“Be good to your neighbor - they know where you live!” The Pilgrims did not have many neighbors, but in the in the fall of 1621 they held a three-day feast to celebrate a bountiful harvest, an event many regard as the nation’s first Thanksgiving. Historians have also recorded ceremonies of thanks among other groups of European settlers in North America, including British colonists in Virginia in 1619. The legacy of thanks and the feast have survived the centuries, as the event became a national holiday in 1863 when President Abraham Lincoln proclaimed the last Thursday of November as a national day of thanksgiving. Later, President Franklin Roosevelt clarified that Thanksgiving should always be celebrated on the fourth Thursday of the month to encourage earlier holiday shopping, never on the occasional fifth Thursday.

And what would Thanksgiving be without some numbers from our Census Bureau? 115 million households in the U.S. could potentially celebrate, with most buying groceries at the 64,000 grocery stores around the country. Wisconsin led the nation in cranberry production with 450 million pounds; 768 million pounds were produced this year. North Carolina led in sweet potato production with 1.3 billion pounds out of a total of 2.7 billion pounds, and Illinois led pumpkin production with 502 million pounds out of 1.1 billion. (But California, Pennsylvania and Ohio also provided lots of pumpkins: each state produced at least 100 million pounds.)

Speaking of Illinois, Home State Bank has a newly created Underwriting & Risk Manager opening. Home State is a profitable, seven-branch, 100-yr-old federally-chartered community bank headquartered in Crystal Lake that has created this position in order to accommodate the ongoing mortgage division growth. The candidate will be a highly-visible member of the management team charged with supervising multiple underwriters with hands-on risk management authority, and will work from the “state-of-the-art” Ops Center in Crystal Lake (so local candidates only, please). For more information and/or to apply online, visit www.homestbk.com and resumes may also be sent directly to Dave Impey at dimpey@homestateonline.com.

The market is still ruminating on the poor FHA news formally announced on Friday. Many had been expecting it, as well as expecting the changes in the iconic program due to the shortfall – primarily the 10 basis point increase in the annual cost of the FHA MIP (mortgage insurance premium).

But Ted R. writes, "I was shocked, however, to see that they are eliminating MIP removal on case #'s taken out after the changes hit this spring.  New loans will pay MIP for the life of the loan rather than only until borrower reaches 22% equity and a minimum of 5 years in the loan.  Basically, HUD is eliminating any logical possibility for current FHA borrowers (whose MIP will someday fall off) to refinance (once the guidelines change), as they would go from MIP that will fall off on old loan, to MIP that never falls off on new loan! Here's link to the release, see pages 53 and 54: http://portal.hud.gov/hudportal/documents/huddoc?idñ2MMIFundRepCong111612.pdf. Buried elsewhere in the voluminous report is the volume for FHA refinancing. Suffice to say that volume will soon tumble to miniscule levels!  How eliminating FHA refinances will help the public is beyond me.  HUD does state that they basically want to lower market share dramatically, and I could perhaps see doing life of loan MIP for new purchases, but trapping current borrowers in their current loans (especially those who haven't done anything about their 4%+ rates) seems draconian. Once again, one side of the government doesn’t seem to know what the other side is trying to accomplish: the Administration is doing all they can to promote refinancing as a stealth stimulus for the teetering economy and HUD eliminates FHA refinances for their entire existing portfolio! It sounds a little disjointed if you ask me!" In other words, it will prevent all new mortgagors (going forward) to cancel their MI policy even if the loan-to-value ratio improves during the life of the loan.

Another originator wrote, “The FHA is going in the same direction as the post office.  They will continue to charge more and more, but receive less and less. And the loans that go their way will be worse in quality. As housing turns wouldn’t it make more sense to lower the fees to obtain more revenue for the highest quality of loans the industry has ever originated? Instead they are raising the cost and will continue to be adversely selected. It makes more sense for the higher FICO’s to go conventional with MI. The FHA wanted less market share, which equals less revenue, why is this news surprising?”

Of course, historically some of the wonderful features of an FHA loan are a low down payment, truly blended ratios, and no risk-based pricing matrix (like a conventional loan). But what about investment properties for borrowers who want to put as little down as possible? Unfortunately FHA does not do non-owner occupied properties (some cases of HUD repo aside). So although FHA does allow a true blend of ratios, they will only blend ratios on a single family property.

And speaking of HUD repo’s, let’s not forget that HUD has plenty of places for sale: http://portal.hud.gov/hudportal/HUD?src/topics/homes_for_sale.

And late last week the CFPB announced the delay in the implementation of some of its mortgage disclosure requirements. The CFPB announced that it is providing a temporary exemption from the mortgage disclosure requirements in title XIV of the Dodd-Frank Act, including new disclosures regarding (i) cancellation of escrow accounts, (ii) a consumer's liability for debt payment after foreclosure, and (iii) the creditor's policy for accepting partial payment. The Federal Reserve Board proposed a rule in March 2011 to implement these requirements, but did not finalize the rule prior to July 21, 2011, when authority transferred to the CFPB.  Subsequently, the CFPB issued a proposal to integrate the TILA and RESPA disclosures and create new disclosure forms, which, as proposed, include many of the additional disclosures required by title XIV. In light of the overlap in the two rulemakings, and given that the title XIV requirements are required by statute to take effect on January 21, 2013, the CFPB effectively agreed to delay the compliance date pending completion of the TILA/RESPA disclosures proposal. Here is the CFPB’s press release: http://www.consumerfinance.gov/pressreleases/consumer-financial-protection-bureau-extends-effective-date-for-new-mortgage-disclosures/.

