Did you hear about the two blondes who froze
to death in a drive-in
movie? They had gone to see, “Closed for the Winter.”
I had my standard "beginning of the year" meeting with the family. My
soon-to-be 18-yr old son reported that this time in his life is
“unprecedented”
for him, and that he is working on his “exit strategy” from high
school. He
then said that this would be an “historic opportunity” for me to
provide him
working capital. My 15-yr-old daughter (going on 25) said that although
she is
seeing “green shoots” in the economy, she will need to continue to
spend in
order to assist her Personal Consumption and that I shouldn't let
“uncertainty”
keep that from happening. My wife thought that we should “circle back
after the
first quarter”, during which we can continue to “reach out” to our
partners and
vendors. Is this kind of talk the "new normal"?
OK,
eventually the Fed will either end their $1.25 trillion
mortgage-security
purchase program, or extend it. Everyone, including the shoeshine boy,
knows
this – don’t pay any high priced consultants to tell you that. And
rates will
react accordingly. But heck, not only do we have several more months of
the
program, but we also have the possibility that either they will extend
it, or
that an investor-based market will re-develop - just like "the old
days". Let's cheer for the private investors coming back in.
Do you have money in the bank? Probably. Do
banks and money managers
have lots of capital? Sure they do. Most recognize that the core of
the
problem is not a lack of capital, but rather a lack of willingness to
deploy/invest it. If everyone is saving for a rainy day, they’re
happy
just to have the return of their capital rather than earn a good return
on
their capital. And a solid housing recovery relies on mortgage credit,
decent
rates, and a private mortgage market.
Where does
warehouse lending stand these days? A few years ago one couldn’t swing a dead
cat around without someone
offering you a line. Now, many mortgage banks have either signed
captive
agreements with some warehouse banks/investors, or are actively staying
on the
good side of the 10-15 who are still left and trying to stay above the
$3
million minimum net worth that some require. Some doubt that Freddie or
Fannie
will offer lines as long as they are under government conservatorship,
in spite
of the two agencies continuing to be active in buying loans from
qualified
clients. (I believe that at this point, a minimum net worth of $2.5
million is
required.) Capital requirements are going up for those who exclusively
originate on a wholesale basis (an increasing number of warehouse
lenders and
correspondent investors will not even consider a new application from a
company
that is strictly wholesale) and no one can deny that the percentage of
mortgage
broker business has declined.
Do you remember when everyone in the business
was hoping that Thornburg
would survive, and continue to offer “make sense” loans? At this point
non-government “make sense” deals seem to be in the realm of private
money
lenders, and Thornburg, who is bankrupt, is trying to sell its $11
billion
(almost 17,000 loans) servicing portfolio. Formal bids are due by
January 28th.
They no longer originate, purchase, or securitize loans, and many in
the
industry are viewing the sale of the servicing portfolio as a gauge of
interest
out there for the potential revival of the secondary market.
My apologies to Caliber, who yesterday I called “Caliper” at
one
point but also muddled the condo/FHA news somewhat. My mention of the
condo requirements
does not relate to FHA loans, but is in fact saying that FHA Condo
approvals
are no longer accepted for CONVENTIONAL loans.
Late last week Chase made some
changes to their pricing and to their
credit & and collateral (appraisal) policies. More specifically on
the
pricing side, Chase made an improvement to their Agency conforming
10-year
loans (interesting…) On the appraisal side, on the 18th
Chase will
require that all conventional loan appraisals be performed by a
Certified
Appraiser. Of interest is that appraisals performed by Stated Licensed
Appraisers
will not be acceptable, and that “Chase-approved AMCs have been
instructed to
use only Certified Appraisers on loans being originated for or sold to
Chase.”
In addition, Chase is eliminating their appraisal classifications only
to have
one status: Ineligible (any type of appraisal report or other related
appraisal
work will not be acceptable to Chase). Chase is following HUD’s FHA
appraisal
changes, noted in mortgagee letters.
Starting yesterday, “Chase Correspondent
is eliminating the
option of using FHA condominium project approvals on conventional loan
transactions” and “all Non-Agency loans must be sold to Chase
Correspondent
under a non-delegated status, and as such all individual loans must be
underwritten by Chase and all condominium projects must be reviewed and
approved by Chase’s Project Approval Group.”
Wells Fargo’s
wholesale channel came out
with some
adjustments to the HELOC program starting 1/16. (Yes, there are still
HELOC’s
out there.) But for wage income, 1099s will no longer be considered an
acceptable
form of income documentation. And income from commission, where the
commission
income makes up <25% of the total qualifying income, will require a
current
pay stub(s) with year-to-date earnings (should not be handwritten) and
a few
years of W-2’s or 1040’s. And for self-employment income, 1099s will no
longer
be considered an acceptable form of income documentation – the borrower
will
need, for non-employment income, a 1040 tax return and either the most
recent
bank statement or most recent account statement or distribution letter.
For economic news yesterday we had the ISM
Manufacturing Index, which rose
to 55.9 in December from 53.6 in November, growing for the fifth
consecutive
month and the highest reading since April 2006. (On Wednesday we will
have the ISM service report.) Construction Spending in U.S. Decreased
0.6% in
November. To balance that number we had Construction Spending total
$900
billion in November, the lowest level since July 2003 and down 19% from
a year
earlier. But 10-yr yields are still near the highest level since
June,
and 30-yr mortgage rates are still well above 5% - not bad by
historical
standards, but it won’t get a recent borrower much admiration at the
cocktail
party.
Helping rates is news that the New York Fed
purchased $9.3 billion in
agency mortgage-backed securities the week before last. Yesterday, to
start the year,
traders reported that volumes continued to be light. Ahead of us today
we have Factory Orders for November (expected to rise) and
Pending Home Sales, both at 10AM EST, but anyone who cares is waiting
for
Friday’s unemployment data. Most analysts feel that economic readings
are
showing improvements and that in many markets the housing sector may
have found
its bottom. We’re seeing, so far this morning, a bit of an improvement
in
rates. 30-yr mortgage prices are better by about .250, depending on
the
coupon, and the yield on the 10-yr is down to 3.79%.
I was walking past the mental hospital the other day and all the
patients
were shouting, “13....13....13.”
The fence was too high to see over, but I saw a little gap in the
planks. I
looked through to see what was going on, and someone poked me in the
eye with a
stick!
Then they all started shouting, “14....14....14…”
Rob
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