For this upcoming weekend's cocktail party, tape 1 hour of CNBC on your DVR, play it back during the party, and take a shot every time someone says, "fiscal cliff." Guaranteed fun times – and a hangover!

What is not “fun times,” but with the potential hangover, is the reality of the situation, and the consequences, intended or otherwise. It was December of 2008 when the Fed cut short term interest rates to zero. Four years ago! But this rate environment raises many issues. A.T. writes, “I may be missing something since I am a simple-minded Secondary guy, but… would the bump and extension in MI for FHA push the APR on these loans up to a level to consider them ‘High Cost Loans’ (APR 1.5% higher than the Average Prime Rate)?  If that is truly the case, wouldn't that be up there as one of the stupidest unintended consequences of government in action? The prime rate is 3.25%, so 1.5% above that is 4.75%, and few are doing 4.75% mortgages. A perpetual MI premium would calculate into the APR much more than the current method.  A current MI premium of 125bps in perpetuity should bump the APR calculation more than the current calculation which I believe shows it falling off after getting down to 78% LTV.  If they bump the MI more and it never drops off, isn't there an issue there? A file I randomly pulled from the summer with a 3.875% rate actually had a 4.650% APR bumped up due to the MI.” Great observation!

It seems that Congress is once again tempted to come back to the “mortgage well” since the House passed HR 1629, the STEM Jobs Act of 2012. The bill amends the Immigration and Nationality Act to make up to 55,000 visas available to qualified immigrants with certain advanced degrees who agree to work for at least five years for the petitioning employer or in the United States in a STEM field.   STEM is a designation indicating advanced training in science, technology, engineering or math. (Not mortgage banking or real estate.) When it was sent to the House Rules Committee the bill was altered with what is generally known as a "payfor" which would require Fannie Mae and Freddie Mac to increase their guarantee fees to cover the cost of implementing the STEM Jobs Act. The MBA’s Dave urged Congress to reconsider their approach of using guarantee fees for this purpose.  He said in part, "Fannie and Freddie's guarantee fees are supposed to be used to help offset the risk inherent in providing mortgages, and any increases to those fees should be used for that purpose.  Dipping back into the housing piggybank to pay for unrelated policy items on the backs of America's homebuyers sends the wrong message at a time when the housing market is starting to show signs of recovery."

Speaking of the MBA, it and the 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. 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-sized independents, large independents, mid-size bank-affiliated lenders and large bank-affiliated lenders. 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 the MBA/STRATMOR upcoming Spring 2013 peer group survey (data as of December 31) 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.

Moving on to the CFPB, Paul G. observes, regarding the budget and the CFPB, “A recent article states that the CFPB can draw on up to 10% of the Federal Budget. That claim is just plain wrong. The CFPB's request for FY 2013 was $448 million, not $360 billion, which is what CFPB's budget would have to be in order for it to represent 10% of the $3.6 Trillion federal budget. $360 billion would represent half of all discretionary spending in the budget. I realize that the CFPB is a convenient boogeyman for many people in our industry, but in order to have any credibility, those writing about it, especially in industry publications, need to describe the CFPB as accurately as possible."

And Julian Hebron's The Basis Point points out, "Most discussion about the fiscal cliff fails to address the most serious structural fiscal problems. These problems are so called ‘entitlements.’ Calling these entitlements does not mean that anyone is legally entitled to these. All that it does is relieve Congress from budgeting for these. This has been done for the convenience of Congress and is entirely against the best interests of the nation. The Treasury data analyzes the money presently in these accounts, future anticipated revenues and future anticipated expenses. It then present values the future shortfalls. The conclusion is that the present value of future shortfall was in 2010, $77.9 trillion. What does this mean? It means that if we had $77.9 trillion in these funds, instead of essentially zero, we would be fine." (For the full story, go to http://thebasispoint.com/ and page down once or twice to the entitlement story by Dick Lepre.

Huh? Now the home loan industry might be competing with Wal-Mart or PayPal? What makes them want to enter such a new, compliance & regulatory laden industry? Perhaps it is the returns being earned by current lenders, and potential borrowers are interested: http://www.reuters.com/article/2012/12/03/mortgages-walmart-idUSL1E8MRC5D20121203.

So eventually recent lender and investor updates may include news from Costco, Wal-Mart, or PayPal, but until then we’ll take a look at some relatively recent training, investor, and lender updates.

There is a free webinar on Thursday, Dec. 6, at 2PM EST: “Top LOs: How to Recruit, Train, Support & Keep Them. Learn what to look for in hiring great salespeople, the best recruitment methods to use, plus tips and tricks to help you grow your staff successfully! The webinar is hosted by Guaranteed Home Mortgage Company headquartered in New York and licensed in 28 states. The link for sign-ups is: http://hub.am/U6W2is.

