Mobile homes: personal or real property? This may shed some light on the issue.

First RMIC, then PMI, now...Genworth?  And at some point even the other MI companies would agree that we don't need one less company writing policies.


The hype from Monday's HARP 2.0 announcement about making it easier for credit-impaired borrowers to refinance might give the impression that it will filter through into the economy and the housing market. It is a good step, but in a conference call from Credit Suisse, analysts pointed out "this is not a game changer" to housing or the economy. They estimate 720k borrowers will be able to refinance which translates to between $2 and $3 billion in interest savings; so not much impact to the economy or housing. But many investors are focused on HARP 2.0's reps and warrants information. The biggest surprise may have been that Fannie and Freddie will waive their rights to demand refunds from lenders after flawed loan underwriting in many cases.   FHFA Acting Director Edward DeMarco told reporters the companies would offer "substantial" relief from buyback demands when HARP is used without providing "blanket or absolute" waivers, except for fraud.  Fannie Mae and Freddie Mac also will remove ceilings on the permitted difference between loan amounts and property values and reduce or eliminate certain upfront fees charged for weaker credits, the FHFA said. The mortgage-finance companies will also nix appraisals in more instances and require on-time payments only over the prior six months, rather than as long as one year. Look for specifics by 11/15.

But along the lines of refinance, with tight credit and even tighter conduits, what production are loan agents focusing on? Human nature dictates the loans that will be easiest to close - the low hanging fruit. This means the freshest, cleanest files, which at this time in mortgage banking means recent production (borrowers and properties that already passed muster). Analysts are also seeing most of the prepayments coming from the largest loans to borrowers with the highest FICOs and lowest LTV's, and many from 2010 and 2011. Mortgage traders have recently seen a lot of 3.5 coupon production (3.75-4.125% mortgage rates) from originators in the last few weeks. As one trader noted, "The 3.875% note rate isn't competing with the lender down the road; it's competing with the loan you refi'd the borrower into last year." Traders also report a big pickup in originations of 15- and 10-year mortgages.  That signals a potential pick-up in 15-yr mortgage prepayments: who else takes out a 10-year loan but a 15-year refi?

How was volume in the 3rd quarter? The big four banks combined to write $175.4 billion in new mortgages during the three months ended Sept. 30. That is 24% lower than what these lenders wrote a year earlier. Wells Fargo originated $89 billion in new mortgages, down 12% from the $101 billion last year. JPMorgan Chase originated $36.8 billion in new residential loans, down 10% from the $40.9 billion in the third quarter of last year. BofA came in #3, originating $33 billion mortgages in the third quarter, a 54% decline from $71.9 billion a year earlier. (Las Vegas odds makers don't have BofA moving up in the pack this quarter.) And Citigroup wrote $17 billion in mortgages during the quarter, down 8.5% from the $18.6 billion.

Basel numbers, even though they may not take affect for many years, are a concern to mortgage servicers/banks. Here's a "fun fact": Six of the 27 countries that set global banking regulations still have not fully implemented the Basel II reforms agreed in 2004, and only 11 of the 27 have drafted rules to enact the tougher Basel III standards that are supposed to replace them. The Basel Committee on Banking Supervision writes the rules. The risk-based structure of Basel II remains an essential part of the stricter Basel III framework, which includes higher capital requirements and the first global liquidity rules. The Basel II report card found that Argentina has made no effort to implement the agreement at all, and five more were still in the process of implementation. As for Basel III, 11 countries have written drafts, but nine of them are members of the EU, which introduced a bloc-wide version in July. Five more countries hope to have drafts completed by the end of the year, including the US and Switzerland. The rest, including Russia, Japan and India, will take longer. And focusing on Switzerland, the Swiss finance ministry submitted amendments to national capital rules for banks to bring them into line with the Basel III international framework aimed at protecting the industry from future financial crises. Per the article in Reuters, the greatest impact would be on UBS and Credit Suisse: the new rules will force the two big banks to hold equity Tier 1 capital of at least 10 percent, compared with 7 percent under the Basel III industry rules.

