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Nov. 16, 2010: Reader feedback; too many investor updates to count ranging from C-Bass to Impac to Wells to Freddie Mac
Rob Chrisman
We're now in that lull period leading up to
Thanksgiving. Many feel it is a good time to pull pranks on
cubicle dwellers: http://www.holytaco.com/25-awesome-cubicle-pranks.
Geez, it seemed like every other e-mail yesterday was a mid-day
rate change. The 10-yr slowly worsened, mortgage prices took it
on the chin. The general feeling (for the day) among traders and
investors was that the evident strength in the
economic numbers, along with the criticism of QEII (take your
pick: too strong and will cause inflation, or too weak and
worthless), is making the market nervous. Ten- and 30-year
U.S. Treasury prices each fell a point as traders unwound
positions taken in advance of the Federal Reserve's QE2. 10-yr
notes dropped almost 1.5 points in price for a yield of 2.95%.
7-yr notes, more of a proxy for mortgage prices, were worse by
1.125. We're seeing a small bounced today - see ending
paragraphs.
Yesterday
I mentioned well capitalized mortgage companies buying banks. A
grizzled industry vet wrote, saying "Buying a bank is a good
idea but it is nearly impossible to do if you are not a bank. I
have worked with very well capitalized clients for over a year
only to find out that the OTS and OCC will not approve the deals
if the business plan is to operate the bank to feed the needs of
the mortgage company. Once you own a bank you can bid on other
banks that are closed each week, but without being in the
pre-approved category you have no idea who is for sale. People
with money who want to buy banks are not allowed to play because
they don’t own a bank."
Regarding
the loan originator compensation issue, a compliance person
wrote in saying, “It seems like all the small guys are waiting
for the big guys to weigh in, and the big guys don't quite know
what to do. So we wait.” A broker wrote, “I have gone to three
compensation meetings. I love how they try to say the brokers
have an advantage. Frankly, no one has an advantage and only the
consumer loses. This is sheer stupidity by government employees
with little understanding of the inner workings of the industry.
Earlier this year we were told that YSP was gone (under the new
2010 GFE), yet the comp rules and discussions continually
reference the YSP. Give us some direction then leave us alone!”
The
folks at HUD were busy yesterday sending out two Mortgagee
Letters. One dealt with users completing a screen in FHA
Connection entitled ‘HECM Referral List Update’ and the other
discussed the PowerSaver pilot program. But hey, don’t take my
word for it – go to: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/.
A ways
back, as my grandfather would say, Flagstar Bancorp
announced the sale of a good-sized chunk of non-performing
loans. Yesterday it announced that the sale had closed, and that
the $474 million of non-insured non-performing residential first
mortgage loans have a new home.
Credit-Based
Asset Servicing and Securitization, known by industry vets as C-BASS,
filed for Chapter 11 bankruptcy. In the past, C-BASS purchased
and serviced subprime and Alt-A mortgage loans. The company is
owned through a joint-venture of mortgage insurers MGIC and
Radian, and back in 2007 sold Litton Loan Servicing to Goldman
Sachs.
Investor
changes
have been coming fast and furious. Wells Fargo
updated its FHA product line (which for the most part now has a
minimum FICO of 640). Wells also tweaked its nonconforming line.
BB&T made changes to its conforming and nonconforming
guidelines as well. U.S. Bank Home Mortgage Wholesale
Division decreased the maximum LTV/TLTV, to 95%, on the Home
Possible Programs. ING reminded their broker clients
that it does not have a price adjustment for loans up to
$1,500,000. Caliber Funding told brokers about its updates
dealing with Combined Disclosures.
Impac
Mortgage Holdings earned about $1 million in the third quarter of 2010.
The earnings come from "mortgage and real estate services fees",
which in turn come from "monitoring, surveillance and recovery,
title and escrow fees, servicing income, and loan modification
fees. Although the name of Impac will always to me represent an
Alt-A lender, I mention Impac because the company has launched
a wholesale division, promising pipeline transparency.
Freedom
Mortgage told
its brokers that its “minimum representative credit score for
standard VA transactions remains at 620, however the VA Jumbo
product now has a minimum representative credit score of 640 for
any cash-out transaction. The LTV for all transactions is
calculated on the total loan amount including any financed
funding fee”, so the CLTV calculation must include the total
loan amount plus any subordinate financing and the maximum
LTV/CLTV for cash-out loans with subordinate financing is 90%.
Now Freedom’s minimum representative credit score for all
standard FHA transactions is increasing to 640. In addition, any
FHA jumbo cash-out transaction will have a new credit score
minimum of 660. As previously announced, the minimum credit
score for an FHA streamline transaction is also 640.”
