May 31, 2012: Mortgage business opportunity; HARP 3.0 musings; what these high MBS prices mean; flood insurance in the news again?
Rob Chrisman
Sometimes
I wish that I could use swear words in this commentary, but they
wouldn't pass e-mail filters. But if I could, I'd use them here.
Why is Congress still “jerking around” with flood insurance? If Congress is concerned
enough with protecting borrowers to ram Dodd Frank through and
put the CFPB in place, why can't they even come to an
agreement on flood insurance? Instead the can is kicked
down the proverbial road: Congress has given itself two more
months to come up with long-term solutions for the program. The
last full-scale reauthorization of the NFIP, a wing of the
Federal Emergency Management Agency, occurred in 2004. Since
2008 the insurance provider has stayed alive through a series of
16 short-term extensions while lawmakers debate how to restore
its fiscal soundness.
This time around, a voice vote in the House extended the life of
the National Flood Insurance Program for 60 days. Last year the
House passed a five-year extension that allowed for increased
premiums and ended some subsidies, but the Senate has been
unable to get a companion bill to the floor for a vote. The
Senate last week passed the 60-day extension after adding a
provision by Sen. Tom Coburn, R-Okla., that would gradually
eliminate premium rate subsidies for people buying second homes
and vacation homes in flood-prone areas. Coburn said that could
save the program $2.7 billion over 10 years. I am done ranting,
and there is a back story, of course, and that is that the NFIP
was largely self-financing until it was overwhelmed by claims
from hurricanes Katrina and Rita in 2005. It now owes nearly $18
billion to the Treasury. But still, should ordinary
borrowers suffer again due to Congress’ inability to come to a
conclusion?
MBA
president Dave Stevens,
ex-World Savings, ex-Freddie Mac, ex-Wells Fargo, ex-Long and
Foster, ex-HUD/FHA, announced that he will soon be ex-MBA. Dave
will be leaving the organization effective June 30, to join
SunTrust Bank as president of SunTrust Mortgage.
Anyone interested in the vacated spot can send their resume to
Michael Young at the MBA…
But here is a different type of opportunity. An experienced,
well-financed mortgage banking group is actively pursuing
opportunities to purchase controlling or full interest in an
established mortgage bank with current annual production
in the $50 million to $300 million range. In 2013, the minimum
liquid capital requirement will be $2.5 for many types of
business. “Our group will provide a minimum of $5 million
injection of equity while building a national platform. The
mortgage banker MUST have minimum of a New York state license -
multi-state license preferred – and must be Direct Endorsed FHA
lender and preferably have seller/servicer approval from Fannie
and/or Freddie. We would like Chase and/or Wells (preferably
both) to be current approved investors, of course other
investors are a positive. Our offer will be based on number of
state licenses as well criteria mentioned above. All inquiries
will be strictly confidential.” Please contact Mr. Kalin at mk@buildaforce.com
to discuss further.
Remember
HARP 3? I received
this note yesterday from New Jersey: "If it is truly the
objective of government to protect the masses and offer a fair
and balanced unwinding of the mortgage situation, HARP 3 is
necessary. At some point, whether it’s a HARP 3, 4 or 5, the
basic economics are going to dictate that the ability to
refinance into a lower interest rate should be afforded to all
Americans. I don’t know if it needs to be a 28th Amendment, but
since Congress can’t remember how to build a budget I’d rather
not consider the war over a new Amendment. The Real Estate
sector accounts almost 19% of the US Economy. Considering how
beaten down our economy has been in recent years perhaps
something radical is required. HARP 3 needs to be a unified
refinance program. Perhaps the FHA or Fannie/Freddie is not the
solution, as has been rumored, but the US Government owns
another source of funding: the USDA. Since USDA is
exempt from many state laws it’s foreclose process is simpler,
thus making it more attractive in the MBS markets – and no MIP,
simple and complete.”
Speaking
of
HARP III, here's Part
II of a little write up, near the top right corner: http://www.stratmorgroup.com/.
How
do Ops and compliance folks keep up with things? Here are some somewhat recent
investor/agency updates. As always, it is best to read the
actual bulletin, but this will give one a flavor for what is
happening out there. In no particular order…
The FHA has issued a few reminders about the source reference
and data elements for 203(k) transactions in FHA Connection for
insuring. The values in “Est. Value of Property” (line C3 on
the conditional commitment section of the 203kWS); FHAC,
Appraised Value; and FHAC, Escrow Amount should be used to
obtain the correct LTV at the time of insuring for Purchases or
Refinances. For more 203(k) loan program resources, there’s an
online reference guide at http://portal.hud.gov/hudportal/HUD?src/program_offices/housing/sfh/203k/203kmenu.
Freddie Mac announced
that, beginning November 26, the GSEs’ respective electronic
delivery systems will deliver a fatal or critical edit when the
data for ULDD Sort IDs 525 (appraisers’ state license), 627
(loan origination company), and 634 (loan originator) is not
delivered. Freddie has also issued a reminder that, under
Dodd-Frank, the GSEs are all required to publicly disclose
information on ABS loan repurchase requests, including the
identity of whoever is funding the applicable mortgage. As
such, lenders will need to supply ULDD data points Sort IDs
641.1 (“NotePayTo”) and 641.2 (the name of the entity funding
the mortgage as listed on the note).
