Surety Bond Requirements for Bankers; Buying Real Estate with Cold Hard Cash; Feedback on Broker Business; MI Companies Report Slowdown

There is always someone who wants your money - hopefully not more than you do. Here's a quick little FDIC quiz on scams: QUIZ

The FDIC, which doesn't just close banks, also provides tips to borrowers on making their mortgage payments: CHECK IT OUT

Palm Harbor Homes, owner of CountryPlace Mortgage, filed for Chapter 11 bankruptcy protection and said that Fleetwood Homes Inc. agreed to lead a court-approved auction of the reorganized builder of manufactured homes and certain of its subsidiaries for $57.5 million. Fleetwood Homes, which is owned jointly by Cavco Industries Inc. and Third Avenue Value Fund, also agreed to provide debtor-in-possession financing of up to $55 million which will be used to extinguish all of Palm Harbor's obligations due on its credit facility with Textron and to fund the company's operations while it's in bankruptcy. The builder's affiliates - Standard Casualty Company, Standard Insurance Agency, Palm Harbor Insurance Agency and CountryPlace, were not included in the filing and their operations will not be affected.

A surety bond is a performance bond, given to protect the recipient against loss in case the terms of a contract are not filled; a surety company assumes liability for nonperformance and is often put in place to cover loan officers. Mortgage originators should know that there will be new surety bond requirements in the states of Illinois, Tennessee, Minnesota, and Wisconsin. In Illinois, starting at the end of the year, new bonding levels will go from $25,000 to $150,000 based on loan volume. In Tennessee, for mortgage lenders, brokers, or servicers, the surety bond amount for renewal applications will be via a three tier system based on the dollar amount of Tennessee residential loans the licensee originated in the preceding calendar year. Up in Minnesota, commencing today, the minimum surety bond will be $100,000 and letters of credit and net worth will no longer be accepted. Lastly, in Wisconsin the minimum amount of the required surety bond is $300,000 for mortgage bankers and $120,000 for mortgage brokers.  In addition, the bond must be increased by $10,000 for each licensed branch location when the number of branch locations exceeds five. 

According to the National Association of Realtors, currently 29% of real estate around the nation is paid for with cash - no loan. But in some places it is higher: in September Park City, Utah it was 50% - 35% for single-family homes, over 50% of condominiums, and nearly 80% of land sales were paid for with cash in the 3rd quarter. But wait a minute - what about leverage? So instead of tying up $500k of cash in that condo, use $100k in cash, get a $400k loan, and take the $400k of cash you didn't put into the condo and invest it in stocks, in growing your company, etc...READ MORE

Both mortgage insurance applications and primary insurance in force decreased for Genworth, MGIC, PMI, Radian, Republic Mortgage Insurance, and United Guaranty - the six member firms of the Mortgage Insurance Companies of America. The group puts out monthly stats, and the latest ones for September showed MI applications were down about 3%. But versus 2009, the numbers are higher: MI apps increased 21.4% compared to October 2009. The amount of primary insurance in force also increased, up 31.5% compared to the same period last year.

Speaking of MI, Chase updated its list of accepted MI providers for correspondents which goes into place next week: MGIC, PMI, UGIC, Genworth, CUNA/CMG, and Radian. RMIC will, at this time, only be used for mortgage insurance transfers on HARP loans.

I love e-mails that begin with, "The problem with your commentary is..."

I continue to receive reader input on the mortgage broker model. "Why is it, if a commodity is sold wholesale to a retail outlet that in turn marks up the price and then sells the commodity for full retail price without disclosing the cost they paid, it is considered good business and does not "breed distrust"? Yet when this same system is applied to a financial instrument, it is wrong, broken and Congress needs to fix it? Anyone promoting passing along wholesale mortgage prices to consumers should try walking into Wal-Mart and asking the general manager what the wholesale cost of items in the store are."

"I don't believe the 'problem' with our industry lies with how brokers were compensated.  I think the problem was with products being offered, and underwriting of those products. Brokers, like any good businessman sell the products put in front of them and look to maximize profits just like every other business in existence does. I say fix the source, not the symptom."

"Maybe to be a fully compliant transparent broker, the MBS yield, coupon, and hedge costs should be disclosed with each transaction. Why not require wholesale rate sheets include the profit margin the wholesale lender is making - that way the broker can be informed as to how much the institution is making on them?"

This from a broker: "Broker business is down due the post-crisis swing to FHA loans, which many brokers aren't eligible to handle, new disclosure and licensing regulations that put brokers at a disadvantage, and a rash of mistrust and bad press associated with the credit crisis. But really, brokers had nothing to do with the slipping of underwriting guidelines. We were, however, happy to go along with the 2005-2007 frenzy, and many in our ranks ruined it for the rest of us by charging as much as the market would bear. But being a mortgage broker is the traditional small business model, offering attractive opportunities to energetic self-starters who like to be their own bosses and reap the full rewards of their own efforts. This segment of the industry is needed to provide a competitive counterweight to the few mega-retail banks that now dominate the post-crisis mortgage market."
 
"Brokers will make less on each loan in a transparent system, but they will do more loans because they will waste less time on deals that don't close. Lenders will be able to market directly to borrowers, and will no longer be vulnerable to lawsuits from borrowers who were grossly overcharged by predatory brokers."
 
US Bank Home Mortgage is no longer requiring an appraisal to be with an underwriting file on refinances. USBHM will require proof that the appraisal has been ordered, so brokers should include that with all new refinance submissions to underwriting - "we still will not accept any wholesale files where the US Bank TIL has not been issued."

What happened yesterday with rates?

In the last week or so mortgage prices have had a nice rally/improvement, and traders say that "they ran out of steam" compared to Treasury prices. Origination and MBS selling by money managers increased throughout the day, with traders seeing a large amount of selling in the higher, existing coupon areas (5% and above). Ongoing fears regarding EU banks, particularly Spain and Portugal, fueled the flight to safety again. But then we had much stronger-than-expected Chicago PMI and Consumer Confidence numbers.

The S&P/Case-Shiller Home Price Indexes showed broad-based declines in home prices in the 3rd Quarter of 2010, with the National Home Price Index declining 1.5% from a year earlier.   The Case-Shiller index of 10 major metropolitan areas dipped 0.5% from August, while the 20-city index decreased 0.7%. Adjusted for seasonal factors, the declines were 0.7% and 0.8%, respectively.   FULL STORY AND CHARTS

We saw some intra-day price weakening Tuesday, so even though MBS prices ended the day roughly unchanged, the fact that they started off so strongly and then went south resulted in the changes. TradeWeb reported activity at 119% of the 30-day average, up from 59% on Monday. And the 10-year Treasury note ended the day at 2.80%.

We've already had the MBA's mortgage application numbers. Apps declined 16.5% in the week ended Nov. 26, with refinancing down 21.6%, the biggest drop of the year. The measure of purchases climbed 1.1%, and now refinancing has dropped to about 75% of all applications. FULL STORY AND CHARTS

It all began with an iPhone...

March was when my son celebrated his 15th birthday, and I got him an iPhone.

He just loved it. Who wouldn't?

I celebrated my birthday in July, and my wife made me very happy when she bought me an iPad.

My daughter's birthday was in August so I got her an iPod Touch.

Last week came by so for her birthday I got my wife an iRon.

It was around then that the fight started......

What the wife failed to recognize is that the iRon can be integrated into the home network with the iWash, iCook and iClean.  This inevitably activates the iNag reminder service.