Fannie and Freddie announced updates to the implementation dates and requirements for loan delivery and appraisal data under the Uniform Mortgage Data Program (UMDP).

The UMDP is a joint effort by Fannie Mae and Freddie Mac (the GSEs) at the direction of Federal Housing Finance Agency (FHFA) to standardize and drive data quality that benefits the entire mortgage industry. Fannie Mae and Freddie Mac understand the magnitude of the change required to achieve this important goal and its impact on a number of industry players. To facilitate its successful adoption, the GSEs have collected extensive feedback from a wide array of customers, lenders, appraisers, and other industry participants.

Any company, whether or not it sells to the agencies, can pretty much use this for a template for future data and appraisal information requirements. Obviously any investor wants to know precise details for a loan, or pool of loans, being purchased, and restoring investor confidence in MBS information is critical.



In early November HUD published a notice that announced its proposal to conduct an FHA Home Energy Retrofit Loan Pilot Program (Retrofit Pilot Program or Pilot Program) known as FHA PowerSaver. Targeted to the single family housing market, the Retrofit Pilot Program is designed by HUD to meet this statutory directive and provides funding to support that effort. It is a work in progress, but lenders should visit THIS SITE for the latest.

Whether it is from Norwest to Wells Fargo or RFC to GMAC/RFC or GMAC to changes are rarely straightforward. In fact, anyone around prior to Norwest buying Wells Fargo - but keeping their name - often still refer to themselves as Norwest employees! AmTrust will be, in most states, changing its name to NYCB Mortgage. "Loans registered as table funded broker transactions on or after January 3rd*, 2011 will close in the name of NYCB Mortgage Company, LLC. Loans registered prior to January 3rd, will close in the name of AmTrust Bank, a Division of New York Community Bank. Until further notice, Closing Documents for the following states will continue to reflect AmTrust Bank, a Division of New York Community Bank on all loans, regardless of registration date: California, Massachusetts and Texas."

If you're a MERS employee, how would you like to wake up and find this out: a bill has been introduced that would gradually phase out the use of MERS within the government-sponsored enterprises as well as Ginnie Mae. Actual passage is anyone's guess, but H.R. 6460 would prohibit Fannie Mae and Freddie Mac from purchasing or acquiring any new MERS mortgage deal of six months after its enactment and also be prohibited from new lending or investing in securities consisting of MERS mortgages for six months. After the six-month time period expires, "MERS shall not be the named mortgagee or mortgagee of record on any mortgage owned, guaranteed, or securitized" by the GSEs. MERS said it has been reviewing the bill and analyzing its impact on the mortgage and housing markets.

There is enough confusion and uncertainty out there about compensation that the Mortgage Bankers Association has written to Federal Reserve Board of Governors asking for written guidance to assist the mortgage industry's compliance with the Board's final rule on loan originator compensation and steering (the Rule) published on September 24, 2010. "Specifically, the Rule prohibits: (1) basing compensation to a loan originator on a loan's terms or conditions, subject to a limited exception for loan amount; (2) compensation to a loan originator from both the consumer and a party other than consumer for the same The Rule is far-reaching and requires major changes to long-operating compensation practices that heretofore have been both legal and prevalent. Unfortunately, in our view, the Rule does not definitively address many matters of particular importance, and has engendered numerous questions from creditors and loan originators seeking to comply. Notwithstanding, it requires compliance by April 1, 2011." "Unfortunately verbal guidance in itself is insufficient."

The MBA's letter points out that "there are several differences between the Rule and the Dodd-Frank Act. Examples include that Dodd-Frank prohibits several specific types of steering, including steering a consumer from a favorable loan to a less favorable loan regardless of the compensation of the loan originator or creditor. The Fed rule, however, takes a different view of steering, first by restricting steering based on compensation and then by interpreting its compensation rules as an anti-steering rule. Also, while Dodd-Frank prohibits compensation that varies based on the terms of the loan, it allows compensation to vary based on the principal amount of the loan without any conditions. In contrast, the Fed rule only permits the use of fixed percentage of the loan amount, subject to optional minimum and maximum dollar amounts that also must be fixed."

I have heard from several folks (please see note at top of e-mail), saying that originators would be better off focusing on their existing pipelines and on obtaining new business than on how their compensation will be structured in 4 months. There will be a lot of misinformation and confusion until questions are cleared up by either the government, or by the top 3-4 investors. But compensation confusion has not stopped mid-sized lenders from weighing in on their policies and procedures. Yesterday I mentioned a letter from 360 Mortgage in Texas. Sierra Pacific, in California, also sent out its take on the April changes. "Effective on applications received on or after April 1, 2011 a loan originator (LO) cannot receive compensation that is based on the terms or conditions of the loan.  This includes interest rate, product type, etc.  The only exception is compensation based on a percentage of the loan amount.

