Apr. 25, 2013: HARP marketing coming our way; BOK expansion; Zillow website to check out your neighbors; National MI on the move
Rob Chrisman


Discrimination and disparate lending is on the industry’s mind. (See next paragraph for a free call on the topic today.) I received this note from the mid-Atlantic region: “If a builder negotiated with a bank to offer a discount to the buyers of a project, and the interest rate offered was below the normal lending rates that the Banks Retail operations were offering, would we have violations?” I don’t know…maybe call 1-800-CFP-RULE. The cynic in me says “yes” and that there should be no room for negotiation or deal making that creates disparate outcomes. Shouldn’t all borrowers receive the same treatment regardless of which builder they use? Or for that matter, is it disparate lending that a Borrower A chooses Lender A and Borrower B chooses Lender B, which has higher rates. Is it the lender’s fault that Borrower B has a higher rate? Lastly, “If I run a well-capitalized bank that has a private banking group, and I offer our current “normal” depositors different rates terms and programs than those offered to the private banking group, will the CFPB or FDIC accuse me of disparate treatment?” I will take off my cynic’s hat, as it is counter-productive.


I will be on a flight to Washington to speak to the Washington Association of Mortgage Professionals meeting (http://www.mywamp.org/) tonight; otherwise I would listen in on the California Mortgage Bankers Association’s monthly call today at 11AM PST. It’s free, and the topic is “How the FHA's Discriminatory Effects Standard May Affect Your Business.” To Join the Teleconference Portion, follow these instructions: 1. Dial 1-800-351-6802, and 2. When prompted by the operator, provide the passcode:  4378. For more information contact Dustin Hobbs at dustin@cmba.com.


“HARP on, Wayne!” How much more steam does this refi engine have in it? And wouldn’t it be really cool and cost-effective if you, as an originator, had your marketing paid for by someone else? Well, the answer to the first question, given the “box” that surrounds these borrowers (must have a Fannie Mae- or Freddie Mac-backed mortgage that was guaranteed on or before May 31, 2009, must be current on their loan, and must have a current loan-to-value ratio more than 80 percent, and so on), is 2 million per most sources I’ve read. That means we’re about halfway through – but boy those loans seem to be becoming harder to do!


The answer to the second question is yes, Fannie Mae is going to pay for your HARP marketing. Not directly, of course, but it will come pretty close with flyers, talking babies, door-to-door salesmen, sky writing, removable tattoos, Clydesdales, and…sorry, am I confusing my marketing efforts? Anyway, here is more information – it should be in full swing by the summer: https://www.fanniemae.com/singlefamily/harp-consumer-outreach-materials.


Speaking of Fannie, its stock, and that of Freddie’s, has been doing very well lately. Yes, the overall stock market has been doing well – in part due to stock buybacks. If you were a company paying a 3% dividend on outstanding stock, but could borrow the money instead at 2.5%, wouldn’t you borrow the money, and be able to deduct the interest, and buy back the stock? Sure you would – but Fannie and Freddie don’t pay dividends to you or me directly. Nonetheless, there is some optimism out there about the longer term prospects of the agencies.


And while we’re on long-term prospects, Wells Fargo, with its $100 million expansion in Iowa isn’t the only one banking on the future. BOK Financial is building an Ops Center in Kansas City, and doing some hiring: http://www.bizjournals.com/kansascity/news/2013/04/24/bok-financial-hiring-125-for-new.html.


Zillow recently launched a new-look website. The big addition to the Zillow Research website is the Date page.  This page houses all available data in one place for easy downloads.  All the tables are available with national, state, metro, county, city, ZIP code and neighborhood-level data on different subjects such as the Zillow Home Value Index (ZHVI), Zillow Rent Index (ZRI) as well as other metrics.  Definitions of the data as well as downloads for all data within a specific level of geography are located at the bottom of the data page. The Briefs page shows all of the Zillow Research briefs published on the website.  The Reports page houses all of the Zillow Real Estate Market Reports, Negative Equity Reports as well as the Zillow Home Value Forecasts and presentations. The Collaborations page shows current and past research collaborations with various research institutions.  The goal of this is to provide easier access to Zillow’s data. For example, here is cyclist Lance Armstrong’s new house in Austin: http://www.zillow.com/homes/1009-N-Weston-Ln-,-Austin,-TX-78733_rb/.


