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Nov. 19, 2010: Chunk of servicing bought by IBM; HUD homes at 50% discount; several investor & MI updates
Rob Chrisman
There are lots of clever folks out there in the
advertising business. That, combined with the fact that tonight
is Friday night… http://www.rukz.com/forward/view.php?tbpic&aid73.
In what
could be a sign of things to come, way in advance of Basel III,
"The mortgage services division of IBM has taken control of
roughly $47 billion in servicing rights from JPMorgan Chase
and eventually may increase its contract to $100 billion."
The story, from National Mortgage News, indicates what could
happen if banks don't want or need or can't keep servicing.
May-as-well sell it now, ahead of them required to sell under
Basel III capital changes?
It
isn’t even Thanksgiving yet, and things are on sale – like HUD
homes. Pick up a HUD-owned house for 50% of the value?
Heck, if I could go to paramedic school, then pick up a $500k
house for $250k - that certainly would pay for the training! If
you know of any fire fighters, teachers - that type of person
employed in that type of occupation, then you should tell them
to check out this program: http://www.hud.gov/offices/hsg/sfh/reo/goodn/gnndfaq.cfm.
"You may use FHA, VA, or conventional mortgages, or cash. HUD
requires you to sign a Second Mortgage and Note on the
discounted amount No interest or payments are required on this
"silent second" mortgage if you live in the home for the entire
36 month occupancy period." Heck, let's hope that appraisers
don't use the 50% figure in their comps!
Here’s
an interesting site – the Congressional Oversight Panel for
mortgage irregularities: http://www.cop.senate.gov/
.
Wednesday I repeated a note from Kate Berry at American Banker
about how the chain of title and paperwork flows for a loan. A
reader wrote, “Rob this person couldn't be more accurate about
the big picture. These loan packages were sliced and diced.
Maybe the credit packages were imaged, maybe not, maybe there
was no credit package or a collateral-only package. As lenders
started going belly-up, borrowers couldn't make their payments,
and there were no docs to go analyze to determine why the loans
weren't performing, not to mention incomplete legal packets and
collateral packages.”
I also
mentioned buying a bank. An ex-mortgage veteran now involved in
finding homes for failed banks wrote, "The FDIC doesn't sell
failed banks to anyone other than another established bank, or
in a few cases, an investor group that has already gotten
approved by regulators to operate a bank and received a "shelf
charter". An acquiring bank must be in good capital position
and in good standing with the regulators before they are given
the opportunity to see potential acquisitions. Mortgage
companies might put their excess capital to work in a good
bank first. With the good bank they might have the
opportunity to recapitalize a weak bank before it gets taken
over or buy a failed bank. Well capitalized banks in good
standing with regulators get notified of opportunities."
The OCC,
the FDIC, FHFA, and the Federal Reserve are probably four
entities that you don’t want doing a pat-down search on you at
the airport. But they are examining two nonbank service
providers: MERS and Lender Processing Services Inc. (LPS).
At some point one wonders which agency has legal jurisdiction
over which companies – in this case the government’s Comptroller
of the Currency stated that the agencies have the authority to
examine these firms under the Bank Service Company Act. The
formal goal is to determine the adequacy and effectiveness of
governance over the foreclosure process, with the informal goal
being to figure out if MERS, which has been listed as the
lienholder of record in foreclosure proceedings, has the legal
standing to foreclose, and if a subsidiary of LPS forged
documents so foreclosures could be processed more quickly.
On-site exams of eight major servicing operations and the others
will be completed by mid-to late- December: Bank of America
Corp., Citibank, JPMorgan Chase, HSBC, MetLife, PNC, Wells Fargo
& Co. and U.S. Bank. Folks in the mortgage industry will
tell anyone listening that while any process deficiencies are
inexcusable and should be corrected, the attention they are
getting from regulators and the media is out of proportion to
the offense. Process issues don’t change the fact
that many borrowers simply have not made payments, and are in
fact living for free on either the taxpayer’s or the
servicer’s expense. As one analyst wrote, “Any injustices
done to borrowers, furthermore, have been inadvertent rather
than deliberate, arising out of an extraordinary increase in
defaults for which servicers were totally unprepared.”
Ambac
Assurance’s parent company recently filed for bankruptcy, and
yesterday Ambac said that banks that assembled a dozen poor
performing mortgage bonds that it insured must pay for some of
those losses. “Ambac said it was reviewing loans in residential
mortgage-backed securities (RMBS) issued by the Countrywide unit
of Bank of America and affiliates of Citigroup, among others.”
Ambac, originally founded to insure muni bonds, insured dozens
of billions of MBS’s that have gone bad, and is no longer
writing any new business.
There
are several investor updates – some of them good, none of them
terrible.
Freddie Mac wants to help lenders with their appraisals.
