Speaking
of preparation, here's a note I received that is worth tucking
away in the back of your mind: "Rob - I just looked at the calendar.
We're nearly in the middle of November! Monday is a holiday,
we have two days at Thanksgiving, Christmas Eve is on a
Monday, Christmas Day is on a Tuesday, and New Year’s Eve is
the following Monday. When you throw in some end of year
vacations with everyone, LO's had better get their rate locks
& files lined up sooner than later, and expectations and
schedules should be communicated clearly. Staff at
headquarters, branches, closing officers - staffing will wane.
And the last thing this industry needs is a bunch of upset
borrowers during the holidays due to rate lock extensions or
loans failing to close." Thank you!
The mortgage industry is filled with well-meaning individuals
and companies, continuing to take the high road and therefore
overcome the negative perceptions that much of the public and
press have of our industry. There are plenty of examples, but
one is Fairway Independent Mortgage: "Fairway
Independent Mortgage Partners To Present Purple Heart
Recipient With Mortgage-Free Home At Military Celebration In
Louisiana." The lender is headquartered in Texas, the event
was in Louisiana, and here is the story from California: http://www.sacbee.com/2012/11/08/4971328/fairway-independent-mortgage-partners.html.
And
after Sandy, lenders need to obtain disaster inspection
reports for all the properties in declared disaster areas. A Norcom
Mortgage exec wrote that, "The head of the new ValueQuest
AMC, Eli Pascon, made a decision to complete disaster
inspection reports at cost to the company - an effort on
their part that strains their time and resources so it
really is great they can save money for those borrowers when
they could be charging." The bulletin said, "We have
decided since counties in southern Connecticut were deemed
disaster zones we would do our part to help out. Knowing that
appraisers were busy, we put together a task force to visit
each property that had an appraisal done in the last 60 days
(prior to the storm). Our task force was down in southern CT
the day after the storm and took pictures of the properties to
confirm if any damage was sustained from Hurricane Sandy.
ValueQuest chose to not charge the borrowers for this service
since most had suffered losses already. Under any other
Appraisal Management Company, the lender would have had to
order a Disaster Inspection Report from the appraiser at the
borrower's expense and be subjected to waiting for the
appraiser to fit it into their schedule. We at ValueQuest
understand that 'time is of the essence' and any delay in the
closing may end up costing the borrower more." (For more
information on this AMC visit www.valuequestamc.com.)
Hey,
if someone is earning less than .5% on their cash in the bank,
but paying 4% on their mortgage, why not refi? (The flip side,
of course, if a bank is paying 0% to its depositors, but
earning 4% on the mortgage portfolio, why encourage anyone to
refi?) The latest figures certainly bear this out, with
Freddie producing figures that showed U.S. homeowners who
refinanced in the third quarter lowered their principal
balance in 29% of the new loans. In the quarter, 83% of
those refinancing their first-lien mortgage either kept the
loan amount the same (54%) or reduced it (29%).The average
reduction in interest rate came to 1.7 percentage points, "or
a savings of about 31 percent in interest rate," Freddie Mac
said. Here are the nitty-gritty details: http://www.upi.com/Business_News/2012/11/07/Refinancing-is-thrifty-in-third-quarter/UPI-13921352321378/.
In
this government-heavy environment, here’s yet another
department we need to follow. The U.S. Department of Homeland
Security issued a Service Bulletin regarding the National
Flood Insurance Program (NFIP). The memorandum outlines
the provisions for homeowners to quality for an extension of
the grace period for payment of National Flood Insurance
renewal premiums. Did you know that the Department of
Homeland Security, through FEMA, leads the federal response to
Hurricane Sandy? I didn't - shows how up on things I am. But
here is the site: http://www.dhs.gov/sandy.
