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Jan. 14, 2011: Chase earnings don't disappoint; major investor updates including good jumbo news; rates improving
Rob Chrisman
"Ok, we start with the side of a cow..." For you
football fans out there, this is a big weekend, here is some
non-mortgage information of great interest – video on how Wilson
makes footballs! Any HR person will be amazed at the number of
years these factory workers have been doing this: http://biggeekdad.com/2011/01/nfl-football-factory/
Folks
wonder where the most reliable sources of mortgage news are.
Besides Us, People, and Martha Stewart's Living, this is quite
amazing. Put your mouse on a city and see today's newspaper's
front page: http://www.newseum.org/todaysfrontpages/flash/
But speaking of news, in a paper published by the Federal
Reserve Bank of San Francisco, In the years leading
up to the financial crisis of 2008–2009, a combination of
factors including low interest rates, lax lending standards,
the proliferation of exotic mortgage products, and the growth
of a global market for securitized loans promoted increased
household borrowing. Is this late-breaking news to anyone
in the mortgage business? “Homebuyers with access to easy credit
helped bid up U.S. house prices to unprecedented levels relative
to rents and disposable income. The rapid rise in household net
worth encouraged lenders to ease credit even further based on
the assumption that house price appreciation would continue
indefinitely. U.S. household leverage, as measured by the ratio
of debt to disposable income, reached an all-time high of 130%
in 2007.” The research piece goes on to
say that house prices in the United States have dropped on
average by about 30% from their peak in 2006, but also that the
personal saving rate trended up from around 1% to about 6% in
the third quarter of 2010 while the ratio of household
debt to disposable income dropped from 130% to 118%.
As has
been written in the past, on the one hand “higher saving rates
imply correspondingly lower rates of domestic household
consumption growth so that a larger share of GDP growth would
need to come from business investment, net exports, or
government spending. On the other hand, an increase in domestic
saving would help rebuild household nest eggs in preparation for
retirement and also help correct the large imbalance that now
exists in the U.S. current account.”
Fraud in Michigan? No way! “The owner of a mortgage
brokerage company pleaded guilty this afternoon to conspiracy to
defraud the U.S. by falsifying documents to obtain loans for
unqualified applicants.” My advice – don’t drop the soap: he
faces up to five years in prison and three years on supervised
release when sentenced, along with paying back the money. http://www.mlive.com/news/grand-rapids/index.ssf/2011/01/owner_of_precise_mortgage_in_g.html
JPMorgan Chase announced earnings today, which were $1.12
per share versus the $1.00 that was expected. Revenue came in
stronger for the 4th quarter, and credit losses declined, and
CEO Dimon noted that credit trends continued to improve.
Non-performing loans are declining, which is very good to see.
Flagstar
rolled
out a jumbo program, sure to turn some heads. Program features include a
5/1 & 10/1 LIBOR ARM options (5/2/5 caps); 2.25% margin,
loan amounts from $417,001 up to $2,000,000, manually
underwritten, maximum 40% debt-to-income; note that all assets
listed on the 1003 must be verified. (The loan amounts depend on
credit score, LTV, primary versus second home, etc.) As always,
it is best to read the actual guidelines from Flagstar.
Flagstar requires a life-of-loan flood insurance certificate for
all properties secured by FHA insured mortgages. Additionally,
properties located within a "Coastal Barrier Resource System"
are not eligible for FHA financing. With the exception of the
spot loan provisions, FHA has extended the temporary condominium
guidance announced in FHA Mortgagee Letter 2009-46a. The
extension applies to all FHA condominium case numbers assigned
on or before June 30, 2011.
Bank of America correspondents learned that it, as
expected, will be following the agency loan level price
adjustments (LLPA's) effective on or after January 17, 2011, and
BofA’s Agency Price Guide will be updated accordingly for all
conventional Best Effort and Mandatory commitments. “Changes
have been made to: LLPAs by Credit Score/LTV, LLPAs for
Subordinate Financing, LLPAs remain unchanged for DU Refi Plus
mortgage loans.” BofA's correspondents were also reminded of the
changes coming up on the 30th. Namely, "effective with all loan
applications taken on or after January 30, 2011, the interest
rate, corresponding monthly payment and any escrow amount for
taxes and property and/or mortgage insurance must be disclosed
on the TIL in the form of a summary table. The table must
contain only the information required, be in a prominent
location on the TIL and be printed in a minimum 10-point font. A
disclosure must be included stating there is no guarantee that
the consumer can refinance the loan to lower the interest rate
or periodic payments. In addition, if an escrow account is
required, that fact must be disclosed, along with an estimate of
the amount of taxes and insurance, including mortgage
insurance."
Wells Fargo's brokers were also told about its new
standard conforming LTV/loan score and secondary financing
adjusters, which kicked in for them a few days ago. Impacted are
“All Conforming loans except Freddie Mac Relief Refinance
Mortgage and Fannie Mae DU Refi Plus.” In addition, brokers were
reminded that certain state laws provide a “redemption period”
after a foreclosure or tax sale has occurred, during which time
the property may be reclaimed by the prior mortgagor or other
party upon payment of all amounts owed. The length of redemption
period varies by state and does not expire automatically upon
sale of the property to a new owner. “Any property with an
unexpired right of redemption is NOT eligible for financing.”
