Jun. 20, 2011: Various reader comments; Top 50 bank stats; pretty quiet out there news-wise
Rob Chrisman

How hard is it to create a new currency in a digital age? http://news.yahoo.com/s/yblog_technews/20110615/tc_yblog_technews/cyber-thief-steals-450000-worth-of-experimental-virtual-currency
 
Reader feedback on current industry trends, borrower education, reverse mortgages, and MI changes continues.
 
"As a peer in the industry, I am pained every time I read that a Realtor or home builder is in the press saying, 'Homebuyers are restrained by stringent lending requirements'. When will they realize that we are back to the lending basics - like documenting borrowers' income and assets? What a concept! So if you call that ‘stringent lending requirements,’ our industry's media perception and therefore buyer perception is tainted. When we stopped using 'stringent lending requirements,' what happened next? These perceived 'stringent lending requirements' are how we underwrote loans when lenders were empowered, and not pressured to insure everyone should be a homeowner."

“Rely on the government to provide financial literacy?  LOL!!  That’s hilarious!  If the government had any financial literacy itself, my tax rate would be much lower (without seeking loopholes). I suggest individuals educate themselves before they enter into contracts. I love your daily market insights, but that comment last week about the government providing solutions made me laugh."

"Your comment that "Congress expects all the regulation to teach [people] about mortgages and finances" was right on target. As if my clients really understand the finer points of their mortgage applications as they robo-sign their way through a quarter-inch stack of disclosures. Yesterday I received an envelope at home with information about the changes to my checking account. The information consisted of two pamphlets totaling 118 pages of small print legal terminology describing the changes to the way the account is now handled.  I have no doubt that the purpose of this mailing was to meet regulatory disclosure requirements but I wonder if the regulators think anybody actually reads this stuff... because I know for a fact that NOBODY reads it except perhaps the junior staff members at a class action law firm trolling for opportunities.  So the regulators should know that this mailing is not helping anyone and will cost us all money because the bank charges higher fees to cover the cost of the mailing and the other regulatory nonsense which doesn't help anyone."

With the news that Wells is exiting reverse mortgage lending in all channels came a reader commenting, "People say this is a recession, not a depression. They are correct, but I think they don’t see one of the big reasons why. There are four safety nets our society has now, that were not in existence in the early thirties: Social Security, Medicare, Medicaid, and Reverse Mortgages. Bank of America has exited the sector primarily due to the fact that a relatively small reverse mortgage department was a distraction to the main effort to show how well they are doing at fixing their issues when the Dodd Frank regs go into effect 7/21. These regs will further penalize the large banks that continue to have legacy loans issues, and Bank of America has Countrywide's. In Wells' case, I believe that Wells does not feel it is in their best interests to continue to produce new reverse mortgages because HUD has eliminated the discretionary power to delay a foreclosure if the bank chooses to do so. As with BofA, the bottom line for Wells is that the reverse mortgage business represented a very small portion of their mortgage business. That business is now a huge regulatory headache and now is going to present a potential risk that Wells is not willing to live with.  If you take away any one of the four programs noted above, and you will have seniors digging through the dumpsters. In 'The Grapes of Wrath,' Granny was in the Ford heading west, and not for the fun of it."
 
"With all the FHA MIP changes recently, the MI companies are excited. But just like investor overlays on Fannie & Freddie programs, MI factors look good, and are true, but may not be ‘real world.’ These ‘aggressive factors’ from private MI have been known for months. There are so many restrictions on the higher risk MI deals they’re not even close to a FHA guideline loan. Ask them if they’ll give you a rate combining all those factors. Good luck trying to do a 45% DTI at 97% LTV with a 660 score. Also private MI these days is risk-priced and the higher risk deals have substantially higher rates than a normal 90% 780 score low DTI borrower does. FHA MI looks cheap on the other scenarios, and FHA will combine the credit factors. FHA will do an all gift 3.5% down, 640 score, no cash reserves, 59% DTI deal combined, blended non-occupant borrower ratios and the appraisal review process will be substantially easier than conforming near this scenario. Private MI won’t do any of those factors alone. You could make an argument about whether this is right or wrong, but FHA does them. Most times it’s the only game in town to get close to a closed loan. Hence FHA is getting 50% of the MI deals these days.”
 
Bank closures have slowed in 2011 versus 2010, but they haven’t stopped entirely. McIntosh State Bank, Jackson, Georgia, was closed Friday, and a purchase and assumption agreement was entered into with Hamilton State Bank, Hoschton, Georgia, to assume all its deposits. In neighboring Florida, First Commercial Bank of Tampa Bay was closed with Stonegate Bank of Fort Lauderdale stepping in.
 
