My wife asked me last night, "What would you do if I won the Lotto?" I said, "I'd take half, then leave you." "That is excellent," she replied. "I won $12 bucks, here's $6, now get the heck out."

Life throws surprises at us all the time, and unfortunately for every single person in this industry, or so it seems, the looming RESPA changes have the potential of bogging down the business. And it is not even a surprise - we've known about it for months! Loan agents are confused about the forms, small mortgage brokers are wondering how they're going to adhere to the changes (even if they can figure out what those changes are), mortgage banks are wondering about their responsibilities, and investors are concerned about both their clients following the guidelines and wondering if loans that fall outside of them will cause a new series of lawsuits. And will their systems be able to handle the new process?! Even when investors notify their clients about RESPA changes, they are quick to note that their announcements are not to be relied upon as comprehensive.

Brokers are, understandably, concerned. (Is that an understatement?) For starters, the form is on HUD's site. And remember that HUD is on your side: "HUD announced that for the first four months of 2010, the staff of the Mortgagee Review Board (MRB) will exercise restraint in enforcing new regulatory requirements under the Real Estate Settlement Procedures Act (RESPA), due to take full effect on January 1. The MRB instructed its staff to exercise such restraint in considering an action against FHA-approved lenders who have demonstrated that they are making a good faith effort to comply with RESPA's new requirements."


On the correspondent side, CitiMortgage reminded their clients that each loan that is sold to Citi "comes with your representation and warranty as to compliance with the RESPA Rule and any other federal, state or local law, rule or regulation governing the origination of consumer residential mortgages. Every Correspondent is responsible for its own compliance." For Citi, the new loan package must include: the final GFE on the RESPA Rule's new form, all documentation relating to any "changed circumstances" as defined in the RESPA Rule, the RESPA Rule's new version of the final HUD-1 Settlement Statement; and the final Itemization of amount financed.

Citi stated (and there is no reason to believe that other investors would vary from this) that the "Summary of Your Loan" and "Escrow Account Information" of the Final GFE and "Loan Terms" of the Final HUD-1 must match exactly. "If they do not, the Final GFE (that was properly prepared and submitted to all borrowers in compliance with required timeframes) will be required prior to loan purchase. If any of the loan terms on the final HUD-1 are incorrectly itemized (but the corresponding terms on the final GFE is correct), then the final HUD-1 may be amended, identified on the form as an amendment, and resigned by borrowers to correct the error(s)." And just don't let there be any differences between the GFE and HUD-1 charges!

Moving away from Citi, for brokers, what is the tolerance level for fees to go up or down?  Wells wholesale clients were told that for decreasing fees (fees going down) there is no RESPA impact.  For increasing fees it depends on the fee.  See the 2010 GFE page 2: sections numbered 1, 2 & 8 are zero tolerance fees.  Sections numbered 3, 4, 5, 6 & 7 allow for 10% tolerance to the total of these fees.  Sections numbered 9, 10 & 11 can change at settlement without tolerance/limits.  Note: some of the items in the 10% tolerance sections may increase without tolerance if the borrower shops for/chooses their own provider.  A valid "Changed Circumstance" may allow you to re-disclose certain fees. Is that clear?

How about some good news, from what appears to be the growth side of our business? Chase is opening 24 more Chase Homeownership Centers in the next four months bringing the total to 51 Chase Homeownership Centers in 14 states and Washington D.C. In spite of government pressure on all the large servicers, "Chase is the only major mortgage servicer that has opened a large network of face-to-face centers", and is adding centers in Boca Raton, Cleveland, Dallas, Fort Lauderdale, Houston, and Seattle. On top of that, Chase will open 18 Chase Homeownership Centers to supplement existing centers.

CitiMortgage announced updates to their credit policies and "work completion escrows". In addition, the announced that the maximum DTI for agency jumbo loans run with DU is 41% for LTV's greater than 80%. Starting earlier this week, their clients knew that the minimum amount that must be held for a work completion escrow has increased to 120% from 100%, and were reminded that for FHA loans the repairs must be completed and the escrow holdback released prior to the loan being purchased by CitiMortgage. In addition, Citi updated some web registration screens in preparation for the SAFE Act roll out in July, added the ability to purchase loans twice a day instead of sending wires out "only" once a day, and reminded patrons that they are adhering to HUD's regulations concerning appraiser independence. Lastly, they clarified their stance on self-employed borrowers and co-borrowers.

Caliber Funding notified clients that, with the change to DU 8.0, all DU 7.1 case files must be at the stage "Final Approval Complete" by December 31st, 2009 and fund no later than January 15th, 2010, otherwise the loan will need to be run through 8.0. ("Caliber Funding will not be accepting the new Minimum Mortgage Insurance Coverage at this time and will continue to require the Standard Mortgage Insurance coverage.")

GMAC Bank Correspondent Funding addressed FHA Maximum County Limits (going along with FHA's loan limits based on counties) and Freddie & Fannie condominium project warranty updates. "GMAC Condominium-PUD matrices and the Conventional Condominium-PUD Warranty form have been updated to incorporate the most current agency guidelines." These include clarified insurance requirements and documentation, for detached condominiums investment properties are eligible ("51% of the total project is sold and conveyed as a primary residence or second home, the HOA is turned over to unit owners and no more than 15% of the total units are more than one month delinquent on their HOA dues"), and so on. Clients should, as always, refer directly to the announcement for more details on GMAC's condominium rules.

The big mid-day news yesterday was the Fed's announcement. They are leaving overnight rates unchanged, as expected, but the markets were more interested in the verbiage of the statement. "Economic activity has continued to pick up and that the deterioration in the labor market is abating. The housing sector has shown some signs of improvement...Household spending appears to be expanding at a moderate rate..." On the mortgage side, "To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter of 2010." As usual, the Fed has to decide to defend long-term rates or keep short-rates low for too long and have the bond market derail the recovery.

What a difference a few days make! Volatility has really picked up again, as rates headed back down this morning after Jobless Claims this morning rose unexpectedly rose last week. They were up 7,000 to 480,000. This news, combined with a rally in the value of the dollar, is giving the stock markets "fits" and lowering rates. The yield on the 10-yr is back down to 3.52% and 30-yr mortgage prices are better by about .375! A difficult market in which to hedge!

A blonde goes into a coffee shop and notices there's a "peel and win" sticker on her coffee cup. So she peels it off and starts screaming, "I've won a motor home!   
I've won a motor home!"
The waitress says, "That's impossible. The biggest prize is a free lunch."
But the blonde keeps on screaming, "I've won a motor home! I've won a motor home!"
Finally, the manager comes over and says, "Ma'am, I'm sorry, but you're mistaken. You couldn't have possibly won a motor home because we didn't have that as a prize."
The blonde says, "No, it's not a mistake. I've won a motor home!"  And she hands the ticket to the manager and HE reads...

"W I N A B A G E L"