Would you like to give your client free access to a pricing engine, similar to what agents use with Optimal Blue? Even if the answer is "no", that's too bad. In Google, a user can type in “mortgage” and up pops a comparison device. “Comparison Ads”, usually hi-lighted in pink as the first choice, lets potential borrowers select the type of loan they are looking for and to compare various rates after entering the mortgage amount, borrower credit rating, down payment and information on the location of a prospective property and the search provides additional real-time price quotes for a number of mortgage products provided by different lenders. It is rumored to be powered by Mortech. Technology marches on…

Maybe GMAC will throw their name into the search engine. In the mean time, starting today, GMAC Bank’s correspondents should note that GMAC is following the HUD FHA Letter 2009-32. Most everyone who originates FHA loans for a living know the changes, which impact seasoning, payment history, net tangible benefit to borrower, maximum combined LTV, etc.

It is time to get out the plastic for appraisals. GMAC clients should know that, per their adherence to HVCC guidelines, GMAC will be required to pay for appraisals using a credit card beginning this Friday. “Prior to placing an appraisal order, the following information must be completed in the "Credit Card" section. Once the credit card type is selected, the remaining data fields (about 14) will appear, and once the order request is submitted, the credit card information is passed to the vendor who will process the credit card.

(Speaking of the HVCC, although there are rumors of rescinding it, many appraisers and brokers are dealing with it. One appraiser, who will remain nameless, told me that his biggest problem with it is that he gets less money under the table now than before, so has less tax free income.)

I flubbed up yesterday, for lack of a better term. I made a mistake in writing “Caliper” instead of the correct name of Caliber. Everyone knows that a “caliper” is something that metal shop teachers use to measure their students earlobes…

U.S. Bank Home Mortgage Wholesale Division is “enhancing” their Fraud Detection & Misrepresentation Protection Process. They have developed an “enhanced collateral review process that will identify loans that may be subject to this issue. Therefore, effective Monday, November 30, 2009 all loans registered or locked with USBHM will be submitted to an Enhanced Collateral Protection Review Process that utilizes sophisticated fraud detection tools. All registered or locked loans will run through the enhanced process and those identified as higher risk will receive additional review pre funding and or purchase.” Prior to funding or purchase, their clients will be informed of any additional documentation or procedures, depending on if the correspondent has delegated authority or not.

FHA originators are expecting FHA mortgage insurance premiums to rise. (Would anyone expect them to decline, given the rising delinquencies and government officials continuing to claim that they will not need taxpayer money to support the program?)  The insurance fund’s capital ratio is at an all-time low, with reserves depleted to the point where they’ve fallen below the 2 percent level required by Congress. That being said, the FHA’s annual independent “actuarial study” shows that the FHA has sustained "significant" losses from loans made prior to 2009, and the capital reserve ratio has fallen below the congressionally mandated threshold. However, the report concludes that, under most economic scenarios, the reserves would stay above zero.

These days, which are the largest banks based on asset size (noted in billions of dollars)? Brokers and lenders who sell to them will recognize many of the names: 1 Bank of America Corporation 2,252, 2 JPMorgan Chase & Co. 2 ,041, 3 Citigroup Inc. 1,888, 4 Wells Fargo & Company 1 ,228, 5 Goldman Sachs Group, Inc. 882, 6 Morgan Stanley 769, 7 MetLife, Inc. 535, 8 HSBC North America Holdings Inc. 390, 9 Barclays Group US Inc. 377, 10 Taunus Corporation 368, 11 PNC Financial Services Group, Inc. 271, 12 U.S. Bancorp 265, 13 Bank of New York Mellon Corporation 212, 14 GMAC Inc. 178, 15 SunTrust Banks, Inc. 172, 16 Capital One Financial Corporation 168, 17 BB&T Corporation 165, 18 State Street Corporation 162, 19 Citizens Financial Group, Inc. 150, 20 Regions Financial Corporation 140, 21 TD Banknorth Inc. 139, 22 American Express Company 119, 23 Fifth Third Bancorp 110 billion.

