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Apr. 8, 2011: Shutdown specifics for mortgage lending from investors and vendors; news on Wells' layoffs, RMIC downgrade, etc.; oil & gold prices nudge rates higher
Rob Chrisman
Rain or
shine, whether or not the US government is closed or open, the
US Treasury will be open next week to auction off $32 billion in
3-yr notes, $21 billion in 10-yr’s, and $13 billion in 30-yr’s.
But in the event of a
shutdown, what about the rest of government? A LO from Michigan
wrote, “I can’t believe this. First the comp thing,
and now our entire government may take a break. No wonder
folks are making jokes like, ‘Ruger is coming out with a new
pistol in honor of Obama. It will be named the ‘Union Worker.’
It doesn’t work and you can’t fire it.” If the government shuts
down today, every non-essential government employee should wake
up really late and smile. After all, they are lucky. When private companies have budget problems, the
people on the non-essential worker list don’t get a three-day
weekend. They get a six-month “vacation” of filling out
resumes, eating Ramen noodles, worrying about their mortgages,
and looking for a job. In comparison, the furloughed government
workers will get an extra day to enjoy the Cherry Blossom
Festival in D.C.”
Caroline Baum wrote a
notable blurb, "What if the U.S. government shut down and no one
noticed? Even worse (or better, depending on one’s point of
view), what if all federal workers went on furlough and the
public realized there were benefits, not just costs, to smaller
government? Essential services will be maintained, including the
distribution of Social Security checks. Employees involved in
the military, national security and law enforcement will stay on
the job. Non-essential workers will be furloughed. President
Barack Obama says a shutdown would further reduce confidence in
government. Guess what? It can’t go much lower. The approval
rating for Congress dropped to 18 percent last month, near the
lowest in the Gallup poll’s 37-year history of tracking the
trend."
Word has it that
since it doesn't rely on Congressional funds, the
Federal Reserve (central bank) would remain open for business
as usual, with normal staffing levels. The Fed would
therefore be able to continue with its day-to-day operations.
The SEC is expected to continue operations as well. But lenders
and vendors were out warning originators about possibilities. CoreLogic told clients that, “If the government
does a shutdown, the last date of service for 4506-T and SSA-89
orders would be this Friday April 8…We will make every effort to
transmit orders to the IRS and SSA as quickly as possible once
received. All SSN orders will be processed during standard
business hours and may not be affected by the shutdown. In the
event of a shutdown, we will still continue to submit all 4506-T
Direct and SSN orders but service time is expected to be
affected due to the IRS and SSA being unavailable to respond.”
For licensing, “Since
CSBS is the nationwide organization representing state banking
regulators, a shutdown of federal government agencies will not
have an immediate impact on day-to-day operations. NMLS
offices will remain open during any government shutdown
and NMLS staff will continue to report to work…Test candidates
should not expect their appointments to be cancelled or be
affected by a shutdown of federal government agencies.”
Franklin American suggested clients,
“Run CAIVRS' checks immediately on all loans that you want to
close in the next week or two in case the shutdown does occur.
A CAIVRS' problem is likely the most immediate impediment to
obtaining insurance once the loan the program is reinstated.
Remit any collected MIP as FHA Connection will not be available
if a shutdown occurs. Complete the insuring of any closed FHA
loans. If the government does shutdown, we expect FHA to publish
a FAQ and answers on their website to address program
operations. However, we wanted to give our lenders some notice
of items they could do to avoid any penalties or process
interruption of their government loan production.”
Plaza Home Mortgage told producers, “We
have been advised that VA will continue business as usual during
the shutdown. Therefore, we anticipate that the WEB LGY
(formerly TAS) system used to order VA Case numbers and
Appraisals will be available, and so will the issuing of VA Loan
Guaranty Certificates. Plaza will send out additional
communications should we learn anything new about how the VA
will be handling loans during the furlough.”
Stearns Wholesale warned brokers, "To
best prepare in the event the government moves to enforce a
temporary shutdown, Stearns strongly recommends that any pending
Case Number, LDP, GSA, CAIVRS, 4506T, and SSI Validation be
ordered as soon as possible. If a shutdown does occur, FHA
Connection and VA Information Portal may or may not be
available, 4506T, IRS Transcript processing and SSI Validation
will not be available. To avoid any delay in closing your loans,
we strongly recommend you ordering any pending FHA, VA, IRS, or
Social Security items today.”
Independent of the
government shut-down, Wells Fargo gave 1,900
mortgage employees their notice. “The cuts
add up to about 3% of Wells Fargo's mortgage staff, including
interim positions that are tied directly to origination volumes.
