Don't Hold Your Breath For HELOCs; Extra Margin In Rate Sheets; 2009 Tax Transcripts Available; Reminder on Originator IDs

By: Rob Chrisman •

Practically every investor put out rate changes for the better yesterday, even after we rallied from the jobless claims and manufacturing data. Even stocks improved. "Fannie 4's", which generally contain 30-yr 4.25-4.625% mortgages, are now above par. Although the security price is now trading at a premium (i.e., rebate), most investors are not passing along the entire gain in price to originators, as you'd expect. Secondary Marketing managers who are on the ball, however, are constantly comparing the price execution between putting the loans into securities and selling individual loans to investors. "Cash" execution (either loan by loan or bulk sales, instead of securitizing the loans) may be subject to price caps and/or maximum pass through rates that could result in the retention of extra servicing.  As an example, Fannie Mae, due to the high MBS prices out there, ratcheted up its cash price caps to 105! READ MORE

Here in Alaska where I am currently vacationing, it is illegal to whisper in someone's ear when they are moose hunting. (Don't ask me why - probably the result of some senator's hunting accident years ago.) The laws dealing with mortgage fraud are much more serious, however, and the FBI's announced mortgage fraud operations this week have certainly created some headlines.

The number of FBI investigations into alleged mortgage frauds more than doubled, to more than 3,000 this year from around 1,200 in fiscal year 2007. "Operation Stolen Dreams"

"Due to improving market conditions", mortgage insurance company PMI announced that 105 MSA/MSADs have been removed from the PMI Distressed Markets. I guess that PMI is comfortable enough with places like Los Angeles, San Diego, Chicago, Boston, Seattle, Indianapolis, New York City, and Washington, DC... sounds like a Bon Jovi song shout-out.

HUD released more information about its FHA manufactured housing regulations. More specifically, the document addresses "Manufactured Home Construction and Safety Standards, Test Procedures for Roof Trusses". HERE is the release.

Wells Fargo's broker clients were reminded that FHFA's regulations will require NMLS Loan Originator and Loan Originator Company ID data for all applications dated on or after July 1, 2010. "Wells Fargo will require this ID data for all applications - with the exceptions of states that have not yet transitioned to the NMLS, and for brokers governed by federal regulations." MORE DETAILS

Oh, and by the way, 2009 tax transcripts are now available from the IRS. Enter 2009 on the IRS 4506-T form or your loan submission will be considered incomplete and investors such as Wells Fargo will place a stop on the loan until completed documents are received.

Crying out for home equity lines? Although some investors offer them, most do not. Don't look for that to change any time in the near future as investors are dealing with many buy-back issues. That being said, reports from rating agencies such as Fitch indicate that home equity loans and lines past due 30-89 days or more have declined for many institutions. It is nice to see the trend, but risk departments at financial institutions are not enamored with the product - and it is hard to push it in front of the board of directors. At year-end 2009, FDIC-insured institutions collectively held approximately $842 billion of junior liens and home equity loans, averaging almost 12% of total gross loans.

The U.S. Federal Reserve said, "Whew!" yesterday after winning another battle to maintain its independence. Congress, in crafting a final Wall Street reform bill, dropped a plan to make one of its top officials a political appointee. The U.S. central bank will actually see its powers increase under the sweeping overhaul of financial regulation. A central element of the bill would give regulators clear authority to seize unstable financial firms before they threaten the economy in an effort to avoid a repeat of the recent crisis.

Although it seems pretty quiet out there, and MBS trading volumes appear a shade below normal, there continues to be news that shows the US economy is still pretty weak. And, usually, a weak economy helps keeps rates low (forgetting for a moment the size of our deficit and our reliance on foreign purchases of our debt...). There is no inflation, unemployment continues to plod along, and even the Philly Fed Index yesterday dropped. If we are staring at a double-dip scenario, why is the stock market hanging in there? Profits are better than expected due to cost cutting, temporary worker hiring has increased, and investors have to put their money somewhere, right? Of interest to note is that the Conference Board's Leading Economic Indicators rose 0.4% in May and last month's decline was revised to flat from -0.1%. A slow recovery...READ MORE ABOUT THE MARKETS


The Governor of California is jogging with his dog along a nature trail. A coyote jumps out and attacks his dog. Here's how the situation played out...

  1. Governor starts to intervene and gets bit, then reflects upon the movie "Bambi" and realizes he should stop; the coyote is only doing what is natural.
  2. He calls animal control. Animal control captures coyote and spends $200 testing it for diseases and $500 to relocate it.
  3. He calls veterinarian. Vet collects dog and spends $200 testing it for diseases.
  4. Governor goes to hospital and spends $3,500 getting checked for diseases from the coyote and on getting bite wound bandaged.
  5. Running trail gets shut down for 6 months while Wildlife Services conducts a $100,000 survey to make sure the area is clear of dangerous animals.
  6. Governor spends $50,000 of state funds implementing a "coyote awareness" program for residents of the area.
  7. State legislature spends $2 million investigating how to better handle rabies and how to possibly eradicate the disease.
  8. Governor's security agent is fired for not stopping the attack and for letting the Governor intervene.
  9. Cost: $75,000 to train new security agent.
  10. PETA protests the coyote relocation and files suit against the state.

Here's how is played out in Arizona...

  1. Governor shoots coyote and keeps jogging. She has spent $0.50 on a .45 ACP hollow point cartridge. Buzzards eat dead coyote.

Any wonder why California is broke?