While we’re discussing companies, let’s just move on to company, vendor, and investor news…


The REIT biz is active. For example, Five Oaks Investment Corp. announced that David Akre has joined the senior management team of Oak Circle Capital Partners LLC, the Company's external manager, as a Managing Director. Mr. Akre will have primary responsibility for developing opportunities in the residential mortgage market, which is expected to enable the Company to better benefit from the curtailment of direct government involvement in housing finance.


On the other side of the nation, in Emeryville, California, National MI issued its first mortgage insurance commitments this month, officially marking its entry into the private mortgage insurance business. Mortgage insurance industry followers remember that the company has access to over $500 million of private, unencumbered capital, and has approved its first 100 master policies with lender customers. Both Fannie Mae and Freddie Mac approved National MI as a qualified mortgage insurer in January of this year. As of April 1, 2013, Freddie Mac began accepting loans with National MI mortgage insurance coverage and Fannie Mae will accept loans as of June 1, 2013 with note dates on or after January 16, 2013. National MI intends to work with lenders nationwide. To date, the company has been approved in 46 states and the District of Columbia, and expects approval from the remaining four states in the near term. More information can be found at www.NationalMI.com.


Just as a reminder, for those who missed it, the FHFA announced that HARP would be extended until December 31, 2015, replacing the previous deadline of December 31, 2013.  All DU Refi Plus and Refi Plus loans are eligible for extension so long as they have application dates on or before the deadline, and, in the case of whole loans, are sold to Fannie Mae on or before September 30, 2016 or in MBS pools with issue dates on or before September 1, 2013.


Ginnie Mae guaranteed about $36.44 billion in MBS in March per the most recent publication of its numbers.  GNMA II single-family pools, which totaled $29.14 billion, made up the bulk of this, while GNMA I single family pools came to $5.04 billion.  Home Equity Conversion MBS issuance, included in the figure for GNMA II single family issuance, came in at $889 million, while multifamily issuance rose to $2.26 billion.


Fannie Mae and Freddie Mac have announced June 22nd as the implementation date for the first phase of the conversion of the current UAD compliance warning edits to fatal edits in the UCDP.  This first phase will include the appraisal effective date, subject contract price/comparable sale price, above grade gross living area, and sale type data fields.  As a general reminder, appraisals that receive one or more fatal edits will be issued a “Not Successful” status that renders them ineligible for delivery to either of the GSEs.  The full text of the April 2013 UCDP Release Notification and UAD Update is available via https://www.fanniemae.com/content/news/ucdp-uad-newsletter-april-2013.pdf.


Bank lenders are reminded that they must submit their Q1 2012 financial information to Fannie by April 30th.  See the Mortgage Bankers’ Financial Reporting Form (Form 1002) page for more info and a link to the MBFRF electronic submission portal (https://www.fanniemae.com/content/guide_form/form-1002-mortgage-bankers-financial-reporting-form).


Freddie has updated the maximum amounts for which it will reimburse servicers for foreclosure- and deed-in-lieu-related attorney fees and changing the structure of bankruptcy fees from the current baseline attorney fee model to a “Menu Billing” fee model.  Reimbursement protocol has also been revised, as the 104DC claims process and its associated expense codes have been retired and replaced by the new “Bankruptcy,” “Foreclosure,” and “Other Legal” data fields that will be added to 104SF claims.  Claims using 104DC will be processed until June 1st, after which claims must be made through 104SF.


