Sometimes
I
revert back to 5th grade. (Some would suggest I’m still in it.)
Have you heard of the new HAMP-related Principal Reduction
Alternative Program, known as PRA? Why didn’t officials use
“PRAP”? (That’s the 5th grader coming out.)
Seriously, in January, Treasury announced significantly enhanced
payments to encourage investors to consider or expand principal
reduction modifications under HAMP. “To effectuate this change,
Treasury issued Supplemental Directive 12-01 on February 16,
2012, tripling the investor incentives that can be earned for
permanent modifications under HAMP’s PRA Program, for loans with
trial period plan effective dates on or after March 1.” Few of
the existing HAMP incentives have enjoyed the market success
desired, and only time will tell whether this initiative is more
fully embraced.
In other words, PRA
provides an option for servicers to offer modifications that
include principal reduction when borrowers owe significantly
more on their mortgage than their home is worth, but does not
obligate servicers to offer such modifications, given that
principal reductions generally require the investor’s consent.
In an attempt to get more investors to agree to principal
reductions, Treasury will offer three times the incentives it
previously offered.) The Treasury will provide investors
incentive payments to reduce principal down to an MTMLTV of
105%, but will not provide incentives to go below that ratio.
Investors are paid substantially less, however, if the loan was
more than six months past due at any time during the 12-month
period prior to the NPV evaluation date. Under those
circumstances, an investor will be paid $0.18 per dollar of
principal reduction, regardless of the MTMLTV achieved. The PRA Program does not
apply to loans owned or guaranteed by the GSE’s.
On to the fun stuff, like underwriting and documentation changes
in the last week or so.
In
light of the tornadoes
that recently devastated certain parts of the Midwest,
properties listed in several zip codes will need to be
re-inspected and deemed to be in satisfactory condition, which
will need to be documented on or after March 2, 2012 (contact
investors for a full list). Proof of re-inspection will often
be required before loans on any of these properties will close.
If the property did not require an appraisal due to guidelines,
investors usually will still need a satisfactory inspection and
accompanying photo.
The FHA has
clarified that all appraisals must be AIR compliant and that all
FHA loans are required to have a copy of the termite/pest
inspection on file if any evidence exists that a termite/pest
inspection was “ordered, requested, required, and/or completed,”
even it was the borrower who elected to do so.
Fannie Mae has tweaked the DU Refi Plus program a bit: the
Benefit to Borrower requirements have been modified such that
interest rate reduction is considered an acceptable/eligible
transaction type, and Fannie has clarified that timeshares,
segmented ownership projects, and houseboat projects are not
eligible. The newest
version of DU (8.3, in case you’re wondering) will come into
effect on March 17th (hence the rollout by many
wholesalers).
Responding
to
popular demand, Wells Fargo Wholesale has expanded its LTV
limits across the board. For Wells-serviced Freddie Relief
Refinance mortgages registered or locked on or after March 12th,
the maximum LTV and CLTV on Fixed Rate Loans is unlimited, while
the maximum LTV on ARMs is now 105%. The same goes for Fannie
DU Refi Plus mortgages registered or locked on or after March
19th (subject to DU updates). Other Wells-serviced loans are
subject to new minimum credit score requirements of zero (!),
and borrowers are no longer limited to the number of loans they
can take out on primary, secondary, and investment properties.
Note that there are no
policy changes for loans not serviced by Wells.
Some
housekeeping
from Fifth Third:
condo conversions must meet the criteria outlined in Section
1.07 in the Correspondent Seller Guide. The Correspondent
Channel Early Payoff Policy, which affects any loan originated
from a correspondent and purchased by Fifth Third that pays off
within 150 days of purchase, is posted in full in Section 1.21.
The Mortgage Credit Guideline Manual will feature an appraisal
portability table in the relevant section to clarify the
transfer of an appraisal from a broker, correspondent, or other
lender. Lenders should remember that, in order for loans to be
purchased by Freddie or Fannie, DO and LP AUS findings must be
released to Fifth Third.
Effective
immediately,
Franklin American
increased the maximum time frame on a work completion escrow
from 120 to 180 days for all FHA and USDA products and expanded
property guidelines to allow both existing properties and new
construction on Conventional Conforming, FHA and VA products.
The Conforming Fixed Product Description now covers resubmitting
loan casefiles to DU after closing for all conventional
products; remember that FAMC does not allow resubmissions to LP
after closing.
