Fannie Mae 125% CLTV Product; Feedback on "All Cash" Real Estate Purchases; Updates from Flagstar, Wells, GMAC, Chase, FAMC

I am writing this commentary from a Starbucks in Austin, TX, trying not to watch bleary-eyed UT sorority pledges stagger in and out, where the real estate market is pretty stable. But there are areas that are, shall we say, "more affordable". For instance:  HERE and HERE

Doctors can be so frustrating. You wait a month and a half for an appointment, and then the doc says, "I wish you had come to me sooner." Hopefully someone waiting to lock in an interest rate on a mortgage isn't hearing that from their lock desk. As one trader said yesterday, "Mortgages continue to implode this morning after getting walloped last night. Buyers are few and far between as banks and money managers join servicers and originators in a sell-a-thon." Another trader from BofA said that "mortgages went out like the garbage". The trader is talking about mortgage rates/prices compared to Treasury rates/prices, but you can catch the gist of the mood yesterday. Over $5 billion in mortgages were sold, mostly 4.25-4.625% 30-yr mortgages, and mortgage prices ended the day worse by .250.

In Wednesday's commentary I repeated a statement from a broker, "FNMA offers the DU REFI PLUS program, for those with a FNMA owned mortgage, up to 125% LTV with no MI.  Try to find a wholesale lender that offers up to 125%."

Someone responded, noting, "I personally wouldn't want an un-saleable deal with 125% CLTV on my books, and neither would my warehouse bank, although GMAC's guide says, 'Subordination of existing junior liens permitted without maximum CLTV limitations, as identified in Section 18 Loan Amount and LTV Limitations.'"

Another wrote, "Towne Mortgage does offer this to their brokers, and also offers Fannie loans with up to 10 properties. Towne Mortgage covers the Upper Midwest and SE Atlantic Coast. Try Hank Arnold at harnold@townemortgage.com.

Lastly, an industry vet wrote, "Wells Fargo will allow you to broker a Wells to Wells refi up to 125%. In addition to this, MetLife allows MetLife to MetLife refinances up to 125%.  If you have a FNMA or Freddie Mac loan that is not serviced by MetLife they will go to 105% but its turn times are near 30 days for approval and another 30 days for submissions."

Last Friday I noted NAR's observation on the increase in all-cash real estate transactions. I received some input, good as always. "I 'm sure that 'all cash' purchases are up, but I don't think it has anything to do with the nuisance of underwriting.  I'm just not certain that anyone who has the wherewithal and discipline to have that much liquidity, wouldn't want to take advantage of historically low interest rates even with some hassle factor involved.  My guess is that many of the home purchases that are counted each month are trustee sales.  Because of this process, this is one of at least two housing statistics that are less meaningful than they used to be.  The other statistic that is misleading is single family re-sales. Since a high percentage of these trustee sale/cash purchases ends up being resold within a few months, the foreclosure flip effectively gets double counted.  While it is still positive that another home is taken off the market, the second purchase of the same home does inflate the statistic somewhat."

Another wrote, "It's worth noting that many of these 'cash' transactions are bridge financing.  Banks favor cash deals for the REO's in competitive bid situations.  When the good properties come up as REO's, and there are multiple offers, cash deals have an edge as the winner."

The investor changes continue. Flagstar, in response to Fannie Mae's lender letter 2010-03, recently adopted the LQI (Loan Quality Initiative) policies and its customers are required to deliver investment quality loans to Flagstar Bank.

Flagstar updated its Freddie Mac Super Conforming Program (remember when everyone knew the loan limits, and how they were set?), and last Friday announced the availability of MGIC's new Credit-Tiered Rates for eligible loans on the Borrower Paid Monthly Premiums, Borrower Paid Annual Premiums, Borrower Paid Single Premiums and Borrower Paid Split Premiums. (Credit-Tiered Rates are not currently available in Alaska and Lender Paid Mortgage Insurance is only available with Genworth and RMIC.)

Flagstar also increased the minimum credit score requirement for loans exceeding an 80% LTV for single family, primary residence, purchase transactions. "All conventional products that previously included a 660 credit score option for this scenario are included in this change and will now require a minimum credit score of 680." (Flagstar also raised its minimum credit score for the Rural Housing Program from 620 to 640, but although funding has been passed by Congress and signed by the president, there seems to be some hold up...)

