Here’s an interesting debate question one industry vet asked: “How many non-depository mortgage bankers are still giving partial lender credits to borrowers?”  I think you will find that depository lenders do not allow this practice as it is a violation of Fair Lending and Desperate Impact.  Loan Originators are not allowed to provide anything to one borrower that is not equally available to another, yet loan originators continually increase interest rates and give lender credits as a means to compete.  I guess MLO Comp missed that one.”

The end of the year is a good time to clean things up, which includes cancelling Case Numbers. HUD reminded lenders that, “Case Number assignments eligible for cancellation where the borrower and property remain the same: Lenders may request a case number cancellation only for loans that have not yet closed.  Lenders must submit their request to the jurisdictional Homeownership Center (HOC) via the relevant electronic mailbox below.  Fax requests are no longer accepted by FHA. Denver:  Send request to email box: denhocinsure@hud.gov, Philadelphia:  Send request to email box: PHOCInsure@hud.gov, Santa Ana:  Send request to email box: snahocinsure@hud.gov, and Atlanta:  Send Request to email box: ATLInsurance&Underwriting@hud.gov. Your request must include in the subject line of the electronic mail: type of request (i.e. case number cancellation), and case number that you wish to cancel.”

Another thing that usually happens at the end of the year is a drop off in mortgage applications: I guess trying to figure out whether to make pumpkin pie or the chocolate-peppermint parfait takes precedence over locking in a rate. The MBA reported that last week’s apps dropped 2.6%. Michael Fratantoni, MBA’s vice president of research and economics, wisely noted, "Remarkably low rates are not enough, as many homeowners continue to hold back due to lack of equity in their properties, poor credit and a weak job market." Refi’s are now nearly 81% of apps!

Speaking of the MBA, they and STRATMOR Group have conducted the Peer Group Survey and Roundtable Program since 1998. This program creates a forum for participating mortgage banking companies to review their financial results and operating practices in relation to their peers: benchmarking. This program is widely regarded not only for its detailed benchmarking outputs by production channel, but also for its 1.5-day roundtable meetings. The meetings allow companies to network and share ideas and issues with peers. Peer groupings are flexible and change over time, but include: mid-size retail independents, mid-size multi-channel independents, mid-size bank-owned institutions and large lenders typically originating over $5 billion annually. For each group meeting, the MBA/STRATMOR team compiles a detailed presentation of historical trends and analyses of the most current data series. If you would like to participate in MBA's upcoming Spring 2012 peer group survey (data as of December 31, 2011) or would like additional information, please contact Marina Walsh in MBA's research and economics division, at mwalsh@mortgagebankers.org or Jim Cameron at STRATMOR Group at jim.cameron@stratmorgroup.com.

The CFPB wants more input on alternative mortgage disclosure forms: http://www.consumerfinance.gov/know-before-you-owe-closer-to-closing-mortgage-disclosure-that-is/. It is also looking for comments on its plan to collect information related to the implementation of certain mortgage servicing rules, specifically the reset of hybrid adjustable rate mortgages, periodic mortgage loan statements, and force-placed insurance disclosures. The CFPB plans to implement those requirements in part through model forms and disclosures: http://www.ofr.gov/OFRUpload/OFRData/2011-32080_PI.pdf.

Last week I wrote about recent fraud statistics, reported by Housing Wire. Fraud risk is one of area lenders may be able to reduce the exposure but never eliminate it.  If a borrower wants to misrepresent information or their intentions they can likely get away with it. The statistics from last week would lead one to believe that is fact.   Fannie Mae indicates that undisclosed debt (27%) and occupancy fraud (21%) are two of the bigger culprits on new originations. Many have turned to technology to assist in the detection and so have the investors. Take for example occupancy.  Many portfolio lenders now have the ability to compare utility bills to borrower.  If they don’t match does that mean there is occupancy fraud?  It leads one to believe, and we’ve seen signs, that the new repurchases will likely be triggered earlier in the process, perhaps in advance of default or even foreclosure loss. There are insurance solutions that can provide cost effective protection from these risks.   If you have interest in learning about the solutions contact Justin Vedder at justin_vedder@ajg.com with Arthur J. Gallagher (NYSE: AJG).

