I had a co-worker once tell me, "After a holiday, the only thing that makes me glad to see the people I work with is having just seen the people I am related to."
Anyone looking for a job should visit JP Morgan's career site. According to the San Antonio Business Journal, JP Morgan Chase Bank plans to hire 1,200 mortgage loan officers in 23 states nationwide by the end of 2010. (Of course, that averages out to 100 per month, or four per state per month, but what the heck - they're still hiring.) "The additional workforce will increase the financial institution's sales force by 60 percent and will help more Chase customers finance home purchases or reduce their monthly payments through refinances. The new loan officers will be spread across bank branches in 23 states. Chase currently has 1,925 mortgage bankers nationwide." Chase originates loans through their nearly 5,200 branches, as well as mortgage offices, call centers, and through retail correspondent lenders in all 50 states.
Brokers have a right to be confused. One the one hand they are hearing the "hard sell" by mortgage banks about the demise of the Yield Spread Premium, and the argument that they should join up with an originator who has a warehouse line or two. On the other hand, brokers are watching existing mortgage bankers be squeezed by warehouse lenders, and by large investor net worth requirements.
The fact of the matter is that the YSP is not dead quite yet, and in fact the "commentary period" goes until Christmas Eve. And no one expects a major shift to be formulated during the week between Christmas and New Years. Even after that, it will take several weeks, if not months, of sifting through those comments until a verdict is reached, after which the implementation could take several more months. At this point the implementation of HUD's RESPA rules, which require brokers to disclose their YSP as a credit to the borrower, is expected to be delayed for a few months. The Federal Reserve proposed rule, with any comments due by Christmas Eve, seeks to prohibit compensation based on any transaction's terms or conditions.
Brokers continue to point to the fact that they are a good variable cost business channel for loan origination, and that it's hard and expensive for large investors to put "bricks and mortar" everywhere there's a broker. It appears that the goal of Fed is to remove the incentive for a broker or agent in a bank to sell something away from the rate sheet. The initial word went out via this release, but to write a comment go to HERE and scroll down a little to find the specific Reg. Z comment section.
In a related, but not the same, issue, HUD published final regulations for RESPA that will have a considerable impact on all mortgage loan transactions beginning January 1, 2010. There is scheduled to be a new standardized Good Faith Estimate (GFE) and HUD-1 forms that are mandatory for all loan transactions, new required written list of Settlement Service Providers to be delivered with GFE, and new restrictions that limit the amount of fees collected to those provided on the initial GFE, except in very limited circumstances. Fortunately HUD has provided samples of the new forms and continues to update a Frequently Asked Questions page. Both are accessible from HUD's RESPA site HERE
But while we're on the updated HUD-1 usage, Flagstar reminded clients that "Unfortunately the usage of the new HUD-1 requires many system enhancements on Flagstar's side and we are unable to accommodate the usage of the new HUD at this time. We ask that all customers please wait until January 1, 2010 until submitting this updated form. Submitting the new form before then may cause underwriting and post closing delays.
Starting tomorrow Flagstar Bank will be making changes to the Making Home Affordable programs which impact the Fannie Mae DU Refi Plus, Freddie Mac Relief Refinance, and the Freddie Mac Open Access programs. It is best to check their announcement directly, but included in the DU Refi Plus changes are existing loans that are not currently serviced by Flagstar will be limited to 105% LTV. (Existing loans currently serviced by Flagstar will remain to be eligible to 125% LTV, based on program parameters.) For Investment and Second Home transactions, Flagstar-serviced loans will be limited to 105% LTV and non-Flagstar-serviced loans will no longer be eligible. Condos in Florida or Arizona will no longer be eligible when the existing loan is not currently serviced by Flagstar.
For the Freddie Mac Open Access programs existing loans that are not currently serviced by Flagstar will be limited to 105% LTV but existing loans currently serviced by Flagstar will remain to be eligible to 125% LTV, based on program parameters. For investment and second home transactions Flagstar serviced loans will be limited to 105% LTV and non-Flagstar serviced loans will no longer be eligible.
