And speaking of Congress, a year and a half has gone by since the Dodd-Frank financial reform act was signed into law, “but barely a quarter of the rules in the legislation have been finalized, though federal regulators are rolling out key components of the bill:” http://www.washingtonpost.com/business/capitalbusiness/banks-still-waiting-on-most-dodd-frank-rules/2011/12/20/gIQAeBZUHP_story.html.

Holistic financial counseling – counseling that focuses on a borrower’s entire financial situation – can prevent both foreclosures and re-defaults, according to a recent White Paper study sponsored by Florida-based special servicer, Outreach Financial Services, and authored by STRATMOR's Dr. Matt Lind. According to the white paper, servicers avoid net losses of about $3,894 on an average $210,000 loan for each borrower who receives basic counseling. However, this figure increases to between $5,754 and $7,147 when borrowers receive holistic counseling aimed at their total debt and spending patterns. Read it at http://www.stratmorgroup.com/BulletinBoard.aspx or contact Matt Lind at Matt.Lind@Stratmorgroup.com if you have questions.

And here’s another study to read over the upcoming 3-day weekend: the MBA and the Research Institute for Housing America (RIHA) released of a new exclusive report: "The Great Recession and Attitudes Toward Home Buying." “The report finds that almost 80 percent of American households believe that now is a good time to buy a home, despite high unemployment, slow economic growth and problems plaguing the economy. This positive attitude is attributable to low house prices and low mortgage interest rates. The data shows that the pattern of home-buying sentiment during the current recession looks similar to that of past recessions and is consistent with the long-run average level.” This is good to know, and it is good to know that it is free at and available for download at www.housingamerica.org.

Most lenders have resigned themselves to not seeing any HARP 2.0 business until March (although see below!), when it is incorporated into the automatic underwriting systems and the market figures out where the loans should be priced. But investor chatter continues, with some examining the exact percentage of loans being processed through DU Refi Plus, and whether rep and warrants related to “ability to repay” falls under “underwriting” or “employment/income”. We know that Fannie Mae has reported that around 30% of their HARP refinancings have used automated appraisals, which were only available through DU Refi Plus until recently. Given this statistic, it is reasonable to assume that DU Refi Plus applications consist of at least 30% of HARP refinances but the true number is actually higher since the coverage for automated appraisals for Fannie Mae is somewhat limited. Although it is difficult to gauge the exact number, analysts put the number at around 30-50% of total HARP refi applications.

The second question investors are interested in answering is whether the “ability to repay” putbacks would fall under “underwriting” or “employment/income”. Note that buyback statistics are not restricted to HARP putbacks and trends across originators may vary. In the context of this information, the Mortgage Bankers Association states the following trends in “Employment/Income” related claims: both Fannie and Freddie verify employment (VoE) on stated income products, Fannie makes use of bankruptcy documents to identify income issues, and Freddie uses outside investigators to locate past employers. So the “employment/income” related claims are related to employment verification (whether the borrower has a job) or income inconsistencies (i.e., reported and actual income are different). The “ability to repay” is ascertained after income and employment information is gathered and buyback requests related to this specific issue thus falls under “underwriting”.

United Wholesale Mortgage (http://www.uwmco.com/) has announced that it has successfully implemented the government’s enhancements to the HARP 2.0 that went into effect Dec. 1, 2011. Mat Ishbia, president of UWM said, “There are very few lenders that have implemented HARP 2.0 thus far, and we don’t expect to see immediate adoption because of the technology, staffing and liquidity implications. At UWM, we are committed to offering our customers the products they need to satisfy marketplace demands and grow their business.” The press release noted, “UWM added HARP Phase II to its broker portal, EASE (Easiest Application System Ever), where brokers can price and determine eligibility via EQ (Easy Qualifier). The primary changes to HARP are the reduction of pricing adjustments on all HARP loans which allows borrowers to save more money than they could have before, removing the 125 percent CLTV restriction, and the ability to not require appraisals on many loans. Notable is that Fannie Mae and Fannie Mae’s Desktop Underwriter (DU) system will not be updated to accept unlimited loan-to-value applications until March of 2012, and UWM will roll out that enhancement once Fannie Mae’s system is ready.”

And rates are certainly good! Yesterday the yield on the 10-yr shot down through 2.00% and closed at 1.91% on thin holiday volume and a lack of economic news. Numerous investors had price improvements, certainly helped by continued Fed MBS buying. Thomson Reuters noted, “When volume is as low as it is, fewer people (and fewer dollars) are required to move market levels such as stock indexes, bond yields, or MBS prices.”

The economic calendar for today includes Jobless Claims at 8:30am (expected higher to +375k but came in +15k to 381k), 9:45AM EST brings December Chicago Purchasing Managers index (expected 61.0 vs. 62.6 previously) and 10AM EST Pending Home Sales for November (only +1.5 vs. +10.4 prior print). Ahead of all that rates are pretty much unchanged from Wednesday’s close with the 10-yr at 1.92% and MBS prices “unched”.

A man had just settled into his seat next to the window on the plane when another man sat down in the aisle seat and put his black Labrador Retriever in the middle seat next to the man.
The first man looked very quizzically at the dog and asked why the dog was allowed on the plane.
The second man explained that he was from the Police Drugs Enforcement Agency and that the dog was a 'sniffing dog'.
“His name is Sniffer and he's the best there is. I'll show you once we get airborne, when I put him to work."
The plane took off, and once it has leveled out, the Policeman said, “Watch this.”
He told Sniffer to 'search'.
Sniffer jumped down, walked along the aisle, and finally sat very purposefully next to a woman for several seconds.
Sniffer then returned to his seat and put one paw on the policeman's arm.
The Policeman said, 'Good boy', and he turned to the man and said, “That woman is in possession of marijuana, I'm making a note of her seat number and the authorities will apprehend her when we land.”
“Gee, that's pretty good,” replied the first man.
Once again, the Policeman sent Sniffer to search the aisles.
The Lab sniffed about, sat down beside a man for a few seconds, returned to its seat, and this time he placed two paws on the agent's arm.
The Policeman said, “That man is carrying cocaine, so again, I'm making a note of his seat number for the police.”
“I like it!” said his seat mate.
The Policeman then told Sniffer to 'search' again.
Sniffer walked up and down the aisles for a little while, sat down for a moment, and then came racing back to the agent, jumped into the middle seat and proceeded to defecate all over the place.
The first man was really disgusted by this behavior and couldn't figure out how or why a well-trained dog would behave like that. So he asked the Policeman, “What's going on?”
The Policeman nervously replied, “He's just found a bomb.”