An agent wrote to me and said, “Rob, I was explaining to a listing agent as to why we needed an appraisal review on her property last night. What that entailed, why they are done, etc. etc.  She responded with, ‘Why does the lender care about the appraisal when the buyer is putting a lot of money down?’ She went on to say, or ask, ‘Why didn’t I take this loan to a portfolio lender?’ I responded with, ‘Do you mean like World Savings or Washington Mutual or Bear Stearns or Thornburg?’ She said, ‘Yes, there must be lenders who don’t care about such things.’ I guess she hasn’t seen or heard the news in 2-3 years.  I was shocked.”

But hope springs eternal. A broker wrote, “Things are going great!!  I think this is an exciting time.  I had a small branch of about 6 or 7 LO’s for the last two years…and was approached by a great group of people to bring over my branch and start up their sales department.  We have about 15 LO’s now and are hopeful to hit 20 million in volume this month!!  We are aggressively pursuing ways to position ourselves for the purchase market but also want to take advantage of the rates at the moment.”

Lately there has been some talk in the investor community about using covered bonds to supplement or replace mortgage-backed securities, therefore helping the secondary market for mortgages, which in turn would help originators. What is a "covered bond"? In this case, covered bonds are debt securities backed by the cash flows from mortgages, and recourse to a pool of mortgages secures (“covers”) the bond in case the issuer becomes insolvent. Covered bond assets remain on the issuer’s consolidated balance sheet, which comforts end-investors, since they are held on the issuers’ books and the interest is paid from an identifiable source. (Current MBS’s are not held on the issuers’ books.) This type of security has been popular in Europe, but not here in the US. New accounting rules, however, require issuers to carry collateral on their balance sheets even for securitized products such as mortgage bonds, a key feature of covered bonds, and there may be some legislation brewing regarding the FDIC taking over an issuer (in the event of a collapse) that would make it easier to issue them. In the event of default, the investor has recourse to both the pool and the issuer.

The Mortgage Bankers Association of America (MBAA) released its “National Delinquency Survey” for the fourth quarter. A glimmer of good news shone forth as total mortgage delinquency rates, seasonally adjusted, were down 17 basis points during the fourth quarter. If only we could ignore the fact that they were up year-over-year by 159 basis points. At this point, reports the MBAA who recently sold their headquarters, 9.47% of all mortgages on one- to four-family homes are now in some state of delinquency.

Will the $1.5 billion plan rolled out Friday by President Obama help the average agent? Nope. First, it is a proverbial drop in the bucket – remember that the Fed is buying over $2 billion a day currently. Second, it is directed toward California, Nevada, Arizona, Michigan, and Florida. It is targeted at preventing more foreclosures (Nevada has been able to chant “We’re #1, we’re #1” in foreclosures for over three straight years.) and the money, re-directed from the TARP bank bailout, will go toward homeowners who have lost their jobs, owe more than their houses are worth, or cannot afford to make monthly payments. State and local agencies will be given the leeway to tailor programs for the money, Obama said. The U.S. Treasury will approve the program proposals. Funds will be allocated through a formula based on home price declines and unemployment, so no, it doesn’t help brokers.

The FDIC shut down four banks on Friday. La Jolla Bank (CA) with 10 branches went to OneWest Bank. George Washington Savings Bank (IL) with 4 branches went to FirstMerit Bank (OH). Marco Community Bank (FL) was taken over by Mutual of Omaha Bank, and La Coste National Bank (TX) will be run by Community National Bank (TX). The failure of La Jolla Bank, George Washington Savings, Marco Community, are expected to cost the insurance fund $882 million, $141 million, $38 million, and $4 million respectively. The agency expects the cost of resolving failed banks to grow to about $100 billion over the next four years, and the FDIC mandated banks prepay about $45 billion in premiums last year, for 2010 through 2012, to replenish the insurance fund.

