Quality Control Second Credit Report Requirements; FHA Broker Approvals; Do Not Call Lists; Lender Turn Times Redefined
I was reading in the paper today about a dwarf that got pick-pocketed. How could anyone stoop so low? ("Bah da bum")Speaking of stooping low, the ringleader of a mortgage fraud scheme involving dozens of homes in northern Virginia and losses of at least $9 million has been sentenced to five years in prison. Among 20 other arrests, real estate agent Ruben Rojas led a scheme whereby two real estate agents and a loan officer recruited "straw buyers" with incomes of less than $25,000 and then were approved for loans of $800,000 or more with little or no down payments. America is a great country! Sometimes new houses were built, and their rooms were cut into several additional smaller rooms.
As we approach June 1, more and more lenders are realizing that Fannie will only require a second credit report on loans that lenders select for QC review post-delivery. Specifically, the lender must re-verify the borrower's credit history by obtaining a new in-file credit report for loans underwritten manually and through DU or other automated underwriting systems. The credit report must be from a source other than the original credit reporting agency.
By doing this a lender can find out whether other creditors have recently requested information about the mortgage applicant, which is a "red flag" indicating someone might be trying to obtain several loans on the same property: "shotgunning". Don't even try to use a credit report that is months old. HERE IS THE BULLETIN
Other changes: Fannie will require include more frequent reviews before and after funding loans with certain high-risk characteristics. The "loan-quality initiative," announced in February, is designed to reduce loan repurchase requests, as I mentioned last week. If lenders do a better job on the front end of making sure the loans they deliver meet Fannie's guidelines, buybacks are bound to be reduced. Fannie, in fact, is offering seminars that introduce its updated lender QC policies, as detailed in Announcement SEL-2010-03, where the company will discuss the background and objectives surrounding the changes." The next webinar is this Wednesday, and registration can be found HERE. For other seminars, check out Fannie Mae's PAGE.
Borrowers know that applying for a mortgage involves the lender pulling a credit report. What they may not know, however, is that this allows credit bureaus to sell a borrower's information to third party vendors - which include other mortgage companies. Savvy agents and brokers tell their clients to register themselves on the "Do Not Call" list. https://www.donotcall.gov/. And they should sign up for "Opt Out Prescreen" which will stop the four credit bureaus (Equifax, Experian, Innovas, and Trans Union) from selling their name as a trigger lead for five years. Go to www.optoutprescreen.com. And while you're at it, to cut down on junk mail go to www.directmail.com/directory/mail_preference/.
On Friday the coffee mugs of four more banks became collector's items, and the FDIC despot insurance fund took a hit of about $214 million. 1st Pacific Bank (CA) is now part of City National Corp., and Bank of Bonifay (FL) is now part of First Federal Bank of Florida. Also gone are Towne Bank (AZ) and Access Bank (MN).
Starting last week, Wells Fargo's wholesale group eliminated the pre-close turn times in all of its delivery locations. "Pre-close turn times will now be incorporated into the standard condition turn times."
I am not a broker, but I would think that if there were 2 "pre-close" days and 2 days for condition review, and instead I see 4 days for turn times - what's the difference? Wells also reminded broker clients that veterans "may pay a maximum of a 1% origination fee charged by the lender/broker (plus reasonable discount points used to buy down the rate), as well as reasonable and customary amounts for certain itemized fees. A discount fee paid to the broker is not allowed, except in New Jersey, where by state law broker-income fees should be disclosed as "discount." The lender/broker may charge the veteran a flat fee up to 1% of the loan amount. The flat fee is intended to cover the lender's costs and services, which are not reimbursable as 'itemized fees.'" Wells' memo goes on to discuss the IRRRL's ("this fee may not exceed 1% of the existing VA loan balance..."), but in a different topic, "Either as required by state or local law, or by voluntary agreement in the purchase contract, the seller may pay for all or a portion of the transfer taxes. Wells Fargo policy is that the portion of the transfer taxes that the seller is paying does not need to be disclosed on the GFE if the seller is required by state or local law to pay all or a portion of the transfer taxes, or the transfer taxes are explicitly outlined in the purchase contract as being all or partially paid by the seller."
