Happy birthday to Tina Turner who turned 77 on Saturday. (I doubt if her personal information is at risk after HUD was hacked.) I bet Tina, who is a Swiss citizen, has some Swiss Francs in her bank account. In this country, there is currently about $1.8 trillion sitting in checking accounts at financial institutions across the country. That is a lot of money earning roughly, on average, $0 every year. And the markets think that a chunk of it will be siphoned off, in the eventual form of taxes, to pay for re-building roads and other infrastructure, causing inflation, causing higher rates.
FHFA announced that the 2017 conforming loan limit for mortgages acquired by Fannie Mae and Freddie Mac will be increased nationwide from $417,000 to $424,100. The FHFA said its own home-price index (HPI), which it uses to set loan limits, showed values rising 6.1 percent in the third quarter from a year earlier. (Recall that the Housing and Economic Recovery Act of 2008 (HERA) set the baseline loan limit at that existing level for one to four family houses in most of the U.S. and required it be adjusted each year to reflect any changes in the national average home price. When prices continued to decline HERA also made clear that the baseline could not be adjusted upward until the average U.S. home price returned to its pre-decline level.)
The increases in the conforming loan limits could make it much easier and cheaper for some first-time homebuyers to enter the market, as the down payment and credit requirements for government-backed mortgages are often looser than those of jumbos. The increase could bring a negative reaction from some Republicans who say the government should have a smaller footprint in the mortgage market.
FHFA reported on Wednesday that its third quarter House Price Index (HPI) is now 1.7 percent higher than in the third quarter of 2007 and the agency has raised conforming loan limits by 1.7 percent to $424,100. The new loan limits are effective January 1, 2017.
For those along the coasts, and a couple spots in-between, FHFA designates as so-called high-cost areas, markets where 115 percent of the local median home value exceeds the baseline loan limit. HERA sets the maximum loan limit as a function of the area median home value with a ceiling on the limit of 150 percent of the baseline limit. Under this formula, the new limit for the highest cost areas will have a ceiling of $636,150 in 2017. Other counties will have limits below that amount, but higher than the new baseline. FHFA said as a result of generally rising home values, the increase in baseline loan limit, and the rise in the ceiling loan limit, the maximum loan limit rose in all but 87 counties (or county equivalents) in the country.
(There are additional separate calculations for Alaska, Hawaii, Guam, and the U.S. Virgin Islands for one-unit properties with additional exceptions for some especially high cost specific locations.)
Does it mean as much as it used to? I received this note from an ex-Agency officer. "Rob, in the past the conforming loan limits were used as a benchmark for the industry. They still are. But the weight the limit carries has become more symbolic than practical. The limits have no bearing on non-QM loans, portfolio product, or on any non-agency products. Pools allow up to 10% of super-conforming/high balance conforming loans. In fact, in many areas the rates on "jumbo" loans are less than Fannie & Freddie loans. Why? With jumbo loans, there is no ~50 basis point guarantee fee, which many feel is over-charging borrowers and lenders for the risk on current production - portfolio lenders are financially valuing the perceived risk lower than the Agencies want to earn on their gfees. The loan limits are a convenient way for lenders to measure home values, but their importance has diminished."
Lenders and investors far & wide continue to adjust their conforming conventional offerings.
Wells Fargo updated its LTV/TLTV/CLTV matrix for Prior Approval Loans to reflect Fannie Mae's 90% maximum LTV for purchase and "No Cash-Out" Refinance ARM Loans secured by primary residence cooperatives. Wells has removed its overlay related to real estate commissions totaling more than 8% of the sales price on conventional Conforming, Non-Conforming, and Guaranteed Rural Housing (GRH) Loans. Wells also announced it has expanded its identity of interest policy for Non-Conforming Loans by removing the requirement for a Generic VECTORTM automated valuation model (AVM) or field review.
