Here's something that hasn't been on the front burner for mortgage bankers & Realtors for a while: flood insurance. "The federal program that insures homes against flood damage expires next Friday and is at risk of not being renewed. Industry executives say that if the National Flood Insurance Program lapses, it would become all but impossible to get a mortgage in flood zones across the country until the program is revived." Overnight, Senate leaders moved some disaster money around and passed bare-bones legislation to avert a government shutdown at week's end. That measure, approved by the Senate on a 79-12 vote, would keep the government running until mid-November. The House appears likely to endorse that measure next week when it returns from a weeklong recess. So not only can we think about why they deserve a week’s vacation, but we get to do this all over again in mid-November.

http://www.insurancejournal.com/news/national/2011/09/26/217245.htm

Top Dot - does the company have $9 million to pony up? I hope so - it may owe just that due to a class action compensation judgment. A federal court entered a $9 million judgment against Top Dot Mortgage for violations of the Fair Labor Standards Act. The class action suit was brought on behalf of 166 loan officers who were not properly paid minimum wage or overtime by Top Dot Mortgage and its individual owners. Under the FLSA, employees are entitled to wages for all hours worked and time-and-a-half pay for all time worked over 40 hours worked in a work week, unless they are exempt from the Act. Federal law also requires employers to maintain accurate records of hours actually worked by employees. "At trial, we proved that Top Dot willfully created a pay plan which denied its loan officers minimum and overtime wages in violation of federal law, while its individual owners wrongfully added millions of dollars to their personal income" said lead trial attorney Ryan Stephan. The jury specifically found that class members averaged 10 hours of unpaid overtime each week. Based on the total verdict, each of the 166 class members was awarded $54,000 on average – but let’s not forget the attorney’s cut! http://eon.businesswire.com/news/eon/20110923006066/en/STEPHAN-ZOURAS/Class-Action-Lawsuit/Wage-and-hour

TBW – the gift that keeps on giving. Most, if not every, mortgage company has an accounting firm. In what could be a very closely watched case, Deloitte Touche Tohmatsu, the world's largest accounting and consulting firm, was accused on Monday of failing to detect fraud during its audits of Taylor, Bean & Whitaker. Deloitte "certified TBW as a solvent, viable company with accurate financial statements every year from 2001 to 2008," one of the complaints said. "Despite Deloitte's credentials and expertise as one of the 'Big 4' accounting firms, those statements -- and the rosy picture they depicted of TBW -- were completely false," it said. http://www.reuters.com/article/2011/09/26/us-deloitte-mortgage-idUSTRE78P51E20110926

Many have wondered how the rating agencies have escaped punishment in the mortgage crisis. Well, that may be ending: the SEC is considering taking civil action against Standard & Poor's for its rating of a 2007 mortgage debt offering. We all know that the three major agencies (S&P, Moody's Investors Service and Fitch Ratings) gave high ratings to mortgage investments that turned out to be worthless. If the SEC charges S&P with violating securities laws, and it hasn’t happened yet, it would mark the first time it's brought an enforcement action against a top rating agency. S&P is owned by New York-based McGraw-Hill. Regardless of the outcome of the S&P case, the entire rating agency industry may be facing enforcement actions related to the financial crisis.

The Fed's FAQs on its MBS purchases was released yesterday, with few surprises. Agency MBS purchases will likely be concentrated in newly-issued agency MBS in the TBA market. Purchases will consist of fixed rate 30- and 15-year agency MBS only and that are guaranteed by FNMA, FHLMC and GNMA. The Fed's FAQ said it would publish on or around the 8th business day of the month, the tentative amount it expected to purchase between the middle of the current month to the middle of the following month. For the October 3 to 13 period, it expected to buy around $10 billion in agency MBS. Purchases would be made "on a frequent basis" over the month. For more information, see http://www.newyorkfed.org/markets/ambs/ambs_faq.html.

