Deanna Favre issued a statement the other day saying, "Those pictures Brett sent to that reporter were meant for me - but you know Brett - they were intercepted!"

What's a poor mortgage banker to do? The MBA released their mortgage rate predictions yesterday. They expect rates on the 30-year fixed-rate mortgage will average 4.4% in the fourth quarter of 2010, increasing to a 4.7% average in the first quarter of 2011, and climbing to 5.1% by the end of next year. I am not smart enough to predict rates, nor do I really care to remember predictions from a year ago. But somewhere I seem to remember everyone and their brother predicting rates were going to go up during 2010 - and here we are with 30-yr rates near 4%. They say that economists are good at explaining why their previous predictions did not come true. Of course, being an economist is certainly more difficult than, say, being a weatherman in some place like San Diego. ("The weather today is.... nice...back to you, Lou.")

Yesterday I mentioned a Mortgagee Letter - "Requirements for Combined Loan Amounts." There was some confusion upon visiting HUD's site, but remember that "This Mortgagee Letter eliminates the requirement that the sum of all liens not exceed the geographical maximum mortgage limit for both purchase and refinance transactions...Only the FHA-insured first lien is subject to FHA's maximum mortgage limits." One can view the 2010 letters and click on the letter of your choice. An astute reader points out that the notice says specifically that the CLTV limits are not changed, and that lenders still have to be within the 97.75%. HERE is the mortgagee letter. FHA also posted its updated condo recertification processing requirements document on-line.

Speaking of HUD and FHA and programs in that arena, Ginnie Mae is increasing the base net worth requirement for Single Family Program participants. Remember that Ginnie Mae does not buy or sell loans or issue mortgage-backed securities (MBS), but instead guarantees investors "the timely payment of principal and interest on MBS backed by federally insured or guaranteed loans" mostly FHA & VA loans, but also loans from the USDA Rural Housing Service (RHS) and HUD's Office of Public and Indian Housing (PIH). Minimum net worth is moving from the current $1 million base requirement to $2.5 million in 2011. "In addition, the formula for calculating the additional net worth required above the base net worth requirement is changing. Currently, additional net worth is calculated as 1% of Remaining Principal Balance (RPB) plus the amount of available commitment authority between $5 million and $20 million, plus .2% of RPB greater than $20 million. With this change, additional net worth will be calculated as .2% of the Issuer's RPB, plus the amount of available commitment authority."

Ginnie Mae is also instituting a new liquid asset requirement, and will require that Issuers eligible for its Single Family Program have liquid assets of 20% of Ginnie Mae's net worth requirement. Single Family Issuers will have until October 1, 2011, to meet the new liquid asset requirement. For full details go to and click on "New Financial Requirements".

Should modified FHA or VA loans be put into a generic Ginnie Mae security with other, non-modified loans? Last year Ginnie Mae began collecting several new data elements on the "Schedule of Pooled Mortgages", and although entering them then was not mandatory, it will be starting in February. "In order to improve the quality of data being disclosed, Ginnie Mae is changing its requirements for loan purpose, credit score, and loan-to-value ratio from "optional" fields to "required" fields. Failure to submit the required data elements at pooling will result in a failed pool. The loan purpose codes have been changed, with "purchase" and "refinance" remaining, but with the addition of "Loan Modification - HAMP" and "Loan Modification - Non-HAMP". Perhaps the enhanced disclosure will calm investor concerns about modified loan prepayments, but the goal seems to be keeping modified loans TBA-eligible.

Here is a very interesting spin on bold programs. During the Great Depression in the 1930's, HOLC, another mortgage acronym that has been forgotten, was created to refinance housing debt. It did not eliminate all foreclosures, but certainly helped. Check it out this story on the Home Owner's Loan Corp.

I received a few comments, always appreciated, on QEII yesterday.

"I take serious exception with one of your lines: 'As I mentioned recently, when the US government, who prints money, wants inflation, it is not a wise strategy to bet against them.' I am not arguing against the point, but I think that it's an extremely relevant fact that monetary policy and the printing of money is done by the Fed, a private corporation, owned by the TBTF banks and private members, and that the printing of money is not done by the government. I fundamentally believe that QEII, the printing of money is a disastrous idea. I know that my radical views won't make your commentary..."

