Lenders Using the GFE as Marketing Tool; Lenders Cut by FHA; Condo Approvals; Guidance on Borrowers Facing Imminent Default;

On the possibility of Fannie and Freddie going away, one clever rep wrote to me and asked, "Do we really need FNMA, FHA, and FHLMC when it is all government run anyway?  They could start a new entity named "Federally Regulated Committee to Normalize Mortgage Securities", or "FRCNMS" - pronounced "FRICKEN MESS".
 
In fourth grade, at Hoover Elementary School, Mark Pipes goofed off one too many times. Mrs. McDaniel made Mark bend over, grab his ankles, and she proceeded to beat his rump with a wooden pointer. The rest of us in the class didn't quite know how to react seeing one of our brethren disciplined this way. "The herd was spooked", and needless to say I remember it over 40 years later. I wonder if the FHA herd is spooked out there, hearing more news of the FHA Mortgagee Review Board (MRB) permanently withdrawing FHA approval for Strategic Mortgage Corporation, ProMortgage, Americare Investment Group, which does business as Premier Capital Lending and TopDot Mortgage. The MRB suspended FHA approval on Home Mortgage Inc. (HMI) for six months. In addition to losing its FHA approval, TopDot faces action from Ginnie Mae.  READ MORE
 
You know it's a slow news day when I start dredging up IRS forms, and put a great joke at the end. But in this case, these might be worth a gander, as they are the instructions for reporting points paid to the IRS, and the definition of points. READ MORE
 
Are some companies using the new GFE as a marketing tool?

Sure they are, although exactly how HUD will view them remains to be seen. "If another lender rejected your loan because the GFE was filled out wrong, come to XYZ Mortgage! As long as your borrower cancels that loan, you do not have to wait to submit it to XYZ. We'll help you fill out the GFE correctly, and get your loan funded fast. We're 48 hours from receipt of your complete file to a decision! For personal assistance completing your GFE, contact your Account Executive ..."

And from another company: "If a loan is rejected due to not meeting the new GFE requirements, the new loan needs to be created the same day the old one is cancelled. Then an email needs to be sent to XYZ Mortgage with the old and new loan numbers asking for the lock to be transferred.  If it is past 24 hours since the loan was rejected then you must create a new loan and lock at current market pricing."

Although this news only impacts servicing companies, it does have potential ramifications for smaller lenders. The FHA has issued guidance to its approved servicers on how to assist borrowers facing "imminent default." Previously, these homeowners were ineligible for such assistance until after they had missed payments. Servicers will now have additional options for those borrowers who seek help before they go delinquent, which hopefully increases the likelihood that the borrower will be able to retain their home, and servicers can use forbearance and the FHA's Home Affordable Modification Program (FHA-HAMP) to assist borrowers facing imminent default.

Wells wholesale made a series of announcements to their clients. These included FHA Condominium Approval Changes (effective Feb. 1, FHA Condominium Project Approvals are no longer allowed for conventional loans, and spot approvals will not be allowed - you'll need either: HRAP -HUD Review and Approval Process - Approval, or DELRAP - Direct Endorsement Lender Review and Approval Process - Approval). Wells also addressed HVE expiration dates for the Freddie Mac Relief Refinance Mortgage Program, a few VA policy clarifications, etc.
 
Franklin American issued an update for their clients. Following other lenders, and Fannie, "FHA-approved condo projects (Type U) are no longer allowed on conventional mortgage loans" after February 1, and any loans in the pipeline must be purchased by the Ides of March. "FAMC will continue to require that all loans receive a Limited Review on the DU Findings or are approved via Fannie Mae's Condo Project Manager (CPM); DU Refi Plus loans are excluded from this requirement."

