Originator Feedback From The Trenches; FHA Broker/Lender Approval Guidance; HomePath Update; Citi Non-Agency Lending; 95% MI

My comments yesterday about the general state of mortgage bankers and brokers drew some interesting responses....

One reader wrote, "What actual data exists to show the percentage of brokers and bankers were any more dishonest than accountants, carpenters, mechanics, appraisers, bond traders, or whatever the reader does for a living? Brokers, by their nature, are small businesses operating in the communities they serve. It is unlikely they will treat someone unfairly that they will see in the supermarket the next day, when their reputation in the community is everything to their survival."

Another comment was: "To blame brokers, mortgage bankers, real estate agents, or appraisers for the bubble and subsequent bust is naive - no one can provide data that supports the hypothesis that appraisers across the nation all colluded, for example, or all became dishonest at the same time leading to the over appreciation of every market in the nation - which is the justification for HVCC."

And another: "Brokers keep the banks honest by shopping them in attempts to secure the best rate for the consumer. If broker compensation is limited, there will be little financial incentive for brokers to spend the time and resources necessary to process a loan and find the best rate and product for the consumer. It's like trying to reduce health care costs by mandating doctors only charge $100 per operation, and attracting skilled doctors into the profession."

Annnnnnnd yet another: "I've been doing 20-Hour SAFE ACT classroom training for the MBAA. One of the points I make to brokers and bankers is that once they have their Federal MLO license, they will have earned a very impressive credential attesting to their competence and training.  The stringent licensing, screening, training and testing requirements will make entry into the industry much more difficult in the future and will deter many of the marginal players who have tainted the reputation of industry. MLOs with mortgage brokers and mortgage bankers will have an edge over their bank/depository counterparts because bank based MLOs are not tested and trained to the same extent.  I am seeing bank MLO's working to obtain a personal license so they will be free to move to the mortgage broker or mortgage banker side as opportunities arise."

It sounds like things have changed for the new FHA requirements and timetables for broker/lender FHA approval.  HUD has delayed the original May 20th implementation of the non FHA approved brokers being able to start originating loans through a sponsored lender, and the new date is now rumored to be September 20th.  The FHA Connection is not ready to accommodate the required fields to accommodate this. And on 9/20 any "mini correspondent" customers will be required by HUD to have a DE underwriter on its staff, obviously with test cases completed. This will supposedly still apply if the relationship is non-delegated.

I received verbal notification that CitiMortgage's wholesale channel is pulling out of the non-agency jumbo mortgages through loan brokers.

Wells Fargo's correspondent channel never did away with offering to buy 95% MI loans as long as their sellers could find MI companies who would go up to 95% LTV. Most MI companies backed down from the 95% levels, but the reason I bring this up is the solid rumor that Wells' wholesale may soon unveil programs that go to 95% for brokers in certain geographic areas. MI companies are moving back up the LTV curve. Stay tuned for details!

Starting earlier this week both Wells Fargo's correspondent and wholesale channels began purchasing loans originated under Fannie Mae's HomePath mortgage program - prior approval only, no delegated underwriting. As with other investors, however, there are no published Fannie guidelines on the program! For Wells, the HomePath Mortgage program is available for purchase transactions, fixed-rate and ARM loans, loans with the IO payment feature, owner-occupied, second homes or investment properties, single family attached, detached, condo, co-op and PUD's. Fannie HomePath LTV's go up to 97% for primary residences and 90% for second homes and NOO's. There are, of course, minimum FICO score requirements: 620 for 80% LTV's, 660 up to 97% LTV's and scores are higher for high balance conforming loans. There are no appraisals required under this program since the sales price is used. "Wells Fargo may not receive or review an appraisal for loans originated under this program. If an appraisal is included in the loan file, the loan will be declined under the HomePath program." (Apparently receiving an appraisal nullifies the reps and warrants Wells has with Fannie.)

Wells wholesale released a torrent of updated features to its Brokers First website, with new and exciting data fields, titillating appraisal input methods, and sleek fee confirmation tabs. On a more serious note, Wells' wholesale changed their flipping policy. Remember that a flip transaction is "a purchase transaction on a property that has been acquired by the seller in the past 12 months and is being re-sold at a higher price - acquisition of title to the date the borrower signed/dated the purchase contract." Generally, flip transactions are ineligible for Wells Fargo conventional financing but there are exceptions. For example, sales of properties by Government Sponsored Enterprises (GSEs), state or federally chartered financial institutions (banks or lenders), mortgage insurers or federal, state or local government agencies, or relocation deals, or sales of properties where the property transfer to the current seller occurred at least ninety days prior to the current purchase date, and the increase in sales price is less than 10% annualized (example 90 days = 2.5%), and the increase in sales price is explained in the appraisal and supported by an additional Wells Fargo-approved appraisal review product.

