Thanks to Erin for this quote from Eric Hoffer: “In times of change, the learners will inherit the earth, while the learned will find themselves beautifully equipped to deal with a world that no longer exists.” Everyone probably knows someone in each category, but darn, why did I put my entire 401k into WaMu stock a year ago? Washington Mutual's shares plunged 17% yesterday, hitting their lowest price in 16 years, due to huge mortgage-related losses and a new projection that its write-downs could hit $27 billion by 2011!

Did you know that a borrower could have more than one FHA loan at the same time? This program is not a vehicle for individuals to acquire rental properties, so as a rule, no. But there are four exceptions: a) Relocation. If a borrower is relocating for employment purposes and the current primary residence has an FHA insured mortgage and won't be sold, they may be eligible for a second FHA loan. b) Increase in family size. If the borrower's number of legal dependents will increase to the point that the current house no longer meets their needs, the borrower may be permitted to obtain another home with an FHA insured mortgage. c) Vacating a jointly owned property. In the event a borrower is vacating a property and a co-borrower will remain in the property, the borrower is permitted to obtain another FHA insured mortgage. d) Non-occupant Co-borrower. A person who will be a non-occupant co-borrower on an FHA insured loan can have an FHA insured loan on their current primary residence. Or, vice versa: a person is a non-occupant co-borrower on an FHA insured loan and wants to purchase a house for themselves on a FHA insured loan.

According to a story in the Wall Street Journal, FHA officials are seeking a ban on seller-assisted down payments for federally insured mortgages due to losses.

The story mentions that, “Under the seller-funding practice, a third party - typically a charity - provides the down payment for the buyer and is then reimbursed by the home seller, often a home builder. This can help home sellers close deals with buyers who can't come up with down payments on their own”, but studies have shown that the government-backed loans made to borrowers who receive down-payment assistance go into foreclosure at three times the rate of loans in which borrowers pay for their own down payment!

Do investors have “declining markets” policies for FHA loans? Citi, for one, has such a policy. Why? Although FHA loans are insured, Citi holds the servicing of the loan but is not insured for losses they may incur to the servicing value as a result of delinquencies, foreclosure, etc.  Thus the reason for Citi’s overlays.

Are lower prices attracting buyers? You bet, although underwriting guidelines are still tight. The number of Americans signing contracts to buy existing homes unexpectedly rose in April. The index of pending home resales rose 6.3 percent to 88.2, the highest level in six months, following a 1% drop in March, the National Association of Realtors said yesterday.

Can Fed officials move the markets by their comments? NY Bank President Timothy Geithner, speaking in New York, stated that "tighter monetary policy" may be needed globally - which pushed two-year yields up on speculation that policy makers will raise borrowing cost to dampen accelerating inflation. Since two-year notes are more sensitive to changes in the central bank's interest-rate policy, their prices declined (rates rose) the most, and the difference in yield between the 2-yr (2.72%) and 10-yr (4.01%) narrowed to within 128 bps! This morning we’re at 2.89% versus 4.06%, but ARM prices will suffer as a result of seeing the 2-yr suffer its largest drop in 10 yrs, and curve flattened dramatically. This morning it was reported that the U.S. trade deficit widened more than expected in April by 7.8% to $60.9 billion as the average price for imported oil jumped. (The gain was the largest since September 2005.)

Three sisters ages 92, 94 and 96 live in a house together. One night the 96 year old draws a bath. She puts her foot in and pauses. She yells to the other sisters, "Was I getting in or out of the bath?" 

The 94 year old yells back, "I don't know. I'll come up and see." She starts up the stairs and pauses. "Was I going up the stairs or down?" 

The 92 year old is sitting at the kitchen table having tea listening to her sisters. She shakes her head and says, "I sure hope I never get that forgetful, knock on wood." She then yells, "I'll come up and help both of you as soon as I see who's at the door."

Rob