Honestly, I lose track of who is suing who. California’s Attorney General filed lawsuits against mortgage giants Fannie Mae and Freddie Mac on Tuesday, demanding that the companies that own some 60 percent of the state’s mortgages respond to questions in a state investigation. Silly me – I thought that California was already involved in a lawsuit with the agencies. Anyway, CA is investigating Freddie and Fannie’s involvement in 12,000 foreclosed properties in California where they served as landlords. The AG also wants to find out what role the companies played in selling or marketing mortgage-backed securities, is calling on Fannie and Freddie to identify all the California homes on which they foreclosed, and want the mortgage firms to reveal whether they have information on the decreased value of those homes due to drug dealing or prostitution, as well as explosives and weapons found on those vacant properties.

Remembering back to your U.S. government class, the Supreme Court decides to hear certain cases, and then actually hears the arguments months later. In mortgage news, the Supreme Court has decided to hear a fair housing case that could upend a legal theory that the Department of Justice, banking regulators and private attorneys use to show mortgage lenders have discriminated against minority borrowers. Most fair lending cases against lenders these days are based on a "disparate impact" legal theory where the government or other plaintiffs rely on data and maps to show discriminatory lending practices. Prior to the Obama administration, the Justice Department and banking regulators adhered to a “disparate treatment” standard where they had to go beyond statistics and prove intent to discriminate. “Under the disparate impact theory, they rely exclusively on statistics,” according to Andrew Sandler, a partner at the Washington law firm BuckleySandler. “There is some likelihood that the Supreme Court will significantly narrow or eliminate the use of disparate impact under the Fair Housing Act in fair lending cases.” Basically the government should find evidence of intent to discriminate before filing cases against lenders. Watch for “Magner v. Gallagher” coming to a theater near you early next year.

Here is a note from a reader on a plan: “If you can short sale a home, you should be able to refinance your home on the same premise as a short sale. This will get the lenders to adjust their valuation systems since suddenly values take a dramatic leap because lenders will use the better comps versus looking for the worst comps and remove some of the uncertainty around values. The loan program would be for primary residences only, 100% of determined value.  The DU Refi Plus to 125% or higher nonsense needs to stop and lenders need to take a stand - we are kicking the can down the road. The borrower would pay a slightly higher rate of 50 to 75 bps higher than market rates.  The loan should have a prepayment penalty but Congress will never buy that, and there is no interest tax deduction going forward for that home for a certain period of time. The lender takes out a life insurance policy on the borrower, paid for by the higher rate, for the balance owed and is paid in full upon their death. And the program could apply to all loans where the borrower owes more than it is worth, not just Fannie/Freddie loans since many people are in Alt A and Subprime loans are not being offered the same opportunity as a Fannie borrower. We need to get rid of the band aid lending policies and end this. I call this the Homeowner Stabilization Act. For thoughts write to Mark Weber at mweber89@cox.net.

"European Union officials suggested that working out the details of an agreement on fiscal integration between the many EU countries may take months." I saw this headline, and wondered, “Is this a surprise to anyone?” But yesterday the markets were moved by events here in the United States as investors moved money out of fixed-income, “risk-free” markets and into stocks. The Housing Starts and Building Permits numbers helped, and investors tended to shrug off news that Congress remained unable to reach an agreement to extend the payroll-tax (which, one could argue, could create potential risks to economic growth). Treasury 10-year notes lost nearly one point in price and rose to 1.92%, and rate-sheet MBS prices fell/worsened by about .250 – a nice “tightening.”

But once again, we find ourselves watching the bickering in Washington, but note that without Congressional action, payroll taxes will go up significantly in 2012 which would add materially to fiscal drag. That may help rates – but most originators would rather have a better economy than lower rates.

For economic news, later this morning we have Existing Home Sales for November which is projected higher by 1.6% to 5.05 million. And the Treasury concludes its latest round of auctions with $29 billion 7-year notes at 1PM EST. Rates are currently unchanged with the 10-yr at 1.91% and MBS prices unchanged from Tuesday afternoon.

Exercise?

My grandpa started walking five miles a day when he was 60. Now he's 97 years old and we have no idea where the heck he is!
I like long walks, especially when they are taken by people who annoy me.
The only reason I would take up walking is so that I could hear heavy breathing again.
I have to walk early in the morning, before my brain figures out what I'm doing.

I do have flabby thighs, but fortunately my stomach covers them.
The advantage of exercising every day is so when you die, they'll say, "Well, he looks good, doesn't he."
If you are going to try cross-country skiing, start with a small country.
I know I got a lot of exercise the last few years - just getting over the hill.