Bank Failures; Guideline Updates: GMAC, PMI, CitiMortgage, Caliper; Fraud in NorCal

It was reported that for the ninth year in a row, the most popular car color was silver. In fact, GM says that this year, all three of the cars they sold were silver.  But I saw a clever sign at a car dealership: "The best way to get back on your feet? Miss a car payment."

We had some good news last Monday when it was announced by the Federal Reserve that 9 of 10 large banks ordered to raise capital in May "had met or exceeded their goals, the exception being GMAC Financial Services, an auto lender still negotiating for a fresh infusion of taxpayer funds." The Fed said that together, the 10 institutions determined by regulator stress tests to need bigger cushions against losses had boosted their Tier 1 common equity by $77 billion. Even GMAC is expected to meet its remaining buffer need by accessing the TARP Automotive Industry Financing Program. (General Motors lost $1.15 billion in the third quarter. You and I own 61% of it.)

At the other end of the spectrum, regulators closed two banks and one thrift Friday, bringing the total number of U.S. bank and thrift failures this year to 123. Gone are Century Bank and Orion Bank of Florida, and Pacific Coast National Bank of California. IBERIABANK, who is out of Louisiana, and who apparently likes capital letters, took over the branches.

And there is nothing to get one's attention like fraud. In Northern California seven people were indicted on 53 counts of wire fraud and money laundering on more than 100 properties. READ MORE.

Now I know why compliance folks make the big bucks. Who can keep track of the following stuff?

GMAC Bank correspondents saw them revise some state-specific guidelines on Friday for valuations of VA Interest Rate Reduction Refinance Loans (IRRRL). For Kansas, at a minimum, the tax assessor's statement of value is required in order to meet Kansas ' Law. If the loan amount (including funding fee) exceeds tax assessors' statement of value, provide written notice to consumer regarding High LTV mortgages and the availability of credit counseling. For West Virginia, a full appraisal report will contain a standard interior/exterior conventional appraisal report completed by a licensed appraiser, max LTV is 100%, including funding fee, Notice of Reasonable Value is not required to be issued, the underwriter is required to review and evaluate appraisal report, and if health and/or safety issues are noted on appraisal report the borrower must provide a written statement, prior to funding, to address how deficiencies will be corrected. And "Reduced Mortgage Insurance", "Lowest Cost Mortgage Insurance", and "Custom Mortgage Insurance" are not permitted for loans submitted to LP.

As Freddie did, Fannie Mae published their loan limits for 2010 for all conventional mortgage loans, mirroring FHFA's limits for "normal" loans and high-cost area loans. The general loan limits for 2010 remain unchanged from 2009. For high-cost areas, there are no differences between the 2010 and 2009 high cost area loan limits published by FHFA unless requests for individual area median home price increases are evaluated under appeal. Any lender with questions should consult Fannie's reference material on their eFannieMae.com website. And for lenders still doing second mortgages, the loan limit for 2010 is $208,500 (or $312,750 in Alaska, Guam, Hawaii, and the Virgin Islands). Furthermore, the sum of the original loan amounts of the first and second mortgage loans may not exceed the applicable loan limit for first mortgage loans based on the location and the number of units of the subject property.

PMI told their clients that they are actually expanding their eligibility and underwriting guidelines, as opposed to what it seems many others in the business are doing. For PMI, starting yesterday, condominiums "may now be insured in non-distressed markets to a maximum 95% LTV (attached housing in Florida is not eligible). Cash-Out Refinances are now eligible in non-distressed markets to a maximum 85% LTV with a 720 credit score. Second Homes are now eligible in non-distressed markets to a maximum 90% LTV with a 720 credit score. Construction-Permanent Loans are eligible in non-distressed markets to a maximum 95% LTV to $417,000 with a 680 credit score, and 90% LTV to $625,500 with a 700 credit score (no coverage during construction phase). And with PMI, High-Balance Loans can now be insured in non-distressed markets with a 700 credit score, and in distressed markets to a maximum 90% LTV with a 740 credit score. PMI also opened up high-balance loans for properties in AZ, CA, FL, HI, MD, MI, NV, NJ and RI to a maximum 85% LTV with a 740 credit score.

CitiMortgage rolled out some FHA program changes, starting this upcoming weekend. Regardless of if the loan is FHA, DU, or LP, a "minimum FICO score of 640 is required on all FHA loans, including FHA Streamline Refinance, for transactions with a base loan amount ≤ $417,000, prior to the inclusion of UFMIP. This credit score requirement applies regardless of AUS findings or FHA requirements." Also, "The unpaid charge-off or collection account ("Item") does not have to be paid in full at or before loan closing if an individual Item is <$250, or total of all items total <$1000. For example, if the total is equal to or greater than $1,000, all Items must be paid off, regardless of the individual Item balances. If the total is <$1,000, only the individual items with balances of $250 or more must be paid off. OR the Item has not reached a judgment or lien status and the borrower has documented evidence of the dispute."