Moving into recent agency and investor news…

Fannie Mae and Freddie Mac announced new guidelines for the management of law firms. On November 9, Fannie Mae and Freddie Mac announced new, coordinated requirements with respect to the management of law firms for default servicing, bankruptcies, and related litigation. Effective June 1, 2013, servicers (i) will be permitted to choose their own attorneys, create their own processes for managing foreclosure processing, and maintain direct relationships with their law firms, (ii) will be required to establish procedures to manage and monitor all aspects of the law firm's performance and compliance with applicable requirements, and (iii) upon request, will be required to perform a due diligence review and provide Freddie Mac with the results. Fannie provides similar details (especially keeping in mind the FHFA’s goal to merge the two agency’s policies and procedures). Both Fannie Mae and Freddie Mac will accept and respond to servicer recommendations of law firms beginning March 1, 2013, and will begin conducting new firm training in April 2013. Law firms that are currently in the retained attorney network are not exempt from the new selection and retention processes. Here are the bulletins: http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1225.pdf and https://www.fanniemae.com/content/announcement/svc1222.pdf.

M&T Bank published the list of counties in Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New York, North Carolina, Rhode Island, Virginia, and Washington, D.C. in which properties require re-inspection for damage from Hurricane Sandy.  This includes Bronx, Kings, Nassau, New York, Richmond, Rockland, Queens, Suffolk, and Westchester Counties in New York and Atlantic, Bergen, Cape May, Essex, Hudson, Middlesex, Monmouth, Ocean, Somerset, and Union Counties in New Jersey, all of which were designated as major disaster areas by FEMA.  A second list of counties where re-inspections are recommended but not mandatory has also been released.  This affects all loans registered on or after October 31st.

As per the updated subordinate financing guidelines for Fannie loans, M&T is now permitting CLTVs up to 105% when paired with eligible Community Second subordinate liens.  The previous CLTV limit still applies to ARMs; loans on second homes, investment properties, and co-ops; and cash-out refinances.

With immediate effect, M&T has expanded eligibility for Fannie co-ops to allow loans on second homes under the Type I (NY) and NYC Pilot programs in addition to the Type I (National) program.

PHH is no longer accepting registrations of non-PHH-serviced VA IRRRLs, and all such existing Tier 6 loans must be submitted for underwriting by November 21st, delivered by January 4, 2013, and funded/purchased on or before January 18, 2013.  The delivery and funding/purchasing guidelines apply to Tier 7 loans as well.  Tier 3, 6, and 7 VA Fixed P&I loans are now subject to a minimum credit requirement of 640, which replaces the previous minimum of 620.

Effective for conventional Tier 3, 6, and 7 registrations dated November 16th and after, the PHH underwriting guidelines now require two years’ tax returns, regardless of AUS findings.  This applies to both manually underwritten and AUS-scored loans, including those with non-conforming loan amounts.  DU Refi Plus loans are not impacted.

PHH has announced plans to launch its new quality control process in conjunction with Alerko Risk Analytics.  With the implementation of the program, Tier 7 Correspondents will receive feedback on a monthly basis and will be required to provide responses addressing the reports.

Turning to the markets, interest rates seem pretty content where they are. Minor fluctuations in the agency MBS market may be absorbed by lender profit margins. Regardless, the numbers last week continued to show that our economy is stuck in low gear, which although is fine for inflation, is not going to result in many jobs. And as the Wells Fargo economics team points out, “Complicating much of the data is a lack of clarity over how Hurricane Sandy has affected production and sales and how the fiscal cliff is affecting business spending.” Retail Sales fell in October (which certainly doesn’t help GDP), but, “If the slowdown is due to Hurricane Sandy, sales will likely rebound in November and December, but if it is due to consumers pulling back on spending ahead of the fiscal cliff, the slowdown may weigh more heavily on consumer spending in the fourth quarter.”

This is a slow week using any number of gauges, but the markets continue to be focused on the same two macro events that it has been for the last few weeks (US fiscal cliff and Greece). Economic news-wise, today & tomorrow we have lots of housing news: Existing Home Sales, the NAHB Housing Market Index, Housing Starts, and Building Permits. On Wednesday we have a slew of news: Jobless Claims (a day early), a Michigan consumer survey number, and Leading Economic Indicators. The “benchmark” U.S. T-note closed Friday with a yield of 1.57% and is now 1.61%, and MBS prices are worse about .125, primarily based on optimism about the fiscal cliff.

In this time of year of 2013 predictions, let’s take a look at previous thoughts on the future. (Part 1 of 3.)

"Man will never reach the moon regardless of all future scientific advances."
Dr. Lee DeForest, "Father of Radio & Grandfather of Television."
"The bomb will never go off. I speak as an expert in explosives."
Admiral William Leahy, US Atomic Bomb Project
"There is no likelihood man can ever tap the power of the atom."
Robert Millikan, Nobel Prize in Physics, 1923
"Computers in the future may weigh no more than 1.5 tons."
Popular Mechanics, forecasting the relentless march of science, 1949
"I think there is a world market for maybe five computers."

Thomas Watson, chairman of IBM, 1943
"I have traveled the length and breadth of this country and talked with the best people, and I can assure you that data processing is a fad that won't last out the year."
The editor in charge of business books for Prentice Hall, 1957
"But what is it good for?"
Engineer at the Advanced Computing Systems Division of IBM, 1968, commenting on the microchip.

"640K ought to be enough for anybody."
Bill Gates, 1981
“This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us."

Western Union internal memo, 1876.

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 some of the considerations facing the FHFA regarding Fannie and Freddie. 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