FAMC also clarified the LTV and maximum entitlement for VA loans (the maximum entitlement available to a veteran for "Other" refinancing loans is $36,000 which results in a maximum loan amount of $144,000, unless the veteran has additional equity to equal 25% of the loan amount when added to the available entitlement), discussed how the underwriter must determine that the gift funds were the donor's own funds (sourced with a bank statement) and were provided by an acceptable source, and reminded clients that FAMC loan terms are limited to 15, 20, 25 or 30 years. (The policy is that the maximum loan term of an FHA streamline is the lesser of 30 years, or the unexpired term of the existing mortgage plus 12 years, rounded down to 15, 20, 25 or 30 years. The maximum loan term of a VA IRRRL is the lesser of 30 years, or the unexpired term of the existing mortgage plus 10 years, rounded down to 15, 20, 25 or 30 years.)
 
And in spite of the HUD waiver on flipping properties, FAMC's property flipping requirements remain unchanged at this time, but have followed FHA's guidelines on no longer limiting the origination fee to 1% of the mortgage amount. "HUD continues to require that fees charged are fair, reasonable, and customary for the area. The 1% fee limitation in the closing cost section of the FHA Product Description has been removed." VA's retention of the 1% maximum origination fee, however, remains in effect, and VA loans using the new Good Faith Estimate (GFE) and HUD-1 no longer require the Interest Rate and Discount Disclosure Statement.
 
Fannie Mae successfully implemented the release of DU for government loans last weekend, so that they will now support the new 2010 FHA and VA county loan limits.

On to the market, where it was pretty quiet yesterday, which is often normal ahead of an FOMC meeting. Stocks rebounded a tad, and bond prices were down a touch, with $118 billion of supply coming this week "in the belly of the curve" as they say: 2-yr, 5-yr, and 7-yr Treasury notes. We did have Existing Home Sales released yesterday, which showed a drop of almost 17% in December, far worse than expected. Inventories were up, although home prices rose slightly. For 2009 the median house price is down by 12.4%, worse than the 9% decline in 2008 and in fact the worst performance on record.
 
Overnight Chinese banks ordered to raise their reserve ratios, which effectively slows down their lending, and thus the economy, which helps lower rates. Besides the $44 billion sale of 2-year notes today, we do have some chain store information, the S&P Case-Shiller Home Price Index, and Consumer Confidence numbers. The 10-yr is down to 3.58% and mortgage prices, along with the 5-yr Note, are better in price by about .250.
 
Upset about disclosures? Some feel strongly that the appraisal and disclosure process have become immensely more complicated in the past year. Well, not that a US Senator or Congressman necessarily knows exactly what a disclosure is, but if you'd like to complain and give specific feedback on problems you've experienced, you can always contact

Andrew Cuomo  
http://www.ag.ny.gov/contact.html  (Appraisal issues only)

Nancy Pelosi  
http://www.speaker.gov/contact/

Barney Frank 
http://www.house.gov/frank/

 A man was waiting for his wife to give birth. The doctor came and informed the dad that his son was born without a torso, arms, or legs. The son was just a head! But the dad loved his son and raised him as well as he could.

Twenty-one years later, the son was old enough for his first drink. The dad took him to a bar, tearfully told him he was proud of him, and ordered the biggest, strongest drink for his boy. With all the bar patrons looking on curiously, the boy took his first sip of alcohol. Swoooop! A torso popped out!

The bar was dead silent, and then burst into a whoop of joy. The father, shocked, begged his son to drink again. The patrons chanted, "Take another drink! Take another drink!" The bartender shook his head in dismay.
Swoooop! Two arms popped out!

The bar went wild. The father, crying and wailing, begged his son to drink again. The patrons chanted, "Take another drink! Take another drink!" But the bartender ignored the whole affair.

By this time, the boy was getting tipsy. With his new hands, he reached down, grabbed the drink, and guzzled the last of it.

Swoooop! Two legs popped out.

The bar was in chaos. The father wept with joy. The boy stood up on his new legs. He stumbled to the left. He stumbled to the right. Then he stumbled through the front door and into the street, where a truck ran him over.

The bar fell silent. The father moaned with grief.

The bartender merely sighed and said, "He should have quit while he was a head."