Dec. 1, 2012: As California goes with housing and employment, so goes the nation? Lots of investor updates
Rob Chrisman

Sometimes it is interesting to talk about financial, non-mortgage statistics that we can all relate to. A recent study examined, "Are we in a global environment where food prices can drive energy prices rather than the more typical relationship where energy prices tend to drive food prices?" The study points to numbers from the CIA Factbook that illustrates how much of household income is spent on food. In the U.S, we spend 6.6%. (Calories are cheap!) The U.K. is at about 10%, Germany 11%, Japan 15%, Turkey 21%, China 22%, Iran 23%, Saudi Arabia 24%, India 28%, Pakistan 42%, and Azerbaijan 45%. There are many that believe high global food prices are a precipitating condition for social unrest. ...More specifically, food riots. One wonders if household spending on housing is the inverse.

As California goes, so goes the nation? California reported a 10.1% unemployment rate last month, down from 11.5% in October 2011 and the lowest since February 2009. In September, California had its biggest month-to-month drop in unemployment in the 36 years the state has collected statistics, from 10.6 percent to 10.2 percent, though the state has the third-highest jobless rate in the nation, and metro areas like Yuba City and Merced still see unemployment over 17 percent. Home sales rose 25% in Southern California in October compared with a year earlier, and houses are sitting on the market for a shorter time and selling at higher prices as new home construction is rising. That has meant homes are selling faster at higher prices — which means fewer homeowners owe more than their house is worth. California could set the trend for what will happen in the country, meaning that opposition to taxing the wealthy is opposition to the recovery.


But conservatives argue that the state’s latest tax increases and its thicket of regulations would drive out businesses and people to states like Nevada or Texas. The independent California Legislative Analyst’s Office projected a deficit for next year of $1.9 billion — down from $25 billion at one point — and said California might post a $1 billion surplus in 2014. In addition to a series of deep budget cuts in recent years, voter approval of Proposition 30 to raise taxes temporarily to avoid up to $6 billion in education cuts has been cited as a helping hand. Other voter initiatives were approved to begin repairing a notoriously dysfunctional government, as it no longer takes a two-thirds vote of the Legislature to increase spending (the requirement remains for tax increases), and a nonpartisan election system went into effect this month. Many now see the possible end of a decade of acute state budget challenges as indications show California’s leaders face a dramatically smaller budget problem in 2013-14.

Yet California still faces major problems. The economic recovery is hardly uniform. Central California and the Inland Empire — the suburban sprawl east of Los Angeles — continue to stagger under the collapse of the construction market, and some economists wonder if they will ever join the coastal cities on the prosperity train. Cities, most recently San Bernardino, are facing bankruptcy, and public employee pension costs loom as a major threat to the state budget and those of many municipalities, including Los Angeles. But there are many signs of incipient growth, including a surge in rental costs in the Bay Area, which suggests an influx of people looking for jobs. Although it will continue to be a polarizing recovery for different parts of the state, the foreclosure storm is beginning to subside, and fewer foreclosed homes are flooding the market.

The U.S. Treasury Department, as part of the rescue of the financial system in 2008, set aside funds to help homeowners in California and 17 other states hit hardest by the foreclosure crisis. Four programs of Keep Your Home California were established by the California Housing Finance Agency, after consulting with community leaders statewide. The goal of these state-run programs with their $2 billion budget is to keep homeowners facing foreclosure in their homes, whenever possible. State officials established the four programs to help those from the behind-in-payments homeowner to those who need some money after a short sale, as well as to assist unemployed homeowners struggling to pay their bills and a principal-reduction program for homeowners with homes underwater. Keep Your Home California has earmarked $875 million to Unemployment Mortgage Assistance, the largest of the four programs. The Principal Reduction program is the second largest at $790 million, followed by the Mortgage Reinstatement program at $129 million. The remaining dollars are earmarked to help homeowners relocate after a short sale; as long as the loan service approves the plan. The federal funds are part of a $75 billion effort by the Obama administration to help troubled borrowers. Many complain about the socialistic angle of this, and rightly so, but few homeowners or LO’s mind the values going up or the low rates.


Turning to vendor, NMLS, investor, and agency news, here are some relatively recent updates to give us an indication of trends.

A quick Veros clarification from Thursday’s: only correspondent clients can select Axis for the appraisals through VEROS.  Wholesale brokers cannot, as it is not deemed AIR compliant.

Bay Equity’s anti-steering disclosure policy went into effect recently for all loans currently in process.  All files must include a fully completed and signed Bay Equity anti-steering form signed and dated by the borrower at least one business day before the Note date.  Origination points/fees and discount points must be disclosed in dollar amounts, and negative numbers in these fields aren’t permitted.  For full details of the policy, consult the Anti-Steering Cheatsheet, available at

The Bureau of Consumer Credit Protection in Maine has announced that it will require all lenders that issue residential mortgage loans to convert to the NMLS.  Beginning on December 1st, all loans originated within Maine now need to have a valid company NMLS ID showing proper Maine registration within NMLS.  For more information, see the State Licensing Requirements of the NMLS Resource Center at

Hammerhouse launched a new division for non-sales recruiting about 4 months ago. Management just had a press release done on it and have had some great success so far in the results. “With Hammerhouse focusing on Production and Executive Sales Leadership, TORQ will focus on all non-sales (Operations) including Secondary and in time is a link to the press release from Mortgage Professional Magazine:


In preparation for its new default-related legal service requirements, Freddie is holding a “Servicer Selection and Management of Law Firms” webinar, which will be available through the online Learning Center.  See for details and registration links.

