Feb. 9, 2013: Chinese New Year; thoughts on the Dignity Mortgage; investor news & training opportunities
Rob Chrisman


Tomorrow commences the Chinese New Year which falls on Feb 10th this year and is the year of the Snake. Technically, the Chinese New Year could fall in Jan or Feb since it is a lunar year and so changes every year: “Since traditional Chinese holidays like the Moon Festival are based on the Chinese lunisolar calendar, the date on the western (Gregorian) calendar changes from one year to the next. This Chinese New Year calendar provides dates and descriptions of significant traditional holidays and festivals in 2013, the Year of the Snake, which begins on February 10, 2013 and ends on January 30, 2014. There are five elements to the Chinese Zodiac, and this year is the water element which is associated with the color black (don’t ask me- why not blue), it is the Year of the Black Snake.  Here’s a link, if you want to see how the different signs fare in the year of the Black Snake: http://www.gotohoroscope.com/2013-horoscope/chinese-new-year.html.


Plenty of mortgage companies have three budgets: one based on a decline in volume of 20%, one with volumes steady, and one with an increase of 20%. So if someone told the CEO that mortgage volume was going to decline 24% this year, the CEO would take action very quickly, correct? Well, it takes the Post Office and Congress much more time to act, and in an effort to stop losing billions in losses, the USPS plans to halt Saturday delivery of letters this August. Mail volume has plummeted from 210 billion pieces in 2008 to just 160 billion in 2012, a decline of 24%, while revenues have declined 13%. Worse, per capita use has declined a whopping 33%.


News recently came out about “The Dignity Mortgage” and I received this note from Dennis Smith, the Broker/Co-Owner of Stratis Financial Corporation. “On the ‘Dignity’ mortgage, when I read this column earlier in the week my first reaction was, ‘these people are just setting themselves us for higher rate loan as in five years when they can convert to lower rate there will not be a lower rate at that time.’ Then I read further and I just got really ticked off reading the comments by ex-Fannie exec Pinto. So ticked I wrote the following to the writer Mr. Reckard: ‘In your report in today’s LA Times regarding the new sub-prime mortgages you have the following: Edward J. Pinto, a former Fannie Mae chief credit officer who argues that lax FHA lending helped feed the foreclosure crisis in low-income neighborhoods, said the Dignity Mortgage proposal "is a stupid and crazy idea — a poison pill." Mr. Pinto could not be farther off the mark with his statement and it being in a major publication like the LA Times without refuting the statement gives credence to his claim.”


Dennis goes on. “I have been in the mortgage industry for over 25 years. I was actively originating mortgages throughout the housing bubble expansion and subsequent collapse and am still actively engaged in the industry originating mortgages. Mr. Pinto’s statement is blatantly untrue and anyone who was anywhere near the industry knows this to be the case. There are a couple of facts that bear out my statement of the untruth of his claim that ‘lax FHA lending helped fee the foreclosure crisis in low-income neighborhoods.’ Primarily is the data showing the number of FHA mortgages declining nationwide, in all income level neighborhoods, in the period leading up to the housing bubble burst. FHA loans declined because conventional mortgages, Fannie Mae and Freddie Mac, had taken over the market for low down, high debt-to-income, low FICO borrowers and were considerably cheaper than FHA for the borrowers. Our company, which has been authorized to originate FHA loans since 2000 our first full year of originating mortgages, went several years in the period from 2001 through about 20060 or 2007 without doing any or perhaps one or two FHA loans per year. After the collapse when FHA raised its loan limits and the GSE’s and conventional lenders finally curbed their lax underwriting standards we saw our FHA volume increase to 20-25% of our total volume.”


And on: “During the period of the early 2000’s Fannie Mae and Freddie Mac severely loosened their credit guidelines as well and lenders were paying hefty premiums for loans in CRA targeted census tracts identified as low and moderate income—thereby replacing FHA. How loose were the standards? Borrowers could get 100% financing , 80% on a conventional first mortgage and 20% on a second mortgage, with single underwriting to Fannie/Freddie guidelines that would include debt-to-income ratios as high as 60%, no verification required for income other than a phone call to the borrower’s place of employment to ensure s/he was still working, no verification of assets other than bringing the assets to closing, often no verification of property value (i.e. no appraisal) as long as the GSE’s Automated Underwriting System indicated the value listed was within their estimate. Mr. Pinto’s attempt to lay blame on FHA for the lax underwriting standards for the high incidence of foreclosures is further belied by the data showing who owns the loans in those areas that have been foreclosed upon, look at the losses by Fannie and Freddie against the payouts by the FHA insurance program to lenders, it is not even close the amount of losses sustained and paid for by the U.S. taxpayer.”


On to some very recent investor, agency, training, and lender updates. As always, it is best to read the full bulletin for complete details.


As most know by now, as of April 1st, the FHA’s Home Equity Conversion Mortgage program will consolidate the Fixed Rate HECM Standard and Fixed Rate HECM Saver initial mortgage insurance premiums and principal limit factors under the HECM Saver fixed interest rate pricing option.  HECM Saver should be designated as the initial MIP and use the HECM Saver principal limit factors to calculate the amount of funds available on a fixed rate HECM loan.


A quick congrats to Richard Garrie, who was named Chief Appraiser for United States Appraisals, a nationwide appraisal management company. (Richard has over seventeen years of residential valuation experience, including eight years as a branch manager for Forsythe Appraisals, LLC.)


