Investor Update After Investor Update: Overlays and Bulletins Galore
I love releases from the Federal Reserve Bank of New York regarding Capital Markets. One came out yesterday...
"Jump-Robust Volatility Estimation using Nearest Neighbor Truncation". The summary began, "We propose two new jump-robust estimators of integrated variance based on high-frequency return observations. These MinRV and MedRV estimators provide an attractive alternative to the prevailing bipower and multipower variation measures. Specifically, the MedRV estimator has better theoretical efficiency properties than the tripower variation measure and displays better finite-sample robustness to both jumps and the occurrence of "zero" returns in the sample."
Thanks for clearing that up guys!
I wish I could say all is quiet with the investors out there - but I can't. So if you don't care about underwriting and policy changes, reminders, and overlays, skip to the end of today's write-up. As always, the actual bulletin is the most precise source of information! In no particular order...
Fannie Mae launched a new consumer Web site, "KnowYourOptions.com", to educate homeowners about their options to avoid foreclosure and how to get help. One can go to https://www.efanniemae.com/sf/kyo/index.jsp Fannie also issued a release notification for new EarlyCheck access options that will be implemented 9/25 in support of the Loan Quality Initiative (LQI). "EarlyCheck was created in response to customer feedback about the need for assistance in identifying and correcting potential eligibility and/or data issues as early in their processes as possible." https://www.efanniemae.com/sf/technology/ou/earlycheck/pdf/ecrlsnotif.pdf
Freddie Mac announced "two new Guide Exhibits that map our existing required loan delivery codes to their respective MISMO data point and valid value equivalents. These temporary Guide Exhibits are designed to assist you with implementation planning and do not change any of our current Guide delivery requirements". Freddie encourages clients to read the bulletin - apparently it is a long-term project since the MISMO-based loan delivery data requirements don't take effect until late 2011. http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1018.pdf
Last week Wells Fargo's wholesale channel told its brokers that, "In accordance with FHFA regulations related to the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (S.A.F.E. Act), Wells Fargo will require Nationwide Mortgage Licensing System (NMLS) data for Tennessee, Alabama, Michigan, Missouri, Nebraska, New Mexico, and Oregon. (These states join several others where Wells already requires NMLS data.) Wells also alerted brokers as to changes for Fannie Mae messages and processing for Social Security Number and occupancy information, August deadlines for purchase closing commitment & FHA Streamline Refinance Transactions, and reminded brokers of the HVE expiration dates for the Freddie Mac Relief Refinance Mortgage Program.
On the correspondent side, Wells gave clients an update on third party flood certificates, reminded them that remedies under the Loan Purchase Agreement are not affected by loan modifications, and announced online access to Wells' new Client Performance Scorecard will be coming in mid-August.
Like Citi, Wells, and every other investor, Bank of America has a set of overlays for its clients. For underwriters, they add job security and at the same time seem to decrease an underwriter's life expectancy! Short sale agreements are required to ensure terms of short sale to be met, for BofA paying off non purchase money second TDs prior to closing or the loan will be considered cash out, all loans with rapid appreciation will be reviewed, and correspondents must provide a modified HELOC agreement from the second TD holder, not just notification letter of modification. Borrowers with disputed credit accounts must have the dispute resolved, non-permitted additions are not accepted, for its DU Refi Plus program the maximum cash out allowed is $250,000 but BofA does allow high balance loans under DU (not LP), etc., etc.
Chase told its lenders that, "In order to align our Non-agency Interest Only products with our Agency Interest Only products, Chase Correspondent is making updates to the Non-agency Interest Only products effective August 16, 2010, as follows: reducing the maximum DTI, reducing the maximum LTV/CLTVs, increasing the minimum reserves, and reducing the maximum LTV/CLTVs for Non-Permanent Resident Aliens."
Yesterday I misstated information regarding ING's change to its IO pricing. The IO adjustment is now a 0.375% add to the interest rate, as opposed to previous .5 addition to the price.
Flagstar Bank is no longer sponsoring broker customers for Desktop Originator. "Correspondents that are currently sponsored or request new sponsorship must maintain the following: a 'Star Rating' of 3.5 or higher and 30% of all DO submissions with Flagstar Bank selected as the lender must result in a funded loan with Flagstar Bank. Flagstar also reminded clients that 'due to recent clarifications regarding cash back, several changes to the Freddie Mac Relief & Open Access programs are effective immediately, such as the maximum loan amount will be calculated based on the good faith estimate and payoff letter received at the time of underwriting. The loan expiration date will be based on the date of the payoff letter plus 10 days not to extend past the end of any month. If a borrower makes additional payments, or there are any other changes or updates to the pay off letter, a new pay off letter will be required and loan must be re-submitted to underwriting. And so forth. Some of Flagstar's policies are overlays and "supersede" any FHA and VA policies. This guideline is effective for all loans received in Underwriting on or after August 16, 2010. To improve funding and loan purchase turn times, all earnest money deposits must be verified before the underwriter will issue a "clear-to-close" status for FHA and VA purchase transactions, regardless of the amount or percentage of the earnest money deposit.