"One of the issues I have with the QE notion is that there already is a ton of excess money on the system. There are $1 trillion in excess bank reserves parked at the Fed.  Lack of confidence on the part of business and consumers makes folks less willing to borrow (and spend).  The effects of QE 2 will be a deflated dollar (and the ill-conceived notion that somehow the only effect will be to lower the trade gap) and perhaps inflation.  One could make a case that the only this QE 2 is doing is monetizing debt since there is no apparent way to service it."

"QEII is a euphemism for printing money out of thin air....i.e. inflation.  But terms like "inflation" and "printing money out of thin air" aren't politically palatable any longer, so creative semantics takes over and we get "quantitative easing".....just vague and mystic enough for the public and financial press to defer to the Fed's delicate genius and refrain from opposing such blatant intrusions on our economic liberties as Americans. I'm not sure what "adequate money supply" means exactly.  Adequate to whom?  I would think markets would best determine the money supply. Inflation is the increase in money supply, and rising prices are the consequence of the inflation that's already happened. The money supply has already been inflated substantially, and rising prices have followed, and will follow.  Commodities and many foreign currencies are at all-time highs against the dollar.  QEII means a further erosion of US consumer purchasing power, and lower standards of living...and possible hyperinflation. Now Geithner is at the G20 lecturing the world's healthier economies.  I heard one commentator say that's like having an F student lecture the straight-A student about how the A student shouldn't study so much because they are making the F student look bad."

CitiMortgage released its set of monthly credit policy overlays to its correspondent clients. In it Citi lays out the additional guidelines as compared to DU, LP, DU Refi Plus, LP Open Access, FHA, FHA Streamline, VA, and VA IRRRRRRL (I always lose track of the R's) programs. When I am traveling and speaking to folks, I am often asked why investors have overlays. I tell them because even though the government guarantees certain programs, the servicing company still has to deal with the problem loans, and incur the additional expenses. Citi sums it up: "In order to reduce the risk of the loans we purchase, CitiMortgage has credit overlays in our policy in addition to agency guidelines."

Union Bank released a "3 common errors made on the Broker GFE that can cause rejection by Union Bank" memo.  Block 1 MUST include Broker Compensation, Broker Processing and UB Origination charge of $1,595.00 and must match the figures input in the Union Bank Mortgage Broker Fee Disclosure. Block 5: If the loan is a purchase, UB requires disclosure of the Owner's Title Insurance in Block 5, regardless of who is paying this cost (disclosure of this amount is not required if property is located in Washington or Oregon). And in Block 8, if the loan is a purchase, UB requires disclosure of the Transfer Taxes regardless of who is paying this cost (disclosure of this amount is not required if property is located in Washington or Oregon).

Are you feeling more confident? Even if you're not, whoever is surveyed by the Conference Board is - their Consumer Confidence Index rose slightly in October to 50.2 from 48.6, but remained at its second lowest level since February.  The low level remains a concern for the spending outlook. Also recall that yesterday's Case-Schiller home price index fell -0.3% in seasonally-adjusted terms in August, the second consecutive monthly decline. Nearly all 20 metropolitan regions of the country showed sequential declines in August-with the exceptions of New York and Washington, D.C. which were flat. On the "good news" side, housing affordability is extremely high according to NAR. And it may seem that commercial banks are easing lending standards for prime mortgage borrowers, per the August Senior Loan Officers' Survey compiled by the Federal Reserve showing it's first loosening in underwriting standards since 2006.

Tuesday $3.5 billion in MBS's were sold, and prices ended the day worse by .375-.50. The mortgage supply is certainly helping to push prices down and rates higher, and on the Treasury side the 10-year Treasury hit its highest yield in over a month. Always easily spooked, the markets seem to be focusing on the possibility that next week's Fed announcement will be "disappointingly incremental". 

An Arizona couple, David and Samantha Ribbon, had 9 children.

They went to the doctor to see about getting David "fixed". The doctor gladly started the required procedure, and then suddenly asked them what finally made them make that decision. "Why, after 9 children, would you decide to do this?"
David replied that they had read a recent article about 1 out of 10 children being born in the United States probably ending up working in the mortgage services sector, and they just couldn't afford to take that chance.