Dec. 1, 2012: As California goes with housing and employment, so goes the nation? Lots of investor updates
Rob Chrisman
Sometimes
it is interesting to talk about financial, non-mortgage
statistics that we can all relate to. A recent study examined,
"Are we in a global environment where food prices can drive
energy prices rather than the more typical relationship where
energy prices tend to drive food prices?" The study points to
numbers from the CIA Factbook that illustrates how much of
household income is spent on food. In the U.S, we spend
6.6%. (Calories are cheap!) The U.K. is at about 10%, Germany
11%, Japan 15%, Turkey 21%, China 22%, Iran 23%, Saudi Arabia
24%, India 28%, Pakistan 42%, and Azerbaijan 45%. There are
many that believe high global food prices are a precipitating
condition for social unrest. ...More specifically, food riots.
One wonders if household spending on housing is the inverse.
As California goes, so goes the nation? California
reported a 10.1% unemployment rate last month, down
from 11.5% in October 2011 and the lowest since February 2009.
In September, California had its biggest month-to-month drop
in unemployment in the 36 years the state has collected
statistics, from 10.6 percent to 10.2 percent, though the
state has the third-highest jobless rate in the nation, and
metro areas like Yuba City and Merced still see unemployment
over 17 percent. Home sales rose 25% in Southern
California in October compared with a year earlier, and houses
are sitting on the market for a shorter time and selling at
higher prices as new home construction is rising. That
has meant homes are selling faster at higher prices — which
means fewer homeowners owe more than their house is worth.
California could set the trend for what will happen in the
country, meaning that opposition to taxing the wealthy is
opposition to the recovery.
But
conservatives
argue that the state’s latest tax increases and its thicket
of regulations would drive out businesses and people to
states like Nevada or Texas.
The independent California Legislative Analyst’s Office
projected a deficit for next year of $1.9 billion — down from
$25 billion at one point — and said California might post a $1
billion surplus in 2014. In addition to a series of deep
budget cuts in recent years, voter approval of Proposition 30
to raise taxes temporarily to avoid up to $6 billion in
education cuts has been cited as a helping hand. Other voter
initiatives were approved to begin repairing a notoriously
dysfunctional government, as it no longer takes a two-thirds
vote of the Legislature to increase spending (the requirement
remains for tax increases), and a nonpartisan election system
went into effect this month. Many now see the possible end of
a decade of acute state budget challenges as indications show
California’s leaders face a dramatically smaller budget
problem in 2013-14.
Yet California still faces major problems. The economic
recovery is hardly uniform. Central California and the
Inland Empire — the suburban sprawl east of Los Angeles —
continue to stagger under the collapse of the construction
market, and some economists wonder if they will ever join the
coastal cities on the prosperity train. Cities, most recently
San Bernardino, are facing bankruptcy, and public employee
pension costs loom as a major threat to the state budget and
those of many municipalities, including Los Angeles. But there
are many signs of incipient growth, including a surge in
rental costs in the Bay Area, which suggests an influx of
people looking for jobs. Although it will continue to be a
polarizing recovery for different parts of the state, the
foreclosure storm is beginning to subside, and fewer
foreclosed homes are flooding the market.
The U.S. Treasury Department, as part of the rescue of the
financial system in 2008, set aside funds to help
homeowners in California and 17 other states hit hardest
by the foreclosure crisis. Four programs of Keep Your Home
California were established by the California Housing Finance
Agency, after consulting with community leaders statewide. The
goal of these state-run programs with their $2 billion budget
is to keep homeowners facing foreclosure in their homes,
whenever possible. State officials established the four
programs to help those from the behind-in-payments homeowner
to those who need some money after a short sale, as well as to
assist unemployed homeowners struggling to pay their bills and
a principal-reduction program for homeowners with homes
underwater. Keep Your Home California has earmarked $875
million to Unemployment Mortgage Assistance, the largest of
the four programs. The Principal Reduction program is the
second largest at $790 million, followed by the Mortgage
Reinstatement program at $129 million. The remaining dollars
are earmarked to help homeowners relocate after a short sale;
as long as the loan service approves the plan. The federal
funds are part of a $75 billion effort by the Obama
administration to help troubled borrowers. Many complain
about the socialistic angle of this, and rightly so, but few
homeowners or LO’s mind the values going up or the low
rates.
Turning
to
vendor, NMLS, investor, and agency news, here are some
relatively recent updates to give us an indication of
trends.
A quick Veros clarification from Thursday’s: only
correspondent clients can select Axis for the appraisals
through VEROS. Wholesale brokers cannot, as it is not deemed
AIR compliant.
Bay Equity’s anti-steering disclosure policy went into
effect recently for all loans currently in process. All files
must include a fully completed and signed Bay Equity
anti-steering form signed and dated by the borrower at least
one business day before the Note date. Origination
points/fees and discount points must be disclosed in dollar
amounts, and negative numbers in these fields aren’t
permitted. For full details of the policy, consult the
Anti-Steering Cheatsheet, available at http://cl.s4.exct.net/?qs7cf17bbdb4b503d818176a6abe6c676fd82f643e7b557532c4ddfb65bdab98fc.
The Bureau of Consumer Credit Protection in Maine has
announced that it will require all lenders that issue
residential mortgage loans to convert to the NMLS.
Beginning on December 1st, all loans originated within Maine
now need to have a valid company NMLS ID showing proper Maine
registration within NMLS. For more information, see the State
Licensing Requirements of the NMLS Resource Center at http://mortgage.nationwidelicensingsystem.org/slr/Pages/DynamicLicenses.aspx?St%C3%A7ateIDME.
Hammerhouse launched a new division for non-sales recruiting
about 4 months ago. Management just had a press release done
on it and have had some great success so far in the results.