Franklin American sent its clients an updated sample Appraisal Compliance Certification form. (This form has also been posted on FAMC's website at www.franklinamerican.com for future reference.)
SunTrust is now waiving the declining market reductions to the maximum LTV/TLTV on "the Key Loan Program rate/term refinance transactions when the borrower's current loan is in SunTrust's portfolio". With a few caveats - prior SunTrust portfolio transactions on condotels are not eligible, condominium and PUD reviews are not required on SunTrust portfolio to SunTrust portfolio rate/term refinance transactions, etc. - check out SunTrust's bulletin for more details on occupancy requirements and others. SunTrust also told its clients that borrowers with credit scores as low as 720 may be eligible for the Key Loan Program, and that correspondent clients are now able to originate Jumbo Solution second mortgage transactions for properties located in the state of Minnesota.
GMAC Bank is no longer accepting settlement requests via e-mail. "All requests for closing should be submitted to GMACB using our Imaging Upload tool. Freddie Mac Relief Refi-Open Access and DU Refi Plus Product Updates."
Caliber Funding has made changes to its Conventional and FHA underwriting guidelines. Caliber's clients are best advised to read the bulletin, but the changes encompass the ability to use exterior-only DU property inspection reports, how "When DU recommends Form 2075, Fannie Mae relies on the property valuation performed by the proprietary automated property valuation model within DU, and an appraisal of the property is not required, unless the property inspection reveals apparent adverse physical deficiencies or conditions, apparent adverse environmental conditions, or that the subject property does not conform to the neighborhood", appraiser requirements when this form is recommended by DU, new and expanded use of the DU Property Inspection Waiver (PIW) based on LTV, occupancy, etc., the use of the Exterior-Only Inspection Residential Appraisal Report - FNMA/FHLMC Form 2055 - in the state of Texas, the documentation of rental income, and adjusted its FHA underwriting guidelines concerning streamline refinances. Caliber also reminded brokers of its minimum loan amount of $40,000 for all program options.
Do brokers need another wholesale investor? The folks at Fairway Independent Mortgage Corporation, think so, and announced Fairway - who did over $3 billion last year - is entering the wholesale market with select banks, credit unions and brokers. For further information please contact Dan Cutaia danc@fairwaymc.com.
PennyMac Mortgage Investment Trust reported a Q210 net income of $8.2 million, up dramatically from the $1.3 million earned in the 1st quarter. PennMac, founded by ex-Countrywide employees, primarily invests in residential mortgage loans and mortgage-related assets to the tune of $133 million in distressed mortgage assets, including $97 million in nonperforming residential mortgage whole loans and $36 million in MBS's last quarter.
In mortgage trading, yesterday was relatively quiet - and in fact although mortgage prices were worse they started off the day like that and it seems that there has been much intra-day price changes from investors this week. (That may change later today with the release of prepayment information, ahead of the employment data tomorrow, and the Fed meeting next week.) We learned that the ISM Non-Manufacturing Index, which covers about 90% of the economy, rose to 54.3 in July from 53.8. (Anything above 50 signifies expansion.)
We also learned that the Treasury will sell $34 billion of 3-yr notes next week, down from $38 billion at its last quarterly refunding, $24 billion of 10-yr notes, and $16 billion of 30-yr bonds on Aug. 12. (The U.S. Treasury again cut the size of debt offerings, citing stronger tax revenues, but warned it may not be able to keep trimming sales at the same rate due to doubts about economic recovery.) By the end of the day, 10-yr Treasuries were down almost .5 in price to 2.96%, and current coupon mortgage security prices were worse by about .125. Originators sold $2.9 billion - mostly 4% - a little more than recent volumes.
Jobless Claims came out, so that must mean its Thursday. This morning Jobless Claims were up from 460k to 479k, but continuing claims were down. The 4-week moving average moved higher, and in fact Claims are at their highest level since April.
Riddle of the Day: What is it?
Michael J. Fox has a small one.
Arnold Schwarzenegger has a big one.
Madonna doesn't have one.
The Pope has one but doesn't use it.
Clinton uses his all the time.
Bush is one...
Mickey Mouse has an unusual one.
Liberace never used his on women.
Jerry Seinfeld is very, very proud of his.
Cher claims that she took on 3.
We never saw Lucy use Desi's.
Answer below
The answer is: 'A Last Name.' Get back to work.