I guess that these two banks weren’t “too big to fail.” In the words of Sheila Bair, the departing chairman of the FDIC, the era of too-big-to-fail banks isn’t just ending -- it’s already over. A few weeks back she said, “Congress has given the FDIC a tremendous amount of responsibility to ensure that financial organizations formerly deemed too big to fail will no longer receive taxpayer funded bailouts.” The market seems to believe otherwise, however, and given the way the stocks and bonds of companies like BofA, Citi, Chase, Wells, and so forth are trading, analysts believe that the government would indeed rescue them if a crisis threatened to take down the global financial system. The basis for Bair’s assertion rests in the FDIC’s new powers under the Dodd-Frank Act, which didn’t even pretend to address the issues at too-big-to-fail Fannie Mae, Freddie Mac, or AIG.
 
And the Federal Reserve Board recently released information on the Top 50 bank holding companies in the US as of March 31 2011. It is apparent that “too big to fail” banks are still too big to fail, and wonders if that should really be a goal of our government. The four largest US bank holding companies each have assets above $1 trillion (Bank of America and JPMorgan Chase are above $2 trillion) and control roughly 52% of all assets of the entire group. All told, the top 50 bank holding companies control over $14.6T in assets.
 
Investor news included GMAC announcing a reduction in jumbo appraisal fees in California. GMAC also updated several product summaries, including its VA fixed rate, VA ARM, VA high balance fixed rate & ARM, and its VA refi options matrix. And on June 27, “the Uniform Collateral Data Portal (UCDP) will be available for submitting appraisal data files to Fannie Mae and Freddie Mac (the GSE’s). Due to system enhancements required for implementation, GMACB will mandate the use of UCDP and receipt of the Doc File ID beginning Monday, October 23, 2011.”

Rate sheet-wise, starting today GMAC will be adding a 5 and 7 day Individual Mandatory lock window, the addition of 75 and 90 day Individual Best Efforts lock windows, and will be inverting the order of rates to display the lowest rates at the top of each grid – woe to companies which have rate sheets based on a spreadsheet…

Over at Chase, starting tomorrow it revised its comparable sale requirements for subject properties in new subdivisions, (or recently converted) condominium projects, and PUD projects.

EverBank rolled out a portfolio Jumbo 6 month LIBOR ARM product yesterday for loans up to $3 million, and the rates are below 3%.
 
Rates continue to be just fine. Friday the University of Michigan Consumer Sentiment index slipped 2.5 points to 71.8 in June as the recovery faltered, but the Conference Board’s index of leading indicators rose 0.8% in May. This was greater than expected and more than reversed the previous month’s decline. Friday’s markets were also nudged by some “progress” in Greece – but those problems are going to be with us a very long time. Our 10-year notes declined about .250 in prices and closed at 2.94%, but for the entire week were nearly unchanged.
 
Today is a new day (stating the obvious), and the 10-yr. note is down to a yield of 2.92% and MBS prices slightly better. With no positive headlines out of Europe/Greece over the weekend the risk-off trade was back in play. European officials decided to hold off on approving the next installment of the original Greek bailout package until Greece passes the budget cuts. Nothing will get done there until after the results of the confidence vote tomorrow. There is no data scheduled for today, and Fed speakers will remain quiet until the FOMC decision on Wed (expect no hints of QE3, talk on "extended period", lower GDP forecast). Tomorrow we have Existing Home Sales, Wednesday another housing price index, Thursday Jobless Claims & New Home Sales, and on Friday GDP and Durable Goods.
 
 
The only way a married couple could pull off a Sunday afternoon “quickie” with their 8-year old son in the apartment was to send him out on the balcony with a Popsicle and tell him to report on all the neighborhood activities.
He began his commentary as his parents put their plan into operation:
"There's a car being towed from the parking lot,” he shouted.
“An ambulance just drove by!”
“Looks like the Andersons have company,” he called out. “Matt's riding a new bike! Looks like the Sanders are moving! Jason is on his skate board!”
After a few moments he announced, “The Coopers are having sex!!”
Startled, his mother and dad shot up in bed! Dad cautiously called out, “How do you know they're having sex?”
“Jimmy Cooper is standing on his balcony with a Popsicle.”


If you’re interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com . The current blog takes a look at the opinions on QRM’s impact on our industry. If you have both the time and inclination make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.