Wells
Fargo Funding told its correspondent clients to please disregard its
update from earlier this week, instead sending out a new
bulletin addressing the recent changes to Fannie Mae and Freddie
Mac’s Standard Delivery Fee matrices. The bulletin stated the
new Wells Fargo Funding adjusters, noting that these adjuster
changes do not apply to Fannie Mae DU Refi Plus Loans. The
changes are effective for best effort production (locks, relocks
and renegotiations) on and after January 12, 2011. The original
fee structure will be retained on extensions. For mandatory
sales, "to receive the old adjusters, Loans should be delivered
by February 18, 2011, to ensure purchase by February 25, 2011.
For Loans purchased after February 25, 2011, the new adjusters
will apply."
U.S. Bank Home Mortgage Wholesale/Correspondent Division
reminded us that the new Risk-Based Pricing rules, issued by the
Federal Reserve Board and Federal Trade Commission, became
effective on January 1, 2011. “The new law requires that all
borrowers be provided with the Risk-Based Pricing Notice before
loan closing, but not earlier than the time the approval
decision is communicated to the borrower. The Notice provides
borrowers with information regarding their credit, including how
their credit score compares to the credit scores of other
borrowers.”
Franklin
American issued
updates on conventional property flipping, gave notice that it
had approved a new MI company (Essent), clarified documentation
requirements for rental income from a 1-4 unit investment or 2-4
owner occupied subject property on conventional conforming
loans, noted that for FHA/VA loans two years tax returns and
transcripts are required for all self-employed borrowers
regardless of AUS feedback, and let clients know about an
underwriting fee increase of $50 that will take place in March.
FAMC also spread the word about new file delivery deadlines,
updated disaster area requirements, an updated electronic
signature policy, risk based pricing credit score disclosures,
invoices for third party fees, and Truth in Lending document
changes. Check with the actual bulletin for full details too
lengthy to reproduce here.
Lastly, M&T also notified clients of changes to its
guidelines, which apply to its FNMA Standard & FNMA High
Balance product line(s).
Turning
to the interest rate markets…yesterday was a good day! Volumes
picked up in MBS sales, which, when prices are moving up, is a
good sign. But overall volumes are less than where they were a
month or two ago, indicating that indeed a slow-down is
occurring. On the demand side, traders are reporting good demand
for MBS production – given how clean and well documented this
paper is, who wouldn’t want to own it? Of course, that doesn’t
help the foreclosure numbers for 2010, which set a new record.
Anyway,
the 30-yr bond auction went ok (at least it is out of the way).
MBS prices closed up nearly 1/2 point on 3.5s to 1/4 point on
5.5s, rate-sheet mortgage prices improved by .250-.375.
Today
we have already had a slew of economic news, which has moved
rates lower. CPI saw its highest change going back to mid-2009,
+.5%. The core rate was +.1%, and year-over-year the CPI was
+1.2%. December Retail Sales were +.6%, less than expected and
less than November's +.8%, ex-auto it was +.5%. For the year
Retail Sales were up 6.6%. For Capacity Utilization we had a 76%
print, and Industrial Production was +.8%. JPM reported better
than expected earnings this morning ($1.12 EPS vs. $1.00 est.),
while Citi, BONY, and Wells report early next week. And 9:55AM
EST brings the preliminary Michigan Sentiment report for January
which is anticipated higher to 75.4 from 74.5 at the end of
December. The 10-yr is down to 3.27% and MBS prices are
better by .125-.250, roughly.
(Warning,
parental discretion advised.)
I was a
very happy man. My wonderful girlfriend and I had been dating
for over a year, and so we decided to get married.
There was only one little thing bothering me....It was her
beautiful younger sister. My prospective sister-in-law was
twenty-two, wore very tight miniskirts, and generally was
bra-less.
She would regularly bend down when she was near me, and I always
got more than a nice view. It had to be deliberate. Because she
never did it when she was near anyone else.
One day her 'little' sister called and asked me to come over to
check the wedding invitations.
She was alone when I arrived, and she whispered to me that she
had feelings and desires for me that she couldn't overcome. She
told me that she wanted me just once before I got married and
committed my life to her sister. Well, I was in total shock, and
couldn't say a word.
She
said, “I'm going upstairs to my bedroom, and if you want one
last wild fling, just come up and get me.”
I was stunned and frozen in shock as I watched her go up the
stairs. I stood there for a moment, then turned and made a
beeline straight to the front door. I opened the door, and
headed straight towards my car.
Lo... And behold, my entire future family was standing outside,
all clapping!
With tears in his eyes, my father-in-law hugged me and said, “We
are very happy that you have passed our little test. We couldn't
ask for a better man for our daughter. Welcome to the family.”
And the moral of this story is:
Always keep your condoms in your car.
There will be no commentary on Monday in honor of the Martin
Luther King Holiday.
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