Ben Bernanke made headlines yesterday in a speech to the Economic Club of New York. In spite of Mr. Bernanke being on the Federal Reserve side of the equation, he addressed the strength of the dollar (or lack thereof) which is normally the Treasury’s domain. Clips of his speech include “Significant economic challenges remain”, “Longer run inflation expectations are stable”, “weak income growth may restrain household spending” (do ya’ think?), and one can expect moderate economic growth in 2010. In a nod toward commercial real estate problems, Bernanke said that the prospects for non-residential construction are poor.

In addition to Bernanke’s words, the market reacted to a speech that Fed Gov. Fisher made where he actually stated that he expected mortgage-backed securities to widen to Treasury securities (i.e. all else being equal, mortgage rates would move higher even if Treasury rates remained constant). This makes some sense, given the tightening that we’ve seen, but after his comments mortgages did indeed widen out. Some dealers reported that origination volume has picked up as well, with lenders doing some selling Monday afternoon. If you are a money manager who is mandated to buy mortgage-backed securities for your fund's portfolio, do you go with current A-paper product or perhaps dip down into the lower credit areas? Well, in mortgage credit land, Alt-A and option ARM prices continued to decline, yet more pristine collateral has been much better supported.

As I have mentioned, few investors will pay much above 100 or 101 if they have reason to believe that a given loan is going to pay off in 6-12 months. FHA and VA loans, for example, prepay for a variety of reasons, including the sale of the house (when the mortgage is not assumed), refinancing, delinquency buyouts, and liquidation (without being bought out first). Most analysts expect delinquencies and liquidations to increase in the coming years for these loans, which in turn leads them to question any statements about HUD not requiring government bailout money for the FHA.

With locks and the “supply” of mortgages low, and the Fed continuing to buy agency product, mortgage rates have continued to do well versus Treasury rates. What will break the recent trends? Well, as I noted above, speeches by officials and expectations may do it. If banks decide to take some profits and start selling MBS’s, that could reverse the trend. Or if mortgage prices continue to rally, that will eventually lead to another round of refinancing, increasing supply, pushing down prices and pushing up rates.

In general, a survey conducted by the Wall Street Journal shows that economists expect the Fed to raise overnight rates by next September. So does that influence trader’s decisions now? Not really – a lot can happen between now and then. Those same economists believe that the unemployment rate will hit 10.3% by year end, and for the rate to stay above the mid-9’s through the year.

This morning we have seen the Producer Price Index numbers, which were lower (less inflationary) than expected for October. “Seasonally adjusted index for prices paid at the farm and factory gate rose 0.3 percent following a 0.6 percent drop in September.” Gasoline prices rose 1.9 percent last month but compared to a year ago are down 16 percent. Core producer prices, which are for folks that don’t eat or use energy, were down .6% and the largest decline since July 2006. So with inflation numbers contained, you’d expect bond prices to rally and rates to drop, right? Wrong. The 10-yr is up to 3.37% and mortgage prices are worse by about .250.

A guy asks, "In what isle could I find the Polish sausage?" 
The clerk looks at him and says, "Are you Polish?" 
The guy (clearly offended) says, "Well, yes I am! But let me ask you something....  If I had asked for Italian sausage, would you ask me if I was Italian? Or if I had asked for German Bratwurst, would you ask me if I was German?  Or if I asked for a kosher hot dog, would you ask me if I was Jewish?  Or if I had asked for a taco, would you ask if I was Mexican?  If I asked for some Irish whiskey, would you ask if I was Irish?"
The clerk says, "Well, no, I probably wouldn't." 
With deep, self-righteous indignation, the guy says, "Well then, why did you ask me if I'm Polish because I asked for Polish sausage?" 
The clerk replied, "Because you're in Home Depot."

Rob

(Check out http://www.mortgagenewsdaily.com/channels/pipelinepress/default.aspx. For archived commentaries, check www.robchrisman.com, or to subscribe/unsubscibe write to rchrisman@robchrisman.com.)