Freddie Mac & PennyMac Earnings; Tax Credit Extension; HPML Test; S.A.F.E. Forms
After hearing about Fannie D4L's program (Deed for Lease), my cousin made sure that Fannie owned his loan, and then called them because he was having trouble with his water heater's pilot light. As you can imagine, the call didn't go very far up Fannie's organizational chart.
Many are viewing the program somewhat skeptically, saying that Fannie and banks can't manage the properties that they own now. The program is meant to allow some homeowners facing foreclosure to hand the deed back to their lender but remain in the home as a renter - the servicer has to decide that the borrower qualifies for a "deed in lieu of foreclosure." The rent can't exceed 31% of their monthly gross income, the borrower cannot have 12 or more past-due payments on their mortgage and they must have made at least three payments since the loan was first taken out. Primary residence only - and no non-Fannie loans please! The borrower's credit score is indeed impacted, but not as badly as a foreclosure.
Freddie Mac reported a third-quarter net loss of $5.01 billion versus a loss of $25.3 billion in the same quarter a year earlier. After payment of $1.3 billion dividend on its senior preferred stock to the Treasury Department, Freddie Mac's net loss came in at $6.3 billion. Freddie has had over $63 billion in net losses over the seven quarters ended in March, and has used over $50 billion in government/taxpayer capital in the last year (which pay us a 10% dividend).
PennyMac Mortgage Investment Trust, run by several ex-Countrywide executives, posted a net loss of $730,000 for its first two months of business (ending 9/30). The company had raised $335 million in an IPO, but apparently has found out that the bidding pool for distressed assets has become pretty competitive and limited PennyMac's purchases to about $73 million of so- called non-agency mortgage bonds. The price of the stock hit a new low, and is down about 11% from PennyMac's $20 IPO price.
How about that tax credit extension!? According to the NAR, the tax credit goes live on November 7, 2009. People buying a home for the first time in three years would receive an $8,000 tax credit if they sign a contract by April 30 and close by June 30. Homeowners who are buying a new primary residence would be eligible for a $6,500 tax credit beginning November 7 if they owned their home for five consecutive years in the previous eight. The income caps are $125k for individuals and $225 for couples. Anyone who collects the tax credit but sells the home within three years of buying it must return the refund. READ MORE
The California Mortgage Bankers Association reports that in California the State Regulatory Registry has released the new updated disclosure forms to be used by companies and individuals when applying for S.A.F.E. Act licensing. These forms can be found HERE. If you'd like some pre-license education, contact the CMBA! I spoke to one seasoned retail agent who told me that he was surprised how hard the test was, and that if someone expects just to show up and take it, and do well, that they are mistaken!
What are lenders using for HPML (Higher Priced Mortgage Loan) tests that must be performed based on the date the rate lock is agreed upon between borrower and lender? By now the list is fairly standardized, so I will steal Franklin American's, who views any one of the following documentation options as acceptable: executed and dated rate lock agreement between borrower(s) and lender, completed FFIEC calculator screen print reflecting the rate lock date, screen print from lender's loan origination system which clearly details rate lock date, screen print from lender's loan origination system which clearly reflects loan officer or processor notes detailing the date on which the borrower(s) accepted lock terms, any other hard copy and validated information that correctly reflects the rate lock date. And don't forget to keep it in the loan file!
If loans are paying off early, which investor wants to pay a premium for them? The speed at which pools of mortgages have been paying off early was noticed by traders. Fixed-rate prepayments were up 17% in October, mostly attributable to improved rates and thus refinancing - speeds for 2008 and 2009 loans picked up the most! Freddie Mac prepayment speeds were up 14%, although they are still slower than Fannie Mae prepayments due to differences in buyout policies. If rates stay steady, or creep up, investors expect prepayments to level off, although the Treasury department extended the timeframe for borrowers to submit all the necessary documents needed to make the trial modification permanent and had also simplified the documentation process. Therefore some of the borrowers who could not successfully complete the trial modification in the required 3-month period might be able to complete the modification process in November.
How about the markets? Well, both bonds and stocks were up (rallied) Friday despite the unemployment data. Mortgages have been doing especially well, all things considered and in spite of the prepayment information mentioned above, but with volumes down a little, and Fed demand still brisk, the laws of supply and demand take over. There is virtually no scheduled news before Thursday - and don't forget that Wednesday is a holiday (and, I believe, not even counted as a rescission day for docs). On Thursday we have Jobless Claims, and on Friday we have some Trade Balance figures along with some import and export price measures, and the preliminary University of Michigan Consumer Sentiment survey. But don't forget our auctions this week! Get your checkbooks ready, as a record $81 billion refunding package will be up for bid this week. Sales include $40 billion in 3-year notes today, $25 billion 10-year notes tomorrow, and a $16 billion 30-year bond sale Thursday. READ MORE ON THE WEEK AHEAD Currently there is not much change in rates from Friday, with the 10-yr at 3.499% and mortgages about unchanged.
A client bought a new home and the broker wanted to send flowers for the occasion.
The flowers arrived at the home and the owner read the card; it said "Rest in Peace".
The owner was angry and called the florist to complain.
After he had told the florist of the obvious mistake and how angry he was, the florist said, "Sir, I'm really sorry for the mistake, but rather than getting angry you should imagine this: somewhere there is a funeral taking place today, and they have flowers with a note saying, "Congratulations on your new home".