Mortgage Support Needed in Russia; Jumbo Market Making a Comeback?; Warehouse Lending; Investor Updates

A rubber band pistol was confiscated from algebra class -- -- because it was a weapon of math disruption.

Any weapons race with Russia doesn't receive the publicity it did 30 years ago. But whatever you call someone who originates loans in Russia (brokers?) received some good news last week, when Russia's Prime Minister Vladimir Putin announced that the government will help to lower the mortgage rates investing more than $8.3 billion. The government will provide this money to banks thus substantially subsidizing current mortgage rates, which are currently near 14-15% in Russia. Putin set a target rate at 11% with a maximum down payment of 20%.

Do folks here in the US and in the mortgage business have any good news to cheer about, besides rates not being 11%? Some are dealing with changes in FHA lending and the effect on condominiums. The markets and interest rates are facing the end of the Fed's purchases of mortgage backed securities and the end of the first time homebuyer tax credit ($8000). The economy does not appear to be rebounding enough to generate much home buying interest, the unemployment rate is hovering around 10%, and foreclosure filings are not yet abating.

It could very well be that the jumbo market, like a dormant volcano, is about ready to rumble back to life. In addition to jumbo security prices rallying, there have been several newspaper articles on the subject, and there are rumors that Wells Fargo plans to roll something out in a few business channels possibly as soon as the end of this month. In Los Angeles and Orange counties, Wells Fargo Home Mortgage (retail) already lowered their down payment from 25% to 20%.  But, as one would expect and hope, borrowers must provide evidence of high income, have sizable bank accounts as a cushion against the unforeseen and occupy the houses themselves. We don't really want more problems in the jumbo market by going too far back the credit curve, do we? Do we?

And warehouse lenders are hungry for business. Last week I mentioned a warehouse lender looking for customers, and if your volume justified it, to give them a shout. Here is another one who is seeking new customers nationwide: Georgia Banking Company. Lenders should contact Ronica Roundy at info@gbcfunding.com or via their website at www.gbcfunding.com.

PHH reported that it returned to a profit in the fourth-quarter as the company cut costs and the volume of its loans grew. The company earned $97 million for the quarter compared with a loss of $216 million in the same quarter last year. "Our 2009 core earnings were a reflection of higher mortgage production volumes and margin improvement, as well as cost reductions in our businesses."

A new item was released concerning GMAC's 3D program. The program, which was in place for some GMAC correspondents who were eligible, was recently suspended in general and for all clients approved for the program.  As it stands now, GMAC is working with FNMA regarding the 3D program and tweak it to better suit the current risk model and viability of the two companies working together. It is widely known, however, that GMAC has undergone, and could continue to undergo, significant changes in both management and business channels.

Wells Fargo's wholesale channel came out with an announcement focusing on the 4506-T form for brokers, how the form is incorporated in Wells' reporting system (mandatory starting 4/1), frequently asked questions, and some training opportunities. Until further notice, brokers are to order one 1040 form for 2008, for example.

Franklin American provided their customers with guidance on recently published agency information. For example, borrowers are required to have rent loss insurance on certain investment property transactions when the borrower is relying on rental income to qualify. When the borrower is using rental income for qualification purposes, rent loss insurance will be required on all 2-4 owner occupied properties and 1-4 investment properties regardless of underwriting method. For condominiums, HO-6 (walls-in) insurance policies are required on all loans where the master HOA policy does not provide coverage of the interior of the unit, and HO-6 impounds are required on all loans where escrows are required. As with other investors, borrowers may not obtain "gap" coverage to meet the minimum project insurance requirements, and for FHA and VA loans the Condominium's Homeowner's Association, not the borrower is responsible for obtaining and maintaining flood insurance under the NFIP on properties located in an SFHA.

Flagstar, for its direct endorsed customers, stated that customers will be responsible for processing any corrections required by HUD in order to obtain a Mortgage Insurance Certificate (MIC). The announcement is in great detail, and patrons are advised to read it. "All corrections must be processed within 15 days from the date of notification. Upon notification that a correction is needed Flagstar will place a coinciding E&O on the loan. In order to clear the E&O the customer will be required to submit a copy of the correction document and proof of that the document has been mailed." (If you're in Philadelphia, for some reason, the procedure is slightly different - check Flagstar's announcement.)

Flagstar told customers that the 4506-T Request for Transcript of Tax Return form must be completed in its entirety. "Originators must ensure all sections (including checkboxes) are completed prior to having the borrower sign the document. Information that is missing or incorrect could delay the processing." Another memo from the company addressed Fannie Mae's Homepath Appliance Incentive, where Fannie Mae is currently offering buyers of their REO properties an additional incentive up to 3.5% of the final sales price to be used toward the purchase of new Whirlpool appliances: "while borrowers may obtain FHA financing to purchase a Fannie Mae REO property, FHA considers the 3.5% appliance purchase incentive to be an 'inducement to purchase' Therefore, the amount of any appliance incentive must be deducted from the purchase price before calculating the maximum purchase LTV." And for VA loans, Fannie Mae Appliance incentives are considered seller concessions. "The combination of all seller concessions, including the Fannie Mae appliance incentive is limited to 4% of the property value."

Yesterday we learned that in January Personal Income increased .1% but that Personal Spending Increased by .5%. So much for that savings rate, which hits its lowest level since 2008. In addition, the ISM Manufacturing Index for February fell slightly from January's levels, and Construction Spending dropped .6% as expected. The decline in construction spending was led by a fall in private nonresidential construction spending, which more than offset a moderate increase in residential construction. Lastly for news yesterday, Fed Vice Chairman Donald Kohn said that he will leave the Federal Reserve at the end of his four-year term as vice chairman after 40 years at the central bank. Although the announcement was somewhat early, it was not altogether unexpected and many believe that he will be a huge loss to the institution at time when credible, independent thinkers are required to get the Fed through a very difficult political period ahead.

Through all of that we had the usual Fed buying, and higher coupons (which are mostly older, 6% and higher, mortgages) doing somewhat better than lower coupons. With a slight break in the scheduled news today, the rate markets are pretty quiet and close to unchanged from yesterday, although the stock markets appear poised to continue rallying.

A young Texan grew up wanting to be a law man. He grew up big, 6' 2'', and strong as a longhorn and fast as a mustang. He could shoot a bottle cap tossed in the air at 40 paces. When he finally became of age he applied to where he had only dreamed of working: the West Texas Sherriff's Department.

After a big mess of tests and interviews the Chief Deputy finally called him into his office for the young man's last interview.

The Chief Deputy says, "You're a big strong kid and you can really shoot. So far your qualifications all look good.  But we have what you call an 'attitude suitability test' that you must take before you can be accepted. We just don't let anyone carry our badge son."

Then, sliding a service pistol and a box of ammo across the desk, the Chief says, "Take this pistol and go out and shoot six illegal aliens, six Democrat senators, six meth dealers, six Muslim extremists, and a rabbit."

"Why the rabbit?"

"Great attitude," says the Chief Deputy. "When can you start?"