And if you're selling a loan to Citi, don't wait on doing those repairs! All repairs must be completed prior to purchase. If the repairs required an escrow holdback the repairs must be completed and the escrow holdback released prior to the loan purchase by CitiMortgage.

Also for Citi, starting tomorrow, for loans that receive case numbers on FHA Streamline Refinance Transactions, a minimum tri-merged credit score of 640 is required. At the time of loan application, the borrower must have made at least 6 payments on the FHA-insured mortgage being refinanced and have a mortgage history of 0x30 in the previous 12 months and all mortgage payments were made within the month due for the 3 consecutive months prior to the date of the loan application. Cit's changes follow HUD's criteria that other lenders have announced regarding net tangible benefit for the borrower, etc. on FHA and VA loans, along with cash out LTV restrictions. And starting this weekend conventional cash-out refinances are being restricted as follows: "The maximum LTV/CLTV/HCLTV for a cash-out refinance transaction is 80%/80%/80%, except for loans approved using LP where the maximum LTV with subordinate financing is 75%. IO products are no longer permitted with a cash-out refinance.

Caliper Funding, the old First Magnus, made some revisions to their guidelines commencing tomorrow. For example, for properties that were recently listed, properties listed for sale within the previous 6 months will be eligible for refinance transactions, the subject property must not be currently listed for sale and must have been taken off the market for at least one day prior to the application date, the borrowers must confirm their intent to occupy the subject property for principal residence transactions, and for cash out transactions, properties listed for sale in the 6 months preceding the application date for new financing are limited to 70% LTV/CLTV/HCLTV.

Caliper also made some changes to their Secondary Financing guidelines. "If the subordinate financing does not require a monthly payment, a qualifying payment must be calculated by amortizing the balance at the interest rate in effect at the time of underwriting for a 15 year term. If the subordinate financing requires interest-only payments, such as a HELOC, the qualifying monthly payment must be calculated using 1% of the total line amount."

This week, on the economic schedule, we've already had Retail Sales for October, and later this morning we have Business Inventories. In the "old days", Retail Sales accounted for about 70% of economic activity, but many economists feel that we are witnessing a change in buying behavior, so this could change in coming years. Sales at U.S. retailers rose more than expected (up 1.4%) but last month's figures were revised downward from -1.5% to -2.3%. After this news the 10-yr is up almost 3/8 a point and at 3.39%, and mortgage prices are better by .125-.250.

The most significant economic data will be the monthly inflation reports: PPI (Tuesday) and CPI (Wednesday). Industrial Production, another important indicator of economic activity, will be released tomorrow; Housing Starts and Building Permits are scheduled for Wednesday. Also notable, the Treasury will announce the size of upcoming Treasury auctions on Thursday after Leading Economic Indicators, Jobless Claims and the Philly Fed. READ MORE

A group of country friends from the Cottonwood Baptist Church wanted to get together on a regular basis to socialize, and play games. The lady of the house was to prepare the meal.

When it came time for Al and Janet to be the hosts, Janet wanted to outdo all the others.  Janet decided to have mushroom-smothered steak, but, mushrooms are expensive.  She then told her husband, "No mushrooms, they are too high."

He said, "Why don't you go down in the pasture and pick some of those mushrooms?  There are plenty in the creek bed."

She said, "No, some wild mushrooms are poison."

He said, "Well, I see varmints eating them and they're OK."

So, Janet decided to give it a try. She picked a bunch, washed, sliced, and diced them for her smothered steak. Then she went out on the back porch and gave Ol' Spot (the yard dog) a double handful.   Ol' Spot ate every bite. All morning long, Janet watched Ol' Spot and the wild mushrooms didn't seem to affect him, so she decided to use them. 

The meal was a great success, and Janet even hired a helper lady from town to help her serve. She had on a white apron and a fancy little cap on her head.

After everyone had finished, they relaxed, socialized, and played Phase 10 and Mexican Train dominoes.  About then, the helper lady from town, came in and whispered in Janet's ear, "Mrs. Williams, Ol' Spot just died." 

Janet went into hysterics, and then called the doctor to explain what happened. The doctor said, "That's bad, but I think we can take care of it. I will call for an ambulance and I will be there as quick as possible. We'll give everyone enemas and we will pump out everyone's stomach. Everything will be fine - just keep them calm."

Soon they could hear the siren as the ambulance was coming down the road. The EMT's and the doctor had suitcases, syringes, and a stomach pump.

One by one, they took each person into the bathroom, gave them an enema, and pumped out their stomach.  After the last one was finished, the doctor came out and said, "I think everything will be fine now." Then he left.

They were all looking pretty weak sitting around the living room, and about this time, the helper lady came in and said, "You know, that fellow that ran over Ol' Spot never even stopped."