The FHA has issued a clarification of servicer Right of Entry on vacant FHA-insured properties stating that mortgagees are required to comply with state and local laws and “maintain supporting documentation of their attempts to gain access or permission.”  This includes court orders, pleadings, and notices, all of which will be accepted by HUD for the purpose of monitoring due diligence.  Guidance has also been clarified to state that costs associated with any legal action necessary to access the property may be listed as a claim expense provided that there’s documentation to back it up.

Hurricane Sandy may be out of the headlines, but there are still a lot of damaged properties out there, and the FHA will be granting an additional 60 days for loans on properties in Presidentially-Declared Major Disaster Areas to close. The extension applies to all case numbers assigned on or after October 29th.

As per the Secure and Fair Enforcement for Mortgage Licensing Act, the FHA will not assign a case number if the loan officer name and NMLS ID are entered incorrectly at the time of case number assignment beginning on January 28, 2013.  Lenders are also reminded that, when registering a new third party originator in the FHAC Sponsored Originator Registry, they are required to include the TPO’s NMLS ID, full corporate address, and EIN number.

The 1990 census data, which the USDA has been using in its designation of “rural” communities, apparently expired on September 30th.  The Rural Housing Guaranteed program will remain unchanged for the time being, however, as the 2010 data won’t be implemented until March 27, 2013.

Following the recent implementation of the ULDD, Freddie Mac and Fannie Mae have revised the Relief Refinance, Open Access, DU Refi Plus, and Refi Plus eligibility requirements to provide the option of basing the expiration date on the Application Received Date in place of the note date of the mortgage.  As such, Relief Refinance, Same Servicer Relief Refinance, Open Access, DU Refi Plus, and Refi Plus loans must have Application Received Dates on or before December 31, 2013.  Freddie has also announced that the deadline for delivering Relief Refinance loans will be September 30, 2014.

Fannie has updated the maximum attorney and trustee fees allowed for mortgage, participation pool mortgage, and MBS mortgage loans serviced under the special servicing option secured by properties in certain states.  The full list of state-specific fees is accessible via the Fannie website.

Wells Fargo is updating its Prior Approval High Balance Conforming Loan LTV matrix for primary residence; purchase and rate/term refinance; and 5/1, 7/1, and 10/1 ARM transactions in order to align its guidelines with the changes recently announced by Fannie.  The Manual Underwriting and Home Opportunities LTV matrix has also been updated, and Conventional Conforming ARM matrices have been added for primary residence cash-out refinances; second home purchases, no-cash-out refinances, and cash-out refinances; and investment property purchases, no-cash-out-refinances, and cash-out refinances.  All new LTV requirements go into effect on December 17th.

As per amended bankruptcy, foreclosure, deed-in-lieu, short sale, and repossession guidance, Wells will no longer consider loans with LTV/CLTV ratios over 70% eligible for purchase after December 17th.  Loans with LTV/CLTVs less than or equal to 70% will be permitted if the adverse credit can be attributed to extenuating circumstances or financial mismanagement and the borrower has a minimum of 60 months’ or 84 months’ re-establishment of credit, respectively.

Wells has updated its charge-off requirements for non-conforming loans such that individual unpaid charge-off of $500 or less will be allowed with no requirement to pay off, while individual unpaid charge-off exceeding this amount will be required to be paid off.

Citibank has updated its Ineligible Originator List, which can be accessed through the elfno/Forms section of the Citi Correspondent website ( 

As of November 26th, Citi began publishing a monthly Post-Purchase Audit Findings Report that covers loan level detail of all Tier 1, 2, and 3 defects on the Correspondent Lending website.  The Response Worksheet, designed to review Tier 1 deficit audit findings, will also be available as part of the report.

A woman awakes during the night to find that her husband was not in their bed. She puts on her robe and goes downstairs to look for him. She finds him sitting at the kitchen table with a hot cup of coffee in front of him. He appears to be in deep thought, just staring at the wall. She watches as he wipes a tear from his eye and takes a sip of his coffee. "What's the matter, dear?" she whispers as she steps into the room, "Why are you down here at this time of night?"
The husband looks up from his coffee, "I am just remembering when we first met 20 years ago and started dating. You were only 16. Do you remember back then?" he asks solemnly. The wife is almost reduced to tears herself, just thinking how caring and sensitive her husband is.
"Yes, I do" she replies.
The husband pauses. The words were not coming easily. "Do you remember when your dad caught us in the back seat of my car?"
"Yes, I remember," said the wife, lowering herself into a chair beside him.
The husband continues. "Do you remember when he shoved that shotgun in my face and said, "Either you marry my daughter, or I will send you to jail for 20 years?"
"I remember that, too" she replies softly.
He wipes another tear from his cheek and says...."I would have gotten out today."


If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at 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.




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