We have six days until Halloween, after which, it seems, the pumpkin lots magically transform into Christmas tree lots. Halloween goes back to Celtic rituals thousands of years ago - even then guys probably didn't like dressing up for parties. The Census Bureau estimated that there were 41 million potential trick-or-treaters in 2010. No, they didn't count eggs thrown or toilet paper rolls hurled over tree limbs - that was the population of children age 5-14 in the U.S. Last Halloween there were 117 million occupied housing units for them to hit up for Baby Ruth bars. And, drum roll please, the USDA tells us that there were 1.1 billion pounds of pumpkin production by major pumpkin-producing states in 2010.  Illinois produced an estimated 427 million pounds! California, New York and Ohio checked in with about 100 million pounds each.

Here's a tip: the FHA prohibits loans where the FICO of the borrower is below 580 unless the LTV is below 90%. Yesterday the commentary mentioned how some companies advertise something like, "Minimum FICO 560 on our FHA loans!!" Usually these lenders are approved with Ginnie Mae, are issuing their own securities, often are servicing these loans, and therefore can offer these products with few or no overlays. Of course, I am sure that any lenders doing loans "down there" are carefully watching, as HUD will be, how the neighborhood watch numbers are in a year or two.

I can't imagine any time someone walks up to you and hands you a subpoena it is a good day. Imagine what it is like for BofA to be handed a "mortgage probe subpoena" from the State of California!

Are the Morgan Stanley guys the smartest guys in the room? Morgan Stanley, the sixth-largest U.S. bank by assets (how'd they move up there?) will sell its Saxon unit to Ocwen Financial. Thus Morgan Stanley is exiting mortgage servicing in the first quarter of 2012.  Investment banks are selling mortgage servicers - perhaps they didn't count on the higher costs for billing, collections and foreclosures. As you recall Ocwen also bought Litton from Goldman Sachs last month, and reportedly outbid Fortress Financial (owner of Nationstar) in this deal. From Morgan's perspective the sale will reduce its risk-weighted assets as it attempts to meet capital standards set to start taking effect in 2013.

When did HARP become a verb? With all the news yesterday, one research piece noted, "Borrowers still must have originated their loans prior to May 31, 2009.  Not contained in the press release is an expansion of the May '09 or earlier eligibility requirement to more recent origination. Most HARP alumni are NOT eligible to HARP again. Only borrowers that refi'd thru HARP in March-May '09 may HARP again."

That aside, the plan was pretty much as expected by mortgage analysts, traders, and the market in general, with the controversial cut-off date being a nod to mortgage security investors who were counting on some yield, and enjoying the premium MTM price on their books. Among the items to be changed were the elimination of the 125% LTV limit, a Streamlined Refi process by minimizing/eliminating appraisals and extensive underwriting requirements if borrowers are current on their mortgages (when AVM estimate provided by GSEs), Fannie and Freddie agreeing to waive some of their LLPAs for borrowers that reduce loan terms, a requirement that borrowers must be current on their loans for 6 months, and the elimination of the "put back risk" to the originator if borrowers have been current on their mortgages for 6 months (i.e., rep and warranty indemnification).

Put another way, enhancements to HARP Phase II address several other key aspects of HARP including: eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers; removing the current 125 percent LTV ceiling for fixed-rate mortgages (FRMs) backed by the GSEs; waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by the GSEs; eliminating the need for a new property appraisal where there is a reliable automated valuation model (AVM) estimate provided by the GSEs; and extending the end date for HARP until Dec. 31, 2013 for loans originally sold to the GSEs on or before May 31, 2009.

The GSEs plan to issue guidance with operational details about the HARP changes to mortgage lenders and servicers by Tuesday, Nov. 15, and quick investors may start taking locks by early December. Chase & GMAC already announced they would sign on. But since industry participation in HARP is not mandatory, implementation schedules will vary as individual lenders, mortgage insurers and other market participants modify their processes. View the announcement.

Jeff B. from the STRATMOR Group observed, "In view of the President's announcement today about refinancing underwater mortgages owned by the GSE's, this will reportedly enable about 1,000,000 homeowners to refinance their homes.  If we assume an average loan balance of $200,000, this means a potential origination volume lift of about $200 billion in production. Given the MBA forecast of $900 billion, this program would represent about a 22% potential increase in national volume.  And this program still leaves another 10 million underwater homeowners. Maybe it's the start of something more optimistic than we have been hearing?" (Mr. Babcock's statement refers to an MBA release, repeated a few paragraphs down.)

