Recently General Motors reported a $6 billion first-quarter
loss, and are approaching Chapter 11. My son said that once they get through
bankruptcy GM probably want to go back to making cars that nobody wants.
Remember how everyone was saying that loan programs got
carried away, and one of the main reasons was that borrowers “didn’t have enough skin in the game”?
Well, I don’t know how this fits in – I must be missing something.
But the HUD Secretary announced the “monetization of the tax
credit” at the NAR Real Estate summit. “Shaun Donovan, secretary of
the U.S. Department of Housing and Urban Development, said that the FHA is
going to permit its lenders to allow homeowners to use the $8,000 tax credit as
a down payment.” “We all want to enable FHA consumers to access
the home buyer tax credit funds when they close on their home loans so that the
cash can be used as a down payment,” Donovan said. This will allow
eligible home buyers to access the funds immediately at the closing table.
Where is the market this morning? Well, we
did have some economic news out this morning. Jobless Claims rose more than
expected last week, apparently due to auto plant shutdowns related to Chrysler's
bankruptcy. Claims were up 32,000 to 637,000. Continuing claims jumped 202,000
to a record high of 6.56 million in the week ended May 2, which is the 15th
straight week of record highs, and the four-week moving average for new claims
rose 6,000 to 630,500 in the week ending May 9. More importantly, U.S.
producer prices were +.3% in April, more than expected. In March the PPI was
-1.2%, but those darned food prices rose 1.5% in April. Excluding food, PPI
would have increased 0.1%, and in fact the core rate (excluding food &
energy) was +.1%. The 10-yr is currently at 3.10% and mortgage security
prices are worse by between .125 and .250.
Those risk managers and underwriting gurus
at Wells Fargo
have been busy! (And please note – these are not intended to be used by
underwriters, since I condense them, but merely to get a sense of what is going
on out there in the market.) In the wholesale business channel:
They changed their verification of mortgage/rent
requirements, effective on the 16th. “Wells Fargo Home Equity
will require a 12-month housing payment history for all income contributing
borrowers, including: VOM with payment history for all mortgages not reporting
on the credit bureau, Internal verification may be performed by Wells Fargo
Home Equity for Wells Fargo liens, and if a 12-month mortgage payment history
is not available the borrower’s verified current or previous rental
payment history (VOR) may be used as supplemental documentation. (I am sure
that underwriters get excited when they hear, “Effective with standalone
and simultaneous applications taken on or after May 16, 2009, income
continuance requirements will be extended from three to five years when the
income source is greater than 25% of the qualifying income. Income continuance
requirements will continue at three years for any income source that is less
than or equal to 25% of the qualifying income, including…”)
Effective earlier this week, any loan that is submitted with
a DU Refi Plus certificate through wholesale must be registered, underwritten
and closed as a DU Refi Plus loan. All pipeline loans must be closed and funded
and/or recorded by Friday, June 12, 2009. “We are unable to accept a
standard rate/term refinance when the DU certificate reflects the loan is eligible
for a DU Refi Plus unless the loan is a High Balance Conforming Loan or DU Refi
Plus loans that are ineligible due to the original loan having mortgage
insurance.” And for “Freddie Mac Relief Refinance transactions
registered on and after May 1, 2009, will no longer require the full appraisal
to be in the file at time of submission. However, for Freddie Mac Relief
Refinance loans registered on or after May 1, 2009, the Appraisal Order
Confirmation must be provided in the file to pass minimum submission requirements.”
Speaking of DU, Wells wholesale also came out with
“Full Appraisal Required for Certain Property Types. DU will determine
the appraisal product or PIW eligibility. However, for DU Refi Plus loans, when
the property is a condominium, cooperative, 2-4 unit or the property was
previously purchased as an REO/foreclosure in the past 12 months, a full
appraisal is required regardless of the DU response provided.”
Not to be outdone by their wholesale
channel, Wells’ correspondent group came out with announcements regarding
an LTV enhancement for detached PUD’s in the High Balance Conforming loan
program, corrected a minimum FICO score for these loans, stated that temporary
buydowns will no longer be allowed on 3/1 conforming ARM loans, and tweaked
their policy for multiple financed properties and reserve requirements for
them.
Wells Fargo Correspondent “has received an extension
for all DU loans originated under the HERA permanent loan limits and policy.
The new ‘purchase by’ date has been extended to on or before July
15, 2009.
Back in March the correspondent group told sellers that both
an IRS Form 4506-T and IRS tax return information would be required for all TPO
loans, and then in April announced that Wells Fargo will no longer require a
complete and signed IRS Form 4506-T or IRS tax return information for FHA
Streamline Refinance and VA IRRRL transactions. Wells clarified things by
saying that “effective immediately, the policy for IRS Form 4506-T
requirements are revised to require a complete and signed IRS Form 4506-T for
all borrowers and all loan products, regardless of income source, documentation
level, or underwriting option.
Early next week, Wells Fargo Funding will expand the maximum
LTV from 85% to 90% for detached PUDs with the Wells Fargo Funding High Balance
Conforming Loan Program. (This enhancement only applies for High Balance loan
amounts up to and including $625,500 with primary residence, purchase or
rate/term refinance, fixed rate transactions without subordinate financing.)
Wells went on to describe the changes to their PUD guidelines.
Finally, Wells’ correspondent group instituted revised
loan score requirements for the new 2009 program with a minimum of 660, but
then it is determined by LTV, fixed versus ARM, and then based on units.
Radian came out with some updated language regarding
property flips. Radian defines a “flip transaction is a
purchase transaction for a property recently acquired by the seller which is
being resold for a quick profit (with or without improvements made to the
property) after a brief holding period.” This doesn’t include
inherited properties, properties included in a divorce, relocation, etc. The
memo is very detailed, but basically any property that is owned less than 90
days is ineligible for insurance, any agreement of sale that contains a
reference to “assignment of a contract of sale” is ineligible as it
is considered to be a potential property flip, etc. Properties owned between 3
and 6 months are eligible for insurance only if they meet certain criteria.
The National
Information Center
has just released consolidated financial statements for bank holding companies
for Q1 09. It turns out that the top 50 banks added $42 billion of
mortgage-backed securities during the first quarter. Agency MBS holdings
(Fannie & Freddie) increased by $32 billion, and Non-agency MBS holdings
went up by $10 billion ($8 billion was in CMOs). What does it mean? It would
appear to indicated that the banks are continuing to buy agency MBS’s,
although not as much as the Fed, including a smattering of other securities.
The Fed has been in typically buying about $5 billion per day of MBS’s,
which of course helps keep our mortgage rates down.
I paid $400 and joined a health club last year. I haven't
lost a pound.
Apparently you have to go there.
Rob
(For archived commentaries, check www.robchrisman.com,
or to subscribe write to rchrisman@robchrisman.com)