Lenders One Mortgage
Cooperative has added Priceweaver to its list of preferred
providers, which means that members now have access to
Priceweaver’s flagship internet product, LenderHub. The
web-based service can be used for pricing by both secondary
marketing professionals and originators, allowing them to work
in tandem. It’s also suitable for lenders of varying sizes.
Jumbo Fixed and Jumbo ARMs at GMAC are subject to
this week’s Loan/FICO adjustments. And additional cap for
determining a new mortgage’s maximum base loan amount for the
purposes of calculating the Credit-Qualifying FHA Streamline
Refinance with Appraisal has been put in place as well. Loans
with a DTI > 40 and <45 and LTV > 75% for Jumbo ARMs
will have underwriting changes soon.
Chase’s
ChaseLoanManager has been updated to include new FHA High
Balance Market Type 107 loan amount thresholds, Non-Agency 5/1
ARM availability, and modified Product Switch policies.
Citibank,
keen to reduce the incidence of post-purchase quality defects,
continues to encourage lenders to use its recently designed
Quality Control Environment assessment to identify any weak
areas in the loan origination and delivery process. The
self-assessment involves reviewing systemic prevention controls,
which target the source of the risk (think second signature
requirements, checklist additions, documentation of staff
accountability), and detective controls, which detect omissions
or errors that have already been made. Citi promises lots of
feedback to those who complete the analysis.
As more banks set down standard definitions of what constitutes
a “large deposit” requiring verification, Flagstar has issued
its own guidelines. For Flagstar purposes, a “large deposit” is
any deposit or aggregate of all deposits that is over $1,000 per
month and exceeds 30% of a borrower’s total monthly gross
income. If the deposit or aggregate exceeds 2% of the sales
price, the FHA requires verification, and loans requiring
mortgage insurance are subject to the MI company’s own
guidelines. Flagstar has amended guidelines regarding rolling
property taxes and insurance into a new loan amount for all
conventional products.
MGIC
spread the word to clients that new lower premium rates for
borrowers with credit scores of 760 and over will come into
effect for MI applications received on or after March 12th
- unless you happen to live in New York or Washington.
United
Guaranty
announced an enhancement to its Performance Premium (its
risk-based MI pricing) for MI applications and rate quote
requests received on or after March 12, 2012 (subject to state
approval). “For many high-credit-score borrowers, borrower-paid
monthly premium rates will be even lower.” Check out details at
www.ugcorp.com/news/announcements.html.
Guild is offering a
Standalone California Homebuyer’s Downpayment Assistance Program
in conjunction with FHA, VA, Conventional and USDA loans. The
program lets first-time homebuyers to put down 3% of the sale
price or the appraised value as a down payment or closing cost
and allows for property. To qualify, borrowers must fall within
these income limits and have 640 FICO, DOs, and Freddie or USDA
automated approval. They will also have to complete certain
homebuyer education requirements.
Bay Equity is
offering enhanced Lender Paid Mortgage Insurance, including
blended rations for non-occupant co-borrowers to 90% LTV and
conforming cash-out 85% LTV. Also available is the FNMA
Multiple Property Financed program, which provides loans to
borrowers with five to ten financed properties.
Finally, for those interested in training, Ballard Spahr LLP will
offer a webinar (part two of three, in fact) on how to implement an
anti-money laundering program on Thursday, March 22nd.
Aimed specifically at residential lenders and originators, the
webinar is designed to help industry professionals prepare risk
assessments, establish the necessary policies and procedures,
and develop training programs in compliance with FinCEN’s
February 7th ruling. To register or find out more, contact
Lorna Burns at burnsl@ballardspahr.com.
Two
Irish nuns have just arrived in USA by boat and one says to the
other, "I hear that the people in this country actually eat
dogs."
"Odd," her companion replies, "but if we shall live in America,
we might as well do as the Americans do."
Nodding emphatically, the mother superior points to a hot dog
vendor and they both walk towards the cart. "Two dogs, please,"
says one.
The vendor is only too pleased to oblige and he wraps both hot
dogs in foil and hands them over the counter. Excited, the nuns
hurry over to a bench and begin to unwrap their "dogs."
The mother superior is first to open hers. She begins to blush
and then, staring at it for a moment, leans over to the other
nun and whispers cautiously: "What part did you get?"
If
you're interested, visit my twice-a-month blog at the STRATMOR
Group web site located at
