Perspective on Fannie & Freddie's UMDP; Flood Insurance Expiration; Fed's Credit Card Website; More Lender Updates!
Ninety five percent of my news comes from either People Magazine ("Sandra Bullock & Jesse James Split") or FHFA ("FHFA, Fannie Mae, and Freddie Mac Announce Uniform Mortgage Data Program") - whichever attracts my attention at 4AM. Given that this is a serious mortgage publication, emphasis is put on agency news of course (Sandra, I am still here for you if you need a shoulder to cry on)...
The Federal Housing Finance Agency (FHFA) announced a major new initiative by Freddie and Fannie to "improve the consistency and quality of data for appraisals and other loan information. This will enhance the depth of collateral, borrower and loan data submitted to the Enterprises. The Uniform Mortgage Data Program (UMDP - another acronym to remember) is a long-term, joint effort to create improved and uniform data standards and collection processes." It is a great thing to have uniform standards, although this is obviously another step that will make mortgage bankers wonder why we have both Fannie and Freddie. For this project, each of them gathered data independently from seller-servicers, appraisers and other market participants and loans sold to or guaranteed by them and will include more complete and consistent data on loan characteristics, borrower information; the property securing the loans; and the identity of the parties creating the transaction.
The UMDP does not replace the LQI, but rather it implements two of the objectives: electronic submission of appraisal data and collection of additional loan data in an updated format. From MND Newswire: Fannie & Freddie are "attempting to reduce the number of new loan repurchase requests by locating ineligible loans before they are purchased. This means there is going to be a healthy market for approve/ineligible agency loan paper. Getting acquainted with a friendly scratch and dent desk seems like a smart idea. Perhaps this is where private funding sources will re-inflate the non-agency secondary mortgage market?"
As if we don't have enough to worry about, HUD reminds us that the Federal Emergency Management Administration's (FEMA) authority to issue flood insurance policies under the National Flood Insurance Program (NFIP) will expire at midnight on May 31, 2010 unless it is reauthorized by Congress and signed by the President before then. FEMA issues guidance for lapses in authority, which can be found at http://www.fema.gov/business/nfip/ FHA will continue to insure single family mortgages on homes where flood insurance is normally required but was not secured during a lapse in flood insurance coverage authority. However, FHA-approved lenders should have an appropriate flood insurance policy application on file and collect and remit premiums pursuant to FEMA's guidance when an insured mortgage is being closed.
Looking for a credit card? Knock yourself out on this website.
In an interesting move by the Federal Reserve, they have placed 300 credit card company agreements (mostly companies with 10,000 or more open credit card accounts) online in a searchable database for public viewing. Can something for mortgages be far behind?
Recently US Bank's National Wholesale Sales Division has made several changes for originators brokering to them. A week ago USB came out with revised credit scores for all government loans, both FHA and VA. FHA Streamline Refinance (non-credit qualifying) Non LP or DU now require a 640 minimum FICO score (loan amounts over $417,000 require a minimum 680 FICO score). For VA IRRRL loans USB increased current FICO score minimums by 20 points. FHA & VA loans with LP or DU AUS approval had no minimum FICO score changes, nor did manually underwritten loans (non LP or DU). Keep in mind that the FICO score must be based upon a tri bureau merged report with a minimum of 3 trade lines evaluated for a period of 12 months or more. Its rate lock policy was also reviewed. "If the loan is locked with USBHM, and subsequently closes, the loan must be delivered to USBHM. We expect a minimum of 70% of all locked loans to be delivered to U.S. Bank Home Mortgage. Customers delivering less than 70% of their locked loans create hedge cost losses for USBHM, difficult to absorb... Customers in violation of this policy could run the risk of termination". USB also posted its revised lock extension and re-lock policy. After June 1, to extend a lock 7 days will cost .125, 15 days will be .375, 30 days will be .5 (if you need more time past that, call USB). A maximum of two (2) extensions only will be granted on any single loan. A re-lock of a loan may be requested following an expired lock period, and the new price will be the worse of market at the time of re-lock or the original lock.
Union Bank has also been making changes for brokers. Recently the company told brokers that it revised the Broker Price Opinion policy ("If the borrower is purchasing a new primary residence and retaining their current residence, and the borrower's current residence must be appraised to determine the amount of equity, a drive-by appraisal is required."). For salaried borrowers, UB will perform a verbal VOE, and UB added guidelines for when rent loss insurance on a non-owner occupied property is required. Union Bank, dealing as other investors are with volatility, told its brokers that all loans whose rate lock has expired are subject to the "higher of" rule, unless UB has excessive origination cycle times. Its rule states that on the day following rate lock expiration, except when expiration is cause by UB, the borrower is subject to the higher of the original interest rate or the current interest rate on the day following expiration. And brokers should send their loan packages in soon - packages not received within 30 days of the lock expiration date, or after the expiration date, will be re-priced using this method for a 60-day lock.