And for Freddie's Relief Refinance program, Flagstar states that investment and second home transactions will be limited to 105% LTV, loans with an LTV exceeding 90% must use a Home Value Explorer (HVE) - ordered by Flagstar Bank (value must not be more than 90 days old), property must receive a confidence score of Medium (M) or High (H), etc.
Lastly, Flagstar reminds clients that effective for all loans currently funding they will be requiring a Verbal VOE to be submitted with all requests for funding. "We strongly suggest that the verbal verification of employment be completed the day of, or the day prior to closing in order to ensure an accurate verification."
Fannie's DU Version 8.0, which is slated to be implemented in exactly one month, will update DU's credit risk assessment, the maximum allowable total expense (DTI ratio to 45% (which aligns with their manual underwriting requirement), with flexibilities up to 50% for certain loan casefiles with strong compensating factors (except for DU Refi Plus loan casefiles), the retirement of EA-II and EA-III recommendations (except for DU Refi Plus loan casefiles), the implementation of the high-balance mortgage loan eligibility guidelines, and the ending of HomeStyle Construction-to-Permanent loans. Whew!
Fannie is also going to increase the minimum representative credit score requirement to 620 for both DU and manually underwritten loans (including government loans). "A loan-level price adjustment (LLPA) will apply when the minimum MI coverage level option is chosen. This change is intended to help MI companies preserve capital and potentially increase their capacity to insure conventional loans with LTVs above 80%. In addition, we are simplifying standard MI to be uniform across all products including Flexible Mortgages and manufactured housing, and are retiring the Reduced and Lower-Cost MI options."
Move over Wells, BofA, Chase, and Citi, here comes... PennyMac? PennyMac Mortgage, known as a buyer of troubled housing debt and run by ex-Countrywide employees, expects to start purchasing newly issued loans and packaging them into bonds. Recently, Private National Mortgage started making home loans directly to consumers. "The so-called conduit business that will buy new mortgages to resell as securities will focus on loans eligible to be bundled into bonds guaranteed by government-supported Fannie Mae and Freddie Mac or U.S. agency Ginnie Mae, and potentially prime loans larger than the limits of those entities if the market for related bonds revives, Kurland said."
According to the MBAA, applications rose about 3% last week. Apps to refinance were up about 11%, but apps to purchase properties fell almost 12%. But since refinancing now accounts for 71.5% of all applications, total apps rose slightly. READ MORE
Back to the fixed-income markets, which were closed yesterday in spite of the equity markets being open. The results of the 10-year note were "solid". The auction came in at a yield of 3.47% and a bid/cover ratio of 2.81 - slightly below average. Indirect bidders bought 47.3% of the auction, also slightly below average. Putting the Treasury market aside for a moment, mortgages rates did very well on a relative basis Tuesday. There is a very good demand for mortgage servicing right now, and with volumes light prices rose. The Fed continues to buy mortgages regardless of price performance on a day to day basis.
Today we will have a $16 billion 30-yr bond auction (currently at a yield of 4.40%). We have already found out that Jobless Claims fell for the second week in a row and the four-week moving average of claims was the lowest in nearly a year. Initial claims for state unemployment benefits dropped last week to a seasonally adjusted 502,000, the lowest since January, from a revised 514,000 the prior week. And the four-week moving average dropped to 519,750, the lowest since a matching level in the week ended Nov. 29, 2008. After the news we find our friend the 10-yr at 3.47% and mortgages roughly unchanged.
When Love Fades...
A man was sitting on the sofa watching TV when he heard his wife's voice from the kitchen.
"What would you like for dinner, Love? Chicken, beef or lamb?"
He said, "Thank you, I'll have chicken."
"Screw You. You're having soup. I was talking to the cat."