FHA to Raise Premiums? HARP 2.0 Hesitation; CFPB Status; MI & Investor Updates


What is
Barack buying Michelle this year? A little non-owner unit, perhaps, but not
thanks to Freddie Mac’s HomeSteps, which is owner-occupied only.
The real estate sales unit of Freddie Mac launched a sales promotion for its
inventory of foreclosed homes in select states. Under the HomeSteps Winter
Sales Promotion, HomeSteps will pay up to 3% of the final sales price towards
the buyer’s closing costs and a $1,000 selling agent bonus for initial offers
received between Nov. 15 and Jan. 31, 2012. Freddie sold a record number of
real estate owned properties in 2011 at 94% of market value (whatever that means)
and accounted for 4.4% of the nation’s inventory of foreclosed properties as of
Sept. 30. But accept no substitutes! The offer is valid only on HomeSteps homes
sold to owner-occupant buyers – sorry Mr. Obama. It is available on HomeSteps
sales in 28 states and the District of Columbia. Hey, before you scoff, take a
look – there are some decent incentives and sweet deals: http://www.homesteps.com/.

Twelve miles up the road, Fannie Mae is
promoting its HomePath Online Offers system
, which collects offers and
manages the submission process on properties listed on HomePath.com. On Pearl
Harbor Day “agents and brokers representing buyers are required to submit
offers exclusively on the web site. Only properties listed in the following
areas are eligible to submit online offers on the designated launch date:
California, Florida, and Wayne County, Michigan.” Fannie believes its system
offers, “A transparent offer process that keeps Selling Agents informed of the
status of their clients’ offers on HomePath properties listed on HomePath.com
and improved communication between the Selling Agent and the Listing Broker
regarding offers on HomePath properties listed on the HomePath web site.” For
more information go to http://www.homepath.com/
or give ’em a shout: 1-866-218-4446.

(By the way, Freddie is temporarily
suspending all scheduled evictions involving foreclosed occupied single-family
1- to 4- unit residences
. Freddie’s announcement noted, “1-4 unit
residences with Freddie Mac-owned mortgages beginning December 19, 2011,
through January 2, 2012. The suspension will apply only to eviction lockouts
related to Freddie Mac-owned REO properties and will not affect other pre- or
post-foreclosure processes.” The press mentions Fannie doing the same, although I could not find its announcement.)

agencies still have plenty of “foreclosure cannon fodder” although delinquencies
continued to decline in October according to information released by Lender
Processing Services.  But foreclosure inventories reached a record high
during the month, now representing 4.3% of all active mortgages – how does anyone expect house prices to move
higher with that overhang out there?
The total delinquency rate in the
country is now about 8%, down from over 9% in October 2010. Per LPS the average delinquent loan in foreclosure
has been delinquent for 631days
versus a few years ago when an average
foreclosure took 251 days from the first missed payment.  The length of
the process has increased by three months just since the beginning of this year
for various reasons (backlog, type of foreclosure in the state, lawsuits, and
so on).

When in
doubt, do some training. “The CFPB in Focus: Where Are We Now and What Lies
Ahead?” is being presented by BuckleySandler.
“In this webinar, we will review the current status of the CFPB and its
progress to date, including an overview of the scope of its powers, stated
priorities, key staff, and the issuance of the CFPB’s new Supervision and
Examination Manual. We also will discuss the CFPB’s enforcement powers: how it
intends to enforce consumer protection laws, its plans to collaborate with
other federal and state regulators, and concerns regarding how the CFPB will protect
confidential data provided by industry in examination, enforcement, and other
contexts.” It is next Thursday, 2-3:15PM EST, and you can register at https://www1.gotomeeting.com/register/335580144.

And if you have commercial loans, the FDIC will host a free telephone seminar
to discuss prudent commercial real
estate (CRE) loan workouts and related accounting issues
, including the
treatment for troubled debt restructurings (TDRs). The seminar will be held
from 1-2:30PM EST on December 15. “Employees of all FDIC-supervised
institutions are invited to participate.” For more info go to: http://www.fdic.gov/news/news/financial/2011/fil11071.html.

Wednesday the commentary mentioned some frustration that secondary execs were
having, watching investors disappear, scale back, or not expand their business
lines. I received this note: “Tell folks to keep the pressure on the smaller
lenders to develop true mandatory delivery platforms, and encourage newer participants
like Pennymac, Impac companies, American
Home, and Bank of Manhattan
to do the same.  As the banks exit the
correspondent space, non-depository lenders will fill the void and we will have
a more competitive market for Agency product. I am also seeing a trend to offer
bank overlay product (which I believe is the infancy of private label).”

Adam Quinones with Thomson Reuters
wrote, “Mortgage-backed security dealers are reporting slowdown in TBA hedging
recently but the Fannie desk has been busy. Wednesday they reported a $2.5
billion session while the Street was about $1 billion. That is a big
discrepancy! More lock desks must be going direct to the cash window. With
fewer AOT options and more folks
choosing to retain servicing
, the lack of TBA hedging more recently makes

And Eric W. wrote, “Provident Funding
has entered the correspondent space this year and offers a treat execution in
the conventional space. As Freddie’s #1 ranked servicer with over $50 billion
is servicing assets they are leading the market in price daily and offer both
best efforts flow and mandatory pricing. There is no AOT but there is a
competitive bulk price.” For more information write to ewilson@provident.com.

