Attack of the FHA loan files? 

Most of the United States begins Daylight Saving Time at 2:00 a.m. on the second Sunday in March and reverts to standard time on the first Sunday in November. So by my calculations, that means that this Sunday here in the U.S. most of us "fall back" and it will dark by dinner time.

I doubt if this will impact the pace of the Fed buying securities backed by mortgages. For the week ending on October 28th (yes, they end their week in the middle of the calendar week) the Federal Reserve's MBS program was a net buyer of $18 billion agency MBS, which was the similar to last week. For the year purchases of agency MBS stand at $977 billion. Recently the Fed has had an appetite for 30-year 5.0s and 5.5s (which include 5.25-6.125% mortgages). The Federal Reserve finished its $300 billion Treasury purchase program yesterday, and at this point the mortgage purchase program will end in March.

As one trader said regarding yesterday, "What a difference a day makes." Bond prices went down and rates went up, the equity markets saw some nice gains, oil moved above $80 per barrel again, and the 7-yr auction went nothing like the 2 & 5-yr sales from Tuesday and Wednesday. Was all that due to a slightly-stronger-than-expected GDP number? Some of it was, although analysts quickly point out that a good portion of the increase is due to government spending. But as most know, markets are like springs: when they move far enough in one direction, they can snap the other way very quickly.

Fortunately for mortgage rates, relative to Treasury yields, locks and supply are down somewhat and there is decent demand for new production, so mortgage rates did better than benchmark yields. The major earnings announcements are behind us, and many companies feel that they are done cutting costs and now are hoping for actual revenue growth. Imagine that!

Today is a "newsy" day, so we could see some continued volatility. We have already seen Personal Income and Consumption (Spending). U.S. consumer spending, as expected, fell in September for the first time in five months, down 0.5% with a slight upward revision in August.

Personal income was flat last month after rising 0.1% in August, also as expected. Savings increased to an annual rate of $355.6 billion, lifting the saving rate to 3.3 percent from 2.8 percent in August - and some of that will go into stocks and bonds, right? Later we have the Chicago Purchasing Manager's Survey, along with a revision to the Michigan Consumer Sentiment numbers. After the news we find the 10-yr at 3.44% and mortgages a  better.

The expected extension and expansion of the tax credit, probably the last one, is expected to be voted on as soon as today and probably signed in the next few days, at best. The signing may happen in spite of the administration preferring a slightly different version. The latest version, and this has not been voted on by the Senate, would extend the credit to home sales that go under contract by April 30 and close by June 30, 2010. A new, $6,500 tax credit would be available for buyers of owner occupied primary residences who have owned during five of the eight years prior to the purchase. Although the House may have its own version, this extension includes a few items such as the home price limit would be $800,000, and the annual income limit to qualify for the tax credit would be $125,000 if you're single and $250,000 for couples.

And regarding the loan limits: appropriations committees in the House and Senate are proposing to extend the temporary limits for conforming jumbo loans, keeping the $729,750 loan amount through 2010 in some markets. The committees recognize that the government must do what it can to not de-stabilize the housing markets, and are thus recommending this action. Of course, nothing is simple, and the proposal is attached to an appropriations bill to fund other initiatives - in other words, it is not standing by itself. The entire appropriations bill still face votes in both the House and Senate. As I see it, at this point there is no reason not to extend the limits - it just hasn't been done yet.

Anyone selling loans to US Bank in "declining markets" after November 3 had better note their changes to Second Mortgage and Simultaneous HELOC products and maximum LTV's. USB removed several states from their declining markets list (including GA, OH, MN, VA, DC, and MD) which changes their maximum LTV from 75% to 85%. Going the other way, however, are ID, UT, WV, and NY (for HELOC's), which join AZ, CA, FL, IL, MI, NV, NJ, NM, OR, RI, and WA.

Are print editions of newspapers dead? Not quite! For adjustable-rate mortgages based on a London Interbank Offered Rate (LIBOR) index, Freddie Mac wants their clients to use the print edition of the Wall Street Journal. "Seller/Servicers must inform borrowers in writing that the LIBOR value to be used in calculating the interest rate adjustment is the average of rates for six-month or one-year U.S. dollar denominated deposits, as applicable, as published in the print edition of The Wall Street Journal."

So you think it is easy being a loan modification agent? Five people from Southern California, feeling they were victims of a loan modification scheme, took matters into their own hands and allegedly beat and tortured two loan mod agents. The defendants are charged with torture, false imprisonment by violence, and second-degree robbery.  According to authorities, they live in a house in foreclosure, allegedly sought loan mod assistance from the victims but believed that nothing was being done and wanted their money back. The victims also were allegedly robbed of their loan paperwork (gasp - their loan paperwork!?!) and personal belongings.

Flagstar, who seems to be coming out with changes 3-4 times a week these days, after December 1 will reduce their maximum allowable fees test from 4.75% to 4.00%. (Clients should use Flagstar's "high cost calculator" if there is any question, and clients are reminded that "even though Flagstar performs these tests, ultimately it is your responsibility to comply with these new guidelines as well as all state and local high cost requirements.") Flagstar also changed the pricing adjustment on Freddie Mac detached condo properties by removing the -.75 loan level price adjustment for LTVs >75% although all other condo properties will continue to receive this pricing adjustment. And speaking of condominiums, Flagstar, following FHA's extension of the implementation date of the condominium approval revisions, set Pearl Harbor Day (12/7) as the date.

But wait, there's more from Flagstar! Effective for all loans funding after this weekend, Flagstar will be requiring a Verbal VOE to be submitted with all requests for funding, hopefully completed "the day of, or the day prior to closing in order to ensure an accurate verification. A Verbal Verification of Employment is currently required to be submitted on all conventional loans at closing. This change expands this requirement to make it a condition for funding on all loans."

GMAC correspondents learned that GMAC, following Fannie's lead, is making some changes to credit scores for manually underwritten conforming loans after today. In addition, GMAC made a change to adjustments for the FHLMC Relief Refi Open Access products for high LTV, low FICO products.

(Warning: PG rated.)

Charlie was fixing a door and found that he needed a new hinge, so he sent his wife to Home Depot.  At Home Depot, Mary saw a beautiful bathroom faucet while she was waiting for Walt, (the manager) to finish waiting on a customer. 

When Walt was finished, Mary asked: "How much for that faucet?"

Walt replied, "That's pewter and it costs $300."

"My goodness that sure is a lot!" Mary exclaimed. Then she proceeded to describe the hinge that Charlie had sent her to buy, and Walt went to the back room to find it.

From the back room Walt yelled, "Mary, you wanna screw for that hinge?"

Mary replied, "No, but I will for the faucet!"

And while we're PG, with respect to tomorrow: How come the witch couldn't get pregnant? The warlock husband had a hollow weenie.