Originator Identification Requirements; Mortgage Fraud Report; Flood Insurance Saga; Condo Guidance; FHA Annual Premiums

Sometimes the best intentions go awry.

For example, it is a well-known fact that storing food in the refrigerator usually helps preserve them - except bread. Someone's intention may be to keep bread around longer. Refrigerator temperatures inhibit mold growth in bread, but the refrigerator air draws the moisture out of bread and it actually becomes stale faster. (Sealing it in plastic in the refrigerator only seals moisture in, which helps mold growth.)

Many years ago it was the government's intention to promote home ownership by asking the agencies to move down the credit curve, making home financing available to "harder-to-finance" groups of borrowers. How did that work out?

Federal Housing Finance Agency (FHFA) regulations will soon require additional Loan Originator Identifiers on all Agency loans. In compliance with FHFA, on all apps after July 1, information on loans will also include Loan Originator ID and Loan Origination Company ID. There is some state-by-state variance with this. But for the Nationwide Mortgage Licensing System (NMLS), no action is required "of any mortgage loan originator who is an employee of a federally insured depository institution or an owned and controlled subsidiary of such a depository institution that is federally regulated."

Anyone interested in making or buying FHA loans on condominiums should know that HUD sent out an update for technical support. It is probably a good number to throw in your antique rolodex. Now not only can you e-mail info@fhaoutreach.com but you can also call (800) 225-5342 to reach the FHA Resource Center. "The FHA Resource Center will provide responses to general inquiries received from consumers and industry partners.  Responses requiring technical knowledge will be escalated to the jurisdictional Homeownership Center for review and response." Prior to that, "check to see if your question is already included in the Condo FAQs currently posted on the web HERE." And you can always visit this site to see if the project is approved HERE.

The House of Representatives has just approved by a 406-4 vote the Federal Housing Administration Reform Act, designed to add more financial strength to the FHA. The FHA now has the authority to raise the ceiling on the annual premiums it charges borrowers for the FHA guarantee and raises the limits on multifamily housing in certain high cost communities, among a few other things.  As we all remember in early April the upfront premiums went from 1.75 percent to 2.25 percent - but not the annual premium. Now the FHA has the ability to increase its annual premium to 1.50 percent of the unpaid balance of the loan. This shift will allow for the capital reserves to increase with less impact to the consumer because the annual MIP is paid over the life of the loan instead of at the time of closing.

SunTrust sent out a new bulletin, pertaining to its Portfolio Affordable Mortgage Housing Program, with revised permanent resident alien guidelines (a permanent resident alien borrower will need an "INS Form I-551, Alien Registration Receipt (green card), with an unexpired date on the front. A minimum of two (2) years must be remaining at the time of loan application. Or "if the borrower does not have a green card, an unexpired passport with an unexpired stamp reading, "Processed for I-551. Temporary Evidence of Lawful Admission for Permanent Residence. Valid until [date]. Employment Authorized" is acceptable as long as there is a minimum of two (2) years remaining at the time of loan application") a clarification regarding ineligibility of foreign national borrowers, and condominium and HUD median family income limits.

AmTrust told its clients about a few change to its "Waiting Period after a Deed-in-Lieu, Pre-foreclosure, and Short Sale" starting at the end of this week. To re-establish credit a 4 year period is required for a deed in lieu of foreclosure borrower, which does not follow Fannie's recent change. For pre-foreclosure and short sales, the period required to re-establish credit is measured from the completion date, with timeframes based on the LTV. And for AmTrust, as with everyone else, on or after June 19th qualifying rates for 3/1 & 5/1 ARMS are being updated with DU 8.1.  

"Reg B"? From here on AmTrust "will send Regulation B notices directly to applicants informing them of the adverse action taken due to an incomplete application. Regulation B requires that a credit decision is made 30 calendar days from receipt of a completed application and that creditors notify applicants of action taken before this 30-day deadline." For all Table and Warehouse funded transactions, "Regulation B notices for adverse action taken due to incompleteness will be automatically sent when the complete credit package is NOT submitted to AmTrust on or before 28 calendar days from the loan's Initial AU Submission date."

Friday, East West Bank of Pasadena, California, assumed all the deposits of Washington First International Bank, Seattle, Washington. And while we're talking about shutting companies down, in Kentucky the state Department of Financial Institutions issued a cease-and-desist order against Home Ownership Possibilities for Everyone LLC, or HOPE, from continuing to operate in the mortgage business. Per the state, the company was not licensed or exempt from needing a license, charged illegal upfront fees, and made misrepresentations to customers or concealed facts. If the state is correct, call HOPE's management foolish or call them gutsy, just don't call them for a loan. (State law says application fees may not exceed $100 and bars up-front fees.)

