A mortgage exec from the Carolinas wrote, “Did you happen to catch the article in the WSJ about FNMA and FHLMC pushing back on lenders to repurchase mortgages made years ago for the most remote and technical reasons, many of which are a tremendous stretch to say the least? Here is an excerpt: ‘What's the problem? Everyone from real estate agents to top Fed officials has a list. Credit scores, depressed by the recession, may not be reliable predictors of borrowers' ability to make payments. Appraisers are low-balling, overcompensating for past mistakes and struggling because there are so few truly comparable sales to value homes. Supervisors are making lenders overly cautious. A shrinking mortgage industry means more bottlenecks. (Fannie, Freddie, and the FHA) bear the risk that the loan won't be paid back. All three took huge hits, and are trying to reduce losses by forcing lenders, originators and middlemen to take back loans that shouldn't have been made—because the borrower lied, the appraisal was inflated, the paperwork was irresponsibly sloppy. After all, why should taxpayers pay for sins of those who recklessly made bad loans?”

The quote continues: “But if the agencies are scouring files to seek any excuse to send back loans that went bad not because of initial negligence or fraud but because, say, a borrower lost a job after five years of on-time payments, does that make sense? Or does it make lenders like doctors who order lots of extra tests out of fear of malpractice suits. Neither the individual nor society is well-served. This is a big deal. Taking back one bad loan can wipe out a lender's profit on dozens of good ones. Squeezing every nickel out of mortgage makers is sweet revenge, but if it leads them to make fewer new loans to worthy borrowers, it'll push home prices lower than they would otherwise be—and that hurts us all.”

The mortgage exec continues, “I am hearing that the ABA is beginning to raise this issue.  Many community banks and small independents are being bombarded with loan repurchase requests and it is becoming an increasing burden to their ability and/or willingness to provide mortgage loans. How can Fannie & Freddie be actively searching for new clients when this is happening to their old clients?”

Farther up the “life of a loan” chain, an industry vet from the Northeast wrote, “Many mortgage bankers are finding it difficult to fund loans to the volume levels that they are used to due to investor delays in reviewing funded loans. Citi, Wells Fargo, and MetLife are reportedly not even reviewing loans for 2-3 weeks. This is causing widespread delays in funding loans and extensive costs in extension fees. Readers should know that just because an investor is backed up doesn't mean that it won't get around to looking at your loan. Although the extension fee is a little odd - if a company delivers a loan that meets the requirements on time, and the investor causes the delay, common sense suggests that the seller shouldn't have to pay a fine. Of course, if a mortgage company can't fund loans on its warehouse line and misses delivery deadlines, that could result in a fee.”

The vet continues, “Just hearing that lenders are not being able to fund loans because their lines are capped with loans that investors are not able to review for 2-3 weeks because the investor is backed up means that loans in the pipeline cannot be funded and have to be extended because on line capacity.  Usually a lender turns their line a minimum of two times a month.  Many lenders are only able to turn it less than one time because the dwell time of loans on the line is so bad.  Wells reporting that they are not looking at conventional loans for 13 business days!”

Announcements by LandSafe and Core Logic exiting certain product lines & scaling back (http://finance.dailyherald.com/dailyherald/news/read?GUID865917 and “LandSafe Closing Services has made the strategic decision to exit the business of providing closing services to non-Bank of America entities”) have added one more thing to the end of the year to do list for lenders. Of course, competitors are “fast on the draw” to step in. For example, DataQuick “has a turnkey solution for credit, flood, AVM’s and appraisals that can get you easily up and running with cost effective, compliant and easy to implement services. DataQuick is integrated with over 50 LOS systems, has direct portals as well, can run credit reports in batch, and supports 12 AVM’s.  If interested call your DataQuick representative or email Wendy Barnett - wbarnett@dataquick.com.

With the bond markets closed Thursday, and an early close Friday, there isn’t much to discuss in the U.S. sector. The 10-yr T-note ended the week at 1.97%. Overseas, however there were the usual gyrations. Equities are up around the world, spurred higher by a slew of weekend reports discussing how Eurozone officials are working on a slew of policy responses to the Eurozone debt crisis. But are we seeing a repeat of early October, when very depressed sentiment met up a series of press reports speculating on the formation of a "grand plan" for Europe? I am thinking “yes” but what do I know? The coming two weeks, with many events, will be decisive for the situation in Europe and watch for things to continue to spiral or stabilize.

On this side of the pond, this week is filled with economic news. Today we have Home Sales, and tomorrow is the S&P/Case-Shiller and FHFA home price indices and Consumer Confidence. Wednesday has the ADP employment numbers, some productivity numbers, the Chicago Purchasing Manager survey, Pending Home Sales, and the Beige Book. Thursday is Jobless Claims & Construction, and then on Friday we have Unemployment data. And unfortunately for those waiting to lock, the yield on the 10-yr is worse by 9 basis points (2.06%) and MBS prices are worse by about .250.

Here’s a headline from Friday: “Pepper Spraying, Homicide Bullish Indicators, Economists Say.”
MINNEAPOLIS – “In what economists are hailing as a clear sign of economic recovery, Walmart customers across the USA jammed into stores on Black Friday, sometimes killing each other to buy useless stuff. ‘We have been looking for evidence that the economy is on the mend,’ said Davis Logsdon, chairman of the economics department at the University of Minnesota.  ‘When people resort to homicide to buy a Blu-ray player, that is very, very good news indeed.’ Mr. Logsdon said he was ‘impressed’ by the lengths to which some Walmart customers were going to grab coveted sale items. With many customers using pepper spray and other weapons to get a shopping advantage, however, Mr. Logsdon advised Americans not to enter a Walmart unarmed. ‘If you want to get your hands on a doorbuster, you’d better have a firearm,’ he said.  ‘Fortunately, Walmart is offering several great doorbusters on firearms.’ ‘Egyptians risk their lives for new government,’ he said. ‘Americans bravely do the same for new flat screens.’” (Thanks to the Borowtiz Report for this one.)