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Aug. 25, 2011: Buffett buys $5 billion of BofA; government refi program unlikely; UAD pushed back; various investor news
Rob Chrisman
Warren
Buffett’s
Berkshire Hathaway, who owns about 10% of Wells Fargo, announced
that it is investing $5
billion in Bank of America. $100,000 per share for 50,000
shares…as one would expect, BofA’s stock is up over 20%. Buffett
stated that BofA is a “strong and well-led company.” That is a
big chunk of change, and already at a profit given this
morning’s stock move. He now owns big chunks of the two largest
mortgage lenders.
The mortgage herd is spooked again, as it was last year (or
maybe the year before) with a story making the rounds about a government-sponsored
major refinancing program. Brian Collins with National
Mortgage News seems to be the source of this, although "industry
officials" are quoted. But "at this point in time there are few
specifics on the table regarding the plan." The story goes on to
say, "Mortgage executives say the White House is finally
realizing they cannot get the economy rolling again until they
provide some payment relief for the estimated 11 million under
water borrowers...'My best guess is the administration will
offer incentives to lenders to allow borrowers who are current,
but under water, refinance,' one source said. This source also
added the refinancing program will focus on Fannie Mae and
Freddie Mac guaranteed loans as well as mortgages in
private-label securities. The GSEs already have a special
refinancing program for borrowers with loan-to-value ratios
above 105% -- but the effort has not reached many underwater
borrowers."
Tom Harmon, a mortgage trader with Cantor-Fitzgerald, quickly
wrote, "The National Mortgage News ran a headline, 'White House
Contemplating Major Refinancing Program?' Prior to today, I
have not heard of the National Mortgage News. Their 'sources'
offered no details. There is nothing new here. The
administration and some in congress will continue to make
headlines of home issues. As the administration has run out of
economic bullets, this is likely to be a talking point ahead of
the elections. Don't be distracted. Focus on handicapping any
major enhanced streamline refinancing program rolled out by
Fannie or Freddie or one mandated by congress without
substantial GSE reform/changes. Congress has had a few years to
tackle the tough housing issues we face. None may be tougher
than the ultimate fate of the GSE's and guidelines under which
they operate. A national refinance program makes a nice
headline; however, the implementation is not a simple flip of
the switch. This is not a 'no cost' fiscal stimulus as many
claim. Presuming the government is willing to let the private
investment community take the hit on the trillions of 30-year
Fannie & Freddie-issued MBS's currently trading over a 109
dollar price, don't forget the $542 billion agency MBS at the
GSE's. While one could argue that the GSE credit book would be
in a better position, the GSE itself may not be. For the above
reasons, we are unlikely to see an endemic large scale enhanced
refinance program. Thus, we return to a congressional
solution. The budget debate renews in the fall and will take
the front and center position. While it is likely we will see
continued focus and execution on HAMP/HARP type programs, do you
think congress will introduce and pass a major GSE bill ahead of
next year's elections?" Well said.
Even
the New York Times picked up on the article: http://www.nytimes.com/2011/08/25/business/economy/us-may-back-mortgage-refinancing-for-millions.html?_r3.
Appraisers
everywhere
know that the deadline
for implementing new Uniform Appraisal Dataset (UAD)
requirements has been pushed back to January 1, according
to Mortgagee Letter 2011-30. The new UAD requirements will go
into effect for all case numbers assigned on or after January 1,
2012 and for all appraisals performed on HUD real estate owned
(REO) and Pre-Foreclosure Sale (PFS) properties with an
effective date on or after January 1, 2012. Previously, the
implementation date for the UAD was September 1, and AMC’s are
shifting their processes in advance of the deadline: http://portal.hud.gov/hudportal/documents/huddoc?id-30ml.pdf.
Toll
Brothers,
viewed by some as a barometer for demand for housing demand for
high-end residences, reported tepid quarterly order growth (+2%)
and a rise in cancellations (up to 7.4%) and warned that stock
market volatility and economic uncertainty continue to weigh on
homebuyer confidence: http://www.reuters.com/article/2011/08/24/us-tollbrothers-idUSTRE77N25Q20110824.
When
it comes to LO training & licensing, it is always good to
have a chart, right? Fortunately I am not licensed - there is no
way that I could keep track of the requirements. But the NMLS folks try to make
it easy for loan reps to track the necessary education: http://mortgage.nationwidelicensingsystem.org/profreq/education/Pages/default.aspx
I wish that I was smart enough to come up with a plan "to reduce
the housing glut AND put Americans back to work, incentivize
investments in real estate, encourage self-sustaining growth in
the depressed housing-market and help clear the inventory of
over three million of the unsold existing homes." But I am not,
and have to rely on a Congressman's proposal: http://ackerman.house.gov/index.cfm?sectionid%3&parentid4§iontree4,253&itemid15.