The CEO of Townstone Financial of Chicago wrote, "Any improvement in HARP is good news, since our economy is in quicksand and being weighed down by housing.  It will be interesting to see which banks accept loans under the new HARP, since the minority currently go to 125% LTV, and perhaps major MBS investors insisted on the May 2009 cutoff. It would have made more sense for Freddie and Fannie to go back up to 10 mortgages per individual so that the investors could cleanup some of the inventory and place a floor under the market. Is this really the best program that the administration could come up with?"

Another noted, "Officials keep prolonging the HARP program from 2011 to 2012, and now to some time in 2013, but prolonging the length of the program isn't the problem. This program should be giving all people the chance to refinance, or at least moving the date that Fannie or Freddie purchased the loan from 5/31/2009 to 5/31/2010.  Nothing changed as far as I am really concerned. People who had their loan purchased by Fannie or Freddie before this date still can't do anything and people who have state program-based loans (through various Housing Development Authorities, for example) can't do anything either.  Is this just another smoke screen to get individuals to believe that they are truly trying to help the housing market?"

(Yes, the MBA does things other than lobby Congress and release the weekly application index. It recently released some projections for 2012: "Slow Growth in Purchase Originations, Drop in Refinancing, Weak Overall Economic Growth in 2012" with originations estimated to fall from $1.2 trillion in 2011 to $900 billion in 2012". Jay Brinkmann, the MBA's Chief Economist among other roles, said, "Europe is in or soon will be in recession. There is the risk that the European situation could harm the US financial system, and could lead to further damage to US consumer and business confidence. If that were to happen, we think that the US could fall into a short, and relatively mild, recession. We do not anticipate any actions out of Washington that would have a material impact on the economic outlook.")

Capital Markets Cooperative (CMC) will be acquiring Cunningham & Company, a North Carolina-based lender and a fully approved Fannie Mae and Freddie Mac seller/servicer and a Ginnie Mae issuer. It would seem that the move will add secondary marketing liquidity to CMC's clients, which is a good thing, and the acquisition/retention of servicing certainly ties into the Wilbur Ross investment from several months ago.

Freedom Mortgage sent out word to its brokers that for some USDA loans, business is kicking back in.

GMAC Bank's clients were reminded that "under the Equal Credit Opportunity Act (ECOA), all loans sent to GMAC Bank for underwriting must be decisioned within 30 days of the credit file received date. Credit file received date is defined as the initial upload of any credit documentation to Image Central. The creditor must notify an applicant within 30 days of an approval, counteroffer or adverse action decision. GMACB's current process is to provide the decision to the client, who in turn is responsible for informing the applicant of the decision."

SUNTRUST Mortgage now accepts the use of a Texas or Virginia automatic subordination for a Combo or EZ Two second mortgage when the first mortgage is a DU Refi Plus transaction. Additionally, they clarified that other lenders' second mortgages may be subordinated using Texas or Virginia automatic subordination. And it updated the eligible mortgage insurance (MI) provider list to include CMG Mortgage Insurance Company (CMG). CMG provides MI for credit union lenders.

What did the HARP news do to mortgage rates? When the plan was initially leaked early on, prices on 5.5-6.5% MBS (high coupons) opened down/worse between .5-1.5 compared to the 10-yr Treasury improving by .250. Owners of the high coupon products are, of course, worried, as an asset that you have valued at 108 suddenly becomes worth 100 when the loans pay off. By the end of the day MBS prices closed down/worse about .125 on current coupon products - concerns revolved around the additional supply of mortgages coming into the market, and how strong demand will be.

For fun today we have the release of S&P Case-Shiller HPI for August, expected to show a year-over-year decline, a FHFA house price index number, showing us what Realtors probably already know, and Consumer Confidence (somehow expected to increase slightly). And so far rates are pretty much unchanged from Monday afternoon.

I did not attend, but Blackstone CEO Steve Schwartzman was the keynote speaker at the recent Alfred E. Smith Memorial Foundation Dinner in New York.  He noted, "Brian Moynihan is here tonight. He's the CEO of Bank of America. As many of you know, Brain's brother, Patrick, runs a Catholic boarding school in Haiti. Their parents must be so proud to see two of their boys running an underfunded, non-profit organization."

If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog takes a look at Fannie & Freddie & the FHFA, and the changes they have in the hopper. If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what's going on out there from the other readers.