Yesterday afternoon, per the Census Bureau, the U.S. population reached a milestone that is very meaningful to mathematicians: 314,159,265 residents, or pi (3.14159265) times 100 million. Pi is a mathematical constant that is the ratio of a circle’s circumference to its diameter. “This is a once in many generations event...so go out and celebrate this American pi,” said Census Bureau Chief Demographer Howard Hogan. The securitization industry had a little something to celebrate yesterday, and that was Chicago Mayor Rahm Emanuel's position on eminent domain: http://www.chicagotribune.com/business/breaking/chi-emanuel-eminent-domain-not-the-right-instrument-to-address-underwater-mortgages-20120814,0,575221.story.

In the story above is a brief explanation on how Mortgage Resolution Partners stands to profit from their efforts. A note I received yesterday observed, “This excerpt from the Mortgage Resolution Partners website says a lot: ‘Implementation of the CARES program by local governments acts as a catalyst for similar programs in other communities and for broader policy changes, helping to alleviate the US mortgage crisis.’ Maybe attorneys and special interest groups could alleviate all mortgages - that would end the crisis.”

A quick clarification. Yesterday's banter about Realtors and LO's contained a link to NAR’s regulatory efforts. But as many folks pointed out, that link isn’t redirecting correctly since it’s going to an internal, “member section” of NAR's site. Here is the appropriate link to see what the organization has been up to: http://www.realtor.org/political-advocacy/all-advocacy-issues.

And anyone who thinks that buybacks issues are behind us had better think twice. "Fannie & Freddie Continuing to Clamp Down on Banks" is the trend, and trust me, given that banks are not likely to absorb all this by themselves, these putbacks will be pushed down into smaller originators: http://in.reuters.com/article/2012/08/14/us-mortgages-repurchases-idINBRE87D14V20120814.

I was reading in the paper today about this dwarf that got pick-pocketed.   How could anyone stoop so low? Many in the industry are accusing the CFPB of stooping low by advertising that it wants employees to go "undercover", a la secret shoppers, to nab banks. Use the code name "George Orwell." Here is the complete story: http://www.washingtontimes.com/news/2012/aug/12/consumer-bureau-seeks-sleuths-for-bad-bankers/print/.

Many in the industry are concerned about the CFPB's proposed mortgage servicing rules. The proposals consist of a 250-page Real Estate Settlement Procedures Act (http://files.consumerfinance.gov/f/201208_cfpb_respa_proposed_rules.pdf) (Regulation X) rule and a 178-page Truth in Lending Act (Regulation Z) rule (http://files.consumerfinance.gov/f/201208_cfpb_tila_proposed_rules.pdf). Comments on the proposals will be due by October 9; implementation is expected to be issued by January. While the proposals’ page count may seem modest compared to the CFPB’s nearly 1,100 page proposal integrating RESPA/TILA disclosures, the servicing proposals are untypically single-spaced rather than double-spaced.

In addition to the proposals, the CFPB also released a report titled “Summary of Proposed Mortgage Servicing Rules.” The report summarizes the study used by the CFPB to inform its development and testing of the model disclosures that were published with the proposed rules: http://files.consumerfinance.gov/f/201208_cfpb_detailed_summary_proposed_mortgage_servicing_rules.pdf.

There is a short, readable write up of its implications at http://www.stratmorgroup.com/, click on the link in the top right corner. Note that both Fitch Ratings and the MBA have reacted to the CFPB’s proposed rules for mortgage servicers. Fitch said that in general it views the proposed rules positively because, if implemented, they would set consistent standards for all servicers, including smaller nonbank entities "that have thus far avoided the mandated changes."  Fitch, however, warned that the rules, like other servicing focused initiatives, will further increase compliance costs.  

Lawsuits are a part of the biz, and former Fannie CEO Daniel Mudd must face a lawsuit in which the U.S. Securities and Exchange Commission accuses him of misleading investors about the company’s exposure to risky loans. http://www.bloomberg.com/news/2012-08-10/ex-fannie-mae-ceo-mudd-must-defend-sec-suit-judge-rules.html.