Here is something of interest: financial websites for
sale. It seems that four years ago Parkside Lending (CA)
purchased a set of domain names with the expectation of
purchasing a depository institution, possibly one specializing
in wireless banking. Now the company is offering some of them to
the industry to interested buyers - most likely banks. Available
are names like bankbillpay.com, depositmobile.com,
mobile-billpay.com, myhandheldbank.com, mywirelessbank.com, and
so forth. For the complete list and more information, contact
Matt Ostrander at matt@parksidelending.com.
Flagstar reminded its
clients that the FHA prohibits borrowers from having more than
one FHA-insured mortgage at a time. “FHA has clarified to
Flagstar that this policy includes all borrowers who are on
title to a property encumbered by an FHA-insured mortgage,
regardless of whether they are also obligated on the FHA-insured
mortgage. The four exceptions below are the only ‘exception
situations’ in which FHA will permit borrowers to have more than
one FHA loan and/or an interest in more than one property
encumbered by an FHA-insured mortgage: relocations, increases in
family size, vacating a jointly owned property, and a
non-occupying co-borrower. Also, “The Flagstar Bank Loan
Requirements have been updated to reflect the following change:
Effective immediately, the 4506-T Execution Criteria have been
updated to reflect that two years of tax transcripts will be
required on all conventional loans. This change however excludes
Freddie Mac Relief Refinance– Doc. #5354, which does not require
results.”
Franklin
American
addressed its PMI stance. “To be eligible for sale to FAMC,
loans with PI
certificates must have a note date on or before September 9,
2011, must be delivered to FAMC no later than September 19, and
must be purchased by FAMC no later than September 30. Any loan
failing to meet these deadlines will be ineligible for sale to
FAMC.” Over at Bank of
America, “Bank of America Correspondent Lending suspends
PMI as an approved mortgage insurer” as did GMAC and Chase.
Chase also sent a
reminder out to its correspondents that they “must promptly
verify the accuracy of the information on the Mandatory Trade
Commitment Confirmation to avoid possible pair-off fees.” Look
for more verbiage early next week.
GMAC
has been busy. It sent out several underwriting changes dealing
with borrower types (“The following has been removed from the
Non-occupant Co-borrower section of the Client Guide:
‘Non-occupant Co-Borrowers who are not Borrowers on the current
mortgage and do not hold title cannot be added to a Cash Out
Refinance as a means to qualify for the loan.’ The evaluation of
the occupant borrower’s qualification is determined by automated
underwriting, or is capped at a 43% DTI for manually
underwritten loans.”), loans to trusts, types of transactions
that delay financing, a conversion of a primary residence to a
second home or investment property, and so on. As with any
investor update, it is important to read the actual changes.
Retailer
&
wholesaler Real Estate Mortgage Network (REMN) announced the
launch of its new consumer direct lending division. Doing
business under the name FinanceMyHome.com (www.FinanceMyHome.com),
this new lending division will service the needs of home buyers
over the internet – quite the trend.
Looking
at the markets, yesterday we had Durable Goods, always a
volatile number, shoot up 4%, but we also had the FHFA note that
its index of housing prices drop .6% during the 2nd
quarter. The FHFA’s numbers show that over the last year prices
have dropped 6% - but of course all real estate is local, right?
As the day wore on, the 10-year UST note yield rose to highest
level in a week, and finished the day worse by more than 1 point
and at a yield of 2.26%. Mortgage-backed security prices
declined over .5 in the lower coupons, and about .25 in the
higher note rates, resulting in intraday price changes from many
lenders.
As
far as today’s calendar goes, Initial Claims (for w/e 8/20) shot
up 5k to 417k, far above expectations, although continuing
claims dropped. At 1PM EST the Treasury concludes its latest
round of monthly auctions with $29 billion 7-year notes. In the early going the
10-yr is unchanged at 2.26% and MBS prices are also about the
same as where they closed Wednesday.
You're An EXTREME Redneck When… (Part 1; part 2 tomorrow)
1. You think a woman who is out of your league bowls on a
different night.
2.
The Blue Book value of your truck goes up and down depending on
how much gas is in it.
3. You've been married three times and still have the same
in-laws.
4. You let your 14-year-old daughter smoke at the dinner table
in front of her kids.
5. You wonder how service stations keep their rest-rooms so
clean.
6. Someone in your family died right after saying, “Hey, guys,
watch this.”
7. You think Dom Perignon is a Mafia leader.
8. Your wife's hairdo was once ruined by a ceiling fan.
If
you're
interested, visit my twice-a-month blog at the STRATMOR Group
web site located at
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