Talking about government loans, GMAC raised their fees
for government loans with FICO scores under 660. VA loans went
to a 1.375% hit, and FHA’s went to a 1.00 hit.
I guess
that some mortgage banks could be counted as small businesses. Chase
announced that it more than doubled its Small Business
Administration loan volume in fiscal 2010. That puts Chase in
the top position and is now the nation's largest SBA lender.
How
much fun is it to lend in multiple states? Flagstar told
its wholesale clients that in North Carolina only 1.25% of the
FHA MIP, VA Funding Fee, GRH Guarantee Fee and PMI will be used
towards the total state point and fees testing due to the total
percentage limit for NC state points and fees being lowered to
4% effective 9/1. And in Georgia, the Residential Fee “was
originally disclosed in block 8 of the GFE, however after
receiving guidance from HUD, we have changed the mapping to
disclose the fee in block 7. You will be required to redisclose
a GFE within three days of this announcement showing the
change.” Exciting stuff!
PHH Correspondent Operations (WCL) has seen a spate of
instances where multiple loans were submitted to underwriting or
auditing for the same borrowers for different properties that
evidenced the same DU/DO Case File ID # had been used: recycled
case numbers. “Some examples of cases where this cannot occur
would be change of subject property and submitting loans for
multiple properties. In any of these cases it is necessary to
order new DU/DO findings. Once the Case File ID# has been
recycled and now applies to a new loan scenario, the 1st loan
becomes ineligible for sale. The DU/DO case number must be
unique to each scenario/loan submitted.”
Icon Residential reminded clients that its minimum credit
score requirement on the FHA program, for conforming and high
balance loan amounts, is 620 for purchase, refinance and
cash-out transactions. (FHA Streamline transactions require a
minimum credit score of 640, and
high balance cash-out transactions require a minimum credit
score of 660.)
Freddie
Mac
released a bulletin addressed to servicers discussing its
“requirements concerning releasing notes, loan modifications,
and late charges for forbearance agreements and repayment plans.
In addition, the Guide Bulletin provides reminders and
additional guidance related to our Home Affordable Modification
program (HAMP) requirements.” http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1027.pdf
Generally speaking, we have really seen a case of “buy the
rumor, sell the news” in this QE2 Fed issue. The plan was widely
anticipated, and traders and investors bought fixed-income
securities leading up to the official announcement of buying
$600 billion of government debt (not mortgage debt) through
June. After all, the Fed buying $1.7 trillion from 2008 through
earlier this year worked just fine, right? Demand for Treasuries
leads to higher prices and lower yields, and interest rates are
linked to yields. Lower rates should encourage people to borrow
money for a mortgage or another loan, and companies to borrow
for expansion. But now investors are saying that it could make
the weak dollar even weaker, lead to trade disputes with other
countries who don’t want to see their currencies or investments
decrease in value, and possibly lead to higher inflation. But now traders and investors are unwinding those
positions.
There is no Treasury supply to absorb until next week which
ordinarily helps bond prices somewhat. But there is more than
enough supply to go around. California has $14 billion in
"Revenue Anticipation Notes" to sell between now and
Thanksgiving - that may certainly weigh on the market. Yesterday $3.5 billion in MBS’s crossed the
tapes, once again almost twice the usual $2 billion or so. On
top of these relatively global issues our markets are grappling
with some decent economic news. Retail Sales yesterday were
stronger than expected. Today we had the Producer Price Index,
with estimates near +1%, and Industrial Production &
Capacity Utilization. The October PPI was up .4%, and the core
rate (less food and energy) was -.6% - what does that tell you?
Tomorrow we have the Consumer Price Index to see how much
producer price inflation was passed on to us, the consumer. We
also have Housing Starts and Building Permits ahead of us this
week. The 10-yr Treasury, which closed around 2.95%, is now
sitting around 2.89%, and we’re seeing a bit of a bounce in
mortgage prices - better between .125-.250 depending on
investor and coupon.
A man goes to see the Rabbi. "Rabbi, something terrible is
happening and I have to talk to you about it."
The Rabbi asked, "What's wrong?"
The man replied, "My wife is poisoning me."
The Rabbi, very surprised by this, asks, "How can that be?"
The man pleads, "I'm telling you, I'm certain she's poisoning me
- what should I do?"
The Rabbi then offers, "Tell you what. Let me talk to her, I'll
see what I can find out and I'll let you know."
A week later the Rabbi calls the man and says, "I spoke to her
on the phone for three hours. You want my advice?"
The man said yes and the Rabbi replied, "Take the poison."
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