Appraisal Requirements; No New GSE Loan Programs; Jumbo Products Needed; Itemized Deductions; Several Lender Updates

OK, for anyone who deals with appraisals in any form, HERE is a great video on YouTube. One of the better lines is, "Wells Fargo and BofA getting appraisals done by appraisal companies they own - It's like Michael Jackson running a freaking boys camp! My E&O is going to go through the roof!" Definitely worth 2-3 minutes.

Despite the fun poked at the appraisal process in that video, many lenders are still searching for help for the hurdles that HVCC has thrown up in their process. I am often asked about appraisal "soup to nuts" solutions. If you are interested, or want to see how one company is managing appraisal requirements for Fannie, Freddie, and FHA, you should take a look at ValuFinders. The firm has been around for many years, and has primarily focused on being a technology company that manages all of the REO's for the government, but lately it has set up a system that helps brokers and lenders carry out the appraisal process and comply with the complete set of government regulations. Check with Paul Anderson at www.Valufinders.com.

You shouldn't look for any new products from Fannie or Freddie. Neither will not be allowed to introduce new loan products in the mortgage market while they are under the control of the U.S. government, FHFA announced, given the companies' massive losses and looming challenges. A story in the Wall Street Journal noted "permitting the enterprises to engage in new products is inconsistent with the goals of conservatorship." The new rule won't apply to foreclosure prevention efforts, which are considered separate from new product offerings. Therefore, until investors are willing to introduce products on their own, don't look for any new industry-wide programs.

So what is the latest on jumbo products? You know, the loans that seem to be needed within 10-30 miles of any coastline, on many waterways, or in the nice neighborhoods of any city, and are now being underwritten to very tight guidelines? The National Association of Realtors (NAR) estimates that the national share of home sales above $750,000 is approximately 2.3% for 2009, down from 4.4% three years ago. Everyone knows that putting jumbo loans into securities is not an option, currently.  The loans are not part of the Fed's MBS purchase program (although loans of up to $729,750 done in high cost areas can constitute up to 10% of a pool), and many are ARM's, which constitute less than 10% of current production. Institutional investors don't want the product, although many banks are adding the loans to their portfolios since the spreads are attractive versus their cost of funds. But banks are cautious about adding 30-yr maturity instruments to their balance sheets, even for their best customers, so many jumbo loans are ARM loans that either go to banks or may have some interest from hedge funds, money managers, private funds, etc.

How about the $1 Trillion in reserves banks are supposedly sitting on? If you ask someone off the street, "Who would YOU lend it to?" you might receive a shrug and a blank stare. Any mortgage banker might reply, "How about self employed or jumbo borrowers?"

Anyone taking a look at the budget saw that, once again, the mortgage deduction is viewed as low hanging fruit whenever there's a deficit. In this case, the attack is on itemized deductions. The proposal to reduce itemized deductions, including the deduction of mortgage interest, for taxpayers reporting income above $250,000 (joint) and $200,000 (single) is being fought by various mortgage banking groups, including the MBAA. The MBAA has also publicly come out against the proposal to tax carried interest at ordinary tax rates (as opposed to the capital gains rate, as it is taxed now), as it would discourage capital formation for lending.

Flagstar lost almost $72 million in the fourth quarter of 2009, which compares favorably with their third quarter net loss of $298 million and a fourth quarter 2008 net loss of $218.5 million.

For all of 2009 Flagstar's net loss was $514 million, compared to a 2008 net loss of $275 million. Eventually an institution runs out of millions, although Flagstar did just receive another $300 million from a large investor.

Franklin American announced their MERS policy, which is summed up by saying, "All loans must be registered with MERS at the time the closed loan is delivered to FAMC. The registration must be completed using the 18 digit MIN assigned to each loan on the MERS Security Instrument and/or Assignment. In addition, all other registration fields must be completed in their entirety and must be accurate." Pretty straightforward.

I will freely admit that I saw nothing in writing, but sources are reporting that CitiMortgage is back in touch with many of the brokers that they cut off last year.

SunTrust recently updated its Mortgage Insurance guidelines, specifically in relation to Single Premium Mortgage Insurance. "Single Premium Mortgage Insurance must be financed in its entirety in the loan. It cannot be 'partially' financed."

Chase revised their extended rate lock costs, making 90-180 day locks .125 in price worse. One always wonders who, besides builders in certain situations, really needs a 180 day or 360 day lock. Regardless, there must be interest out there since most economists believe that rates are going to begin creeping up later this year. Chase also reminded clients that these extended rate locks are "not available on Agency High Balance, Non-Agency, or any Mandatory commitment types."

PennyMac Mortgage Investment Trust, formed last August, reported a net loss for the fourth quarter of $1.15 million with total investment income for the quarter was $1.49 million. Since formation, PMT's total investment income amounted to $2.30 million and its net loss was $1.88 million.

I wish that I could sum up the 83 page HUD document on explaining the roots of the foreclosure process in a few lines. But I can't. So feel free to READ IT HERE

In a story that I saw here on Mortgage News Daily, the Census Bureau released their "Report on Residential Vacancies and Homeownership". This data covered fourth quarter 2009. For example, national vacancy rates in the fourth quarter 2009 were 10.7% for rental housing and 2.7% for homeowner housing. The homeownership rate stands at 67.2%. Lastly, at the end of the fourth quarter of 2009, there were 130.58 million housing units in the US. READ MORE

The National Association of Realtors announced that December's Pending Home Sales ("pending" is when the contract has been signed but the transaction has not closed) improved slightly in December. So what? Well, the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. (No, I don't know what happened in the last 5 years!) READ MORE

There isn't much happening on the trading desks out there. Limited price movement, rates stuck in a narrow range, the Fed in buying the customary amount... but looking at the price movement between coupons, and between Ginnie & Fannie products, things are a little more volatile. Some investors are complaining that they are going to "stay on the sidelines due to FED/Govt uncertainty in our market." And thin markets can mean volatile markets. Later this morning we have another Institute of Supply Management number, and the only other scheduled economic news, of sorts, was the ADP employment number. (ADP, by the way, is the world's largest payroll processing company, but its statistics do not include government jobs.) U.S. private employers cut 22,000 jobs in January, less than the 61,000 jobs lost in December. So far this morning the 10-yr yield is up to 3.68% and the 5-yr and mortgage prices are worse by about .250.


At Any Given Moment:

FACT:   79,000,000 people are engaged in sex - right now.

FACT:   58,000,000 are kissing.

FACT:   37,000,000 are relaxing after having sex.

FACT:   1 old person is reading emails

You hang in there, Sunshine!