Dec. 24, 2012: Youth in lending & real estate; Congress adjourns as we near the cliff - but is lack of action better in the long run?
Rob Chrisman

A few weeks back we had the "Circle the cat" puzzle. Given that this is kind of a wasted day anyway for many, work-productivity-wise, here is another time wasting puzzle site:

Here is another time-wasting exercise: wringing our hands over the fiscal cliff. Despite concerns about the "fiscal cliff," Congress adjourned for the holidays. Why are our elected officials comfortable with taking a little "vacay"? There are three possible reasons: One, all is well and a resolution will be forged between Christmas and New Year's, two, an agreement won't be reached but a stopgap measure will be passed - kicking the can down the road. Or, three, the nation will go off the cliff and Congress will busy itself in 2013 to try to clean up the mess. And there is another entire group that is becoming more comfortable with having the automatic tax increases and spending cuts go into effect, saying that in the long run we're better off.

It's Christmas Eve, and few folks are thinking about robbing a bank. Speaking of which, for those financial trivia buffs out there, the FBI has released the latest robbery statistics and report that in 2011: there were 5,086 bank robberies, burglaries, and larcenies (4% were violent and 1% involved the discharge of a firearm); perpetrators walked away with $38mm in cash; demand notes were used 44% of the time, firearms were used 19%, weapons were threatened 35%, and explosives were threatened 2% of the time. (Imagine a teller yelling, "Whoa! This is really rare!") For a sample, here you go:


The aging populations of Realtors and mortgage bankers and the apparent lack of new blood is a concern to many, and I recently received this note (from someone in their 50’s): “Rob, you have brought up what is in reality is the issue of ‘Succession Planning’ in the mortgage and real estate sectors.  The numbers and facts are clear: ~78MM boomers retiring or reaching retirement and only 56MM individuals in the cohort behind them (Generation X) to replace them.  When combined with the fact that the mortgage and real estate businesses are so entrepreneurial that many times the idea of succession planning is a foreign concept, you have a problem that will only get worse if it is not addressed.  In my opinion, a huge challenge for our space right now and going forward, yet very few firms are doing anything to address the issue.”


It is interesting to note where folks in their 20’s are settling - where are graduates taking their underwater basket-weaving degrees? Though they're in deeper debt than ever before, new college graduates still need to live somewhere, right?  Conventional wisdom holds that these bright young minds flock to centers of influence like New York, Boston, and San Francisco, all known for being "cool" cities with high concentrations of "smart" people. Census data from 2000-2010 suggests otherwise, however: Las Vegas, of all places, recorded growth of 122,304 recent graduates, which represents a staggering 78% increase. Rounding out the top five metropolitan areas playing host to new graduates were Riverside-San Bernardino, CA; Raleigh-Durham, NC; Austin, TX; and Charlotte, NC-hardly perceived to be hotbeds of commerce and culture.  In contrast, New York ranked 38th in terms of new graduate growth, while San Francisco ranked 48th, just above Detroit.


But one factor to remember, as Marilyn L. points out, is that, “Perhaps the reason the smaller cities (re: college grads) are seeing massively larger rates of population growth of grads is that their base numbers of grads on which the growth rates are calculated were probably fairly small to start with. A fairly small influx into Vegas or Durham can produce a big growth rate. With huge existing populations of young people in SF or NYC, it's much harder to move the needle of percent growth, even with large numbers of incoming grads."

And for a bit of a sales pitch we have, “As we speak to lenders, many agree that there is a train wreck coming as many loan officers left the business, many are soon to retire, and many are not suited to obtain purchase business after the refinance market is finished. Our program helps companies recruit, train, and assimilate loan officers focused on purchase production. We’ve been doing this for over 10 years, and at one time 40% of rookie superstars in MOM Magazine came out of our program.” So wrote Jack Karaszewski with XINNIX (


On to the agency & investor updates that never stop. Read the full bulletin for nitty-gritty details!


Fannie has made several updates to its servicing guidelines and now requires servicers to send a payment reminder notice and a copy of the Borrower Solicitation Letter—31 Days Delinquent to borrowers of community lending mortgage loans.  The first sentence of this letter should be amended as necessary to disclose the number of days the loan is delinquent.  In cases where a Cancellation of Debt is filed and over $600 of debt has been cancelled, Fannie has made stipulations as to which accounts servicers are required to send the IRS Form 1099-C and has issued a reminder that 1099-C forms must be filed on or before February 28th of the year following that in which the discharge of the debt.  Failure to submit the form on time results in the IRS levying penalties on Fannie, for which the servicer is ultimately responsible for paying.
New guidance has been released for loans in federally declared disaster areas affected by Hurricane Sandy that had been performing on a Trial Period Plan but were placed on a forbearance plan following the storm.  The updated guidelines are available on and outline what course of action servicers are obligated to take with regards to converting an existing forbearance, evaluating loans on a HAMP or Standard Modification Trial Period Plan, property inspections, and reporting requirements, both for borrowers whose financial situations have worsened because of Hurricane Sandy and for those whose financial situations have not changed.

