|
Nov. 23, 2010: Freddie's fee change; Fannie's 8.2 changes coming up soon; news from Redwood Trust, Berkadia, Chase, etc., etc.
Rob Chrisman
Fraud continues to be an issue, both
currently and in the past. For example, in Citi's latest
bulletin, "Correspondents must have policies and procedures in
place for fraud detection, prevention, training and reporting
that comply with Fannie Mae, Freddie Mac, and CitiMortgage
requirements for each stage of loan origination and servicing
process, including employee screening, hiring and training,
quality control and reporting. Lender employees must receive
fraud training updates at least once a year.”
Yesterday we learned that a Kansas City-area mortgage loan
officer and an area real estate agent were among nine people
indicted in an $11 million mortgage fraud scheme that involved a
network of fictitious businesses and straw buyers. Back in 2005
and resulted in $11.1 million in bad loans on 16 residential
properties in several Missouri communities. The sale prices for
the properties were illegally inflated, and more than $2 million
was paid to buyers solicited to help in the conspiracy, as
fraudulent mortgage applications were submitted and buyers
created fictitious businesses that issued false invoices that
claimed the businesses had provided work and services for which
they were entitled to receive loan proceeds.
Oregon’s
attorney general believes American Team Mortgage, out of
California, improperly charged 32 homeowners $80,000 for loan
modification application fees. The lawsuit was filed in Oregon,
and alleges that most of those fees were charged in advance of
providing services to clients in violation of Oregon law. The
company may have only actually obtained loan modifications for
two Oregon clients, and went out of business 5 months ago.
On the
good news side of things, Redwood Trust “is working on a
second securitization that it expects to complete in the first
quarter of next year. By the end of October, the company had
purchased $160 million of residential mortgage loans and had
made commitments to purchase an additional $138 million. http://www.marinij.com/business/ci_16677084
. (The story comes from the Marin IJ, just north of San
Francisco. They also have a very good sports section: http://www.marinij.com/sports/ci_15199646.)
Freddie
Mac
told its customers of a higher fee structure that is set to
begin in March. Freddie will be “increasing the Indicator Score/LTV
delivery fee rates for mortgages with certain Indicator
Score/LTV ratio combinations” and “revising the secondary
financing delivery fee rates therefore increasing delivery fee
rates for mortgages with certain LTV/total loan-to-value (TLTV)
ratios and Indicator Score combinations and adding a new
secondary financing delivery fee for these mortgages with second
liens and LTV ratios less than or equal to 65% and TLTV ratios
greater than 80% and less than or equal to 95% in the Mortgages
With Secondary Financing fee rate table.” The fee increases,
aimed at higher risk loans, will raise some of the upfront fees
by as much 0.75 percent of loan balances, and lenders are seen
offsetting an upfront fee of 0.25 percent by raising the rate on
a 30-year loan by 0.05 percentage point, causing a rise of about
$10 in the monthly payments on a $200,000 loan. Investors
believe that this should slow prepayment speeds on higher
LTV/lower FICO loans. (So far Fannie has not had similar
increases…so far.).
Freddie
also
came out with new pooling options for fixed-rate super
conforming mortgages, along with streamlining the process for
correcting data for mortgages delivered under a Best Efforts
contract and reminding Sellers about our requirements for proper
note endorsements. Currently, the association that regulates the
bond market has a 10% cap on “jumbo conforming” loans that can
be put into a security. Freddie is now providing sellers the
option “to form non-TBA Gold and Giant Participation Certificate
(PC) pools that comprise up to and including 100 percent of 15-,
20- and 30-year fixed-rate super conforming mortgages under our
Guarantor and MultiLender Swap executions. While we are
providing new pooling options for fixed-rate super conforming
mortgages, Sellers can still deliver super conforming mortgages
into TBA pools, as long as the aggregate unpaid principal
balance (UPB) of the super conforming mortgages does not exceed
10 percent of the total UPB of the PC pool.”
Don't
look now, but December 11 is right around the corner. Fannie
Mae has issued Frequently Asked Questions (FAQs) related to DO
and DU Version 8.2, which will be released December 11.
