One would hope that a major US bank is what it seems, but uh-oh. Moody’s downgraded the long-term and/or short-term debt ratings of Bank of America, Wells Fargo and Citigroup with a negative outlook on the long-term debt rating for all. In BofA’s case, "Moody's Investors Service has downgraded the ratings of Bank of America Corporation's (BAC) holding company to Baa1 from A2 for long-term senior debt and to Prime-2 from Prime-1 for short-term debt. The long-term deposit ratings of Bank of America N.A. (BANA) were downgraded to A2 from Aa3, while BANA's short-term rating was affirmed at Prime-1. The outlook on the long-term senior ratings remains negative. The downgrades result from a decrease in the probability that the US government would support the bank, if needed. Moody's believes that the government is likely to continue to provide some level of support to systemically important financial institutions. However, it is also more likely now than during the financial crisis to allow a large bank to fail should it become financially troubled, as the risks of contagion become less acute. Moody's is therefore lowering the amount of support it incorporates into Bank of America's ratings to levels reflected prior to the crisis."

"Pay Option ARM's on Aisle 4!" Could Walmart, Safeway, or Costco offer mortgages to its shoppers? The idea is not so far-fetched. If you've ever traveled across the Atlantic, you've probably seen Tesco, a global grocery and general merchandise retailer headquartered in the UK, and is the third-largest retailer in the world measured by revenues (after Wal-Mart and Carrefour) and the second-largest measured by profits (after Wal-Mart). And next year it will be offering mortgages to its shoppers: http://www.ft.com/intl/cms/s/0/0e1ac0c6-e3ad-11e0-bd3d-00144feabdc0.html#axzz1YaC560V7.

We have seven business days left until the temporary loan limits expire. The new old loan amounts for Fannie & Freddie can be found at Fannie's https://www.efanniemae.com/sf/refmaterials/loanlimits/ or Freddie's http://www.freddiemac.com/sell/selbultn/limit.htm.

Radian laid off 7% of its workforce Monday, according to a filing with the SEC. The cuts included the MI company’s COO Robert Griffith.

Freddie reminded its seller/servicers that, "The Federal Housing Finance Agency (FHFA) has issued the area median income (AMI) estimates for 2011. Sellers may begin using the 2011 AMI estimates immediately, but they must use these estimates for Home Possible Mortgages delivered to Freddie Mac on or after December 1. Freddie Mac uses the AMI estimates, among other things, to determine eligibility for our Home Possible Mortgages. Our pricing incentive for Home Possible Mortgages is based on AMI limits.”

In a regulation that many view as interfering with a company's right to set its own underwriting guidelines, the CFPB will complete work on a rule aimed at ensuring borrowers have the ability to repay their mortgages early by next year, generally known as “QM”: http://www.foxbusiness.com/markets/2011/09/20/mortgage-rule-to-be-released-early-next-year-cfpb/.

Ah, NMLS. The SAFE Act requires state-licensed MLOs to complete 8 hours of annual continuing education, and some states have additional requirements. “So far in 2011, MLOs have completed 270,471 hours of continuing education (CE). Roughly 40% of the estimated 85,000 MLOs who are required to complete CE are now compliant.”  You can find CE courses on the NMLS Resource Center at  http://mortgage.nationwidelicensingsystem.org/profreq/education/Pages/default.aspx.

The Federal Reserve System is definitely in the REO game, and is hosting a webinar on the subject. “Real Estate Owned (REO) Disposition Risks and CRA Opportunities,” on Tuesday, October 4, at 2PM EST.  To learn more and/or register (you gotta like the price: free) go to http://www.philadelphiafed.org/bank-resources/publications/consumer-compliance-outlook//outlook-live/. The Fed “will address a number of risks and opportunities associated with property preservation, maintenance, and disposition including: local ordinances and code enforcement, accidents occurring on REO properties, bulk sales of properties, use of brokers/vendors to maintain or dispose of REO properties, eviction of tenants, REO donations, and alternatives to REO sales.”

Citi spread the word that, "HUD has updated FHA County Loan Limits effective for case files submitted on or after October 1, 2011.  Fannie Mae and Freddie Mac have already updated Total Scorecard prior to the October 1 effective date. DU/DO was updated on September 17th and LP was updated on September 1st. Due to these early system updates, loans that are eligible for the temporary loan limits could receive an inaccurate eligibility assessment. Correspondents must ensure that the correct FHA county loan limits are applied by reviewing the county loan limits as listed on HUD's website at: https://entp.hud.gov/idapp/html/hicostlook.cfm Correspondents wishing to register an FHA loan with an ineligible finding for loan amount only will not be able to complete the registration on the Correspondent Website.   The loan must be registered via fax using the Exhibit 2-Registration Form in the Correspondent Manual.