Wells announced changes to its Preferred Payment Plan (PPP) which offers borrowers a .250% interest rate reduction on their loan when their payment is automatically withdrawn (also known as ACH) from a Wells Fargo checking or savings account. The new policy allows borrowers to select a financial institution of their choice for the automatic payment withdrawals.
Sellers can now Register/Lock Fannie Mae HomeReady Loans combined with Fannie Mae's high balance mortgage loan amounts on wellsfargofunding.com. A call to Priceline is no longer required. Also, Wells has consolidated its subordinate financing guidelines for Non-Conforming Loans within Section 825.09: Credit - Long-Term Debt in its Seller Guide for ease of use.
Fannie Mae servicers are reminded, as they complete their principal reduction modifications, to reference the eligible campaign codes listed on page 10 of the Principal Reduction job aid. The campaign codes listed, in addition to the campaigns codes specific to the principal reduction program, are the only campaign codes eligible for Principal Reduction - Case Two submissions.
NationStar's Correspondent Seller guide has been updated.
Effective for new casefiles created in DU 10.0 on or after December 10 purchase transactions will no longer be eligible for Property Inspection Waivers (PIW) for Pacific Union Financial correspondents. Casefiles created in Desktop Underwriter 10.0 prior to December 10 and resubmitted to DU on or after the Fannie Mae update are eligible to proceed with the PIW provided the purchase transaction meets all PIW requirements, an appraisal has not been obtained for the transaction, and the final Desktop Underwriter submission reflects PIW eligibility. The Correspondent is responsible for ensuring that the Property Inspection Waiver (PIW) is eligible, per applicable state law. If not eligible, a full appraisal is required.
Parkside Lending is integrating with Fannie Mae's DU validation service that will verify employment, income, assets and estimated property value electronically! "This new service will save you and you borrowers the time you'd otherwise spend collecting bank statements, tax returns, pay stubs and scheduling appraisals - and enable quicker loan decisions. Look for this option to be available after Fannie Mae's update of DU 10.0 during the weekend of December 10."
For all conforming DU approved loans, PennyMac will be aligning with the updates announced in Fannie Mae SEL 2016-08.
loanDepot's Wholesale division now offers a new low down payment option to its broker partners: Fannie Mae HomeReady Mortgage.
On December 10, lenders will receive Fannie Mae's Day 1 Certainty with freedom from representations and warranties on property value for eligible loans with a Collateral Underwriter risk score of 2.5 or lower on the appraisal. Follow these steps to gain Day 1 Certainty on appraised value.
While the income validation component of Fannie Mae's Day 1 Certainty initiative is available to lenders, the other components (asset, employment, PIW and CU relief) are not being launched until December 10th. As they become available from Fannie Mae, M&T Bank will purchase loans from Correspondent lenders who engage in the Day 1 components, obtaining the various rep & warrant relief.
Effective December 1 Mountain West Financial will no longer entertain Investment Purchase Transactions to First Time Homebuyers. In addition, effective 12-2-2016 the following changes to the Sapphire program will be implemented: 640 minimum FICO score, 45%+ debt-to-income (DTI) ratio requires two month reserves, 700 FICO score required for 50%+ DTI and 50% DTI requires two-month reserves. MWF has also suspended the Mountain Combo product until further notice.
All lenders can now opt in to Fannie Mae's Desktop Underwriter (DU) validation service. The DU validation service is currently available for the upfront validation of income and will be expanded on December 10 to include the validation of employment and assets.
REI Oklahoma, which works with various lenders about down payment assistance programs, announced that it's adding the Freddie Mac HFA Advantage mortgage to its current list of offerings. The HFA Advantage mortgage goes up to 97 percent loan-to-value. In addition, REI Oklahoma offers 3.5% or 5.0% down payment assistance in the form of a gift to qualified homebuyers. Learn more about REI Down Payment Assistance, income limits and guidelines, and find a lender in your area. Interested lenders should contact Dena Sherrill at 800.658.2823.
