FTC Goes After Loan Mod Companies; MERS Training; FHA MIP Suggestion

News

Hopefully
failing a breathalyzer test doesn’t happen to any mortgage bankers tonight
after Happy Hour.

Folks who
are hedging a pipeline, or who have vocal borrowers they locked in earlier this
week, or who own any stocks, could probably use a decent Happy Hour later
today. Operation Twist is not the issue causing the volatility. The surprise earlier this week is that the
Fed will also start reinvesting maturing cash flows from existing mortgage
holdings back into mortgages (it was buying Treasuries), as it seeks to support
housing
. And stocks were hit, since the FOMC’s language on the outlook of
our economy was also downgraded, as the Fed said there are “significant
downside risks to the economic outlook, including strains in global financial
markets.” An MBS trader wrote, “Originators are moving rate sheets
lower into this move but as locks start pouring in, primary secondary spreads
are bound to widen on capacity constraints.”

In my talks around the country, it seems that mortgage bankers care less about lower rates at this point, and more
about the credit pendulum swinging back to “normal” or “makes
sense.”
As one mortgage research person stated, “So the next step
is ‘Refi.gov.’  It’s highly likely that this fed action is the first of a
few steps – the most likely outcome is a 125-150% LTV program.” As I
mentioned to the New England Mortgage Banker’s group yesterday in Rhode Island,
it makes all the sense in the world to take borrowers who have a history of
making their payments and (wanting to make their payments), and let them
refinance regardless of LTV. And if the Fed wants refinancing to put money in
consumers’ hands (at the expense of MBS holders, of course), then why not take
this step?

(Of course one of the issues with this is that about 19% of borrowers who owned
a home in 2007 no longer qualify for a mortgage based on payment history alone,
according to 9/20 testimony from Laurie S. Goodman, a Senior Managing Director at
Amherst Securities Group.

And while
they’re at it how about this, which I received from a politically active loan
broker: “Let’s call for the FHA to allow the use of the current MIP in
place on a mortgage on all Streamline refinances. I just calculated out a
Streamline on a $560k borrower moving his rate from 4.625 to 3.75% when you net
affect his MIP from the old to the new his payment only drops about $90 per
month. So in retrospect, the increased MIP
is actually harming the FHA system by preventing borrowers from refinancing to
a) lower their monthly expenses and b) to revitalize the country.”

Shame on
me, given the number of times that I have taken my 88-yr old father to Costco
for a hot dog lunch, that I did not remember that Costco has offered mortgages for years both online and with
brochures at their retail locations. “Costco does offer mortgages! And
with some of Lender One’s investor partners (Bank of Internet), vendor partner
(NYLX), and member companies (First Choice Bank, Weststar Mortgage, and
Sterling Savings Bank) helping out.”
Lastly, Costco offers mortgages – well sorta. They sell the leads to a small
group of lenders (including us). We provide rates and fees that are drastically
lower than what we normally charge, and Costco members get a screaming
deal.”

Was it Fannie Mae’s fault that it didn’t catch law firms automatically
signing documents without looking at them? It appears so, given this new report
from the FHFA
.

Last Thursday
the commentary mentioned mortgage-banking movies, and this reader wrote in. “I
saw the movie Margin Call at The Sundance Film Festival last year.  It’s
scheduled to be released October 21st nationwide is a must see for anyone
in the industry. Margin Call is a thriller that revolves around the key people
at an investment bank over a 24-hour period during the early stages of the
financial crisis.  Demi Moore Kevin Spacey are the key players in an
interesting plot where a junior analyst realizes that the i-bank holds billions
in worthless subprime notes. It’s well done not a hokey Wall Street II
version of the crisis. See it at IMDB.

Did you
know that MERS only has a 60% market share? (Why would a company – retail –
putting a loan into their portfolio pay the $12-or-so registration costs?) That
bit of public market share trivia aside, MERS
also offers training courses
, the next being October 18 in Atlanta.
Instructors will discuss new compliance requirements, reconciliation and
quality assurance topics, the Corporate Resolution Management System, and so
on.  Online registration and more information are available at www.mersinc.org/events. Seating is
limited, and its 75 smackers. PLEASE NOTE: No onsite registration is available.
“A must-attend event for secondary managers, post-closing, shipping and
servicing managers, and compliance officers, this workshop is an excellent
opportunity for anyone who wants to harness the power of MERS and the MERS®
System for their organization.”

