Lenders Preparing for Fed's Exit; Foreclosure Ban in Process?; FDIC Banking Profiles and CRA Requirements; More GFE
"Talk is cheap, because supply always exceeds demand".
For the week that just ended for the Fed, their MBS purchases totaled $17.6 billion, and they sold $6.6 billion, netting out that magical $11 billion weekly total. They are right on target to end this in about a month. After March 31st, the program ceases. People will still buy homes, mortgages will continue to be originated, but will some of the dire production predictions come true? Everyone in the business is hoping not, but the large investors would prefer not to wait to find out. Big investors have cut profit margins and prices, resulting in some very good (relatively speaking) mortgage rates for borrowers. Investors, account executives, production managers may be already worried that they won't hit their numbers for the year, and appear to be doing what they can to move a little ahead of the pack prior during the first quarter. Because after March 31st, it's anyone's ball game. And keep in mind that any loans that fund and are placed into securities settling in March had better close sooner than later due to lag times. Make hay while the sun shines. 96% OF FUNDING USED
Should foreclosures be run by the government? Lordy lordy... the Obama administration may expand efforts to ease the housing crisis by banning all foreclosures on home loans unless they have been screened and rejected by the government's Home Affordable Modification Program. Bloomberg reported that the proposal was reviewed by lenders last week on a White House conference call, "prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed," according to a Treasury Department document outlining the plan. At present, lenders can initiate foreclosure proceedings on any loan that hasn't been submitted for HAMP eligibility. Under current HAMP rules, foreclosure litigation can proceed while borrowers are under review for the program or even in a trial modification. The proposed changes would prohibit lenders from initiating new foreclosure actions before loan screening by HAMP and would require lenders to halt existing proceedings for borrowers once they are in a trial repayment plan.
The vast majority of jumbo loans are on homes located within 30 miles of either coastline or 1 mile of a lake or river. (You like that statistic? I just made it up - but it makes sense.) Anyway, jumbo loans represent a pretty small proportion of overall lending, which is one of the reasons why that type of product carries little "weight" among politicians. But there is some hope out there. LA TIMES STORY
If you want to be loan originator in Oregon, or already are one, you should know that Oregon now added real estate lenders in to the Unlawful Trade Practices Act. So what? Now brokers have individual personal liability to lawsuits from borrowers with punitive damages, with no time limits on filing action and a "low bar to pass" to sue according to one source. "Unconscionable acts" is very loosely defined in their UTPA. Case law in UTPA in Oregon has shown the courts use "known or should have known" as the bar for liability. And oh, don't forget that the SAFE Act takes affect August 1st in Oregon that has loan officers liable for Class C Felony, Restitution Orders to the consumer from the Director of DCBS, $25,000 fines and a private right of action for "ascertainable loses" for 3 years after closing the loan.
The FDIC doesn't only shut down bankrupt banks at the end of the week, it also produces a "quarterly banking profile" which "provides the earliest comprehensive summary of financial results for all FDIC-insured institutions." Don't be the last one on your block to see it: HERE IS IT. The FDIC has also issued the public list of institutions that it has scheduled for a Community Reinvestment Act (CRA) examination during the second quarter of 2010. "The examination schedule reflects the effects of an institution's size and CRA rating on examination frequency. Absent reasonable cause, an institution with $250 million or less in assets and a CRA rating of Satisfactory can be subject to a CRA examination no more frequently than once every 48 months. Absent reasonable cause, an institution with $250 million or less in assets and a CRA rating of Outstanding can be subject to a CRA examination no more frequently than once every 60 months." The quarterly list is available at www.fdic.gov. And lastly, if you want to spend some time in New Orleans and have a hankerin' to learn the ins and outs of the CRA program, head down there between March 14 and 18 for the National Interagency Community Reinvestment Conference. "The agenda will cover how CRA loans, investments, and services can have a positive and lasting impact in low- and moderate-income communities." MORE INFO
Wells Fargo issued another "Risk Advisory Bulletin" of recommendations, not requirements, for the clients. (By the way, if large investors are sued in a class action lawsuit by borrowers over RESPA & GFE violations that happen during the "leniency period", do you think that HUD will help in their defense? It would seem that large investors think not, and therefore are preferring to "toe the line" when it comes to GFE issues regardless of HUD's official policy of forgiveness.)
It seems that WF is finding addendums and additional pages to the GFE in the closed loan file when the loan file is submitted to Wells Fargo for purchase. HUD addendums or additional pages to the GFE are not allowed - refer to HUD RESPA FAQ, section titled GFE - General, page 9, question 27 for guidance on what is allowed.
Wells tells clients that handwritten corrections or changes to the GFE "may prohibit the purchase of your loan due to our inability to clearly distinguish what took place in the transaction of the loan (e.g. were the updates due to errors vs. a change to fees?)", so when needing to make changes to the GFE as a result of a Changed Circumstance, WF suggests clients "re-disclosure using a new GFE rather than providing handwritten changes to the original. Be sure to include related Changed Circumstance documentation."
Lastly, the investor reminds customers that they should keep old-format GFE's out of the file: "use of the old-format GFE at any point in the origination process for applications taken in 2010 is not acceptable under the new RESPA requirements - even if a document preparation provider is including this in the closing package material" and that "only GFEs provided to the borrower for disclosure or re-disclosure are included in the closed loan file."
In an interesting development, money managers who buy mortgages were intent on buying the higher coupon securities Thursday. Maybe those prices have worsened enough, although higher coupon agency bonds have been hit hardest because they have been trading above their face value, or par, but the agency plans to pay par when it buys them back. The supply of mortgages has certainly increased, so expect that it is coming from higher lock volumes - perhaps due to that aggressive pricing. See how it works? But in general mortgage, and fixed income securities, improved in price yesterday on concerns over the credit issues in Greece and the unemployment picture painted by the hike in Jobless Claims. The $32 billion 7-yr auction was taken in stride. And who cares about Fed Funds? Yesterday the futures market for November priced in a 58% chance for Fed to boost the federal-funds target rate to 0.5% at the 11/2 meeting, down from a 66% chance Wednesday and 100% from last Friday.
It is pretty slow out there, or just my imagination? Hopefully it is just my imagination. Regardless, if you write back, don't look for a quick response - I am heading off to The Great State of Texas today - more specifically Austin and San Antonio - for some sight-seeing and exercise.
His request approved, the CNN News photographer quickly used a cell phone to call the local airport to charter a flight. He was told a twin-engine plane would be waiting for him at the airport.
Arriving at the airfield, he spotted a plane warming up outside a hanger. He jumped in with his bag, slammed the door shut, and shouted, "Let's go!"
The pilot taxied out, swung the plane into the wind and took off.
Once in the air, the photographer instructed the pilot, "Fly over the valley and make low passes so I can take pictures of the fires on the hillsides."
"Why?" asked the pilot."
"Because I'm a photographer for CNN," he responded, "and I need to get some close up shots."
The pilot was strangely silent for a moment, finally he stammered, "So, what you're telling me, is...You're NOT my flight instructor?"
(Life is short. Drink the good wine first.)