Sierra Pacific goes on. "If the LO receives their compensation directly from the consumer (paid at closing or financed into the loan) in a wholesale transaction, the LO may negotiate those fees with the consumer and the fees may vary from transaction to transaction.  Therefore, it will be more advantageous for LOs to structure their deals with the consumer paying the origination fees.  In these transactions, a lender credit (YSP) may still be present but must be applied to all other closing costs such that the closing costs are sufficient to use up the entire YSP credit and there is no cash back to the consumer or surplus YSP paid to the LO. If the LO receives compensation directly from the consumer (paid at closing or financed into the loan), the LO may not receive any additional compensation directly or indirectly from any other person, including the lender, in connection with that transaction.  LOs may not receive both consumer paid origination fees and lender credits (YSP) on the same transaction.  Any lender credit (YSP) must be applied to closing costs other than the origination fees. The LO and consumer may agree to have the LO origination fees paid through a lender credit (YSP).  In those instances, the LO (brokerage company) must contractually agree with the lender in advance to the amount of compensation they want to earn on all transactions they conduct with that lender on which they are paid by lender credit.  (This can be adjusted/reviewed periodically.)  The origination fees in a lender paid wholesale transaction include all broker fees including processing, broker administration, etc.  Bona Fide third party charges are not included in the LO origination fees.  On wholesale transactions where a broker is being contractually paid by a pre-determined lender credit, their origination fees cannot be raised or lowered on a specific transaction by the originator or the lender for any reason.  Surplus YSP may exist (over and above the contractually pre-determined amount) but must be applied to other closing costs.  This will preclude LOs from paying for borrower fee's such as appraisal, or extension fees or reducing their origination charges for competitive reasons in cases where their compensation is being derived from a lender credit.  It will also preclude LOs from earning any lender credit greater than the contractually pre-determined amount.

"LOs are prohibited from steering consumers to any residential mortgage loan wherein the LO will receive greater compensation from that loan than they would from another loan, unless the consummated loan transaction is documented to be in the consumer's best interest.  The LO in a wholesale transaction must meet a safe harbor requirement which gives the consumer three examples from lenders that the LO normally does business with.  The examples must represent loans the LO has determined the consumer is qualified for and will include the lowest rate option and the lowest fee option.  The consumer does not have to choose the option with the lowest rate or fees, but a justification for the choice must be documented, such as quicker turn times, underwriting criteria, etc."


We're seeing a bit of a bounce, and the yield on the 10-yr is down to 3.42% which is even more of an improvement versus Thursday's close at 3.48%. We also saw MBS prices end the day better by about .125 despite stronger than expected economic news (Philly Fed, Housing Starts). Taking a broader view, since mortgage rates hit record lows in early November, the MBA refi index has plunged 36.5%, and according to FTN Financial, the percentage of the agency mortgage market that can be refinanced has declined to approximately 49% from around 67% in early November. This translates to $1.2 trillion in agency MBS that is less refinanceable compared to a month ago, they calculated. Few in the business believe that the issues facing borrowers - tight credit standards, poor home valuations, and a weak jobs market - are going to entirely disappear in 2011.

On the positive side, rates have gotten ahead of themselves in the opinion of many economists and investors. There is little inflation, and although the deficit is a huge long-term problem, in the short run the economy is not breaking any records, unemployment persists, the housing market is not being helped by mortgage rates above 5%, etc. As the economist at the Banc of Manhattan put it, "From 3.50% on the 10-year Treasury, we believe an eventual return to 3.00% is more likely than an extended selloff to 4.00%."

After heavy data/events from Tuesday through Thursday, today we only have Leading Economic Indicators. Today ends the last full week of trading in 2010, and also signals the beginning of Christmas vacations around the US. Sometimes things are quiet, but sometimes thin, illiquid markets can be volatile. 

Here are some G-rated tidbits:

How Do Crazy People Go Through The Forest?
They Take The Psycho Path.

What Do Fish Say When They Hit a Concrete wall?

What Do You Call A Boomerang That Doesn't Work?
A Stick.

What Do You Call Cheese That Isn't Yours?
Nacho Cheese.

What Do You Call Santa's Helpers?
Subordinate Clauses.

What Do You Call Four Bullfighters In Quicksand?
Quatro Sinko.

What Lies At The Bottom Of The Ocean And Twitches?
A Nervous Wreck.

What's The Difference Between Roast Beef And Pea Soup?
Anyone Can Roast Beef.

What Kind Of Coffee Was Served On The Titanic?

What Goes Clop, Clop, Clop, Bang, Bang, Clop, Clop, Clop?
An Amish Drive-By Shooting