The push to extend the temporary loan
limits is pretty much over, raising questions about the housing industry’s
clout
. The new limits
differ by location, but will drop to $625,500 in expensive markets such as San
Francisco and New York from the current $729,750. Lobbyists for real estate
agents and mortgage bankers tried to convince lawmakers to extend the current
limits with no success, especially among Republicans incensed about government
bailouts. A year ago, when Congress was controlled by Democrats, lawmakers
extended the loan limits with little discussion. But this year the Obama
administration let it be known that it supported letting the current limits
fall and did not change its stance as some Democrats had hoped. Now, real
estate industry lobbyists are looking toward a spending bill that may be hashed
out by year-end to enact a one-year extension of the current limits.

The FTC is
going after false mortgage modification websites. It is good to see.

With the
drop in rate, once again investors are publicizing their renegotiation
policies. Wells’ wholesale, for
example, reminds brokers, “When renegotiating a rate, the Broker’s First website
only displays lock periods long enough to cover the current expiration. If a
45-day lock price is better than a shorter term lock and you want to
renegotiate to the 45-day term, you should use the Email Renegotiation Form…In
improving rate environments, it may be possible to exercise a one-time option
to renegotiate the terms of the rate lock in order to improve the rate offered
to the borrower. In certain situations, it may be possible to relock a loan on
the current market price minus a .500% fee at a lower rate. Renegotiations must
provide an improvement to the borrower in rate or reduce discount charged by
Wells Fargo. All benefits must go to the borrower. The new renegotiated lock
expiration date will be the lesser of the new lock period chosen or the current
expiration date. Loans must close within the current expiration date or extend
at the borrower’s cost. The pricing and lock period may be subject to
additional restrictions and current guidelines.” For details restrictions
it is best to check Wells’ bulletin.

Across the
proverbial investor street at Bank of America, the California State Teachers Retirement System (CalSTRS) Home Loan Program
sent out an update
. “As announced on August 18, 2011, the CalSTRS 80/17
program will be discontinued. The last day to lock any 80/17 loans will be
September 30, 2011. Due to the announcement on August 31, 2011, that Bank of
America Home Loans intends to sell its Correspondent Lending business, the
anticipated CalSTRS Home Connection Program will not be released. The CalSTRS
Conventional Standard Program will be discontinued as well; the last day to
lock any Conventional Standard loan will also be September 30…CalSTRS will be
working to re-launch the Home Loan Program in the future. Interested parties
can contact the CalSTRS Home Loan Program Manager at hlp@calstrs.com .”

There is also a rumor that BofA is
suspending FHA/VA streamline refinancings, but I have seen nothing in writing.

Yesterday I mentioned that, “GMAC’s correspondent clients were shown
changes in pricing adjustments for 5/1 ARM’s of various shapes, sizes, amounts,
and geographic locations.” I failed to mention that GMAC wholesale also had similar changes – my apologies.

In terms
of economic news, yesterday we learned that Initial jobless claims dropped by 9k
to 423k for the week ended Sept. 17, as expected, although the four-week
moving average of new claims, a more reliable indicator of the labor market’s
recent performance, rose by 500 to 421,000. We also saw the FHFA House Price
Index Up 0.8 Percent in July, and the Conference Board Leading Economic Index (LEI)
+.3%. It was a “risk off” day, with major stock exchanges around the
world falling between 4 percent and 5 percent as global economic slowing and
recession fears escalated.

As mentioned
above, I think that many in our industry could do with “less lower rates and
more qualified borrowers and properties.” Regardless, the US 10-year note jumped
1.375 in price down to a yield of 1.72%. MBS prices soared 50 and 47 ticks,
respectively, on 30-year 3.0s and 3.5’s, but passing that through onto rate
sheets will take some time. Today there is no scheduled news to push us around,
just further trading based on Europe’s
problems and our economy being in the doldrums
. Stocks are pointing down,
gold is down over $50 an ounce (!), the 10-yr
yield is at 1.75%
, and MBS prices are off their highs.

This clip has been kicking around for quite some time, but is just as relevant
now: a semi-humorous dissection of the European debt crisis: http://biggeekdad.com/2010/09/eu-economy/.

If you’re interested, visit my
twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog takes a look at the recent news concerning
REIT’s, and the possible tax implications. 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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