I spoke at a real estate finance forum in Sacramento where the HARP was Topic #1, and the frustrating consensus is that a) most
lenders have not followed Fannie and Freddie yet, b) look for a retail-based branch
rollout initially, and c) the investors/aggregators don’t know where to price
this stuff (no one is going to pay the same price for a 4% 150% LTV loan as a
4% 75% loan, right?). Once again, just
because the government says something is ok doesn’t mean the aggregators have
to go along with it

By the
way, for those interested in further details about Bank of Oklahoma’s rollout
of HARP 2.0 that was noted in the commentary early yesterday can visit: http://www.marketwatch.com/story/bok-financial-mortgage-group-accepts-harp-ii-mortgage-program-applications-2011-12-01.

MGIC rolled out a new HARP Refi-to-Mod (RTM) program “designed
to complement the changes recently announced by the FHFA, Fannie Mae and Freddie
Mac…Loans currently insured by MGIC that are refinanced under either Fannie
Mae’s Refi Plus or DU Refi Plus programs or Freddie Mac’s Relief Refinance
Mortgage program are eligible for MGIC’s HARP RTM Program. Reps and warrants
associated with the original loan file are extinguished once the HARP
refinanced loan is delivered to Fannie Mae or Freddie Mac. The refinance lender
reps and warrants that the loan is eligible for a HARP refinance and all HARP
requirements of the applicable GSE are met. The 50-basis-point modification
premium charged to New Insured/Servicers will not apply to HARP RTM’s – more
details can be found at http://www.mgic.com/origination/refi_to_mod.html.

Radian Guaranty has requested that a
dozen states waive capital ratio requirements. The company is exploring a
variety of alternatives to continue writing new business in all states where it
currently operates – waivers are being sought in 12 states. Radian has already
received approvals for waivers in Illinois, Kentucky and Wisconsin. Radian’s
risk-to-capital ratio was 21.4-to-one as of Sept. 30 and without any capital
infusion, the ratio is expected to increase as mortgage insurance losses
develop. As we know, MI company ratios have been impacted industry-wide. In the
states that don’t allow a waiver, Radian is seeking the approval of Fannie and
Freddie to operate a new entity: Radian
Mortgage Insurance

Yesterday the commentary noted a link to changes that Fifth Third Mortgage is making. It said “brokers” but attached a
link to the correspondent rate sheet page. Fifth Third correspondent doesn’t
work with brokers; wholesale does, obviously. I apologize for any confusion.

Plaza Home Mortgage spread the word
that “effective with loan applications December 1st and after, any Relief Refi
loan with an LTV of 80% or less will now have a maximum CLTV/HCLTV of 105%.
NOTE:  LP will not be updated with
this restriction until March 2012.  This guideline must be applied
Other underwriting enhancements outlined in Bulletin 2011-22 must
be evaluated and will not be available until LP has been updated. Pricing
enhancements for both DU Refi Plus and Relief Refi are being evaluated now and
we will provide further communication as soon as possible.”

Citi rolled out its monthly pricing
bumps for 24 states in December
. It is fairly broad-based, including fixed
rate ARM, conventional, FHA VA, best efforts, single loan
mandatory, and mandatory trade desk sales. “Pricing incentive is in addition to
all other applicable loan level price adjusters, including existing state
adjusters. Loans must be in all respects eligible for sale to Citi in
accordance with the provisions of your Correspondent Loan Purchase Agreement
with Citi.”

Uh-oh: HUD
Secretary Shaun Donovan told a Congressional hearing that the FHA may need to raise its premiums for some borrowers if
economic conditions worsen. The Secretary said that any negative changes in
2012 that eroded the value of the FHA’s portfolio by anything more than $7
billion would require further steps to shore up FHA’s cash reserve.  An
audit of the agency released on November 15 showed that FHA’s reserves had
fallen 45% over the last year to $2.6 billion.  FHA is mandated by Congress to maintain a minimum balance (the ratio of
economic value to insurance-in-force) in the Fund of 2% and the audit found the
current reserves are now at 0.24 percent
. For the nitty-gritty read it
at: http://portal.hud.gov/hudportal/documents/huddoc?id=SOHUDtestimony1212011.pdf.

the 10-yr T-noted closed at 2.08%, mostly buffeted by strong debt auctions in
France and Spain and the U.S Initial Jobless Claims number coming in slightly
higher than expected. But this morning’s U.S. employment data is impacting the
markets: Non-farm Payroll was +120k, with the previous two month’s revised
higher by 82k, and the headline Unemployment Rate dropped to 8.6%. This is the
lowest rate since early 2009. As you’d expect, rates are higher with the 10-yr up to 2.14% and MBS prices worse by
roughly .250. – MBS PRICES

A man and
a friend are playing golf one day at their local golf course.

One of the
guys is about to chip onto the green when he sees a long funeral procession on the
road next to the course. He stops in mid-swing, takes off his golf cap, closes his
eyes, and bows down in prayer.

His friend
says, “Wow, that is the most thoughtful and touching thing I have ever seen.
You truly are a kind man.”

The man
then replies, “Yeah, well, we were married 35 years.”

If you’re interested, visit my twice-a-month blog at the STRATMOR Group web
site located at www.stratmorgroup.com. The current blog reminds everyone
about how government intervention in the housing market is nothing new. If we
forget history, we are doomed to repeat it, and it is important to know the
last 15 years of the history of the agencies. 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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