And
let’s not forget the Biggert-Waters Flood Insurance Reform
Act of 2012, signed in July. The Act increases access to
the NFIP for some residents whose homes were impacted by
flooding from federal land that resulted from wildfire. The
Act authorizes the NFIP and it’s financing through September
2017. The Act impacts lenders in many areas. For
example, it requires that lenders provide to all purchasers a
disclosure of the availability of flood insurance under the
Real Estate Settlement Procedures Act (RESPA). The Act
increased penalties for lenders that fail to ensure that
properties required to have flood coverage purchase such
coverage. Penalties were increased from $350 to $2000 per
violation, and there is no limit on annual penalties. The Act
requires lending institutions to create escrow accounts for
the payment of flood insurance premiums.
But
wait, there’s more! Termination of force-placed Insurance:
within 30 days of receipt by a lender or servicer of
confirmation of a borrower's existing flood insurance
coverage, the lender or servicer shall terminate any
force-placed insurance and refund all force-placed insurance
premiums and fees charged to the borrower during any period of
coverage overlap. For confirmation of coverage, a lender or
servicer shall accept the borrower's insurance policy
declarations page that includes the flood policy number and
the insurance company. The Act increased the annual limitation
on premium increase from 10% to 20%, and permits lending
institutions to accept a private primary flood insurance
policy in lieu of a NFIP flood policy to satisfy the mandatory
purchase requirements. Lastly, it clarified that condominium
owners with flood insurance policies should receive claims
payments regardless of the adequacy of flood insurance
coverage of the condominium association and other condominium
owners.
On to some other somewhat recent agency, investor, and MI
updates, along with the usual disclaimer that it is best to
read the bulletin for full details, but this will give you a
flavor for current trends.
In
October DU 9.0 was rolled out. I don't have the attention span
or mental capacity to be an underwriter, but as I understand
it (and this question comes up once in a while) , borrowers
have no more freeloading on the divorce and child support, as
it is going in their DTI! “Court assigned debt" is now
included by Fannie Mae in a borrower’s liabilities. There
is no exclusion of any court assigned debts, co-signed debt,
or mortgage assumptions for Fannie. As one person wrote, "Even
if they have a divorce decree where the court has transferred
the liability, it is a 'no go' under Fannie. Originators
should go with LP (if the loan balance fits) or perhaps a
jumbo program."
Bank M&A continued with Ohio’s Incenta Federal Credit
Union acquiring St. Luke Federal Credit Union.
Oh, and save that orange paraphernalia: Capital One Financial
will change the name of ING Direct (which is purchased
earlier this year) to Capital One 360 and will change
its color scheme from orange to red and blue. (How original!)
Last
month, in response the FHFA’s fee increase announcement, Guild
implemented a temporary extension fee increase for all
conforming fixed-rate Fannie and Freddie loans that were
locked before September 9, 2012. Any such loans that require
extensions to lock or re-lock after October 31st are subject
to an additional 50bps on top of the standard fees, while
loans with expiration dates before the 31st are exempt from
the increase. Loans locked before September 9th that have
original expiration dates after October 31st are also exempt
provided that they close within the original lock term. The
extension fee increase doesn’t affect government, Rural
Housing, or non-conforming loans.
GMAC
Bank
updated its appraisal fees so that appraisers can be fairly
compensated for their services. Increased fees will impact
appraisals in the states of AL, AK, AR, CA, CO, FL, GA, ID,
IL, IN, MA, MD, ME, MI, MN, NC, ND, NH, NJ, NY, OH, RI, TX,
UT, VA and WA. Fees will decrease in DE, IA, KS, MS, MT, NV,
OR, SD, TN, VT, WI and WY. Fees will remain unchanged in the
following states: AZ, CT, DC, KY, LA, MO, NE, NM, OK, PA, SC
and WV.
SunTrust
revised pre-sale requirements for new condominium projects
under Freddie Mac condominium warranties, eliminated of the
Fannie Mae “T” PUD Classification Delivery Code, and updated
the Key Loan Program product description to incorporate
current qualifying income and documentation requirements for
the following income types: rental income, retirement income,
social security income, and Veteran Administration (VA)
benefits. SunTrust, of course, incorporated the Fannie DU 9.0
changes, and also published a revised Government Credit
Overlay Matrix.
