Before
school ended,
I noticed that one of my daughter's homework assignments (in "Romance
Languages")
was not turned in. When I asked her what happened to it, she replied,
"Canis meus id comedit." (“My
dog ate it.”) For more handy phrases (like “I never received that
buy-back
request!”) check out http://www.baetzler.de/humor/handy_latin.html.
When things are slow in the mortgage banking world, I dig out my old
mortgage
banking texts. Why aren't we in the "first trust deed banking"
business instead of the mortgage banking business? Did you know that
"in
the old days" the borrower deeded his property outright, as security,
to
the lender, who thereafter was its legal owner? The owner could take
back the
property if the borrower defaulted. The borrower kept the right to be
given
back his property if they fully satisfied the terms. In some states
this system
is still used, except that until a default occurs the borrower retains
possession of the property. In many states a mortgage is not an
actual
transfer of title, but only creates a lien, under which in case of
default the
lender may proceed to collect from the property. Under this system
the
mortgage is actually personal property and not a transfer of title and
therefore it may be passed by assignment, and upon the lender's death
goes, not
to his heirs as if real property, but to his executors or
administrators. Since
it is only a lien, there may be a first, second, third or as many
mortgages on
the property as its owner can procure, each being subject or
subordinate to all
prior mortgages.
How
about those
great rates? Gosh – you mean the economy is not doing as well as
analysts
thought a month ago? For an interesting side note, consumers appear
to be
saving money: personal income is up slightly, personal consumption is
down.
What are folks doing with their money? Keeping it in the bank. And what
are the
banks doing with the cash? Uh, how about investing it in safe Treasury
securities?
Not
only did the
3-yr auction go well on Tuesday, but yesterday’s $19 billion 10-yr
auction
exceeded all expectations. The “bid to cover” ratio, which is a
measure of
demand, was 3.28, basically meaning that for every note purchased there
were
over 3 bids. And the “indirect” bid, typically from foreign entities
and
non-primary dealers, was 44%: a very high level. After the auction the
yield, which
was at 3.42% prior to the sale, dropped to a low of 3.29%, representing
a 1
point rally? (Remember that the recent high yield on the 10-yr was in
early
June at 4.01 %.) Mortgages tagged along for the ride. Today is
Thursday, which
means Jobless Claims. And the 30-yr auction. The yield on the 10-yr
is at
3.36% and mortgage prices are slightly worse than yesterday afternoon,
but
better than yesterday morning.
Mortgage
fraud
continues to make the headlines. Apparently there is not much else
going on in
mortgage banking - or at least that is what the public may think. The
latest
story heralds from the NY area: http://www.nytimes.com/2009/07/09/nyregion/09mortgage.html?refnyregion
Occasionally
I am
asked about good places for charts and graphs, especially for ARM
rates. I will
typically direct the person to http://www.mortgage-x.com/general/mortgage_indexes.asp
CitiMortgage, which, as I have mentioned, is rolling
along
again, reminds me that “as a result of Citi's correspondent
reengineering
program”, they have not "cut off" a single lender during their hiatus
nor given deadlines to fund out pipelines. My apologies if my comments
yesterday were confusing.
Freddie Mac came out with their requirements for
higher-priced
mortgage loans (HPMLs). HPML’s, in case you’ve lost track of all the
abbreviations out there like I have, are mortgages secured by primary
residences that (for first-lien mortgages) have an annual percentage
rate (APR)
that is at least 1.5 percentage points higher than the average prime
offer rate
(APOR) for a comparable transaction. After 10/1 (although look for
investors to
put this in place sooner, of course) Freddie deems the following
products as
eligible for purchase as HPMLs: fixed-rate mortgages, 7/1 or 10/1 ARMs,
or
7/6-month or 10/6-month ARMs, and 7-year Balloon/reset mortgages.
Freddie Mac
will not purchase HPMLs that are prepayment penalty mortgages,
streamlined
refinance mortgages, Freddie Mac Relief Refinance Mortgages, ARMs with
an
Initial Period or Interest Only Period less than seven years, or 5-year
Balloon/reset Mortgages.
Reverse
mortgages
are in the news quite a bit. World Alliance Financial, which
operates Senior
Lending Network but is owned by KBC Group, has stopped taking
applications.
Their statement read, in part, “To be clear, this decision will have no
impact
on our current borrowers, holders of GNMA securities that we’ve issued
and our
partners in the Senior Lending Network.
We will continue to service outstanding loans, as well as
fulfill all of
our other obligations. Our core infrastructure will remain fully intact
while
we seek other opportunities.” KBC Group has received government to the
tune of $41.5
billion in financing and guarantees. Tax money at work!
A
woman was sitting
at a bar enjoying an after-work cocktail with her girlfriends when an
exceptionally tall, handsome, extremely sexy, middle-aged man entered.
He was
so striking that the woman could not take her eyes off him.
The
young-at-heart
man noticed her overly attentive stare and walked directly toward her.
(As men
will.) Before she could offer her apologies for staring so rudely, he
leaned
over and whispered to her, “I'll do anything, absolutely anything, that
you
want me to do, no matter how kinky, for $20.00...on one condition.”
Flabbergasted,
the
woman asked what the condition was.
The
man replied, “You
have to tell me what you want me to do in just three words.”
The
woman considered
his proposition for a moment, and then slowly removed a $20 bill from
her
purse, which she pressed into the man's hand along with her address.
She looked
deeply into his eyes, and slowly and meaningfully said, “Clean my
house.”
Rob
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