Firms controlled by Lew Ranieri and billionaire investor Wilbur Ross are partnering to buy Deutsche Bank Berkshire Mortgage, a major lender to investors in U.S. apartment buildings. Ranieri Real Estate Partners LP and private-equity funds affiliated with WL Ross & Co. are paying an undisclosed amount for the unit of Deutsche Bank AG, which makes loans to apartment-building owners and then sells them to Fannie Mae and Freddie Mac. It did more than $4 billion a year in mortgage loans at the market's peak and is the second-largest originator of Fannie Mae-backed multi-family loans. Given the increase in renters, this could be a very good play. So we can all keep track of players, in May 2010, a group led by Orix Corp. bought Red Capital Group, another Fannie Mae and Freddie Mac multifamily lender, from PNC Bank. And in June 2010, Fortress Investment Group LLC bought CW Financial Services, a broader commercial real estate firm that made loans for Fannie and Freddie. The Berkshire Mortgage unit also services some $28 billion in multifamily loans.

Investors are busy. SunTrust Mortgage is eliminating the Portfolio Affordable Housing Mortgage Program. Bank of America, starting yesterday, shifted the adjustment for Conforming 30 Year Fixed Rate High Balance loans (now 125 basis points – 1.25%) and DU Refi Plus Conforming 30 Year Fixed Rate High Balance loans (now also 1.25%).

Union Bank alerted brokers of several changes, including debt ratios, credit, occupancy, EOM, and is allowing higher DTI’s if credit score and reserve profiles are met. Bankruptcy papers will no longer be required “if the filing and discharge dates are clearly shown on the credit report and there are no open debts (collections, charge-offs, etc.) showing on the credit report that the borrower claims were included in the bankruptcy.  Regardless of age, a letter of explanation will still be required when a bankruptcy shows on the credit report.” Clarification has been made for when certain minor discrepancies on the borrower’s date of birth do not need to be addressed. And under UB’s new policy, for properties that are new construction (where the existing structure was torn down and rebuilt) or have had a major remodel, UB will now give the borrower up to 60 days to occupy the subject property after the close of the loan, subject to certain requirements.

Lenders know that a funding fee is paid to the VA to defray the cost of administering the VA home loan program. This fee changes on 10/1, and every lender is notifying clients about it. US Bank's wholesale division got the word out, and reminded broker clients that, “The funding fee for Interest Rate Reduction Refinance Loans will remain the same at .50%.” And although earlier this month one of its forms changed, USB reminded folks, “Regardless of the new funding fee status shown on the COE, lenders must still be sure to read any and all statements appearing in the “CONDITIONS” field, which appears near the middle portion of the COE.”

GMAC Bank Correspondent Funding and its wholesale channel also reminded clients of the change starting 10/1. “VA Loans approved with the prior funding fee amounts that do not close by September 30, 2011 must be resubmitted for underwriting approval with the new funding fee amounts effective October 1, 2011.”

Wells Fargo's wholesale channel alerted brokers of an update on its HUD Builder Certificate for FHA new construction. It impacts FHA transactions for properties less than one-year old (new construction), and effective with FHA Case Numbers assigned on or after yesterday, so brokers will send the Appraisal Cover Sheet for Sales Contracts, the Builder Certificate (Form HUD-92541) and the purchase contract to Web Support. (Continue to include a copy of the Builder Certificate with the loan submission package.)

Yesterday MBS prices did pretty well, relative to fixed-income Treasury prices, on lower-than-normal volume. Europe was the primary influence on the markets with encouraging talk of another plan in the works. As a result, investors were feeling less risk averse with the Dow up over 2% and Treasuries selling off: 10-year notes were worse by almost 1 point and up to a yield of 1.90%, and MBS prices were worse by about .250.

We learned that New-Home Sales Fell 2.3% in August, in Line With Expectations:  New Single family home sales fell to a 6-month low in August, but the supply of homes available dropped to a record low.  The Commerce Department reported that sales slid to a seasonally adjusted 295,000 unit annual rate.  This is the lowest since February.  Even as sales were weak in August, they were still 6.1% above the same time last year, when new-home sales were at an annual rate of 278,000.

Today for excitement we have a $35 billion 2-year note auction at 1PM EST. We’ll also have some yet another set of S&P Case-Shiller Home Price numbers, and also Consumer Confidence at 7AM PST. Our 10-yr is sitting around 1.97%, still range-bound, and MBS prices are worse by about .250.

Two Cajuns were waiting at the bus stop when a truck loaded with rolls of turf went past.

Boudreaux said, “I’m gonna do dat when I win da lottery.”

“What's dat?” asks Thibodeaux.

“Send da lawn off to be mowed!"