Regarding the bill on mortgage underwriting based on energy standards under consideration, R.W. with Aurora Bank writes, "Regarding, the Sensible Accounting to Value Energy (SAVE) Act they might look to the "wildly unsuccessful" Energy Efficient Mortgages from FHA and FN, FH. There were probably 2 done before Fannie pulled their program:

With an eye on the new HARP plan, Wells Fargo wholesale sent a note to brokers saying, "Wells Fargo will be working as quickly as possible to have the changes in place and available to borrowers. However, we will not be able to determine when we will be able to offer the program enhancements until we receive the specific program guidelines - expected in mid-November - and have the chance to interpret them and make the appropriate process and potential systems changes. Only borrowers with a loan sold to Fannie Mae or Freddie Mac before May 31, 2009 are eligible to refinance through HARP. In addition, borrowers who already have refinanced through HARP are not eligible to refinance through the program again. Fannie and Freddie plan to send the program guidelines required to offer this program to all lenders in mid-November. When we receive them, we will work quickly to make the changes required to support the implementation, including any potential changes to our systems in order to offer the program to customers as soon as possible."

In "ol' Virginnie," Hampton Roads based TowneBank announced that Benchmark Mortgage (Richmond) will affiliate with TowneBank Mortgage, a division of TowneBank. Benchmark has branches in Virginia and North Carolina; apparently the name will go away and it will become TowneBank Mortgage. I wish them well.

Yesterday we learned that the FHFA's House Price Index declined 0.1% in August from July which was revised downward to unchanged from an originally reported +0.8% increase. But the S&P Case-Shiller Home Price Index recorded an increase of 0.2% in August for both the 10- and 20-City Composites. Year over year, prices were down 3.5% and 3.8%, respectively. The difference can be found not only in the period the two indices are examining, but also the subject group: the FHFA index calculates prices paid to purchase houses that are backed by mortgages sold to or guaranteed by Freddie Mac or Fannie Mae

Why does "the market" seem surprised when news comes out that Europe isn't going to solve its financial problems overnight? Yesterday it seemed that way in the stock markets, and bonds did well. Bonds were also helped by an unexpected 6.6 point decline in Consumer Confidence to its weakest reading since March 2009. 10-year notes improved by nearly a point, and dropped to a yield of 2.13%. Mortgage prices calmed down after Monday's kneejerk reaction to the HARP 2.0 information. Mortgage banker selling was limited at around $1+ billion, consisting mostly of 4.0% coupons - and remember that the Fed is buying about $1 billion a day. Agency MBS prices rallied about .5.

How about the market du jour? We already saw the MBA application numbers for last week, which cover 75% of the retail market. Apps were up 4.9%, with refi's up 4.4% and purchases up 6.4%. Refi's still make up about 77% of the market, and with HARP 2.0 heading into 2012, this might not change much. We'll also have Durable Goods for September, and at 7AM PST we'll have New Home Sales, expected to drop (shouldn't we be selling some of the old homes still on the market rather than new ones?), and a $35 billion 5-yr note auction in the late morning. So far rates are down from Tuesday, with the 10-yr at 2.15% and MBS prices down.


Sent to me by a Mississippi reader, here is Part 1 of the thirty-one top things that you will never hear a Southern boy say:
31. When I retire, I'm movin' North.
30. Wrestling is fake.
29. I'll take Shakespeare for $1000, Alex.
28. Duct tape won't fix that.
27. Come to think of it, I'll have a Heineken.
26. We don't keep firearms in this house.
25. You can't feed that to the dog.
24. That car is too old and unsafe to drive.
23. Oh I just couldn't. She's only sixteen.
22. We're vegetarians.
21. Do you think my gut is too big?
20. I'll have grapefruit and grapes instead of biscuits and gravy.
19. Honey, we don't need another dog.
18. Who cares who won the Civil War?
17. Give me the small bag of pork rinds.
16. Too many deer heads detract from the decor.

(Part II tomorrow.)

If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at 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.