Forget all the news about the bailout, and about
Citi/Wachovia! More importantly, Heather Locklear was arrested! Rumors of
thousands of men lined up to post bail are probably exaggerated. http://www.latimes.com/news/printedition/california/la-me-locklear29-2008sep29,0,3093032.story
Obviously this mortgage crisis is proving too much for her.
Are you preparing for a presentation, or being asked by
clients about the current mortgage situation? Here is a site with many, many links
to help with questions that you or your clients may have regarding the quagmire
in which we find ourselves: http://mises.org/story/3128
Why stay put when you can “clean your hands” of
this whole mess? Here is what’s being thrown at the public: http://www.youwalkaway.com/index.php
Remember all those sketchy loans that you sent to either
World Savings or Wachovia? (“They’ll do anything…”) Now
they are CitiMortgage’s headache – supposedly 73% of
Wachovia’s loan holdings are “pick-a-pay” mortgages. Assisted
by the FDIC, Citigroup will buy the banking operations of Wachovia, and
depositors will be fully protected and no cost to the Deposit Insurance Fund is
expected. "Wachovia did not fail; rather, it is to be acquired by
Citigroup Inc on an open bank basis with assistance from the FDIC," a
statement on the FDIC's website said. Shares of Wachovia are now below $2 per
share although Citibank shares are up. Citigroup
will buy the bulk of Wachovia, including five depository institutions, and
assume its senior and subordinated debt. Wachovia will retain ownership of its
retail brokerage unit, AG Edwards, and its assets-management division,
Evergreen.
Congressional leaders reached an agreement on the $700
billion rescue plan for the financial industry, although Congress
needs to vote on it, and then send it to President Bush for his signature. The
plan will give the Treasury access to $250 billion and the ability to purchase
a wide range of assets the Treasury deems “troubled,” the ability
to buy assets from banks (including non-US banks) affected by the crisis, and
eventual access to $700 billion.
Treasury prices are up (better) this morning, although there
continues to be a squeeze on short term money between banks. (The 3-month LIBOR
rate has soared by nearly 80bps over the past 2 weeks to a 9-month high of
3.77%, last Thursday, and eased 1bp to 3.76% on Friday.) For scheduled economic
news, consumer spending was unchanged during August despite incomes from wages
and salaries and all other sources being up 0.5 percent in August. Does anyone
pay attention to scheduled economic releases anymore? Tomorrow is the Chicago
Purchasing Manager’s Survey and Consumer Confidence. Not much on
Wednesday, Thursday Factory Orders and the usual Jobless Claims, but then on
Friday we’ll see the unemployment data. With all of the news this
morning, mortgage prices are better by about .250-.375 and the 10-yr is down to
3.75%
PMI made the following guideline
changes effective October 10, 2008: Investment properties are no longer
eligible for insurance, regardless of the AUS approval, and Debt-to-Income
(DTI) qualifying ratios will be updated (45% DTI for manual underwrite, Loan
Prospector®, custom or proprietary AUS; 55% DTI for Desktop
Underwriter® Version 7.0.) PMI did, however, state that a higher DTI may be
appropriate for loans that are manually underwritten or that receive an LP,
custom or proprietary AUS decision. We may allow a DTI ratio higher than 45%,
not to exceed 55%, when the loan has certain compensating factors.
US Bank correspondent division made a series
of changes, effective October 1, 2008. These impacted their LTV and TLTV
(CLTV), FICO’s, etc. In addition, for their “Declining
Markets” policy, if the subject property is located in AZ, CA, FL, MI or
NV the LTV and or TLTV/HTLTV must be reduced by an additional 5%.
RMIC weighed in with several insurance
changes. Effective November 1, loans with LTV/CLTVs of 95.01% to 97% may only
be originated through a lender's retail channels (i.e., broker originated and
wholesale loans are ineligible). In order to be considered a retail loan,
the loan must be closed and the MI ordered in the name of the originating
lender, by that lender's personnel. The minimum representative FICO
required for insurance on loans over 95% LTV/CLTV will remain 720 as stated in
the August 27, 2008 release notes. In addition, loans on investment properties
and cash out refi’s will no longer be eligible for coverage. All loans
with A-Minus pricing (including all loans with FICOs below 660 and loans with
DU 7.0 Expanded Approval recommendations) will be limited to a maximum
allowable debt-to-income (DTI) ratio of 45%. Loans on second homes will require
a minimum loan representative FICO score of 720, and be limited to a maximum
LTV/CLTV of 90%.
Morris, an 82 year-old man in Miami, went to the doctor at the local
Medical Clinic to get a physical. A few days later the doctor saw Morris
walking down the street with a gorgeous young woman on his arm.
A couple of days later the doctor spoke to Morris and said,
“You're really doing great, aren't you?”
Morris replied, “Just doing what you said, Doc: 'Get a
hot mamma' and 'be cheerful.’''
To which doctor said, “I didn't say that, Morris. I
said, 'You've got a heart murmur, be careful!'”