Flagstar told clients that starting 9/1, it will begin accepting FHA TPO applications from brokers and customers seeking Flagstar sponsorship to originate FHA loans, since the FHA now permits unapproved brokers and correspondents to originate FHA loans, provided they are sponsored by an FHA-approved DE lender. The unapproved broker or correspondent who originates the FHA loan is considered a third party originator (TPO) of FHA loans. Check Flag's seller guide on the website starting that date for the application documents and eligibility requirements.

Franklin American Mortgage Company will no longer require each closed loan file to include the Appraisal Compliance Certification, but "lenders are reminded that they must ensure their processes for ordering appraisals meet all applicable compliance requirements" and should have these policies available for FAMC's review.

Wells Fargo's broker clients received an update that included news on expanded FHA broker approval, various form updates and appraisal process notifications, etc. The big news dealt with the "Expanded FHA Broker Approval" which amended Wells' broker sponsorship, started in early July, by which brokers were eligible to submit FHA loans through sponsorship by an FHA-approved DE lender like Wells. "This new approval process will designate you as a "third party originator" - or TPO - with Wells Fargo" with an updated FHA Case Number Request Form. "Wells Fargo is now responsible for ordering the FHA Case Number for brokers with third-party originator (TPO) approvals via FHA Connection. If you are a TPO broker, you will no longer have access to FHA Connection and may be unable to access this information online."

Chase has revised its co-op project insurance requirements. Until further notice, "Minimum amount of liability coverage for Co-op projects with elevators is being increased from $2 million to $3 million for bodily injury and property damage for any single occurrence. Co-op Master/Blanket Insurance Policy Requirements are being updated to provide specific examples of master/blanket insurance policies not permitted. Co-op project flood insurance requirements are being updated to reflect the minimum amount of coverage must be the lesser of replacement cost coverage for each insured building (including all common elements and property) or maximum coverage available under the applicable National Flood Insurance Program." Chase also revised its "Non-Agency Distressed Markets Table".

GMAC recently told its clients that it will no longer accept loans submitted under the de minimus or honeymoon provisions allowed in some states. (A few states allow lenders or brokers to originate a minimum number of loans without holding a lender or broker license in their state. These provisions have been referred to as de minimus or honeymoon provisions. GMACB will require evidence of adequate entity licensing even in those states that provide an exemption for a minimum number of loans to be originated without a license.) GMAC correspondents were also told of new appraisal requirements for VA IRRRRRRRL (sorry, got carried away there) Loan Transactions. "GMAC-to-GMAC VA IRRRL transactions (loans serviced by GMAC) will not require an appraisal report or limit the total loan amount to 100% LTV of current appraised value" - all other GMACB VA IRRRL underwriting guidelines, for example, minimum FICO score and mortgage payment history, will continue to apply.

JPMorgan Chase plans to sell $1 billion of commercial mortgage-backed bonds, which is the largest sale in 2010. It gives control of delinquent loans to H/2 Capital Partners, holder of the riskiest portion after another offering by Goldman and Citi ceded power to investors in the safest pieces. Goldman Sachs Group Inc. and Citigroup Inc. gave those rights to investors of the highest-rated portions in a $788.5 million offering on Aug. 4.

A farmer had five female pigs. Times were hard, so he decided to take them to the county fair and sell them. At the fair, he met another farmer who owned five male pigs. After talking a bit, they decided to mate the pigs and split everything 50/50. The farmers lived sixty miles apart. So they agreed to drive thirty miles each, and find a field in which to let the pigs mate.

The first morning, the farmer with the female pigs got up at 5 a.m., loaded the pigs into the family station wagon, which was the only vehicle he had, and drove the thirty miles. While the pigs were mating, he asked the other farmer, "How will I know if they are pregnant?"

The other farmer replied, "If they're in the grass in the morning, they're pregnant, if they're in the mud, they're not."

The next morning the pigs were rolling in the mud. So he hosed them off, loaded them into the family station wagon again and proceeded to try again. This continued each morning for more than a week.

The next morning he was too tired to get out of bed. He called to his wife, "Honey, please look outside and tell me whether the pigs are in the mud or in the grass."

"Neither," yelled his wife, "they're in the station wagon and one of them is honking the horn."