low and unemployment is too high." So far, since the speech, stocks have rallied, and fixed-income securities (like mortgage prices) are roughly unchanged but volatile with the 10-yr at 2.50%. Here is a full recap of the speech: Bernanke Cautious on Further Asset Purchases. Still Sees Need for QE

A very elderly couple is having an elegant dinner to celebrate their 75th wedding anniversary.

The old man leans forward and says softly to his wife, "Dear, there is something that I must ask you. It has always bothered me that our 6th child never quite looked like the rest of our children. Now I want to assure you that these 75 years have been the most wonderful experience I could have ever hoped for, and your answer cannot take that all away. But, I must know, did he have a different father?"

The wife drops her head, unable to look her husband in the eye. She paused for moment and then confessed. "Yes. Yes he did."

The old man is much shaken, the reality of what his wife was admitting hit him harder than he had expected. With a tear in his eye he asks "Who? Who was he? Who was the father?"

Again the old woman drops her head, saying nothing at first as she tried to muster the courage to tell the truth to her husband. Then, finally, she says, "You."