Fannie Mae sent out the approval of four new mortgage insurers and provided updated delivery codes for the following companies: Essent Guaranty, MGIC Indemnity, PMI Mortgage Assurance, and Republic Mortgage Insurance Company of North Carolina.

CitiMortgage is continuing to hone its pre-purchase review process, and told patrons, “As we continue to build on our quality initiative, including an enhanced pre-purchase review (“PPR”) process, CitiMortgage now is implementing additional PPR steps to mitigate the possibility of variance from our standards. While most files delivered for purchase will flow through a streamlined 48 hour standard review, please note that some files will be selected for a more in-depth review and could fall outside of the 48 hour turn time. Each Correspondent’s representations and warranties remain in full force and effect with respect to every loan sold to CitiMortgage.”

Flagstar notified clients that the company updated its flood policy guidelines to reflect the following flood insurance requirements: “Flood insurance 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. In addition, this Friday Flagstar is discontinuing all FHA 1-Year ARM products and the $100 Down HUD Repo program. On the good news side, Flagstar will no longer charge an additional fee for Freddie Mac loans located in California condominium projects that do not carry earth quake insurance.

Wells Fargo wholesale tweaked its Mortgage/Home Equity Market Classification List (shifting some counties around but keeping the same policy), and made a change to its MI for “Sweat Equity and Open Collections” and Home Opportunities, My Community Mortgage, and Home Possible programs (transactions with sweat equity and/or open collections are not eligible with LTV’s greater than 80%, and addressed maximum seller contributions and gifts). WF wholesale also told brokers about the FHA allowing the Appraisal Update and/or Completion Report (discussing timelines, ordering new appraisals, etc.), cut its Cash-Out Refinance ARMs with the Interest-Only Payment Feature, adjusted its adverse credit policy for FHA Streamlined Refinances and VA IRRRL’s, and discussed job loss insurance for Conventional, VA and Guaranteed Rural Housing Loans (starting today, for example, job loss insurance paid by the lender is allowed and can be treated as a contribution if within the 6% maximum contribution limit, for conventional loans, and job loss insurance paid by the builder, seller, third party, etc. must be treated as a sales concession with a dollar for dollar reduction). Lastly, WF wholesale shuffled its cash-out refi maximum LTV and CLTV grids. Check them out, as re-printing the details here makes little sense, but the changes were made to meet agency requirements.

In a move echoing other investors, AmTrust has suspended their Interest Only product lines. Is the fact that IO’s don’t pay down the principal make them "untouchable" from an investor point-of-view? No – there are still investors that buy them.

Starting today, ING increased their broker’s underwriting fee from $695 to $795.

How did the fixed-income markets wrap up on Friday? “Money managers, hedge funds, and originators (supply all day is about $1.5 billion) were all better sellers early in the day, but then buyers came in (including the Fed) and things improved. As we head into the last week of February, today is void of economic news. Tomorrow we have the Case-Shiller 20-city Index, along with Consumer Confidence. Hump Day holds New Home Sales. Thursday we have the standard Jobless Claims, and also Durable Goods. Friday is the Chicago Purchasing Manager’s Survey, and Existing Home Sales. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday ($44 billion 2-yr, $42 billion 5-yr, $32 billion 7-yr’s, and $8 billion in 30-year TIPS), and a Bernanke speech on Wednesday. Ahead of all that mortgage prices are better by .125 this morning, as is the 5-yr Treasury note, and the 10-yr yield is about 3.79%.

Bob, an older extremely wealthy widower, shows up at the country club with a breathtakingly beautiful and very sexy 25 year-old blonde.
She hangs onto Bob's arm and listens intently to his every word. His buddies at the club are all aghast.
At the first chance, they corner him and ask, "Bob, how did you get the trophy girlfriend?"
Bob replies, "Girlfriend? She's my new wife!"
They're amazed, but still ask, "So, how did you persuade her to marry you?"
"I lied about my age", Bob replies.
"What?! You are 70... did you tell her you were only 50?"
Bob smiles and says, "No... I told her I was 90."

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.)