A news story broke about CitiGroup’s possible plan on paying back their TARP monies: http://www.businessweek.com/bwdaily/dnflash/content/dec2009/db2009128_444863.htm

Count your blessings that the SEC is not accusing you of misleading investors (or that you didn’t buy gold $100 an ounce higher than where it is now). This is where three former top executives of New Century Financial find themselves: accused of fraud and misleading investors as the company's subprime loan business was failing in 2006. New Century's former CEO and co-founder Brad Morrice, former chief financial officer Patti Dodge and former controller David Kenneally are the names to watch, and probably not hire if you have stockholders since the SEC also wants the three barred from serving as officers or directors of any public company and reimbursement of their bonuses or stock option awards.

Be careful what you charge for FHA loans. The FHA kicked Equitable Trust Mortgage (Baltimore) out of its program yesterday, claiming they overcharged borrowers, particularly minorities, for FHA loans. Supposedly they also failed to disclose all loan origination fees to borrowers, the FHA said in a statement, and Equitable Trust’s loans have a default rate over the national average. For folks keeping track, as of last week the FHA had suspended seven lenders and withdrawn FHA approval for 270 others.

Many smaller mortgage banks use Flagstar for warehouse lines. They were told that, just like the loan funding process, a verbal VOE is required for warehouse lending advances. Flagstar Bank has previously announced that verbal VOE’s within 10 days of closing were required as a pre funding condition, and now this documentation is also required to be provided to Warehouse Lending as a condition for a Warehouse Lending advance, regardless of investor.

CitiMortgage sent out a bulletin to clients reminding them that “Desktop Underwriter and Loan Prospector will be updated the weekend of December 12, 2009. These updates will support the recent credit policy changes (maximum DTI of 45% except for DU Refi Plus, minimum Credit Score of 620, etc.) Cit also came out with changed mortgage insurance coverage requirements starting 12/12. Fannie Mae is updating its MI coverage requirements to include two options: Standard MI coverage without a Loan Level Price Adjustment (LLPA), or lower MI coverage options with a Loan Level Price Adjustment. “CitiMortgage will not accept the second option of lower or reduced MI coverage levels that require an LLPA, with the following exceptions: If a DU Refi Plus loan is refinancing an existing loan that has less than standard levels of coverage, the lower coverage levels may be transferred to the new DU Refi Plus loan with no mortgage insurance LLPA assessed; but if new coverage is required, levels that require an LLPA are not permitted; MyCommunityMortgage and Home Possible loans are not impacted by these changes; Freddie Mac Alt 97 requires 35% coverage, regardless of LTV; CalPERS MHLP loans are not impacted by these changes.”

Citi goes on to make some two-unit LTV/CLTV/HCLTV changes, along with changes to their FHA program (the maximum CLTV for purchase and rate/term refinance transactions is 105% but 60% for Florida condos, and for cash out transactions with loan amounts >$417,000, prior to the inclusion of UFMIP, the bankruptcy and foreclosure discharge/release date must have been at least 7 years prior to the loan application) Under their Streamline Refinance Programs, the maximum CLTV may not exceed 105% (60% for Florida condos), and Citi is going along with HUD’s condo approval requirements. They did announce that a second appraisal on FHA Loans is no longer required for cash out refinances with loan amounts greater than $417,000 or in declining markets, along with making some credit policy changes to their VA loan program starting next Monday. These include a minimum FICO of 640, etc., and generally mirror the FHA program changes. (Clients should read the bulletin for precise details!)

Wells Fargo’s correspondent channel, which has also accepted the continuation of the temporary high balance loan amounts, told clients that, as a result of Fannie Mae’s planned update to DU this weekend, they are updating their High Balance guidelines for Delegated loans using DU. “Effective with DU (version 8.0) approvals on and after December 12, 2009, Wells Fargo Funding will no longer require Sellers to apply the DU credit overlays to Delegated High Balance transactions using DU.” Clients should refer to Wells’ guidelines. Wells Fargo will require a DU recommendation of Approve/Eligible for all Prior Approval High Balance Conforming loan transactions. “A recommendation with ineligible messaging due to loan amount will no longer be allowed.”

Wells Fargo’s wholesale channel came out with revisions to their Home Equity Credit Policy which are effective 12/12. These changes addressed eligible income documentation and asset requirements.

In a sign of the times, Franklin American addressed the question of electronic signatures. “A State and Federal regulatory framework has been created via the state based Uniform Electronic Transaction Act (UETA) and the federal Electronic Signatures in Global and National Commerce Act (ESIGN) enabling electronic transactions, including signatures. Both UETA and ESIGN have established requirements for the permissible use of electronic signatures. UETA and ESIGN are designed so that a signature, contract, or other record related to the transaction may not be denied validity or enforceability because it is in an electronic format. FAMC will purchase loans in which upfront/early disclosures are signed using an electronic signature provided the loan is in compliance with all applicable state and federal guidelines as well as all FAMC requirements outlined in our manual. FAMC will not purchase loans in which other documents are signed electronically, including but not limited to, closing documents and purchase contracts. Furthermore, electronic signatures must be provided through an approved vendor.”

Analysts are still cogitating on the unemployment number from Friday. Is it the strongest evidence yet that the economy is improving? Check this site out: http://cohort11.americanobserver.net/latoyaegwuekwe/multimediafinal.html

The markets didn’t have much to hang their hat on yesterday, aside from Ben Bernanke’s speech to the Economic Club in Washington DC. The press stories said, “US faces significant headwinds to growth”. I don’t know if that is late breaking news. Today is something a little more interesting, like $40 billion in 3-yr Treasury notes for sale. Even though Treasury rates didn’t do much Monday, mortgage rates improved on a relative basis. Why? Bank buying, more Fed buying, minimal supply, and much slower-than-expected prepayment speeds all helped. The dollar rose to its highest level in a month against the euro as investors question whether central banks will increase rates in the near term. Today, once again, there is no scheduled news, but we find a nice rally in the bond market with the 10-yr yield down to 3.40% and mortgage prices better by close to a half a point.

Four old guys who have know each other since they were kids decide to get together for a round of golf. They haven't seen one another for 10 years.

The course is packed and on the ninth hole they have about a 5 minute wait as the group in front of them is playing super slow.

One of the men "John" excuses himself to go water a tree nearby. The other 3 gentlemen begin to have a little chat.

"Steve, how ya been? How's your son", asks Mike.

Steve replies, "Oh he's doing great. He is still in the auto business and has 4 dealerships, 3 BMW and 1 Mercedes. In fact, he just gave a brand new BMW to his good friend free and clear".

"How about your son, Mike?"

"Oh he's doing great too. He is still in construction and has 5 tracts of homes he is working on now.  As a matter of fact, he just gave away a brand new home to one of his friends."

"Joe", says Mike. "What about your son? Don't you have a son too?"

Joe proudly responds, "Yes sir, and he is doing fantastic. He is still working on Wall Street and has 3 brokerage firms. He just gave away a $200k stock portfolio to one of his friend for free". "WOW, our sons are doing great" says Mike.

Just then Bill comes back from relieving himself and asks if they are ready to tee off. One of the other gentlemen says yes, but tells him that they were just discussing the status of their sons. "Bill, don't you have a son too? What's he been up to?" asks Mike.

Joe looks down and with an odd look responds, "Well he's doing alright, but he has been hanging out at those guy bars a lot. You know, not the ones where there are no women?" The other 3 look embarrassed, but just then Bill smiles and says "Whatever he's doing he must be good at it cause he just got a new car, a new house and a new stock portfolio!"

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.)