“The updates in the release of DU Version 8.2 will support
policy changes regarding foreclosures and pre-foreclosure sales;
simplified high-LTV transactions and the removal of the
"Flexible mortgage" label; rounding of the LTV/CLTV/HCLTV ratio;
Community Seconds loan eligibility; inclusion of all revolving
debts in the debt-to-income ratio; updated unit number
requirements; updated minimum borrower contribution
requirements; and other message updates.” https://www.efanniemae.com/sf/guides/duguides/doreleasenotes/index.jsp
The new
DO/DU version will enforce underwriting changes that will
allow buyers to use gifts and grants from nonprofit groups for
their minimum 5% down payment. Currently, borrowers had to
contribute a minimum 5% down payment from their own funds, but
additional down payment money could be from a gift (though never
from a home seller). The exception was for borrowers who put 20%
down: all that money could come as a gift. But with overlays,
many lenders now require a down payment of 10% or more, the new
rules mean that borrowers will still have to come up with extra
funds — either their own or gifts. But with Version 8.2 comes
tougher DTI ratios: the maximum ratio for those seeking a
conventional mortgage will drop to 45 percent from 55 percent
under the new guidelines. Buyers who have missed a payment will
have 5% of the total balance added to their ratios. And
borrowers who have gone through foreclosure will be excluded
from obtaining a Fannie-backed loan for seven years, up from
four.
Yesterday
I wrote about how HAMP is going. I was reminded that,
"HAMP is actually ‘Home Affordable Modification Program’ and is
part of the MHAP – ‘Making Home Affordable Program’ initiative
by the government. MHAP also includes HARP – ‘Home Affordable
Refinance Program’. Said another way, "HAMP stands for Home
Affordable Modification Program, HARP stands for Home Affordable
Refinance Program. Both of these are part of the MHA program."
Thank you.
Berkadia
Commercial
Mortgage LLC, sprang forth from Capmark Financial and is the
servicer backed by Berkshire Hathaway, Warren Buffet’s company.
Berkadia announced plans to use its own capital to fund a least
$200 million in fixed-rate loans to be securitized and sold to
investors. “The program, which will focus on mortgages of $5
million to $25 million, will help Berkadia win
business from brokers that don’t issue loans with their own
capital.” “It’s going to make us much more competitive
with other mortgage bankers.” Berkadia earns income by servicing
$215 billion in mortgages, and will be targeting loans on
offices, retail buildings, warehouses and apartments.
There
are signs of industry titans attempting to increase market
share. Chase is mailing a flyer to existing borrowers
for a free refinance: no appraisal, no income statements, no
fees, and titling the offer the “Chase Rate Reduction Program.”
Wells Fargo appears to have eliminated its processing
time issues, and reduced turn times. Pricing engines such as Optimal
Blue have set up Bank of America's 30-yr Fixed
Rural Housing Direct Leverage product, although GMAC has
discontinued its Conforming 7/1 LIBOR ARM 40 Yr. Union Bank
cleared up a question on its * Tenants-in-Common Vesting on
2-4 unit properties: “effective immediately, on refinance
transactions, all current vested owners and borrowers must
remain the same, with no additional new borrowers added.” Fannie
Mae seller/servicers learned that Fannie Mae will continue
accepting hazard insurance coverage from State Farm Florida
Insurance Company, despite its rating being downgraded by
A.M. Best, on properties securing certain Fannie Mae mortgage
loans in Florida.
There
is no argument that most of the recent data on the economy has
been better than forecasts. The question comes up, of course, were our
expectations too low, or is the economy really starting to
improve? Yesterday we had no substantive news, but like a spring
that was stretched too far last week, bonds continued to spring
back toward lower rates. Last week, and the week before,
mortgage rates begin to move higher for a variety of reasons:
stronger than expected economic data signaled growth which for
some reason always makes some folks fear inflation, and
substantial opposition to the quantitative easing program from
other countries and from many US politicians and economists. The
$35 billion 2-yr auction was decent, and the 10-yr note was up
better than .5 in price to yield 2.81%. In mortgage-land,
traders reported seeing less than half the normal volume, and
MBS prices finished the day better/up by about .250 in price.
Overnight
we had news come out about a North-South Korea issue, which has
caused a small flight to quality, adding to the situation in
Ireland. We have a $35 billion 5-yr Treasury note auction ahead
of us today ($29 billion in 7-yr’s tomorrow), along with the
release of the FOMC minutes from November
3rd. But as anticipated Q3 real GDP growth was
revised 0.5% higher to +2.5% from +2.0% previously. Later we
have Existing Home Sales for October (seen slightly weaker). With
all of that we have the 10-yr yield down to 2.74%, and 30-yr
MBS prices better by .250-.375.
The Transportation Security Administration recently implemented
new search routines at airports. There is growing public
controversy over pat downs and full body scans at airports, The
TSA Administrator stated that “there is a continual process of
refinement and adjustment to ensure that best practices are
followed.” To go along with this change in policy, a series
of TSA airport signs are about to be released, with catchy
slogans:
"Can't see London, can't see France - unless we see your
underpants."
"Grope discounts available."
"If we did our job any better, we'd have to buy you dinner
first."
"Don't worry - my hands are still warm from the last guy."
"Wanna fly? Drop your fly!"
"We are now free to move about your pants."
"We rub you the wrong way, so that you can be on your way."
"It's not a grope, it's a freedom pat."
"We handle more packages than the UPS."
|