“With Hammerhouse focusing on Production and Executive Sales
Leadership, TORQ will focus on all non-sales (Operations)
including Secondary and in time Servicing....here is a link to
the press release from Mortgage Professional Magazine: http://www.teamhammerhouse.com/2012/11/26/hammerhouse-launches-mortgage-operations-talent-recruiting-division-2/.
In
preparation for its new default-related legal service
requirements, Freddie is holding a “Servicer Selection
and Management of Law Firms” webinar, which will be available
through the online Learning Center. See http://freddiemac.sparklist.com/t/424095/4682832/5231/26/
for details and registration links.
The
FHA has issued a clarification of servicer Right of
Entry on vacant FHA-insured properties stating that mortgagees
are required to comply with state and local laws and “maintain
supporting documentation of their attempts to gain access or
permission.” This includes court orders, pleadings, and
notices, all of which will be accepted by HUD for the purpose
of monitoring due diligence. Guidance has also been clarified
to state that costs associated with any legal action necessary
to access the property may be listed as a claim expense
provided that there’s documentation to back it up.
Hurricane Sandy may be out of the headlines, but there are
still a lot of damaged properties out there, and the FHA will
be granting an additional 60 days for loans on properties in
Presidentially-Declared Major Disaster Areas to close. The
extension applies to all case numbers assigned on or after
October 29th.
As per the Secure and Fair Enforcement for Mortgage
Licensing Act, the FHA will not assign a case number if
the loan officer name and NMLS ID are entered incorrectly at
the time of case number assignment beginning on January 28,
2013. Lenders are also reminded that, when registering a new
third party originator in the FHAC Sponsored Originator
Registry, they are required to include the TPO’s NMLS ID, full
corporate address, and EIN number.
The 1990 census data, which the USDA has been using in its
designation of “rural” communities, apparently expired on
September 30th. The Rural Housing Guaranteed program
will remain unchanged for the time being, however, as the 2010
data won’t be implemented until March 27, 2013.
Following the recent implementation of the ULDD,
Freddie Mac and Fannie Mae have revised the Relief Refinance,
Open Access, DU Refi Plus, and Refi Plus eligibility
requirements to provide the option of basing the expiration
date on the Application Received Date in place of the note
date of the mortgage. As such, Relief Refinance, Same
Servicer Relief Refinance, Open Access, DU Refi Plus, and Refi
Plus loans must have Application Received Dates on or before
December 31, 2013. Freddie has also announced that the
deadline for delivering Relief Refinance loans will be
September 30, 2014.
Fannie has updated the maximum attorney and trustee fees
allowed for mortgage, participation pool mortgage, and MBS
mortgage loans serviced under the special servicing option
secured by properties in certain states. The full list of
state-specific fees is accessible via the Fannie website.
Wells Fargo is updating its Prior Approval High Balance
Conforming Loan LTV matrix for primary residence; purchase and
rate/term refinance; and 5/1, 7/1, and 10/1 ARM transactions
in order to align its guidelines with the changes recently
announced by Fannie. The Manual Underwriting and Home
Opportunities LTV matrix has also been updated, and
Conventional Conforming ARM matrices have been added for
primary residence cash-out refinances; second home purchases,
no-cash-out refinances, and cash-out refinances; and
investment property purchases, no-cash-out-refinances, and
cash-out refinances. All new LTV requirements go into effect
on December 17th.
As per amended bankruptcy, foreclosure, deed-in-lieu, short
sale, and repossession guidance, Wells will no longer consider
loans with LTV/CLTV ratios over 70% eligible for purchase
after December 17th. Loans with LTV/CLTVs less than or equal
to 70% will be permitted if the adverse credit can be
attributed to extenuating circumstances or financial
mismanagement and the borrower has a minimum of 60 months’ or
84 months’ re-establishment of credit, respectively.
Wells has updated its charge-off requirements for
non-conforming loans such that individual unpaid charge-off of
$500 or less will be allowed with no requirement to pay off,
while individual unpaid charge-off exceeding this amount will
be required to be paid off.
As of November 26th, Citi began publishing a monthly
Post-Purchase Audit Findings Report that covers loan level
detail of all Tier 1, 2, and 3 defects on the Correspondent
Lending website. The Response Worksheet, designed to review
Tier 1 deficit audit findings, will also be available as part
of the report.
WHO SAYS MEN DON'T REMEMBER ANNIVERSARIES?
A woman awakes during the night to find that her husband was
not in their bed. She puts on her robe and goes downstairs to
look for him. She finds him sitting at the kitchen table with
a hot cup of coffee in front of him. He appears to be in deep
thought, just staring at the wall. She watches as he wipes a
tear from his eye and takes a sip of his coffee. "What's the
matter, dear?" she whispers as she steps into the room, "Why
are you down here at this time of night?"
The husband looks up from his coffee, "I am just remembering
when we first met 20 years ago and started dating. You were
only 16. Do you remember back then?" he asks solemnly. The
wife is almost reduced to tears herself, just thinking how
caring and sensitive her husband is.
"Yes, I do" she replies.
The husband pauses. The words were not coming easily. "Do you
remember when your dad caught us in the back seat of my car?"
"Yes, I remember," said the wife, lowering herself into a
chair beside him.
The husband continues. "Do you remember when he shoved that
shotgun in my face and said, "Either you marry my daughter, or
I will send you to jail for 20 years?"
"I remember that, too" she replies softly.
He wipes another tear from his cheek and says...."I would have
gotten out today."
If
you're interested, visit my twice-a-month blog at the STRATMOR
Group web site located at www.stratmorgroup.com.
The current blog discusses some of the considerations facing
the FHFA regarding Fannie and Freddie. If you have both the
time and inclination, make a comment on what I have written,
or on other comments so that folks can learn what's going on
out there from the other readers.