In more servicing news, Fannie has updated its policies on property maintenance and management for preserving vacant properties for mortgage loans in default.  All work undertaken to maintain the property’s condition must fall within the allowable reimbursement amounts; if not, the servicer must submit a bad to HomeTracker with a detailed description and photos to support the bid.  Guidelines state that servicers are responsible for confirming the vacancy, securing the property, maintaining the grounds, winterization, health and safety, damaged properties, code violations, and completion of work.

Flagstar has implemented new pricing adjusters of +0.250 and +0.375 for Fannie and Freddie 10- and 20-year fixed-rate loans, respectively.  This applies to all loans locked on and after December 10th.

In compliance with the FHA’s recent announcement about the additional data field on its insurance application, Flagstar will be giving DE Delegated Correspondents the option of identifying FHA Streamline refinances as either credit qualifying or non-credit qualifying. Lenders will be required to disclose this information beginning on April 1, 2013. Flagstar has also issued a reminder that lenders are permitted to include closing costs and prepaid expenses in the maximum mortgage calculation for Streamline refinances with appraisals only.  Though the FHA system has been upgraded, Flagstar’s isn’t scheduled to be updated until March 2013 and doesn’t allow FHA permit costs to be rolled into non-credit qualifying Streamlines or credit qualifying Streamlines without appraisals.  As such Flagstar is unable to underwrite, fund, or purchase credit qualifying where those costs are factored into the maximum loan calculation, but look for that to change with the system upgrade in the coming months.  Lenders are also reminded that as per FHA guidance the maximum loan calculation for Streamlines without appraisals may not exceed the lesser of the original principal balance or the outstanding principal balance plus two months’ interest minus the UFMIP refund and that all loans are subject to the relevant county loan limit.

As per VA policy, Flagstar reminds all VA Authorized Agents that they are required to pay an annual $100 recertification fee to the lenders with whom they plan to engage with in the coming year.  This should be paid to Flagstar by December 31st at the latest.

Really, does anyone out there care where rates are today? Let's just say that U.S. economic data at the end of 2012 has been generally favorable, with a "double however."  We can still expect to see a weak GDP report, however, for the fourth quarter of 2012.  And any favorable economic data at year end, however, is already eclipsed by the breakdown of the fiscal policy discussions in Washington. As the economics group at Wells Fargo noted, "As the year winds down, data this week pointed toward soft economic growth in the fourth quarter of this year than in the previous quarter. Third quarter GDP growth was revised higher, likely setting us up for a much weaker fourth quarter. This view was reinforced with the release of the leading indicators this week, which signaled slower growth in the months ahead. In addition, durable goods orders showed that capital spending has yet to recover from its earlier year highs. Consumer spending remains modest, although income growth looked better in November. Indicators on the housing market reinforced our view that housing remains a bright spot."

Not much for scheduled news this week: on Thursday Consumer Confidence will update the results of a monthly survey of 5,000 households to ascertain the level of consumer confidence, and we'll have yet another housing measure: New Home Sales. Friday we have the Chicago PMI. But it all pales in comparison to the darned fiscal cliff - which is not really the end of the world. In fact, many are starting to root for it: if there is no deal before the New Year, taxes will increase on nearly all Americans and government will be forced to scale back on domestic and military programs. Yes, it will hurt the U.S. economy in the short run, but could we be better off in the long run? Many say "yes." Until then, our 10-yr, which closed Friday at 1.75%, is at 1.77% in the early going, and MBS prices are worse a shade on this “early close for the markets” day.

We have just received notice from the North Pole that all those in the lending industry will not be receiving presents this year.  Apparently Santa IS UPSET!!!
He is currently working on a refinance that was set to close yesterday and the lender added conditions…
As he stated to us, He has had it up to his red cherry nose with conditions. 
1. The ELVES have refused to return phone calls to verify employment as they expressed this is just too busy of a time to call anyone.
2. He can’t sign his loan documents in time to make his lock as he will be leaving on an extended vacation starting 12/24.
3. The lender is asking for proof that Santa has not taken out any new loans on his sleigh.
4. The lender is requiring proof that Mrs. Clause has been in the cookie business for more than 2 years.
5. When the Social Security Verification form was sent off the information came back stating “Santa Did not Exist.”
6. Due to a lack of comps in the area and the rural property the lender is requiring a second appraisal.
7. The copy of Santa’s photo ID cannot be verified as there are too many imposters around to prove it is him.
8. The lender has required us to count the expense for reindeer food and maintenance in Santa’s DTI ratio calling it “cost of doing business”.
9. Santa has refused to sign the AKA statement as it is about 4 pages long listing this such as Kris Cringle, Father of Christmas, Jolly old man, Mr. Clause, Old Saint Nick, etc…..
10. Apparently the lender is trying to call Mr. Clause’s work “SEASONAL” and they want to verify if he collects unemployment on the off season.
11. The underwriter is questioning the large number of dependents on his 1040.
12. The underwriter is also questioning the amount of business expenses on his Schedule C, especially his travel expenses.
So all of you out there in the mortgage industry please plan accordingly as we only today left as a shopping day and you are only getting COAL. 

Merry Christmas!


If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at The current blog discusses the role of the IRS and REMIC’s in the current credit crisis. 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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Copyright - Rob Chrisman