This week the Financial Times tells us that the FBI has told them (you following this) that we can expect to see a sweep of mortgage fraud perpetrators this week. Charges are expected to be leveled over offenses ranging from pushing borrowers to lie about their income on mortgage applications to providing homeowners with false information about foreclosure rescue programs, the newspaper said. READ MORE

The flood insurance saga continues, and no, I haven't heard any updates other than State Farm Insurance is pulling out of flood insurance on October 1. The company no longer will handle claims and billing for new or renewing policies as part of the national flood insurance program, moving administration of those policies back to the federal government. "State Farm says there will be a minimal impact on customers, who will be able to buy a policy through a State Farm agent even after the switch."

How are investors handling this latest rally in mortgage prices? Normally skittish about prepays, analysts are seeing lower levels of prepayment fears, as I mentioned last week, given how well higher coupon MBS's are doing. But, unfortunately for brokers, there also the expectation that the primary-secondary spread will widen in a rally, reducing the chance for refi's. Put another way, mortgage companies may just add to their profit margin rather than follow MBS's prices higher. Investors continue to buy mortgage-backed securities investors need interest rate duration in a liquid form, which mortgages provide. On Friday spreads widened a little, which means that MBS yields did not do as well as Treasury yields. But, nonetheless, mortgages have been doing well. (As a side note, the yield spread between European corporate debt and US corporate debt is the widest on record, signaling that investors are not confident that European lawmakers can settle their financial crisis.)

How about these rates? A friend of mine who runs a branch originating mortgages says, "If you can't do loans with these rates, you'd better find something else to do." Of course, there are many constraints, but rates are not one of them being around 4.75%. With the yield on the 10-yr down into the low 3%'s, mortgages have gone along for the ride. Fixed income prices are also taking their cues from the equity markets. Despite the historically low rates, many homeowners have already refinanced recently, remain underwater on their mortgages, have uncertain job situations, or have damaged credit following this downturn, and therefore may not qualify to refinance.

Friday we found out that the US consumer is not purchasing quite as much as analysts had thought they were. For good news, however, the University of Michigan says that consumers are in a better mood, and rates may be helping. We got a nice little rally Friday (even the dollar was up), given that dreary Retail Sale of -1.2% instead of the expected +.2%, and 10-yr notes were up .5 and several investors changed prices. (Countries in Europe are insolvent, and our retail sales being up or down a little is more important?)

Now we have economists talking about a double-dip recession in this country: stagnant employment, housing foreclosures, Europe dragging the U.S. economy down, stocks falling, etc. There have been very few U.S. double dips, however, throughout our economic history. One can argue that industrial production here is recovering, low rates are helping many segments of the economy, including those who have recently refinanced. Revolving debt, such as credit cards, is declining, and non-revolving debt, such as car loans, is increasing - but overall consumer credit is declining. Banks continue to tighten terms and conditions on consumer loans such as extending fewer loans to customers that do not minimum credit levels. Times are particularly difficult for small firms as standards and terms are still tightening and demand is still declining for small business credit card loans. Thus, both the supply and demand for new loans remains constrained. READ MORE

For economic news, there is none scheduled for today. Tomorrow we'll see some import & export price information, along with some manufacturing numbers out of New York. Wednesday will contain the Producer Price Index, Housing Starts, and Industrial Production and Capacity Utilization. Thursday is the big day with Initial Claims, the Consumer Price Index, Leading Economic Indicators, and the Philly Fed survey. Some say that the inflation reports are important, others say that inflation is not a concern, and are more interested in the housing data, industrial production and jobless claims numbers. Either way, stay tuned! ECON CALENDAR

The room was full of pregnant women with their partners, and the class was in full swing. The instructor was teaching the women how to breathe properly and was telling the men how to give the necessary assurance to their partners at this stage of pregnancy.

She said, "Ladies, remember that exercise is good for you! Walking is especially beneficial - it strengthens the pelvic muscles and will make delivery that much easier!"

She looked at the men in the room and told them, "Gentlemen - remember - you're in this together - it wouldn't hurt you to go walking with her."

The room suddenly became very quiet as the men absorbed this information.

Then a man at the back of the room slowly raised his hand.

"Yes?" answered the teacher.

I was just wondering - is it all right if she carries a golf bag while we walk?"