Chase
outlined additional LTV/CLTV reductions to Agency Conforming
Amortizing ARM Investment transactions, clarified minimum
FICO’s for 2 Unit High Balance ARM transactions, clarified
when an exterior appraisal is acceptable, and incorporated DU
9.0. In conjunction with recent Agency announcements, Chase
Correspondent revised the following products and credit
policies: Agency ARM maximum LTV/CLTVs, MyCommunityMortgage
ARM maximum LTV/CLTVs, retirement of Fannie Neighbors,
elimination of appraisal forms 2075, 1075, 2095 and 2055,
limited project review maximum LTV/CLTV or primary residence,
income documentation changes, DU Refi Plus and LP Open Access
updates, other income sources, charge account policy changes,
and reserve requirements for 2-4 units. (Note: These changes
apply to Agency and Non-Agency loan transactions only, as
specifically outlined in this bulletin, and do not apply to
FHA and VA transactions.)
Flipping over to the markets, those who follow the
securities markets know that even though most mortgages have
30 year maturities, most don’t last that long, and are paid
off much sooner. And thus 30-yr MBS markets don’t exactly
track 30-yr bond prices, and traders will often use 5-yr to
10-yr maturities as a proxy. But Thursday was “all about
the long end.” In the morning and early afternoon the sector
traded “heavy” over concern about the $16 billion 30-year bond
auction. But not to worry, as the auction went very, very
well, after which prices did well and rates dropped with the
30-yr closing at 2.75%, the 10-yr at 1.63%, and current coupon
MBS better by .125. And mortgage rates should do just fine
well into the foreseeable future: the latest figures show that
with the increase in prepayments, the Fed is on pace to
continue to buy nearly $80 billion a month of agency MBS.
Don’t
forget – the bond markets are closed Monday, so watch for
conservative pricing later today and from anyone who is open
Monday. Prior to that, we’ve had Import Prices for
October (expected flat, it was +.5, +.4 year over year) and
the preliminary November read on Consumer Sentiment will be
released at 9:55AM EST (predicted slightly higher). In the
early going the 10-yr is down to 1.60%, and MBS prices are
better by about .125.
Yiddish
proverbs.
If
the rich could hire other people to die for them, the poor
could make a wonderful living.
The wise man, even when he holds his tongue, says more than
the fool when he speaks.
What you don't see with your eyes, don't invent with your
mouth.
A hero is someone who can keep his mouth shut when he is
right.
One old friend is better than two new ones.
One of life's greatest mysteries is how the boy who wasn't
good enough to marry your daughter can be the father of the
smartest grandchild in the world.
A wise man hears one word and understands two.
"Don't be so humble - you are not that great." (Golda Meir
(1898-1978) to a visiting diplomat)
Pessimism
is a luxury that a Jew can never allow himself. (Golda Meir)
Any
intelligent fool can make things bigger and more complex. It
takes a touch of genius - and a lot of courage to move in the
opposite direction. (Albert Einstein)
Life
is like riding a bicycle. To keep your balance you must keep
moving. (Albert Einstein)
You
can't control the wind, but you can adjust your sails.
I don't want to become immortal through my work. I want to
become immortal through not dying.
(Woody Allen)
Imagination
is more important than knowledge. (Sign hanging in Einstein's
office at Princeton.)
We can't solve problems by using the same kind of thinking we
used when we created them.
If
you're interested, visit my twice-a-month blog at the STRATMOR
Group web site located at www.stratmorgroup.com.
The current blog discusses some of the considerations facing
the FHFA regarding Fannie and Freddie. If you have both the
time and inclination, make a comment on what I have written,
or on other comments so that folks can learn what's going on
out there from the other readers.