Let’s move on to some relatively recent agency, investor, and vendor updates. They just don’t stop – I don’t know how underwriters keep track of them! For full details it is best to read the full bulletin, but these will give you a flavor for what is going on.

As part of the revision of policies on continuance of income verification, Fannie Mae has added guidelines about evaluating variable income (hourly pay, overtime, bonuses, commission) to address history of receipt, frequency of payment, and income trending.  Clarification has been issued regarding types of income that require the lender to verify a three-year continuance and income sources that have a defined expiration date or that are based on the depletion of an asset.  Lenders are now required to supply federal income tax returns to confirm income from temporary or periodic employment, interest and dividends, and any business in which the borrower has a stake of at least 25%.  

Fannie will be adjusting the required interest rate for standard modifications with a pre-modification mark-to-market LTV ratio of 80% or more.  This rate is required to be implemented for standard modifications with Trial Period plans that go into effect on or after September 1, 2012, though servicers are encouraged to do so for Trial Period plans that go into effect on or after August 1st.

HUD has made a few changes to the TOTAL Scorecard, the new version of which should be used for all first-time risk assessments after July 21st.  Any applications that were scored with a case number under the previous edition of the Scorecard will be eligible to be re-scored under the previous edition for 90 days, after which they will be subject to the new one.  The revisions include the addition of review rules and error codes and the changing of some optional data fields to required data fields; the full details of the changes may be viewed at http://www.hud.gov/pub/chums/aus-developers-guide.pdf.

As the FHA prepares to update the process used to remit MI premiums for the Home Equity Conversion Mortgage program, it is requiring all FHA-approved mortgagees currently responsible for remitting MI premiums but not involved with the Home Equity Reverse Mortgage Information Technology project to submit certain information by July 25th.  The company name; 10-digit FHA Mortgagee ID number; name and title of the company representatives who oversee HECM origination, servicing, and claims; and the phone numbers and email addresses of each company representative should be emailed to HERMITUAM@hud.gov.

Most everyone knows that the Disputed Credit and Identity of Interest sections of FHA Mortgagee Letter 2012-10, which were scheduled to become effective on July 1st, have been rescinded.  The guidance on Year-to-Date P&L and Balance Sheets and Identity of Interest remains in effect for all case numbers assigned on or after April 1, 2012.

Flagstar has issued additional guidance following its earlier announcement that any FHA Streamline refinances registered on or after July 6th where Flagstar wasn’t the original loan’s servicer would be subject to a requirement of a FICO score of at least 680 and a loan level pricing adjustment.  Loans that were underwritten by Flagstar, registered on or before July 5th, and currently floating are exempt from the new conditions provided that they are funded and disbursed by July 31st, while locked loans remain exempt if they’re funded and disbursed by July 31st or the lock expiration date, whichever is later.  Such loans will not be granted lock extensions and will be re-priced if the deadlines are not met.  Similar guidelines apply to floating FHA DE Delegated Correspondent loans, which, given that they were registered before July 5th and meet the July 31st deadline for delivery, are excepted.  FHA DE Delegated Correspondent loans that have already locked should be delivered by the later of July 31st or within five business days of the lock expiring to remain exempt.

The Fannie DU Refi Plus II program at Flagstar has been updated such that it is now divided into “Fannie Mae DU Refi Plus II—Same Servicer” and “Fannie Mae DU Refi Plus II—Other Servicer,” which represent two separate sets of products.  The eligibility requirements for the former remain unchanged; however, guidelines for the latter have been amended.  Loans under “Fannie Mae DU Refi Plus II—Other Servicer” will be subject to their own set of LTV and FICO score guidelines depending on the property type, a DTI limit of 40%, and a requirement of a minimum of six months’ verified reserves, for which all large deposits much be accounted.  Any loans that receive an “Expanded Approval” response require a DU Property Fieldwork Waiver, without which they are not eligible.  With regards to pricing, loans under the “Other Servicer” program that have EA risk classes are subject to updated EA price adjustments, while the EA adjustment for “Same Servicer” products remains at -0.25 for all EA levels.  Loans currently in the pipeline under the existing Fannie Mae DU Refi Plus II program need to be locked on or before July 26th; failure to do so will require the loan to be switched to one of the new products.

