The Fed’s comment period on Reg. Z and yield spread premiums ended Christmas Eve. But not before several Senators fired off a public letter to the Fed Chairman. They call on the Chairman to adopt as "final" the proposed amendments to Regulation Z that ban yield spread premiums. Those in the business obviously had several months to voice their comments, but the Senator's letter ties YSP's in with subprime lending saying, "they too often stripped the wealth that working families accumulated over many years. Eventually, they stripped wealth from our entire economy.... the broker also stood to earn thousands of dollars in additional bonus payments from the lender if he could convince the family to take out a higher priced mortgage..."

http://www.robchrisman.com/references/Senate%20Letter%20to%20Fed-YSP%2012242009.pdf

I am glad that they cleared this up, and noted that yield spread premiums and subprime loans caused the credit mess. I’d always thought it was investor demand, Wall Street actions, poor rating agency judgment, questionable borrower and lender ethics, etc. Their letter makes it much more straightforward. (Ha!) Here’s one article on the status of things: http://www.breitbart.com/article.php?idxprnw.20091228.DC30629&show_article1

As one originator noted, “The problem they cite may be now irrelevant due to the new GFE, which requires that the broker disclose their total compensation under 'Origination Charges,' and though this number may include expected credit from the lender, the form does not allow for an entry titled, 'Yield Spread Premium.' It requires any credit from the lender (like YSP) be included as a credit to offset the borrowers' out-of-pocket closing costs. So ‘YSP,’ as an accepted mortgage finance term, no longer exists due to RESPA 2010. Brokers earn 'Origination Charges' and lenders either pay a credit or charge a discount based on rate. As with most government efforts, this is late and off-target.”

However, the fact remains that much of the public believes the information in this letter. And some are quick to point out that most savvy brokers will figure out a way to be compensated for originating a loan, even if the yield spread premium goes away.

What seems to be a common mistake that brokers are making on GFE’s? According to Wells Fargo’s wholesale group, they are receiving loans with multiple GFE’s – they only want one. And loans with a signed and dated 1003 and GFE dated before 1/1 do not need to be re-disclosed – brokers can use the old GFE and do not need to send a new one. Lastly, the GFE must match the Fee Detail Sheet exactly.

Remember that HUD’s public stand was a recently announced 120-day moratorium on the new RESPA rule provided good faith efforts are being made to comply with the new rule. Neither the effective date of the rule nor the obligation to comply has changed; however, HUD will be lenient with companies for the first 120 days as long as they follow existing rules & FAQs and have made a sufficient investment in technology, training and quality control. This sounds pretty subjective, and it is best just to follow the guidelines.

Are you part of the Nationwide Mortgage Licensing System? http://mortgage.nationwidelicensingsystem.org/licensees/resources/LicenseeResources/Information%20about%20NMLS%20Consumer%20Access.pdf

The public can view Mortgage Loan Originator licensing information through the NMLS Consumer Access path starting January 25^th. The website (NMLS Consumer Access) will make information available about mortgage loan originators due to the SAFE Act. Information will include the NMLS Unique ID, agent’s name, business phone & fax, an indication as to whether the agent is engaged in other business as director, owner, employee, etc., any other names being used, employment history for the last 10 years, license name/number/status by jurisdiction, along with license sponsorship, and branch location associated with the individual. Brokers and agents are being encouraged to review their information in NMLS that will be made publicly available to ensure that it is how you wish the information to be represented publicly. The NMLS is a system of record for state licensure and any information submitted requires an attestation by you to its accuracy.

A trial program for placing this information on chips and implanting them in brokers will begin soon in some parts of the nation. (OK, I just made this one up.)

Apparently MetLife is thinking about truly competing with the Wells’ and Bank of America’s of the world by possibly entering into both correspondent residential lending and warehouse financing. Back in 2008, MetLife bought the origination and servicing divisions of First Horizon (Memphis, TN) and now is supposedly 11^th in the nation in both residential lending and servicing. In an interview with National Mortgage News, their spokesman said MetLife is “exploring these sectors.”

Flagstar “gave the Heisman” to (immediately stopped doing) offering United Guaranty as an MI option, although UG Certificates are still available through their Contract Direct Channel, and originating loans of any program in Puerto Rico. And check those appraisals: “Properties exhibiting two or more of these characteristics are not eligible for financing with Flagstar
Bank:  Corrosion on metal fixtures, wires, or plumbing, sulfur odor in home, or wall board with Made in China or Knauf markings. If the appraiser observes these characteristics are present in the home, or the appraiser comments that only corrosion or a sulfur odor are present, an inspection from a licensed home or environmental inspector will be required.”

Flagstar also changed their pricing on Freddie Mac California condos, and changed their closing package delivery time from 4 days to 3 days for loans from CA, OR AND WA. In addition, flood insurance for loans bound for Flagstar must be equal to the lesser of 100% of the replacement cost (as determined by the flood provider) of the insurable value of the improvements, the maximum insurance available from the NFIP, which is currently $250,000 per dwelling, or the unpaid principal balance (UPB) of the loan.

There is no one that will disagree with the statement that the mortgage markets benefited from government intervention last year. And practically everyone believes that, given the significant challenges housing is facing, the government will stay focused and do whatever it takes to support the market. For this reason, analysts feel that this year we’ll see home price stability or only moderate weakness. Of course, we still have the ARM resets, but if the Fed keeps overnight rates near 0%, and short term rates stay low, ARM loans may not be going up much in rate and may actually decline. And when the Fed purchase program comes to an inevitable end, whether it is in March, or later, banks and money managers will be the primary buyers of agency MBS until the private market kicks in again.

The market did not do so well yesterday and in fact I saw some intra-day price changes from some investors. Treasury supply issues don’t help, with the US government continuing to sell large amounts of fixed income securities to finance the deficit. The 10-yr sale went “ok”, and today we have $13 billion of 30-yr bonds to wade through. Dealers reported an increase in mortgages for sale as both servicers and originators were in selling, and it was estimated that volume increased to $2.5 billion instead of the recent pace of $1.5 billion per day.

Today we will have Jobless Claims and Retail Sales, along with Import/Export Prices. Ahead of those numbers the market were pretty quiet. As it turns out, Retail Sales unexpectedly fell in December by 0.3% last month, the first decline in three months, after rising by an upwardly revised 1.8 percent in November. The yield on the 10-yr is 3.76% and mortgage prices are better by about .125 versus the close Wednesday.

FIVE RULES FOR MEN TO FOLLOW TO A HAPPY LIFE:

1. It's important to have a woman who helps at home, who cooks from time to time, who cleans up and has a job.
2. It's important to have a woman who can make you laugh.
3. It's important to have a woman you can trust and who doesn't lie to you.
4. It's important to have a woman who is good in bed and who likes to be with you.
5. It's very, very important that these four women do not know each other. 

(And no, this is not a quote from Tiger Woods.)

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.)