But Wells' wholesale, after May 24, for the FHA program if the seller is the owner-of-record 90 days or fewer and the sales price of the property is 20% greater than the seller's acquisition cost (what the seller paid for the property), the loan/borrowers will be eligible for the FHA Property Flipping Waiver if they satisfy the requirements of the FHA Property Flipping Waiver policy and meet several Wells Fargo requirements. These include justifications of the increase in value, additional appraisals, etc.

Wells correspondent told clients that after June 13 there will be new loan score requirements for Freddie Mac's Home Opportunities program for manually underwritten loans. Minimum FICO's are being raised from 660 to 680 for loans secured by a one-unit property and the transaction is a rate/term refinance, or the product is a 5/1 ARM.

The Mortgage Bankers Association of America released its weekly applications survey. Talk about volatility in the numbers! The number of mortgage applications in the U.S. dropped last week by 1.5% in the week ended May 14. Purchase apps fell 27%, but the refinancing measure rose 15%. Go refi's!

Speaking of volumes, Navy Federal Credit Union, the largest credit union based on mortgage origination, funded only about $850 million in residential loans during the first quarter, a 60% decline from the same period a year ago

Investors buying fixed income securities have taken over the markets like a cold sweeping through a kindergarten class. Does it really matter that we have yet another release of some Fed minutes, this time from the meeting less than a month ago? A release from the economics team at Comerica Bank sums things up nicely, in case someone asks you during Happy Hour tonight about the economy. "Economic reports show with increasing clarity that a sustainable expansion is taking hold in the United States." But Comerica's economists don't see any Fed tightening, impacting overnight rates, until early 2011 due to the turmoil in Europe. Here in the US, in spite of some encouraging numbers, "economic conditions don't yet create a strong case for an early change in Fed monetary policy" and the Fed will "do what it can to help European authorities to calm their financial markets."

Treasury 10-year note yields hit 3.34%, are the lowest they've been all year, the euro is at a 4-yr low versus the dollar, and the stock market is heading down. Mortgage lenders are scrambling to hold onto locks that they took only a week ago, and everyone who predicted rates were heading higher are justifying why they were wrong. ("Who could have predicted these European issues?") Germany said it will ban naked short sales of European government debt and 10 financial companies - and if German officials are nervous, that is not a good thing. The Fed raising interest rates wwould intensify the downward pressure on the euro, potentially destabilizing already fragile market sentiment.

This morning we have already had the Consumer Price Index. But really, does a few tenths one way or another make a difference given the troubles in Europe? In March the number was +.1%, with a year-over-year reading of +2.3%. This morning's CPI, expected to be up slightly, actually dropped by .1%. Are we going to experience deflation? It is a lagging economic indicator, but still, it will give the press something to talk about. Given the huge rally yesterday, it is not surprising that the market, regardless of no signs of inflation, is giving back a little. Currently the 10-yr is at 3.38% and mortgage prices are maybe .125% worse. READ MORE

On their wedding night the young bride approached her new husband and asked for $20.00 for their first lovemaking encounter. In his highly aroused state, her request was readily agreed to.

This scenario was repeated each time they made love, for more than 30 years, with him thinking that it was a cute way for her to afford new clothes and other incidentals that she needed.

Arriving home around noon one day, she was surprised to find her husband in a very drunken state. During the next few minutes, he explained that his employer was going through a process of corporate downsizing, and he had been let go. It was unlikely that, at the age of 59, he'd be able to find another position that paid anywhere near what he'd been earning, and therefore, they were financially ruined.

Calmly, his wife handed him a bank book which showed more than thirty years of steady deposits and interest totaling nearly$1 million. Then she showed him certificates of deposits issued by the bank which were worth over $2 million, and informed him that they were one of the largest depositors in the bank.

She explained that for the more than three decades she had 'charged' him for sex, these holdings had multiplied and these were the results of her savings and investments.

Presented with the evidence of cash and investments worth over $3 million, her husband was so astounded he could barely speak, but finally found his voice and blurted out, "If I'd had any idea you were doing, I would have given you all my business!"

That's when she shot him.

You know, sometimes, men just don't know when to keep their mouths shut.