Regardless of whether or not it is good or bad for our industry, or the debate about the timing of the announcement, on Christmas Eve the U.S. Treasury agreed to provide Fannie Mae and Freddie Mac with as much capital as they need over the next three years. It is an effort to reassure the investors who bought their debt – not the securities backed by mortgages. But the Treasury also said that it would stop buying the F&F’s mortgage-backed securities and end a short-term-liquidity facility set up for both companies and for the Federal Home Loan Banks. (This does not impact the ongoing Fed purchase program.) The government took over both companies 15 months ago, and has put $60 billion into Fannie and $51 billion into Freddie versus the “old” caps of $200 billion each. Opponents say it gives F&F a blank check with no real end, but supporters say it gives mortgage investors assurance and stability.

In a story making the rounds over the weekend, Warren Buffett and his staff, along with other holders of Res Cap debt, are rumored to be in talks to buy Residential Capital, the mortgage business owned by GMAC, General Motor’s finance division. Res Cap does have quite a servicing portfolio, but still has lost $9.2 billion over the past eight quarters. Res Cap’s losses were one of the main drivers behind GMAC’s $12.5 billion government bailout.

 
Citigroup Inc. and Wells Fargo & Co. said that they repaid $45 billion from the Troubled Asset Relief Program. Citi repurchased $20 billion of TARP trust preferred securities it had sold to the Treasury Department under TARP's Capital Purchase Program, and ended a large loss-sharing program with the government which cancelled $1.8 billion of trust preferred securities that were part of the $7.1 billion Citi paid for the extra support. Our government still owns $5.3 billion in Citi trust preferred securities, 7.7 billion shares of Citi common stock, along with warrants to buy Citi common stock. Wells Fargo said that it redeemed the $25 billion of Series D preferred stock that it had sold to Treasury under TARP's Capital Purchase Program.

ING published their policy on RESPA compliance. It is too long to encapsulate here, so interested parties would be best off at http://www.ingloans.com/wholesale/announcements.asp

Union Bank let their brokers know how they would be impacted by the RESPA regulatory changes. For example, for brokers providing their own GFE, “the broker will continue to provide their own GFE with fees disclosed as accurately as possible.” “Applications submitted to UB on or prior to December 31, 2009 will use the old GFE and old Settlement Statement. Applications submitted on or after January 1, 2010 will use the new GFE and Settlement Statement.” Union Bank can issue the GFE, of course, and after this weekend their rate sheet will reflect a new set of fees (Lender Origination Charge - $1,595, credit Report - $23, etc.)

Wells Wholesale put their spin on FHA’s recently published Mortgagee Letter 2009-52, which provided guidance on Short Sales (a previously owned property that sold for less than what was owed) and Short Pay Offs (principal write down of indebtedness that cannot be refinanced into a new mortgage). Not much of a spin: effective immediately, Wells Fargo Wholesale Lending will require compliance with this guidance, regardless of previous loan type. “Borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement on his or her principal residence simply to take advantage of declining market conditions, and  purchase, at a reduced price, a similar or superior property within a reasonable commuting distance.” http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-52ml.pdf

Wells Correspondent also sent their clients an extensive update including a “New Policy for Purchase Transactions with Re-negotiated Purchase Agreements,” “Wells Fargo Response to Fannie Mae’s Minimum Mortgage Insurance Option, Wells Fargo Response to Fannie Mae’s Minimum Mortgage Insurance Option (“Until further notice, Wells Fargo Funding will not accept the new minimum level mortgage insurance option. Wells Fargo will require all loans processed and decisioned through DU, which are eligible for the new minimum MI coverage, meet Fannie Mae’s Standard MI requirements”), “Changes to the VA Guaranty Amount”, and “Requirements for Higher-Priced Mortgage Loans (which are set forth by HUD).

Wells Correspondent also sent out a Newsflash discussing “Reminder for FHA Second Appraisal Requirements” (Wells Fargo Funding will purchase FHA loans which comply with HUD’s second appraisal requirements. Sellers should be aware, however, that regardless of HUD’s second appraisal modifications, any time a second appraisal has been obtained it must be considered), a reminder that Wells Fargo Funding Does Not Accept the FHA Construction Permanent Mortgage Program Transactions, “Changes to the Maximum Debt-to-Income (DTI) When a Non-Occupant Co-Borrower is Utilized”, “Policies for Documenting and Qualifying Income for Manually Underwritten Loans”, “Minor Revision to Representations and Warranties Related to New MERS Policy”, and “Additional Requirements and Information for RESPA Reform. It is best to examine the few dozen pages of Wells’ detailed announcements for the precise details – they are far too extensive to reproduce here.

Chase’s patrons were recently notified on how Freddie’s recent changes (new income and asset changes) will impact Freddie Mac Fixed Rate and Agency ARM loans eligible for delivery to Chase. Chase will now require that an appraisal (for a loan destined for that program) must be dated within 60 days of the Note date, and added rental income requirements for LP underwritten 2-4 unit Primary Residences converted to an investment property. There were no changes to Chase’s policies on 4506-T’s and VOE’s. “Freddie Mac revised their requirements relating to the use of tax returns and/or leases to verify rental income from investment properties other than the subject property that are owned by the Borrower. As previously addressed in CB 09-76, when rental income is included in qualifying income, the borrower must have a two-year landlord history. In addition, Freddie Mac has provided clarification to indicate fully executed leases may be used to determine rental income for investment properties not owned by the Borrower in the previous tax year.”

Bank of America’s correspondent group followed suit on the VA loan limits for 2010, telling clients that beginning this weekend the new VA loan limits will apply (41 counties restricted to $417,000 maximum loan amount, and 139 counties decreasing in maximum loan limit) and if a client has a loan locked under the 2009 limits, it had better close by Thursday.

Rate-wise, economic news pushed yields higher last week. We finished the week on Thursday after Durable Goods Orders came out higher than expected. Still, the futures market is pricing in an 85% chance that the Fed keeps rates somewhere between 0% and .25% through April. This week, of course, is shortened by the holiday on Friday, but prior to that we have a Treasury auction to get through. The scheduled economic news is pretty light, with the S&P/Case-Shiller price index and Consumer Confidence tomorrow, and the Chicago Purchasing Manager’s Survey on Wednesday.

Four guys are driving cross-country together. One of them claims to be from Idaho, one is from Iowa, one is from Florida, and the last one is from New York.
A bit down the road the man who claims to be from Idaho starts to pull potatoes from his bag and throws them out the window.
The man from Iowa turns to him and asks, "What the heck are you doing?"
The Idahoan answers, "Man, we have so many of these things in Idaho just laying around on the ground – I'm sick of looking at them!"
A few miles down the road, the man from Iowa begins pulling ears of corn from his bag and throwing them out the window. The man from Florida asks, "What are you doing that for?"
The man from Iowa replies, "Man, we have so many of these things in Iowa I'm sick of looking at them!"
Inspired by the others, the man from Florida opens the car door and pushes the New Yorker out.

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.)