I
sure am happy that I am not working in the
mortgage business anymore! First, Bank of America won a restraining
order
barring Colonial Bank from selling or otherwise disposing of $1 billion
in cash
and loans held by Colonial. Colonial, who most think will be taken
over by
the FDIC any day now (and today IS Friday…), was sued by BofA
Wednesday. It
seems that Colonial, through a Taylor Bean commercial paper network
named Ocala
Funding LLC, may be holding the cash and loans as a custodian to the
tune of
more than 6,000 mortgages worth more than $1 billion. And Freddie Mac,
as it
turns out, bought some of the mortgages while Bank of America is acting
as
custodian for the deal. BofA’s lawsuit claims that cash sent by Freddie
Mac to
Colonial, which was acting as an intermediary and required to pass the
money to
Ocala Funding, wasn’t delivered.
The
original complaint requested that Colonial not
sell any of the proceeds that it received from Freddie Mac in exchange
for
mortgage and other loans, and which were owned by Ocala Funding.
Colonial held
the proceeds as a custodian, agent and bailee through bailee letters,
but
according to BofA when the bailee letters were terminated Colonial
refused to
return them to Bank of America. If Colonial fails, it would be the
largest bank
failure this year.
Second,
in a related and just as ugly story, Housing Wire reported
that “Michigan state regulators ordered Taylor, Bean & Whitaker
Mortgage
Corp. (TBW) to stop doing business in the state. TBW originated
nearly
4,000 mortgages worth more than $500m in the state.” As it turns out,
according
to the story, TBW services about 10,000 mortgages ($1.2 billion) in
Michigan,
and the government wants the list. If every state does this…
StoneWater Mortgage “reassured”
their brokers that they are able to accept loans that may have
previously been
sent to Taylor, Bean & Whitaker. They won’t, however, accept
appraisals
which were completed at the request of TBW, and brokers will be
required to order a new appraisal in compliance with SWM appraisal
policies. As
with other investors, all transferred loans must be MDIA compliant.
StoneWater
sweetens the pot slightly by issuing “a $250 credit at closing for
each file that has been transferred to SWM with an appraisal
completed at the request of Taylor, Bean & Whitaker. In
order to receive the $250 credit at closing, documentation must be
provided at
time of submission to demonstrate that the appraisal was completed at
the request of TBW.”
The
saga of mortgage insurance software continues.
I have mentioned MGIC, and Radian, and I was informed that PMI
offers their enhanced
Rate Quote, including geographic restrictions, complete with their
"soft
guidelines" built into it. The system will tell clients whether or not
the
loan qualifies based on the accuracy of the data submitted, and each
loan is run
through their system for geographic restrictions, FICO, LTV and DTI
ratios as
well as geographic loan program restrictions. And, like the others, no
is password
required.
And
while we’re talking MI, RMIC tweaked their eligibility
guidelines and documentation requirements to match what the investors
are
demanding. This applies to loans submitted after October 1. For
example,
the maximum age of credit documents will be 90 days from the date the
note is
signed on existing properties, 120 days from the date the note is
signed on new
construction, or 120 days from the date of conversion of a
Construction-Permanent loan to permanent financing. For appraisals, the
maximum
age will be 120 days from the date of the note for existing properties
and new
construction, or from the date of conversion to permanent financing for
Construction-Permanent loans. “If the appraisal is more than 120 days
from the
date of the note, or the date of conversion, the appraiser must perform
an
appraisal update, which includes the following: an exterior inspection
of the
property; and a review of current market data to determine if the
property has
declined in value since the original appraisal date.” RMIC also
addresses
qualifying borrowers for ARM loans, buy downs, income documentation,
tax
returns, reserve requirements, etc.
How are multi-branch originators, who sell to
the
major conduits, doing with MDIA?
One executive wrote to
me and said, “MDIA has been a challenge. As a correspondent lender
very
few of our conduits have come out with anything definitive for guidance
on what
they will and won’t accept to show compliance. As a company we have
hundreds
of small branches across the country and coming up with a manageable
way to
document when the borrower was sent or received the correct
re-disclosures is a
challenge. Email receipts and fax receipts are one thing but they
don’t
show what was faxed or emailed and there is no way to know for sure.
Until we can get clarification from investors it’s a guessing game.”
Out
of Bloomberg comes the story that Joseph Murin,
the president of Ginnie Mae (not the same as HUD!), will soon resign
after about a year on the job. Gee, these top mortgage-related
companies have
trouble keeping CEO’s! As we’ve talked about, Ginnie Mae, who insures
bonds
made up of FHA and VA loans, has seen astronomical growth lately with
the
increase in volumes of these loans. Critics say that this is the next
subprime
debacle. To put it into perspective, debt explicitly backed through
Ginnie
Mae is almost $700 billion (from $360 billion two years earlier) versus
Fannie
and Freddie’s guarantee on about $5.3 trillion of U.S. residential
mortgage
debt.
What
was the Fed up to last week regarding
purchasing our mortgages? They bought another $20.4 billion for the
week,
mostly 30-yr 5.0% securities (which generally contain 5.25-5.625%
loans). They
bought very few GNMA securities, and nothing in the way of 15-yr bonds.
Just because a borrower has a 2nd
mortgage, does that mean that they are a higher credit risk? Perhaps,
although
it is not the only reason. But by some estimates up to 50% of “at risk”
loans
have a 2nd on them. Thus the government’s program:
http://www.treas.gov/press/releases/reports/042809secondlienfactsheet.pdf
As
summer winds down, with vacations increasing and
“out of office” replies multiplying, we had the Consumer Price Index
news this
morning. The CPI was unchanged in July, as expected, and over the last
year has
fallen by over 2% - the most since 1950. Ex-food and energy, since no
one uses
either of those, the core rate was +.1%, as expected. The bond
market liked
the news, and is rallying: mortgage prices are better by about .125,
and the
yield on the new 10-yr is down to 3.58%. Expect a typical summer
Friday in
the financial markets…
Sex
After Death
A couple made a pact that whomever died first would come back and
inform the
other of the afterlife, since they both wondered about life after
death.
After a long life together, the husband was the
first to die. True to his word, he made the first contact, "Connie
....Connie."
"Is that you, Joe?"
"Yes, I've come back like we agreed."
"That's wonderful! What's it like?"
"Well, I get up in the morning, I have sex. I have breakfast and then
it's
off to the golf course. I have sex again, bathe in the warm sun and
then
have sex a couple of more times. Then I have lunch (you'd be proud -
lots
of greens) another romp around the golf course, then pretty much have
sex the
rest of the afternoon. After supper, it's back to golf course again.
Then it's more sex until late at night. I catch some much needed
sleep and then the next day it starts all over again."
"Oh, Joe you surely must be in Heaven!"
"Well,
not exactly. I'm a rabbit on a golf
course in Arizona.”
Rob
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