Home Savings of America reminded clients that, "Effective with loans ‘obligated’ (approved) by the USDA starting October 1, 2011, the initial Guarantee Fee will be reduced to 2%; in addition a monthly 0.30% annual fee is required.  Therefore effective immediately HSOA will be requiring all new USDA submissions to include the initial Guarantee Fee of 2% and a monthly 0.30% annual fee. Loans in Process: As indicated in the details below, this applies to all USDA loans, and is based on the date USDA issues its conditional approval.  Many USDA offices have a backlog of files to review; plan and prioritize accordingly!  USDA will not make any exceptions to these changing GF requirements, regardless of the circumstances." GMAC also went into a great deal of depth about the government loan amount changes, based on county - it is best to read GMAC's announcement directly.”

Bank of America issued disaster declarations and updates for the remnants of Tropical Storm Lee and the wildfires in New York and Texas, respectively.

GMAC’s correspondent clients were shown changes in pricing adjustments for 5/1 ARM's of various shapes, sizes, amounts, and geographic locations. In addition, "Although FHA will permit the extension of closing dates based on credit approval date GMACB will not accept Purchase or Non-FHA-to-FHA Refinance loans that exceed new county loan limits on loans that close after September 30, 2011. Pipeline loans that exceed new county loan limits and do not meet the FHA-to-FHA refinance categories described below must close on or before September 30, 2011."

PHH Mortgage announced that the VA funding fee will be changing for any VA loan that is closed on or after October 1, 2011. “While the funding fee for VA Interest Rate Reduction Loans (IRRRLs) and Assumptions will not be changing at this time, the factors for all other transaction types will be reduced.”

Starting 10/1 U.S. Bank Home Mortgage Wholesale Division “will no longer accept loan files underwritten by a Mortgage Insurance contract underwriter for our non-delegated Correspondent Lenders. You must send the file to your assigned USBHM Underwriting Center for complete approval that may or may not require mortgage insurance. If the loan file does require mortgage insurance, USBHM will obtain the most competitive premium/tiered pricing based on the applicable MI provider’s rates. USBHM will continue to accept files that have been underwritten by the following approved MI companies as long as you are an approved Delegated Correspondent with USBHM and hold a master policy with one of these providers: MGIC, Radian, UG, GE, and Essent Guaranty.

Lenders continue to enter the correspondent space, especially with concerns about Bank of America's unit being purchased by Nationstar or whoever steps in. Here is a new correspondent with a little twist: "Platinum Home Mortgage is launching a Correspondent Lending Division that will specialize in renovation lending...the Albany, NY-based division will serve retail mortgage lenders in the contiguous 48 states. The Correspondent Lending Division will specialize in government and conventional renovation financing programs with special emphasis on FHA 203(k) and FHA 203(k) Streamlined programs. They also offer the Fannie Mae HomePath Mortgage and HomePath Renovation Mortgage, along with a more traditional product menu. See it at www.platinumcorrespondent.com.

Rates took another turn lower yesterday. It wasn’t due to Existing-home sales for August, which rose nearly 8% and are over 18% higher than a year ago. No, it was due to the FOMC’s announced “twist" – the Fed is selling $400 billion of securities under 3 years maturity to buy a like amount in the 6-30 year range. They did this to lower rates out on the curve in an effort to spur lending, borrowing, and economic growth. Inflation is certainly not our problem!

To support mortgage markets the Fed will reinvest principal payments from holdings into agency mortgage backed securities. This significantly changes the mortgage supply/demand landscape. Dealers expect the Fed to focus its purchases based on issuance coupons, as they did in QE1, which favors 3.5’s and 4’s for now, which include 3.75%-4.625% mortgages. The Fed’s actions may also favor convention production (Freddie & Fannie) - in QE1 over 90% of the Fed’s purchases were in conventionals.

The Fed's move back into MBS was NOT expected and mortgages rallied as a result - especially production coupons where most of the buying will take place. All of this sent longer maturity Treasuries higher with 10-year notes closing up almost .75 in price (1.87%), and MBS prices closed up nearly 1/2 and 3/4s of a point on 30-year 4% and 3.5% coupons, respectively.

While the Committee's decision will keep mortgage rates low, it doesn't change the fact that at this time underwriting conditions remain tight, housing values remain low, and the economy and jobs markets are weak. So many people will still not be able to take advantage of even more attractive rates that are looming as a result of the Fed's future actions to refinance their mortgage. It's back now to the FHFA and what changes they will announce to HARP, but based on Acting Director DeMarco's comments earlier this week, any changes are likely to be limited. Today we’ll have Jobless Claims and Leading Economic Indicators, the FHFA House Price Index for July.

A couple quick ones for the kids:

Two hydrogen atoms walk into a bar. One says, "I've lost my electron."  The other says, "Are you sure?" The first replies, "Yes, I'm positive.”

Apparently, 1 in 5 people in the world are Chinese. And there are 5 people in my family, so it must be one of them. It's either mom or my dad, or maybe my older brother Colin. Or my younger brother Ho-Cha Chu. But I'm pretty sure it's Colin.
 
I went to buy some camouflage trousers the other day, but I couldn't find any.
 
I went to the butcher's the other day and I bet him $50 that he couldn't reach the meat on the top shelf. He said, “No, the steaks are too high.”

Two Eskimos sitting in a kayak were chilly; but when they lit a fire in the craft it sank, proving once and for all that…you can't have your kayak and heat it too.