The Mortgage Bankers Association of New Jersey will be presenting the Annual Joint Mortgage Lending Conference on December 11th in Monroe Township, NJ.  The program will focus on the future of CFPB regulation and will include a speech by the Acting Deputy Associate Director of the CFPB.  Register at http://www.mbanj.com/.

Fifth Third is now requiring all closed loan files that were received on or after November 19th to include a standardized Tax Information form, which should be completed and submitted with the closed loan package in lieu of any tax information currently being used.  The new form can be accessed online.

As a reminder, Fifth Third will suspend all loans that are missing the documentation necessary to verify the interest rate data as required by the Home Ownership and Equity Protection Act for higher-priced loans, including the HOEPA/HMDA Required Information Form and a screen print of a populated FFIEC rate spread calculator.

Fifth Third has announced that its new Age of Note and First Payment policies will take effect for all loans that are currently in the pipeline on or after December 3rd.  The Age of Note policy states that the loan must be purchased within 60 days of the note date and that for escrow closing states, the closing documents must be signed within 15 calendar days of the note date.  Under the First Payment policy, loan payments must be current as of the date of purchase.  If the loan is purchased after the first payment due date, the correspondent seller must have collected payment from the borrower or made disbursements from the escrow account, the latter of which will require the seller to provide a payment history of all pre-purchase transactions.  Sellers are also reminded that they are required to have the ability to service loan payments.

Flagstar has updated its policy on long-term disability income, which must be verified by a copy of the disability policy or benefits statement from the institution paying the benefits or, in the case of Social Security income, a copy of the SSA’s award letter, signed federal income tax returns, copies of the borrower’s most recent bank statements, or a Social Security Benefit Statement.  Self-employed borrowers are also subject to updated guidance requiring two years of their most recent tax returns.

Effective for loan applications dated November 30th and after, Flagstar will no longer permit streamline reviews on primary residences in condo projects in cases where the LTV/CLTV/HCLTV exceeds 80%.

Due to the high volume of appraisal orders Mountain West Financial has been receiving of late, its AMC Mortgage Works will be implementing a fee increase for FHA, conventional conforming, and conventional non-conforming loans.  Applicable fees will be increased by $50 as of December 1st.  Property types that fall outside the typical appraisal coverage area (Unusual, Unique, Rural, Acreage, Waterfront, and the like) will require a direct quote from Mortgage Works and will be subject to additional fees on top of the $50 increase.

MWF has announced that conventional loans with LTVs over 80% may now be fully funded by gift funds provided that they meet specific DTI, credit score, mortgage insurance, and loan amount criteria in addition to the standard gift requirements.  If all of the additional guidelines aren’t met, gift funds will be considered after the borrower has fulfilled the 3% contribution minimum.

Turning to the markets, on Friday Treasuries were roughly unchanged on the day while news flow regarding the fiscal cliff remained light. That certainly didn't change much over the weekend, with some light chatter out of Asia and Europe but it seems the world can focus its attention on the inability for politicians to compromise until faced with...who knows? But there is a slate of economic news this week although most of it is "2nd tier." Today we have some forgettable ISM index, and Construction Spending. Zip tomorrow, and then on Wednesday the ADP employment data and Factory Orders, along with some productivity and unit labor costs that only an economist would love. Thursday is Jobless Claims, but then we have Friday's Unemployment Report from the U.S. Department of Labor. The unemployment rate equals the number of employed persons divided by the total number of persons in the labor force which is measured from a survey of 60,000 households. Wall Street watches this report closely and reactions tend to be dramatic, although with the Fed buying $40-80 billion a month of MBS, can home loan rates really do much?  (Preliminary estimates show an increase in NFP of about 85k.)

On Friday we closed the 10-yr at 1.61%, and MBS prices hardly different from Thursday’s levels. This morning we find the 10-yr at 1.64% and agency MBS prices worse by about .125.

I recently picked a new primary care doctor. After two visits and exhaustive lab tests, he said I was doing “fairly well' for my age. (I am turning sixty in two weeks. (The joke teller, not me!))
A little concerned about that comment, I couldn't resist asking him, “Do you think I'll live to be 80?”
He asked, “Do you smoke tobacco, or drink beer, wine or hard liquor?”
'Oh no,” I replied. “I'm not doing drugs, either!”
Then he asked, “Do you eat rib-eye steaks and barbecued ribs?”
I said, “Not much... My former doctor said that all red meat is very unhealthy!”
“Do you spend a lot of time in the sun, like playing golf, boating, sailing, hiking, or bicycling?”
“No, I don't,” I said.
He asked, “Do you gamble, drive fast cars, or have lots of sex?”
“No,” I said...
He looked at me and said, “Then, why do you even give a ‘darn’?”


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.

Rob