BofA to Repay TARP Funds; More FHA changes; HAFA; Primer on Jobless Claims & Unemployment

I have decided to hold a press conference to confront stories that I was Tiger Woods' mistress. I've never held one before, nor have I ever met the man, nor am I "inclined" that way. But I figure that now is a good time to jump on the band wagon, especially if magazines are paying up for stories. Stay tuned for the time and place - it might be more entertaining than mortgage banking, and I've never been on the cover of "Us".

I would imagine that plenty of folks at Bank of America, and their clients, are happy. Bank of America Corp. said that it plans to repay its $45 billion in government bailout funds, as soon as this week! Apparently the Bank has that much available cash, without sniffing around in the safe deposit boxes of its customers, and raise $18.8 billion in capital to repay the money. This is great news for shareholders (BoA stock moved higher on the news). Of the 4 major mortgage investors & servicers, this will leave Citi ($45 billion) and Wells ($25 billion) with owing TARP funds. There is no news from Citi. As for Wells, ever since they accepted their $25 billion of federal bailout assistance last year, management has said that the bank never needed the money, didn't want it, and shouldn't have been forced by the government to take it. They keep saying they'd like to pay it back, too, but have not offered up a schedule.

If you went to a mall last weekend to look for Cabbage Patch Dolls, the odds are pretty good that it was owned by General Growth Properties - they own and manage more than 200 of them here in the US. They are in the middle of a Chapter 11 bankruptcy plan after failing to refinance portions of its $27 billion in debt. According to the Wall Street Journal, they filed a plan in bankruptcy court to restructure $9.7 billion in mortgage loans which "puts the mall owner a step closer to pulling 166 malls out from the bankruptcy protection entered in April." That leaves another $11.7 billion in remaining debt. "The pact allows mortgage holders to report the loans as performing on their books at the end of the year rather than distressed at a time when delinquency rates on commercial mortgages are rising." Wouldn't it be nice if residential mortgage servicers could do the same?

Lock desks were a little busier last week, and the MBAA reported that applications were up 2.1%. Both refi and purchase applications moved up, and applications to refinance amounted to over 72% of total applications.

If your business is based on originating FHA loans, you should be aware that the HUD Secretary is expected to announce changes to the FHA mortgage insurance program to curtail defaults. And they won't be loosening up anything. The changes may include an increase in the minimum credit score for FHA loans from 500, a boost in the minimum down payment from 3.5% and a reduction in the maximum amount of seller concessions from 6% of the home's value to 3%. Experts say monthly insurance premiums charged to borrowers and the current upfront premium -- currently 1.75% of the loan value -- also could be hiked.

Starting today, GMAC Bank Correspondent Correspondents, should know that "as outlined in the Mortgagee's Assurance of Completion Document (Form HUD 92300), the Lender is required to hold Escrow Repair Funds. Title Insurance companies and Closing Agents are not permitted to hold Escrow Repair Funds for any FHA loan Transaction." GMAC Bank will only permit approved Delegated Clients to hold escrow repair funds for HUD Transactions.

Wells Wholesale told clients that for site (detached) condominiums with FHA financing they will not require project approval. However, the Condominium Rider must be executed and included in the loan file when submitting for funding. Each of the following requirements must also be met: Site condos must be processed as a 203(b), ADP code 731 or 734, FHA Connection requires a Condominium ID, Appraisal must be completed on the Residential Appraisal Report (Fannie Mae 1004/Freddie Mac 70), and the insurance coverage must meet the standard FHA policy.

Without a program, it is easy to lose track of all the acronyms flying around the mortgage business these days. HAFA: Home Affordable Foreclosure Alternatives. The Treasury released details of the HAFA program to servicers. It was originally announced in May, and this refinement includes the general terms and conditions, evaluation process, documentation, and reporting requirements. The program will be effective April 2010 and servicers already participating in HAMP will be required to follow the Treasury's guidance. The program standardizes eligibility for short sales, available to borrowers who meet HAMP eligibility requirements but do not qualify for or complete for a Trial Period Plan. "Upon the successful closure of a short sale or deed-in-lieu through the program, incentives of $1,500 in relocation assistance to the borrower, $1,000 in expense reimbursement to the servicer, and up to $1,000 in investor reimbursement for subordinate lien releases will be provided." And servicers have some leeway to create their own policies.

Today we had the weekly Jobless Claims number. Tomorrow we have the unemployment data. They are two different measures, somewhat correlated but compiled by different organizations and which don't look at exactly the same data. (By the way, analysts are always pointing out the problems between the two.) If I file a claim for unemployment benefits for the first time, I show up on the weekly Jobless Claims number. And I will also show up on the unemployment rate. I can be out of work for months, showing up as unemployed, and collecting unemployment, but I am not a "new" claim. That is where the "continuing claims" number comes into play. People who file claims, and then go back to work show up as having filed a claim but then don't show up on the unemployment radar because they found a job.

Also, if I am looking for work, but unemployed, or just can't work, the government measures me differently than someone who is not looking for work, and unemployed. And if I get a part time job, I am no longer unemployed, but "under employed" - a category that has been increasing. Certain Jobless Claims numbers represent claims from the survey week for nonfarm payrolls which will be released tomorrow. There are always "back month revisions" to the unemployment data, since the initial number is a sample (survey).  Nonfarm Payroll (tomorrow) is put out by the Bureau of Labor Statistics whereas the weekly Jobless Claims number is put out by the Department of Labor, and is a measurement of the number of jobless claims filed by individuals seeking to receive state jobless benefits.

Although there was little volatility in the stock market yesterday, interest rates crept higher. Analysts are carefully following the spread between mortgage rates and Treasury rates: it has become historically narrow in recent weeks but now seems to be widening out, which is bad news for mortgage prices. Secondary folks get calls from agents saying, "Dude, the 10-yr is unchanged, but you made your pricing worse by .125. You have a Mercedes payment coming up?"

This morning we learned that the number of U.S. workers filing new applications for jobless insurance (see above) unexpectedly fell last week to the lowest level in more than 14 months, dropping 5,000 to 457,000 in the week ended 11/28. Jobless Claims have dropped for five consecutive weeks. The four-week moving average for new claims fell 14,250 to 481,250 last week, the lowest level since November last year, and declining for the 13th straight week. However, the number of workers still collecting benefits after an initial week of aid rose 28,000 to 5.47 million in the week ended Nov 21, after declining for 10 straight weeks. After the news we find the 10-yr up to 3.38% and mortgage prices worse between .125 and .250.

And the hits just keep on coming (and don't blame me)...

• Phil Mickelson called Tiger's wife to get advice on how to beat Tiger with a golf club.
• Apparently the police asked Tiger's wife how many times she hit him. She said "I don't know exactly, 4, 5, maybe 6 times...but put me down for a 5."
  What's the difference between a car and a golf ball? Tiger can drive a ball 400 yards.
• Ping just offered Elin Woods an endorsement contract pushing her own set of drivers. They are said to be named Elin Woods...."Clubs you can beat Tiger with."
• News travels fast. The Chinese are already making a movie about Tiger Woods' crash.
  They are calling it, "Scratching Swede, Lying Tiger.
• Tiger just changed his nickname but still kept it in the cat family. His new name? Cheetah.