Fannie Mae is requiring all servicers to submit a Servicer Selection form for each law firm that they plan to retain for default-related services on FNMA loans by March 1st.  See the provided job aid for more information (http://cl.exct.net/?qs=f44b5cea9ee11de340ad6560ee1cd21475057082f5dc23ed1411787be70b0f34).


Fannie Mae and Freddie Mac have published the January 2013 Uniform Appraisal Dataset Update and Uniform Collateral Data Portal Release Notification on their websites, both of which provide details of the first phase of the conversion of compliance warning edits to fatal UAD edits in the UCDP.  The first phases should be implemented in 2013 and will affect the appraisal effective date, subject contract price/comparable sale price, above grade Gross Living Area, and sale type data fields.  When the implementation is complete, an appraisal submitted to the UCDP that receives one or more fatal UAD edits will be issued with a Not Successful status and will need to corrected and resubmitted.


US Bank is now accepting e-disclosures from lenders that use the Encompass Solutions System upon completion of the Lender Approval Request for e-Signatures and Acknowledgment of compliance forms.  Lenders must also submit their policies and procedures reflecting compliance with the E-Sign and UETA laws, Regulation Z of TILA, Regulation X of the RESPA, and any all other regulations that concern disclosures being delivered electronically.  At present, only upfront disclosures (1003, initial TIL and GFE, Affiliated Business Disclosure, Transfer of Servicing Disclosure, product disclosures, etc.) are eligible; electronic signatures will not be accepted for documents signed with a Power of Attorney, IRS documents, or Social Security Administration documents.  All documentation for FHA loans is currently ineligible for e-signatures.


Kinecta reminds all of its business partners doing business in Georgia that all real estate transactions are now subject to the $10 Georgia Mortgage Loan fee, which should be paid to the Georgia Department of Banking and Finance via check.  This should be disclosed in the initial GFE, ideally in Box 7 as a Government Recording Charge, and in the final HUD-1.


MGIC has removed its previous restrictions on attached housing, condos, and co-ops in several Florida markets.  All of the above are now eligible in West Palm Beach, Fort Lauderdale, and Miami.


The FHA is offering a webinar on basic credit and liabilities underwriting on February 28th to any interested loan officers, underwriters, and processors.  Credit history, liability analysis, short sales, and non-traditional credit guidelines will all be covered.  To register, visit http://www.visualwebcaster.com/event.asp?id=91968.


The FHA will be presenting an Income and Assets webinar on February 28th that will discuss effective income, rental income, and self-employed borrowers’ income along with acceptable sources of funds.  Register at http://www.visualwebcaster.com/event.asp?id=91969.


As a reminder, the first of the FHA’s MIP changes, the annual MIP increase, goes into effect for all case numbers assigned on or after April 1st.  Additional changes to the MIP have been announced, the full details and effective dates of which are available via http://portal.hud.gov/hudportal/documents/huddoc?id=13-04ml.pdf.


Title insurance provider Mortgage Information Services has announced the release of its new online fee quote program, Quotelink.  Available via the MIS website, Quotelink allows users to enter data and receive a quote for title, settlement, and recording fees for refinance transactions anywhere in the country.  The quote provides all title insurance, endorsement, closing/settlement, and security instrument recording fees and is stored in the MIS database for later reference.  For more information, see www.mtginfo.com.


Effective for Open Access and DU Refi Plus products, Fifth Third has updated its list of MI providers from which the transfer of upfront single premium lender-paid mortgage insurance and borrower-paid monthly mortgage insurance will be accepted, which includes Radian, Genworth, MGIC, and United Guaranty.  Fifth Third has also announced that it no longer allows temporary buydowns, effective for all new loans and those currently in the pipeline.


US Bank is no longer permitting transactions on one- to four-family investment properties where rental income is the primary repayment source for the loan where primary repayment is considered to be greater than 50% of total qualifying income.  The financing of such properties is only allowed when rental income is not the primary repayment source and the borrower owns fewer than four investment properties, as borrowers who own more than three properties are considered to be real estate investors and therefore ineligible for traditional retail mortgage and home equity loan programs.  Borrowers also needs to undergo a comprehensive cash flow analysis that takes into account the most recent two years’ tax returns and current leases for all properties less expenses to confirm their capacity to repay the loan.  For certain ARM and jumbo programs, USBHM has restricted each borrower and all borrowers collectively from owning more than five 1-4 unit properties or more than three 1-4 unit investment properties.  In addition, borrowers may not be affiliated with the builder, developer, or seller of the subject property for purchase transactions.



Here’s a bit of fun trivia.


We forget 90% of our dreams.

During thinking, we use on about 35% of our brains.

The percentage of people dreaming in black and white started decreasing after the spread of color TV.

Approximately two-thirds of people tip their head to the right when they kiss.

Just days before the World Cup of 1966 in England, the trophy was stolen and then later retrieved by a dog.

The city of Portland in Oregon was named after a coin toss in 1844: heads for Portland and tails for Boston.

A queen bee lays 1,500 eggs a day.

No president of the United States was an only child for his parents.

Other than humans, black lemurs are the only primates that may have blue eyes.

Names in Iceland's phone books are listed alphabetically by first name not by last name.

Cats can hear ultrasound.

The skin of the average woman weighs 3 kilograms, while that of the average man weighs 5 kilograms.

Dutch, on average are the tallest people.

Kissing is healthier than shaking hands.

Jaguars are frightened by dogs.

Linda Wolfe is the most married women in the world.  She legally married 23 men one after the other; each marriage ending in the divorce of death of the husband.

Married men tip better than unmarried men.

India never invaded any country in her history.



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 “A Primer on Asset Backed and Mortgage Backed Securities.” 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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