The ULDD transition period, of which we’re currently in the
middle, will come to an end on July 23, when the requirements of
Phase I will go into effect for loan deliveries whose
applications are dated December 1, 2011 or after. Freddie
encourages making the transition as soon as possible by entering
the date on which the application was received along with all
data required for Phase I. All data entered for relevant loans
should match the appraisal data entered into the UCDP. Fannie’s
website features a number of resources to help with the
transition, including ULDD tutorials (http://freddiemac.sparklist.com/t/410575/4682831/4967/35/),
selling
and delivery training tools (http://freddiemac.sparklist.com/t/410575/4682831/1627/36/),
a
list of key program milestones (http://freddiemac.sparklist.com/t/410575/4682831/4747/37/),
and
an interactive webinar on the new selling system functionality (http://freddiemac.sparklist.com/t/410575/4682831/4876/34/).
Wells Fargo Correspondent
has updated its cooperative LTV ratios, reducing the
LTV/TLTV/CLTV maximum by 5% for conforming loans on primary
residences as of June 18th. Fannie HomePath Program loans
submitted to Wells will not be affected by the changes.
Correspondent clients are reminded that all loans submitted for
purchase on or after June 11th must list the originating
company’s main company NMLS ID on the Universal Residential Loan
Application (a.k.a. Freddie Mac Form 65 and Fannie Mae Form
1003). Submissions that only list the originating company’s
Branch NMLS ID will no longer be accepted. For companies in
Delaware, Maine, and Missouri that don’t have a Company NMLS ID,
the appropriate Agency Assigned Code should be used.
As per Uniform Delivery Dataset requirements, Wells is required
to report the year that a property purchased with an agency loan
was built, regardless of whether an appraisal was conducted for
the transaction. Conventional loans for which the appraisal or
loan application doesn’t supply the year built will be
suspended. This applies to conventional Conforming and
Non-Conforming loans whose applications are dated December 1,
2011 or after.
Loans received by Wells Fargo Wholesale are required to
have The Record of Account (Box 6C) ticked on the 4506-T
Transcript of Tax Return. This is necessary for the loan to
move to the Underwriting Department. Clients are also reminded
that the Return Transcript (Box 6A), Record of Account (Box 6C),
Form W-2, the Form 1099 series, and Box 8 of the Form 1098
series must all be checked and completed as necessary.
New pricing is in effect for FHA and VA loans that locked or
re-locked with Wells Wholesale on or after May 21st; loans
locked prior to this should be renegotiated accordingly. While
pricing was previously based on GNMA I or II identifiers, the
identifiers are no longer selectable, and there is only one
government price on display. Interest rates are now available
in 0.125% increments. Temporary Buydowns on 15-year fixed-rate
FHA and VA loans, previously not allowed, are now being
accepted, and the High Balance FHA Loan Program is being allowed
with 15-year fixed rate, 30-year fixed rate, 5/1 and 3/1 ARM
transactions. The High Balance VA Loan Program is allowed with
15-year fixed rate and 30-year fixed rate transactions with
amortization terms between 20 and 30 years, as well as 5/1 ARMs
with margins of 1.75. The relevant borrowers are required to
qualify at the Note Rate apart from exceptional circumstances.
Wells Wholesale has improved the pricing adjusters for Freddie
Mac Relief Refinance Mortgage 20-year fixed rate loans with LTVs
over 125%. The adjuster for primary residences has been updated
from 1.625 to 1.375; for second home/investment loans, the
adjuster has been changed from 3.125 to 2.875.
And
rates continue to avoid being a source of complaint from anyone.
Yesterday the U.S 10-yr T-note hit 1.63%. Prices on 30-year
Fannie 3.0%, 3.5% and 4.0% coupons hit new price highs
respectively of 102.25, 104.75, and 106.375 per Tradeweb – and
when you add on a little servicing value those are some hefty
premiums! And
originators should remember that just because agency MBS
prices rally doesn’t mean those price moves are passed on to
rate sheets – most lenders are being somewhat conservative
for reasons discussed a few weeks ago in this commentary. But
mortgage rate sheets are almost back to where they were on May
18th – it seems that no points loans at 3.75% for
30-yr and 3% for 15-yr are where the market is. As we all know,
Wednesday’s prices were driven by the ongoing crisis in Europe
which will be with us for years.
At
these lofty price levels, if you were a servicer, would you want
to own mortgages with rates above 4.25%? If you were a borrower,
would you be waiting to refinance? If you were a lender, would
you be worried about the margin calls on your hedged pipeline
while also being concerned about fallout/renegotiation? The
answers, of course, are “no”, “no”, and “yes”. In the meantime,
LO’s and well run
mortgage companies can’t believe their good fortune despite
all the hassles of actually moving a loan from application to
funding.
Continuing
with
the markets, this morning we had the ADP Employment report of
May, always of questionable predictive ability for tomorrow’s
government unemployment data, which came in at +133k (lower than
expected). And April was revised downward. We also had the
weekly Initial Claims (5/26), up 10k to 383k. Other economic
news consists of the preliminary reading on Q1 GDP (+1.9%, lower
than expected) and at 10AM EST is the Chicago PMI index for May.
In the early going the
10-yr is down to 1.60% and MBS prices are better .125-.250.
Puns (Part 3 of 4)
I got a job at a bakery because I kneaded dough.
Haunted French pancakes give me the crepes.
My
Dad was a bankrupt doctor right after med school – he had no
patience.
Velcro - what a rip off!
Cartoonist found dead in home. Details are sketchy.
Venison for dinner? Oh deer!
Earthquake in Washington -- obviously the government's fault.
Be kind to your dentist. He has fillings, too.
I used to think I was indecisive, but now I'm not so sure.
