Yesterday I mentioned Wisconsin's SAFE Act. How about Oregon’s SAFE Act verbiage, which start at the end of July? “Financial Responsibility Criteria: For purposes of this rule, an applicant is not financial responsible if the applicant has shown a disregard of his or her own financial circumstances, taking into consideration the totality of the applicant’s financial circumstances. Factors that the director may consider in determining whether an applicant has not demonstrated financial responsibility include, but are not limited to, the following: (a) Current outstanding judgments or material litigation, excluding judgments solely as a result of medical expenses; (b) Current outstanding tax liens or other government liens and filings; (c) A foreclosure within the past three years and the type of property subject to foreclosure, whether residential or commercial; (d) Pending or completed bankruptcy proceedings, and the nature of the proceedings, occurring within the past five years; or (e) A pattern of seriously delinquent accounts within the past three years. In assessing the financial responsibility of the applicant, the director may consider extenuating or mitigating factors, including but not limited to the following: (a) Involuntary loss of job or income; (b) Involuntary medical expenses; (c) Divorce; (d) Attempting workout arrangements with creditors; or (e) Any other factor the director believes reflects circumstances beyond the control of the applicant.”

VA lenders may want to visit http://www.homeloans.va.gov/docs/2009_county_loan_limits.pdf That is the website that shows the VA county-specific loan limits. GMAC, for example, reminds their clients that any county that does not appear on this list is assumed to have a county limit of $417,000, and that the VA county limits are used to determine the calculation of the maximum amount of guaranty the VA will provide on a loan. It does not dictate the maximum amount of the VA loan. The new 2010 county limits must be used to determine the maximum VA guaranty/Veteran's Available Entitlement for loans closed on or after January 1, 2010.

Sometimes a broker or agent will wonder what happened to investors paying 3-5 points for a loan. After all, older Treasury notes with higher coupons are trading at those levels, and more. But a mortgage investor is not going to pay much above par (100) if the loan is expected to pay off early, for whatever reason. Recently we learned that the “aggregate prepayment speed of the Fannie Mae hybrid ARM sector for December surged 32% from 20.3% CPR to 26.7% CPR.” Prepayments increased most dramatically for credit-impaired borrowers who had IO loans that funded in 2006-2007. The aggregate Freddie Mac hybrid ARM prepayments “increased 12% from 21.4% CPR to 23.8% CPR.” But some analysts believe that the aggregate Fannie Mae and Freddie Mac hybrid ARM prepayments to drop 15-20% this month due to the combined effects of a lower housing turnover in the middle of winter, along with three fewer business days. (Other analysts with attitudes say that anyone using the old “fewer business days” argument is misled.)

And just what is the current hybrid ARM issuance these days? In December production hit $5.3b billion, with Fannie Mae issuing $4.5 billion and Freddie Mac $0.9 billion. But with total hybrid ARM paydowns for December being $9.2 billion, it resulted in a net issuance of negative $3.9 billion. Riveting.

When I think of "USDA", I think of the local meat counter. But savvy mortgage lenders in many areas equate that term with "USDA Rural Development Agency", which has field offices all over the United States. They provide small-business loans, community development funding, and guaranteed home loans for moderate income families in typically low population density areas. Heck, no money down, construction, and closing costs to be folded into the life of the mortgage? And an interest rate that sometimes is dependent on the ability of the borrower to pay? http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

“Do housing prices ever go down?” sounded like a poorly conceived question two years ago. Now, of course, no one would ever say no: of course they do. Early last decade people began buying houses as if it were their last chance to ever buy a house: prices will never be this cheap again! Speculators flipped houses, and nationwide home prices increased by 60% between 2000 and 2006. Of course real estate dealers, mortgage originators, and Wall Street firms had no reason to slow things down, especially if they are paid on a transaction basis. In “the old days” there were natural limits on home mortgages: often times whoever originated the loan owned it and serviced it.

Here’s something to ponder: Given the production statistics, in the past year the Fed has purchased 73% of the mortgages that government-backed Fannie Mae, Freddie Mac and Ginnie Mae have turned into securities. Nervous about the end of March, when the Fed plans/expects to end its purchase program? Remember that it is not in their best interest to just cut the mortgage market loose…

As I mentioned yesterday, everyone is chewing on that unemployment data. We have over 15 million unemployed here in the US, and the length of time of unemployment continues to climb – it is now up to 20.5 weeks. Would you hire an underwriter who had been out of work for the last 5 months? (Well, maybe they could use the break…)The longer a worker is unemployed, the less relevance their skills have to employers looking to hire, and this can become a big problem.

Yesterday was a bit of a slow day in rate-land, with the only volatility coming after “hawkish” comments from Fed Governor Hoenig who said that an unemployment rate of 10% does not preclude the Fed from raising rates. The TIPS auction went well enough, but we still have another $74 billion in Treasury supply ahead of us this week. And the yield curve is steepening again (anytime short term rates barely budge, and long term rates go up, of course the curve steepens.)

Like a college kid’s social life, this week becomes busier as we approach Friday. Thursday and Friday contain news on inflation, manufacturing, and retail sales. And besides the standard news we have the auction and several Fed speakers. (The next Fed meeting starts on January 26^th.) Today we have the Treasury’s $40 billion 3-yr auction. We will have the Trade Balance figures at 8:30AM EST, and then the Fed’s Beige Book release at 2PM EST, but ahead of those items dealers are reporting a wave of solid buying, and rates are down: the yield on the 10-yr is down to 3.74% and mortgage prices are better by .375.

(Warning: PG)

Moms in Group Therapy

A psychiatrist was conducting a group therapy session with four young mothers and their small children.

"You all have obsessions," he observed.

To the first mother, he said, "Mary, you are obsessed with eating. You've even named your daughter Candy."

He turned to the second Mom: "Ann, your obsession is with money. Again it manifests itself in your child's name, Penny."

He turned to the third Mom: "Joyce, your obsession is alcohol. This too shows itself in your child's name, Brandy."

At this point, the fourth mother, Kathy, quietly got up, took her little boy by the hand, and whispered, "Come on, Dick, this guy has no idea what he's talking about. Let's pick up Peter and Willy from school and go get dinner."

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.)