With regards to loans initially targeted to Wells Fargo, Flagstar has announced that it will accept such loans provided that they fit within the current guidelines.  AIR compliant appraisals from Wells will be accepted so long as they are accompanied by an AIR compliance certificate and a lender letter from Wells.  Appraisals completed by an appraiser on the Flagstar Ineligible Appraiser list will require a new appraisal to be ordered.

As per the recently issued FHA regulation, Flagstar will no longer purchase any transaction where the property is encumbered by private transfer fee covenants.  This applies to pipeline loans and new registrations both.

Genworth’s US Mortgage Insurance division has integrated a new “Quick Submit” option into its customer-facing website that allows users to submit full-service loan packages and receive an MI coverage decision with increased ease.  Much of the redundant data entry required under the old interface is no longer necessary, and contract underwriting, HARP, and “doc-only” full-package loans can all be submitted under a single username and password.  Users are also able to track the status of loans they submit.

Yesterday the fixed income (bond) market reacted to the strong Retail Sales stats – is the U.S. economy really picking up steam? Perhaps – certainly property values aren’t plunging, the job market is not desperate, and many government statistics point to areas of improvement. But both stocks and bonds sank in price, so not everyone is convinced. And as we know, low rates can only help mortgage applications for so long (“refi fatigue”), and the MBA’s survey reported that last week’s home loan applications dropped 4.5%. The refinance index decreased 5% from the previous week, and purchases were down 2%. Refi’s are still strong: 81% of total apps, much of that from banks. (ARM’s are still down around 4%.) The average conforming rate was 3.76% and the average jumbo rate was 4.03% - so there you go: .25% difference. (The vast majority of jumbo loans are sitting in bank portfolios – and why not given those rates?)

This morning risk-free Treasury prices are pointing lower again today to a nearly three month high in yield on the 10-yr at 1.76% (it hit 1.79% in London overnight). But stocks are pointing lower – wassup with that? The smartest minds in the room seem to think that the US economy is growing enough for the Federal Reserve to avoid further stimulus measures, but not enough to really help companies (and therefore stock prices). Of course this outlook could, and will, change. For concrete news, we had the Consumer Price Index this morning. Expected at +.2% for July, it was unchanged, with the core rate only up .1% - both more moderate than expected. The Empire Manufacturing Index was down 5.85. In the early going the 10-yr is around 1.77%, and agency MBS prices are worse about .250.

(Parental discretion advised!)
Here are some rumored “top” comments made by sports commentators during Summer Olympics:
1. Dressage commentator: "This is really a lovely horse and I speak from personal experience since I once mounted her mother."
2. Paul Hamm, Gymnast: "I owe a lot to my parents, especially my mother and father."
3. Boxing Analyst: "Sure there have been injuries and even some deaths in boxing, but none of them really that serious."
4. Softball announcer: "If history repeats itself, I should think we can expect the same thing again."
5. Basketball analyst: "He dribbles a lot and the opposition doesn't like it. In fact you can see it all over their faces."
6. At the rowing medal ceremony: "Ah, isn't that nice, the wife of the IOC president is hugging the cox of the British crew."
7. Soccer commentator: "Julian Dicks is everywhere. It's like they've got eleven Dicks on the field."
8. Tennis commentator: "One of the reasons Andy is playing so well is that, before the final round, his wife takes out his balls and kisses them... Oh my God, what have I just said?"

If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog discusses the CFPB’s servicing proposals, for better or worse. 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.

Rob

(Check out http://www.mortgagenewsdaily.com/channels/pipelinepress/default.aspx or www.TheBasisPoint.com/category/daily-basis. For archived commentaries, go to www.robchrisman.com. Copyright 2012 Rob Chrisman.  All rights reserved. Occasional paid notices do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)