Fifth Third has updated guidelines to require that the credit reports for all borrowers with authorized user tradelines undergo be reviewed to ensure that they accurately reflect the borrower’s credit history.  Borrowers that have multiple authorized user accounts but only a few accounts with primary ownership, Fifth Third must be supplied with documentation that confirms the borrower’s relationship to the owner of the account, whether or not the borrower uses the account, and if the borrower makes payment on the account. 

Fifth Third has launched its HomePath product, now available for purchases of Fannie owned properties with low down payments, no additional appraisal, and no mortgage insurance.  For full details, see the HomePath Mortgage product guide on Wholesale Connect.  Loan files with appraisals make the subject property ineligible for HomePath, regardless of whether the appraisal was from another loan program or loan number.


Franklin American has revised its Conventional Non-conforming Jumbo product guidelines such that permanent resident aliens, who were previously eligible after having held a green card for 12 months, must now hold a green card for at least 24 months.  The guidelines have also been updated to include seasoning requirements for construction to permanent transactions when the borrower has owned the property for less than 12 months, for which the LT V calculation will be based on the lesser of the appraised value or acquisition cost if the borrower acquired the lot less than 12 months prior to applying for construction financing.  Delayed financing guidelines have been changed to require the borrower to have purchased the subject property for cash within the last six months instead of the last 12 months and to provide a cash flow analysis of three months’ bank statements if withdrawing funds from a business account.  Verifications of Deposit will no longer be considered to be acceptable documentation of assets.  The above changes all go into effect as of May 1st.


Let’s move to the markets. With yesterday’s weekly MBA application index, the MBA reported that it has seen a sizeable spike (+8.4%) in government refinance activity. This is possibly due to the announcement from FHA that beginning on June 3rd; the FHA will require borrowers with LTVs over 90% to pay mortgage insurance premiums for the life of the loan or for at least 11 years for borrowers with LTVs below 90%. Higher coupons have been struggling with the potential prepayment risks caused by the recent extension of the Home Affordable Refinance Program and a new marketing campaign by the FHFA to promote awareness to eligible borrowers. Adding further jitters to increased prepayment speeds was today's mortgage applications survey from the Mortgage Bankers Association reporting that HARP share increased to 32 percent in the week ending April 19 from 31 percent in the previous week and 30 percent before that. This likely further weighed on higher coupon MBS today.


Rate-wise, there just isn’t much going on! One hears the words “listless”, “range bound”, and “below average volumes.” Current coupon agency MBS prices were unchanged Wednesday, but today is a new day! We had Initial Jobless Claims come out at 339k versus an expected 351k, and we’ll have a $29 billion 7-yr note auction at noon CST. The 10-yr. yield, which ended Wednesday at 1.70%, is sitting at 1.72% - and don’t look for much change on mortgage rate sheets.



(Today’s humor comes from the Borowitz Report, regarding the Twitter report that the White House had been bombed.)

WASHINGTON—Federal investigators said today that they were “baffled” as to why millions of people chose to believe something they read yesterday on Twitter, a social-media site that has falsely reported the deaths of more than seventy-five thousand different celebrities.

“It’s mystifying,” said one investigator working on the case. “One theory we’re considering is that people who spend time on Twitter eventually lose their capacity for critical thinking and become sheep.”

The Syrian Electronic Army, the group of hackers who claimed responsibility for yesterday’s hoax, said that they were “flabbergasted” that it created such chaos: “Honestly, we didn’t think anyone would believe it, what with it being on Twitter and all.”

At Twitter headquarters, a company spokesman said that yesterday’s incident, which briefly caused the Dow to plunge a hundred points and temporarily wiped off a hundred thirty-six billion dollars of value from the S&P 500, was “testament to the amazing growth of Twitter.”

“In a few short years, Twitter has evolved from a mere waste of time into a force capable of massive havoc and destruction,” the Twitter spokesman said.

“We’re excited to see what Twitter does next.”



If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog is, “How Changes in FHA Loan Pricing Will Lead to Changes in Investor Demand." 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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