The interesting thing is that the markets expected them to fail. Sure, by the end of Monday the DOW was down about 250 points, and rates dropped, but the markets started off in a bad way due to continued problems in Europe – but who the heck expects them to solve the European debt issue any time soon?

In a headline worth reading twice, Bank of America told Fannie Mae it won't cooperate with Fannie’s new stance on loan buybacks, setting up the lender for a potential surge in claims and penalties. “The bank is disputing Fannie Mae's demand that lenders repurchase mortgages or cover any losses themselves if an insurer drops coverage, Bank of America said this month in a regulatory filing. BofA said it ‘does not intend to repurchase loans’ under what it deems to be new rules, and the refusal may trigger penalties or other sanctions, according to Fannie Mae. At stake is Bank of America's ability to contain costs from faulty mortgages, which have reached about $40 billion for refunds, lawsuits and foreclosures…Fannie Mae didn't enforce this policy before because “it was a different economic time,” said David Felt, a former deputy general counsel at the FHFA. Defaults were fewer and the firm didn't want to harm relations with lenders by being too picky, he said. “They'd overlook the small things. Well, they're no longer small things, and they're no longer the old Fannie Mae.” Read all about it at: http://news.businessweek.com/article.asp?documentKey76-LUVRXY07SXKX01-6L4S42OT8B1P8543B1MCKDH13E.

And in other Bank of America news, The Financial Times reports that the states of New York and Delaware “won the right to intervene in a proposed $8.5bn settlement agreement over soured mortgage bonds between Bank of America and a group of aggrieved investors. New York attorney-general Eric Schneiderman and Delaware’s Beau Biden say the deal is inadequate to investors and that the trustee for the investors, Bank of New York Mellon, broke state laws. Mr. Schneiderman asked the judge overseeing the agreement to reject it. Bank of America struck the June accord with 22 institutional investors, including the Federal Reserve Bank of New York and bond group Pimco, to settle claims that the bank repurchase home loans bundled into 530 securities with an original loan balance of $424bn. BNY Mellon agreed to the deal on behalf of all investors in the securities.” “This could complicate efforts by BofA to limit its exposure to allegedly faulty mortgage practices. The company’s shares have plunged 59 per cent this year in part on concern the bank faces unresolved and unknown mortgage liabilities. Its shares closed at $5.49 on Monday, the lowest since March 2009.”

Yesterday I noted one bank that was closed on Friday, but missed another: in Iowa Polk County Bank was closed and all deposit accounts, including brokered deposits, have been transferred to Grinnell State Bank, also of Iowa.

How you gonna keep them down on the farm? The Kansas City Fed report that cropland values jumped 25% in its district over the past year to a record high and ranchland values surged 14%. Meanwhile, the Fed Chicago reported that farmland values in its district soared to a record, up 25% in the 3Q as the value of agricultural land increased 7%.

Not only do SunTrust employees have to remind folks that the middle “t” is capitalized in its name, but now has had the company announce it would no longer offer pension benefits to employees after 12/31 of this year, as it seeks to reduce employee benefits costs. The Bank said it will continue to offer 401(k) plans, increase its matching contribution from 5% to 6% and make discretionary contributions starting in 2013.

Wells Fargo Funding sent word out to its clients about several topics: Wells Fargo Funding’s Response to Extension of HARP Program, VA Funding Fees Change Nov. 18, 2011 and Nov. 19, 2011 (As a result of the president signing the bill, effective Saturday, November 19, 2011, the funding fee schedule set forth in the VA Lender’s Handbook, Chapter 8, Topic 8 is again law through Fiscal Year 2016.), Hours of Operation During the Thanksgiving Holiday, New Loss Payee Clause Address – Effective Jan. 12, New Conventional Conforming Price Adjusters – Effective Dec. 12, Changes to Government Price Adjusters – Effective Dec. 12.

The first item of interest is, "Fannie Mae's DU Refi Plus continues to be the HARP program eligible for purchase by Wells Fargo Funding. While we are committed to extending the expiration date according to Agency requirements for DU Refi Plus Loans, any enhancements made by Fannie Mae to the DU Refi Plus program will not be available until we have had an opportunity to assess the impact and offering of the enhancements, and DU  has been updated to support the changes."