And if a broker wants to break a lock with UB, they have three options, all of which are during the original lock period and after the loan has been submitted and received by UB but before docs are drawn. The rate can be split, without cost, between the original and the current rate as long as there is a .5% difference, .125% higher than current for a reduced rebate of +.125% for loans with rebates +.125% cost to points, or the rate can be reset to current rate. (Rate lock break options are not allowed on loans where packages are not received within 30 days of the lock expiration date.)
Toll Brothers, known as a builder in the luxury home market, reported that losses for the second quarter (through April) had narrowed. But still, homebuilder red ink flows: Toll Brothers lost $40 million in the quarter. Revenue fell 22% to $311.3 million from $398.3 million. Write-downs in the latest quarter were $42.3 million, a bit more than a third of the $119.6 million a year earlier.
Starting Tuesday Nationstar Mortgage will require Brokers to order 4506-T verifications through its appraisal ordering portal, but Nationstar will incur the fees for the 4506-T verification orders.
On June 1 Flagstar Wholesale Lending, in accordance with Freddie Mac updates, will be suspending all Freddie Mac IO option loans. Any loans registered under that product type must be locked no later than Friday, and broker or correspondent loans must close, fund and disburse on or before June 4, 2010. Flagstar also told its clients that starting July 1, it will no longer accept fax submissions to its underwriting department. Customers can submit their documents electronically through its "Paperless File Manager", through "DocVelocity", or through "Paperless Document Transfer".
Rates certainly continue to surprise folks who expected higher rates by this time in 2010. The 10-yr neared 3.10%, closed at the lowest yield in over a year and some were beginning to yap about the 10-yr down into the 2%'s. We have a different story today, as hedging pipelines continues to be difficult, as the 10-yr yield has shot back up into the 3.20%'s. Overall the news yesterday helped bonds: continued European fears, the Euro hitting an 8-year low versus the yen, Korean fears, the Case-Shiller index lower, Consumer Confidence slightly higher. We also had a $42 billion 2-yr auction, which is now under water. At one point the DOW was down over 300 points and the 10-yr was up a point. Mortgage prices did well, relative to Treasury prices, as servicers apparently have been buying pools. Large servicers and investors are, of course, worried about prepayment risk of recently originated loans. Of course, one can argue that everyone who could possibly refinance and prepay their mortgage already has. Keep in mind that there is a large amount (in the trillions) of good quality mortgages at higher rates who may be interested in refinancing at no cost. Regardless, new origination being seen in MBS's seems to be running at about $1.5 billion a day.
Today we have already seen the report on mortgage applications for last week. Apps were up over 11%, with refinancing (no surprise at these rates) up 17% but purchase applications are at their lowest levels since 1997 - Realtors watch out. Of total applications, refinancing accounted for over 72%!. New Home Sales have also been released, they were much better than expected. READ MORE. Also on tap today is $40 billion 5-yr auction, which typically goes pretty well. Durable Goods came out at +2.9%, with a back-month revision higher from -1.3% to unchanged. But ex-transportation the number was down, so cars and planes played a big role in this number. Stocks are higher but off their session highs and the 10-yr yield is 6 basis points higher at 3.216%, mortgage prices are down between .125-.250.
A Catholic priest, a doctor, a rich businessman and a mortgage banker were waiting one morning for a particularly slow group of golfers in front of them.
The mortgage banker fumed, "What's with those jerks? We're waiting fifteen minutes between shots!"
The doctor chimed in, "I don't know, but I've never seen such poor golf!"
The rich businessman called out, "Move it, time is money!"
The Catholic priest said,"Here comes the greens keeper. Let's have a word with him. Excuse me, sir! What's wrong with that group ahead of us? They're rather slow, aren't they?"
The greens keeper replied, "Oh, yes. That's a group of blind fire fighters. They lost their sight saving our clubhouse from a fire last year, so we always let them play for free anytime."
The group fell silent for a moment.
The Catholic priest said, "That's so sad. I think I will say a special prayer for them tonight."
The doctor said, "Good idea. I'm going to contact my ophthalmologist colleague and see if there's anything that he might be able to do for them."
The rich businessman replied, "I think I'll donate $50,000 to the fire fighters union in honor of these brave souls!"
The mortgage banker said, "Why the heck can't they play at night?"