Most of the layoffs are these interim employees, who were told
when hired that their position could be short term.” Wells
Fargo's overall headcount was 272,200. http://online.wsj.com/article/BT-CO-20110407-714884.html
BlackRock, best known for
being the world’s largest asset manager and its huge
institutional bond accounts & iShares exchange-traded funds,
is planning a massive expansion in old-fashioned mutual funds
and related retail offerings. BlackRock wants to double its $300
billion U.S. retail business by the end of 2014, with the
managing director saying, “The firm has identified U.S. retail
as a strategic priority. We think we can double our business
from where it is now." http://www.reuters.com/article/2011/04/06/us-blackrock-retail-idUSTRE73545220110406
Wednesday HUD issued a memorandum (APM 11-04) that is not a
surprise, but turned some investor heads. Ginnie Mae will change
its policy with regards to the delinquency status of loans being
pooled into their MBS. “Effective for single-family securities
with an issue date of June 1, 2011 and later, all
loans pooled into Ginnie Mae single-family securities may not
be delinquent by more than the monthly installment of
principal and interest that is due on the issue date.” In
other words, the loan being pooled would need to be current till
the month prior to the issuance of the MBS pool – no more
allowing new up-to-60-day delinquent loans to be pooled into
Ginnie securities. Ginnie Mae was already requiring
“re-performing” loans to be current at the time of the issuance.
The impact on the market and investors is not huge, as analysts
estimate that at most 0.5% to 1% of loans being securitized into
Ginnie Mae MBS were delinquent at issuance.
Fitch Ratings
downgraded Republic Mortgage Insurance Company's (RMIC)’s
“Insurer Financial Strength” (IFS) rating to 'BB' from 'BBB-'. “The
downgrade of the IFS rating is driven primarily by RMIC's
comparatively weak capital levels, continued operating losses
and uncertain business prospects.” RMIC's
weak capital ratios are reflective of Fitch's view that the
insurer's delinquent risk-in-force is currently greater than its
total capital resources (comprised of policyholders' surplus,
contingency reserve and loss & loss adjustment expense
reserve).
GMAC Bank passed on the word
to its correspondents, and brokers in the wholesale channel,
that “all Jumbo loan appraisals must now be ordered through the
Veros Appraisal Management platform provided by GMACB. This
includes Jumbo loans underwritten by the Client under delegated
authority as well as those underwritten by GMACB. GMACB’s
Valuation Team, comprised of licensed and certified appraisers,
will conduct a due diligence on every appraisal ordered through
the Veros platform” to check items including value validation,
appropriateness of the comparable selection, adequacy of the
market adjusters and individual adjustments to comparable sales,
dates of sales, application of appraisal principles, etc. “GMACB
clients will benefit on Jumbo loans where the appraisal is
ordered through the Veros Appraisal Management Service, as loans
will not be denied for purchase or returned for repurchase
solely because the value of the collateral is not sufficient or
the appraisal does not meet investor guidelines.”
Flagstar let its clients know
that, "The FHA continues to require lenders to underwrite FHA
loans using the original appraisal performed for a case number,
regardless of whether the lender and or borrower(s) on the loan
change…In no circumstances will Flagstar accept an appraisal
transferred or uploaded to Flagstar by the loan originator or
any employee of the originating lender.” And starting in 10
days, “The FHA will limit the maximum LTV and loan purpose for
borrowers who re-occupy their investment property less than 12
months prior to the application date of the refinance
transaction. To determine the maximum allowable LTV and loan
purpose, refer to the matrix in the memo.”
In the markets on Thursday, MBS volumes were anemic, as opposed
to Wednesday when they were decent. 10-year notes were worse by
a smidge and closed with a yield of 3.55% while current coupon
MBS prices were slightly better than Wednesday’s close. Rates
were pushed around a little by the .25% rate hike by the ECB,
another strong earthquake in Japan, more hawkish comments from a
Fed official, and the potential for a government shutdown as
Republicans and Democrats are unable to reach an agreement on
the budget.
The week closes out with gold marching toward $1,500 per ounce,
oil at $111 per barrel, and another day of no substantive
scheduled economic news (unless one counts Wholesale Trade for
February later today). Even though the markets assume a shutdown
will be averted, these factors have served to push rates higher,
and the 10-yr yield is up to 3.61% and MBS prices
worse by .250.
On a transatlantic
flight, a plane passes through a severe storm. The turbulence is
awful, and things go from bad to worse when one wing is struck
by lightning. One woman in particular loses it.
Screaming, she stands up in the front of the plane. “I'm too
young to die,” she wails. Then she yells, “Well, if I'm going to
die, I want my last minutes on earth to be memorable! Is there
anyone on this plane who can make me feel like a WOMAN?”
For a moment there is silence. Everyone has forgotten their own
peril. They all stare, riveted, at the desperate woman in the
front of the plane. Then a cowboy from Wyoming stands up in the
rear of the plane. He is handsome: tall, well built, with dark
brown hair and hazel eyes. He starts to walk slowly up the
aisle, unbuttoning his shirt.
One button at a time.
No one moves.
He removes his shirt.
Muscles ripple across his chest.
She gasps.
He whispers in her ear:
“Iron this...then get me a beer.”
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