Word has it that the wholesale lending division of CitiMortgage is telling its current stable of loan brokers that it will not accept new registrations from third-party salesmen unless they've already been approved to do business with FHA. "Brokers that are currently approved and recertified by FHA for 2010 will retain that approval until Dec. 31, 2010." Some months ago the FHA shifted the broker approval business to wholesalers that fund them and making the actual funder responsible for all broker-sourced loans. FHA loans are about 25% of nationwide loan production, and are running at about $1 billion a day.
Flagstar announced that loan funding for properties located in Davidson County can resume. A property re-inspection will be required for loans with appraisals dated on or before 5/6/2010.
Reminder: A satisfactory re-inspection will be required. A property re-inspection will be required for loans with appraisals dated on or before 5/3/2010 in several Tennessee counties. In addition, Flagstar, who recently improved its state-level state-dependent pricing, told brokers that the new RESPA rule has "lengthened Flagstar's review process for correspondent loans and created many new conditions for correspondents to meet prior to CAD purchase. As a result, loans are remaining on the warehouse line of credit for longer periods."
Why should what happens in Greece impact the mortgage rate that Joe Thompson pays in Missoula? US mortgage markets have been helped in two ways: the uncertainty in Europe has led to a flight to quality in safer investments, including US Treasuries and mortgage-backed securities (MBS), and also investors expect that continued economic turmoil in Europe will reduce US exports to the region, slowing US economic growth and reducing inflationary pressures. The United States does not have extensive trade and financial ties with Greece, and banks in this country own few Greek bonds. But other countries do, and the U.S. financial system could be adversely affected indirectly by the heavy exposure of other European countries to Greece.
Although recent indicators suggest that the Euro-zone economy (16 countries) is slowly and weekly expanding, a default by Greece or anyone else (PIGS: Portugal, Ireland, Greece, Spain) would slam the European banking system, and in turn ours. As it turns out, the European Union (EU) and the International Monetary Fund (IMF - almost 20% funded by the US) joined forces to create a loan package/bond purchase plan for $962 billion (759 billion euros). Of course, Greece has yet to succeed with its austerity measures...retiring at age 55 with full pay sounds pretty good. READ MORE SEE HOW THE MARKET REACTED
The aid package created this morning in Europe, along with the huge rally in stocks, once again overshadows any "short term" jobs number. But Friday's unemployment data does point out an interesting feature of the make-up of the employment data. Nonfarm employment rose by 290,000 jobs in April. But the unemployment rate increased, moving from 9.7% to 9.9%. How does that work? Ordinarily, a jump in nonfarm payroll would push the unemployment rate lower. Last month, however, individuals who had previously given up looking for work (and hence were no longer considered to be part of the labor force) sensed improving economic conditions and resumed their job search. So while 805,000 individuals entered (or re-entered) the labor force in April, only 550,000 found jobs. The remaining 255,000 who didn't find jobs are now added to the tally of the unemployed, hence the unemployment rate increase to 9.9% from 9.7% previously. Many jobs came from relatively low-paying industry classifications, or were part-time jobs, and so hourly earnings were unchanged. In fact, the household data shows part-time jobs have accounted for nearly 65 percent of the jobs added over the past three months.
Returning to our markets, one thing that could push our mortgage rates around this week is the $78 billion of supply to bid. Tomorrow we have $38 billion in 3-yr notes to sell, Wednesday $24 billion in 10-yr's, and on Thursday $16 billion in 30-yr bonds. Aside from that, the most significant economic data this week will be Friday's Retail Sales report, along with Industrial Production and Capacity Utilization. Import Prices, the Trade Balance, and Consumer Sentiment will round out a light week - there is nothing today. For those that drive, gasoline prices are the highest they've been since October 2008. Anyway, the news out of Europe has temporarily reversed the flight to quality, and we find the 10-yr yield back up to 3.55% and mortgage prices worse by about 50 bps.
There are lots of poll taken to gauge public opinion. The latest telephone poll directed by Rick Perry, the Texas Governor, asked whether people who live in Texas think illegal immigration is a serious problem:
29% responded, "Yes, it is a serious problem."
71% responded, "No es una problema seriosa."