Mortgage Purchase Program on Schedule to End; MGIC & Bank of America; Lender Updates: Suntrust, Citi, USB

As a way to conserve fresh drinking water, a number of conservation groups are now calling for an end to toilets that flush. To which gas station owners say, "We are so ahead of you. We've been doing that for years."

As expected, the FOMC left overnight rates unchanged yesterday. Some of the language contained in the release, however, caused rates to move up slightly, and the stock market to improve. "Economic activity has continued to strengthen and that the deterioration in the labor market is abating. Household spending is expanding at a moderate rate but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit. While bank lending continues to contract, financial market conditions remain supportive of economic growth." They believe that inflation is likely to be subdued for some time, and therefore expect to leave Fed Funds near 0% for "an extended period".

More importantly to mortgage folks, once analysts picked apart every word of the announcement, is that the FOMC announced that its $1.25 trillion agency mortgage-backed security purchase program will be slowing down as the end of March nears, and ending March 30th. So it is now official. Personally, I believe that the sun will come up again this morning, my car will start, and life will be close to normal. But anticipation is running high for a steepening of the yield curve as long term rates move higher and the short end remains low. In a related story on mortgage production, an annual report on the ARM market published by Freddie Mac shows adjustable-rate mortgages accounted for just 3 percent of all conventional home purchase loans in 2009. That's the smallest percentage for ARMs since at least 1982. READ MORE ON THE OUTLOOK FOR THE FEDS MBS PURCHASE PROGRAM

MGIC reported a fourth-quarter loss but said it received fewer default notices and sold new policies that it hopes are better underwritten. On the news all of the publicly traded MI stock prices rallied. In the release, however, MGIC disclosed that Bank of America has ceased doing business with the company as a result of MGIC's rescission practices. BofA/CW accounted for 12% of all new insurance written in 2008 and 8% of new insurance in the first nine months of 2009 at MGIC, so not having that business going forward, if that happens, will have an impact. This backlash from a major lender hampers income growth at a time when MGIC needs to bring in new income to offset rising claims payments on foreclosed mortgages.

My comments yesterday led to some e-mails about other hiring opportunities. As I have said in the past, I don't want this to turn into a job bulletin board, but it is nice to see that those in the business have some options out there. For example, MegaStar Financial, Colorado's largest privately held mortgage bank and who lends in 34 states, is looking to hire. Go HERE. Also, in Northern California, California Mortgage Advisors is actively recruiting for agents and branches - contact Scott Baer at sbaer@calmtg.com. Obviously the trend is for mortgage companies to staff-up on the loan agent side in order to maintain some market share and support their operations staff.

Investor program changes continue unabated. SunTrust's FHA 30 Year Fixed Rate Seller Paid Interest Payment Reduction Feature and VA 30 Year Fixed Rate Seller Paid Interest Payment Reduction Feature is now in various pricing engines, as are Citi's Agency Flex w/Subordinate Financing 40 Year Fixed, Agency Flex w/Subordinate Financing 30 Year Interest Only, and Agency Flex w/Subordinate Financing ARM product lines.

U.S. Bank Home Mortgage Wholesale Division made a change to its FHLMC Interest Only LIBOR ARM programs starting next Wednesday. "DU Approved Eligible AUS decision is no longer allowed, these products will require an LP Accept, only." The investor did, however, announce a new product (although it is not available in The Great State of Texas) 2nd Lien Purchase Money HELOC. The payment is set at 1% of outstanding balance, has a maximum 85% CLTV depending on state and a maximum loan amount of $250,000 with certain restrictions. Check their announcement for more details.

CitiMortgage released a lengthy update to their patrons. Repeating the seven pages is beyond the scope of this commentary, so check out the actual announcement. That being said, given that many lenders are consumed by RESPA and GFE changes, Citi reminded their clients that "each loan that you sell to CitiMortgage comes with your representation and warranty as to compliance with the RESPA Rule and any other federal, state or local law, rule or regulation governing the origination of consumer residential mortgages." They are putting some RESPA "check points" into their pre-purchase review process that will require Correspondents to provide the final GFE on the RESPA Rule's new form (initial GFE and any subsequent re-issued GFEs due to "changed circumstances"), all documentation (including without limitation and depending upon each Correspondent's process, loan origination system screen prints, borrower correspondence, loan processor notes, and the like) relating to any "changed circumstances" as defined in the RESPA Rule, the RESPA Rule's new version of the final HUD-1 Settlement Statement, and the final Itemization of Amount Financed (or comparable document).

Citi now offers the Freddie Mac Relief Refinance-LP Open Access program for a no cash-out (rate/term) refinance of a loan currently owned by Freddie Mac, and is available for loans with no MI on the existing loan. Citi requires that for FHA loans (except Streamline Refinance w/o Appraisal) they must also receive the Conditional Commitment, and for VA loans (except IRRRL) they must have the Lender's Notice of Value in addition to the other critical documents.

Citi also followed HUD and refined their policy on "Short Sale/Short Payoff" ("In the case of a short sale, the determination must be made, and documented in the loan file, as to whether or not the sale of a current or prior residence resulted or will result in a short sale), went along with the extension of the First Time Home Buyer Tax Credit (contract by 4/30, close by 6/30), agreed to take Fannie Mae Form 1004D/Freddie Mac Form 442 for a recertification of value and/or completion of compliance repairs and completion inspections for existing and new construction properties.

And, like other lenders, FHA-approved condominium projects are not permitted on conventional loans, nor are FHA-approved projects permitted on VA loans. Citi's announcement goes on to address rental income and reserve requirements, a new policy on PUD project reviews and DU Refi Plus subordinate financing, state the discontinuation of their 1-YR LIBOR ARM, address lump sum retirement income distributions, and clarify their policy on buying loans with deed restrictions (often found in loan programs for particular purposes in certain communities and by nonprofit agencies).

We learned yesterday that New Home Sales dropped 7.6% in December, worse than expected. It is the fourth decrease in the past five months, in spite of the tax-credit extension. For the year sales declined 23% to 374,000, the lowest level since records began in 1963. The median sales price of new houses sold in December 2009 was $221,300; the average sales price was $290,600. Sales of new homes plummeted by 41% in the Midwest and 7% in the south. But they skyrocketed 43% in the Northeast and 5% in the West. READ MORE

today we have the 7-yr Treasury Note auction. Yesterday's 5-yr was "fair-to-pretty-good". The auction came in at 2.37%, with "indirect buyers" nabbing 53% of it and a strong 2.80 bid-to-cover ratio. And for market news today, we had Jobless Claims and Durable Goods. New orders for durable goods were +.3% in December, less than expected but still better than the -.4% in November. Durable goods orders are a leading indicator of manufacturing activity & a good measure for overall business health, and for 2009 fell a record 20.2 percent. Jobless Claims dropped 8,000, which is good, but the drop was less than expected, which is bad. With these two pieces of news we find the yield on the 10-yr back up to 3.67% and mortgage worse by between .125 and .250.

Dan was a single guy living at home with his father and working in the family business.

When he found out he was going to inherit a fortune when his sickly father died, he decided he needed to find a wife with whom to share his fortune.

One evening, at an investment meeting, he spotted the most beautiful woman he had ever seen. Her natural beauty took his breath away.

"I may look like just an ordinary guy," he said to her, "but in just a few years, my father will die and I will inherit $200 million."

Impressed, the woman asked for his business card and three days later, she became his stepmother.

Women are so much better at financial planning than men.