"To help you proactively develop controls that may strengthen
your appraisal management and help determine appraisal quality,
Freddie Mac is providing guidance focused on improving the
quality and accuracy of collateral valuations for mortgages
delivered to Freddie Mac. Any appraisers or anyone who reviews
appraisers should check out: http://www.freddiemac.com/singlefamily/news/2010/1117_quality.html
In a
few weeks, during the weekend of December 11, Fannie Mae
will implement DU Version 8.2. In it the Fannie Mae
Flexible 97 and the Flexible with Subordinate Financing programs
will be retired, along with the Flexible products under the
Fannie Mae HomePath and Fannie Mae HomePath Renovation programs
will also be retired. With the retirement of the Flex programs,
the key elements of these programs will be integrated into
Fannie Mae’s standard eligibility requirements. Fannie Mae will
continue to allow loans with the same characteristics to be
underwritten through DU with an LTV up to 97%. Therefore, the
LTV will be increased up to 97% on one-unit, principal
residence, purchase and rate/term refinance transactions on
certain products, per lenders such as Flagstar.
PHH
followed the FHA and told clients that its “FHA product has been
updated to remove the requirement that the combined amount of
the first mortgage and any subordinate lien may not exceed the
statutory limit for the area. Only the first mortgage loan
amount must be within the maximum permitted for the area.”
Flagstar Bank announced the addition a 20-year term to
the Fannie Mae DU Refi Plus, but in a separate announcement told
clients that “For refinance transactions, all properties that
have been listed for sale in the past three months from
application date with an LTV equal to or greater than 70% will
be ineligible.”
U.S.
Bank Home Mortgage Wholesale Division removed it’s 80% TLTV/HTLTV “tier”
level on its Second Mortgage and
Simultaneous HELOC products for maximum total loan to value. The
states that were in that bucket (IL, OH, OR, SC, UT, and WA)
were moved up to the standard 85% group for certain 2nd
mortgage and HELOC programs. Some states remain at a maximum 75%
TLTV/HTLTV on the above mentioned products: AZ, CA, FL, MI, NV,
NJ, and NY. USBHMWD (that just rolls off your tongue, doesn’t
it?) also revised its VA IRRRL guidelines for loans that are NOT
refinances of existing USBHM VA loans. More specifically, “loans
in all states regardless of loan amount require a full appraisal
with interior and exterior inspections and do not have to be
done by a VA appraiser but must meet Appraiser Independence
Requirements, and the appraisal fee may be charged to the
veteran. In addition, the maximum LTV will be restricted to 100%
of the new appraisal, exclusive of the VA funding fee.
Wells Fargo Wholesale told its brokers that it has a new
option for reverse mortgages, or HECM’s, is now available. “HUD
announced availability of the HECM Saver option in Mortgagee
Letter 2010-34 and Wells Fargo will begin offering the program.”
Everbank
updated its FHA Streamline requirements in that it no longer
accepts a 1003 with No Income, No Asset or No Liabilities
products. “All Streamlines will now need to provide a FULL
1003.”
MI
company PMI alerted clients doing business in Florida
that effective January 1, Florida is renewing the Florida
Hurricane Catastrophe Fund Emergency Assessment and raising the
percentage contribution from 1% to 1.3% on new business only.
This assessment applies to mortgage insurance premiums paid on
loans for Florida properties.
It was
another volatile day, with investors seeming to set prices near
the lows, and then repricing when the market improved.
Treasuries opened up the New York session lower after a few
overnight stories: muni downgrades, talk of China to stop buying
Treasuries (but they bought later in the morning), GM, bunds and
the continued PIIGS saga. A better-than-expected Philly Fed
number turned some heads, and nudged bond prices lower and rates
slightly higher. But things quieted down, and traders reported
that buyers came into the market, but not before the 10-yr yield
hit 2.96%. The Treasury announced next week’s auctions, which as
expected will include $35B in 2-yr notes, $35B 5-yr notes, and
$29B in 7-yr notes, all Monday-Wednesday with Thursday’s
holiday. When the proverbial dust had settled, $1.4 billion
of agency MBS's had traded hands but were still worse by
.125-.375.
There
is no scheduled news for today, and looking ahead to next week,
activity is expected to quiet down with the Thanksgiving Day
holiday looming. Besides the auctions there is no economic data
out until Tuesday’s GDP and Existing Home Sales. So far the
10-yr yield is sitting around 2.88%, and mortgage prices are a
tad better than Thursday’s close.
A young man shopping in a supermarket noticed a little old lady
following him around. If he stopped, she stopped. Furthermore
she kept staring at him.
She finally overtook him at the checkout, and she turned to him
and said, "I hope I haven't made you feel ill at ease; it's just
that you look so much like my late son."
He answered, "That's okay."
"I know it's silly, but if you'd call out "Good bye, Mom" as I
leave the store. It would make me feel so happy."
She then went through the checkout, and as she was on her way
out of the store, the man called out, "Goodbye, Mom."
The little old lady waved, and smiled back at him.
Pleased that he had brought a little sunshine into someone's
day, he went to pay for his groceries.
"That comes to $121.85," said the clerk..
"How come so much ... I only bought 5 items.."
The clerk replied, "Yeah, but your Mother said you’d be paying
for her things, too."
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