There are two big Wells news items there, driven by the performance on its servicing portfolio and not some government directive. Wells Fargo Funding is implementing FICO adjusters for conventional Conforming Loans, including DU Refi Plus, Home Opportunities, Home Possible, MyCommunityMortgage, and the High Balance Conforming Loan programs. The changes are a reflection of higher defaults and higher costs to service lower-Loan Score production. A comparison of the old and new adjusters shows a 1 point hit for FICO scores below 620, .250 hit for 620-679, and a .125 ding for 680-739.

But wait - there's more! WF Funding is changing the FICO adjusters for government loans, including the High Balance FHA and VA programs. The changes are a reflection of higher defaults and higher costs to service lower-Loan Score production. Refer to the tables below for comparisons of old and new adjusters by program. Note: The FICO ranges have changed slightly. And the improvement for anyone with a FICO above 720 improved to +.250.

Wells Fargo’s wholesale channel told brokers that the VA Funding Fees will remain at the higher rates (“On Saturday, Nov. 19 the president signed a bill into law to extend the expiration date of the higher Funding Fee”). In addition, it mentioned enhancements to the Certificate of Eligibility for VA loans (A Certificate of Eligibility (COE) is a form issued by the VA that states the maximum entitlement available to a veteran for a VA home loan program.), Wells Fargo is working to implement HARP changes (Quit calling us - "Wells Fargo is committed to updating our policies as quickly as possible; however, until you receive official notification of the effective date, please do not submit applications with the changed parameters."), changes to VA appraisal data effective Jan. 1 (The VA has announced that it will require Uniform Appraisal Dataset (UAD)-compliant appraisals effective on Jan. 1; however, Wells Fargo will accept VA UAD-compliant appraisals prior to Jan. 1.), and an asset documentation change for Freddie’s  Relief Refinance Mortgage program.

On the good news side of things, Existing Home Sales came in above expectations driven by an increase in single-family sales. It takes down the inventory to 8 months, although the distressed sales amounted to 28% of the activity (vs. 13% In Sep), and that first time home buyers made up a greater share of activity. Year over year existing home sales and are 13.5% higher than the 4.38 million unit level in October 2010. Analysts point out that this month’s report is a bit more positive but do not expect the trend to persist. And loan agents can tell you that contract failures reported by NAR members jumped to 33% in October from 18% in September, and were only 8 percent a year ago.

Yesterday’s 2-yr T-note auction was well bid, coming in around .28%, while the 10-yr stayed below 2.00% and mortgage prices improved slightly. Today we’ve had Real GDP for the 3^rd quarter: it was revised from +2.5% to +2.0%, worse than expected. It has pushed stocks down, along with rates: the 10-yr is down to 1.95% and MBS prices are better by .125. Later we’ll have the release of the November FOMC minutes and a $35 billion auction.

 

Cajun economics:

It's a slow day in Mamou, Louisiana. The sun is beating down, and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit.
On this particular day a traveling Shreveport salesman is driving through town. He stops at the Hotel Cazan and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs in order to pick one in which to spend the night.
As soon as the man walks upstairs, Bosco, the owner, grabs the bill and runs next door to pay his debt to Boudreaux the butcher. Boudreaux takes the $100 and runs down the street to retire his debt to Trosclair the pig farmer.
Trosclair takes the $100 and heads off to pay his bill at T-Boy's Farmers Co-op, the local supplier of feed and fuel.
T-Boy, at the Farmer's Co-op, takes the $100 and runs to pay his debt to the local "lady of the night," Clarise, who has also been facing hard times and has had to offer her "services" on credit.
Clarise rushes to the hotel and pays off her room bill with Bosco, the hotel owner. Bosco then places the $100 back on the counter so the travelling salesman will not suspect anything.
At that moment the salesman comes down the stairs, picks up the $100 bill, states that the rooms are not satisfactory, pockets the money, and leaves town. No one produced anything. No one earned anything. However, the whole town is now out of debt and now looks to the future with a lot more optimism.
And that, my friend, is how the United States Government is conducting business today.