While we're on agency stuff, Sun West Mortgage Company has published guidance on acceptability of properties with outstanding Property Assessed Clean Energy (PACE) or HERO programs. The guidance is available in General Requirement section in Underwriting Guide for Forward Mortgage, both wholesale and correspondent.
Shifting to the capital markets, since all these F&F loans end up there anyway, in Wednesday's trading session treasury prices fell causing rates to move higher as a reading on US manufacturing demand (Durable Goods) was significantly higher than forecast. The 10-year's ended Wednesday at 2.35%. And on Friday U.S. Treasuries were nearly unchanged despite stocks hitting all-time highs; the 10-year ended the week yielding 2.36%.
For scheduled news, this week we have quite a bit - although there is zip today. Tomorrow we jump in with GDP for the 3rd quarter, core PCE, the S&P CoreLogic home price indices from September, and Consumer Confidence. Wednesday we'll have the MBA's application data showing that no one took any apps last week, although maybe they'll adjust it, along with Personal Income and Personal Spending, more PCE (Personal Consumption Expenditure) figures, the Chicago Purchasing Manager's survey, Pending Home Sales, and the release of the Fed's Beige Book. On Thursday, December 1, we'll have Initial Jobless Claims, Construction Spending, and some 2nd tier Institute of Supply Management numbers. Friday we'll have all the employment data for November. Will it matter given that the Fed increasing short term rates in a few weeks is all but guaranteed? Maybe, maybe not - but it will give the financial press something to yap about.
We closed the 10-year last week yielding 2.36% and this morning it clocks in at 2.32% with agency MBS prices better between .125-.250 versus prices at the end of last week.
Jobs and Announcements
I received this note from Gellert Dornay, President and CEO of Axia Home Loans. "I'm super excited to welcome Shelly to Axia's executive team! Her decades of experience in leadership roles with the Federal Home Loan Bank, Thornburg and other fantastic mortgage companies, banks, and GSEs will make a huge contribution to our continued growth and positive impact on the communities we serve." Axia Home Loans announced that Shelly Schwieso is joining the company as SVP of Business Development, developing and coordinating the organization's strategic planning & development activities, and evaluating prospective merger and acquisition targets & key partnerships. A 28-year veteran, Shelly is known for her passion to help loan advisors maximize their opportunity for individual growth through operational excellence and commitment to client experience. Shelly states, "I joined Axia because they aren't just building a state of the art mortgage experience, but because I wanted to be a part of something truly special; a sustainable, employee-owned mortgage company focused on the joy of homeownership." If you are interested in becoming an owner of something special, click here.
And Primary Capital Mortgage, a retail, wholesale, and correspondent lender, recently added two new executives to its leadership team: Liane Taylor, SVP Human Resources, and Spencer Mosness, Chief Legal Counsel. Liane Taylor comes from TriStar Services, where she spent the past six years as VP of Human Resources, and Spencer Mosness formerly served as Premier Home Mortgage Inc.'s first attorney and General Counsel. "Liane and Spencer have guided companies through times of accelerated growth and offer firsthand knowledge of what it takes to grow strategically and successfully," said Primary Capital CEO Anthony Coniglio. "As we set our sights on some very significant and important goals over the next three years, I know they will both be incredible assets to our management team." In addition to these new executives, Primary Capital has hired more than a dozen new employees over the past quarter and plans to continue hiring aggressively heading into 2017. To view current job openings or to learn more about Primary Capital's growth, click here.
Compass Analytics is actively seeking a knowledgeable Sales Representative with a background in technology sales. This position will focus strongly on client acquisition for CompassPPE (CPPE), Compass' product and pricing engine, and includes learning about integration capabilities and effectively educating prospects on CPPE to bring them through the sales cycle. Compass an innovator in the exciting and growing FinTech industry and offers a unique opportunity for growth and experience, with a casual-yet-focused, fast-paced work environment including an outstanding compensation and benefits package. Interested candidates should email a cover letter with resume to Marketing Manager Sarah Slagle.