A Few Good Mortgage Studies; One Wholesaler Rolls Out HARP 2.0; Investors’ Thoughts on 2.0’s Impact


Who says
that folks in the mortgage business can’t rhyme?

If you’re away from your home, and you come back and find that a pipe has
burst, and the place is flooding, do you a) fix the leak, or b) raise the roof?
I realize that the situation is more complex than that, but the White House
plans to ask Congress for an increase in
the government’s debt ceiling
to allow the United States to pay its bills
on time. Didn’t we just go through this? The approval is expected to go through
without a challenge, given that Congress is in recess until later in January
and the request is in line with an agreement to keep the U.S. government funded
into 2013. The debt is projected to fall within $100 billion of the current cap
by December 30, when the United States has $82 billion in interest on its debt
and payments such as Social Security coming due. President Barack Obama is
expected to ask for authority to increase the borrowing limit by $1.2 trillion,
part of the spending authority that was negotiated between Congress and the
White House this summer. Under the agreement struck in August during the
showdown over the government’s debt limit, the cap is automatically raised
unless Congress votes to block the debt-ceiling extension.

I mentioned this before, but wanted to mention it again: it seems that MI will stop being deductible in 2012
unless Congress acts – and they’re on recess into January. I received this note
from a reader on the west coast: “From my understanding, the PMI deduction
will be completely eliminated and will not be available to any taxpayer. 
This is definitely something I have an issue with, as it next to impossible for
a first-time buyer to get a home anywhere without paying PMI, but
unfortunately, I don’t make the rules. Since there doesn’t appear to be any
last minute tax battles in Congress like there was last year, I don’t foresee
this changing at least for the 2012 tax year.”

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

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 here 
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.

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”.
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

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

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.”

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
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.”

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 the time
frames for borrowers returning to A-paper status after a short sale or
foreclosure. 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.

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