Private Mortgage Insurance Tax Deductions Extended; ARM Disclosures Updated; Calyx Bundles LOS Services; Wells Comments on Compensation

Rates are still decent, and ARM loans don't immediately jump to mind in this kind of environment for loan agents when a borrower saunters through the door. (In fact, ARM loans have accounted for about 5% of production in recent months.) The Federal Reserve, however, approved an interim rule that will require mortgage lenders to disclose examples of how a mortgage loan's interest rate and monthly payment may change. The Fed has given us plenty of lead time: beginning on October 1, 2011, banks and lenders must alert borrowers to the risk of payment increases before they agree to take out mortgage loans with variable rates or terms, otherwise known as adjustable-rate mortgages. "They will be required to include a payment summary in the form of a table, including the initial rate, maximum rate that can occur in the first five years, and the "worst case" rate possible over the life of the loan, along with corresponding monthly mortgage payments." The rule also clarifies which mortgage types are covered by the special disclosure requirements, including loans with minimum payment options that cause the loan balance to increase, such as teaser rates and negative amortization loans.

Economists make their living off of forecasting the future, or explaining why their earlier predictions were incorrect. But by then, most have forgotten the earlier prediction, or at least, I usually do. Rarely do traders base decisions on what an economist will say, but in the mortgage banking arena, predictions by the MBA, Freddie, and Fannie carry a little more weight. (For example, in October the MBA announced its prediction that mortgage originations could be 30% lower in 2011 than in 2010.) Per Fannie Mae, the fourth quarter will not wind up being a memorable time for housing sales. Fannie has projected that existing sales will increase slightly, but that new home sales will drop significantly. Fannie expects 2010 housing sales to be down 7% from last year, and with slightly lower median prices across the nation. FULL STORY

Taxpayers will find $2.7 billion in their stockings after news broke that six regional banks have repaid TARP funds. Can you believe that it has been two years since our government invested $389 billion in the financial system? "Hats off" to companies who have already repaid the money, and to this latest batch: Huntington Bancshares, First Horizon National, Wintrust Financial, Susquehanna Bancshares and Heritage Financial. They each bought back all of the government's outstanding preferred shares and paid out dividends. (Bank of Kentucky Financial, repurchased half of the Treasury's preferred shares.)

Thank you to Barbara W. of Mortgage Training Today, who wrote to say that the tax bill agreement extends the deduction for private mortgage insurance through 2011. "The Mortgage Insurance Cos. of America, a trade group, estimates the deduction saves borrowers who pay mortgage insurance $300 to $350 a year. To qualify for the full deduction, you must have adjusted gross income of $100,000 or less. Taxpayers with AGI of between $100,000 and $109,000 can claim a partial deduction. In addition, borrowers can't deduct mortgage premiums on home loans that closed before 2007."

There is nothing quite like a little corporate news before Christmas from out in California. Loan origination software company Calyx Software has acquired Loan-Score Decisioning Systems. Apparently Calyx and Loan-Score will continue to operate as separate companies. Calyx will be adding staff in the next several months to accommodate the business of both firms. The combined company now "offers a product and pricing engine, an automated underwriting system, a portfolio analysis engine, channel focused point-of-sale Web portals, and a comprehensive library of investor guidelines and pricing, among other services."

Wells Fargo sent out word to its broker clients that, per the existing schedule, on April Fool's Day 2011 the new comp rules go into place. Wells expects to put out its plan in February, but reminds us "The rules prohibit a loan originator from: Receiving compensation based on the interest rate or loan terms other than loan amount, increasing their compensation by raising the consumers' loan costs - for example by increasing the interest rate, or directing or "steering" a consumer to accept a mortgage loan not in the consumer's best interest in order to increase the compensation. The rules allow a loan originator to: Receive payment from the consumer or the lender, but not both. Receive compensation based on a percentage of the loan amount and volume. Broker compensation can be paid as a percentage of principal loan with minimum and maximum dollar thresholds. Broker Loan Officer (LO) compensation can vary by LO provided that the compensation model is the same for every transaction originated by that LO. Broker compensation can vary based on geography to allow for differences in the costs of loan origination, such as rent and other overhead expenses. Compensation models can change due to market conditions. The prohibition of paying compensation to loan originator based on loan terms and conditions does not apply to payments that the customer makes directly to a loan originator."

Yesterday we learned that according to the NAR, Existing Home Sales rose 5.6% to a seasonally adjusted annual rate of 4.68 million in November from October, but are about 28% below late 2009's levels. MBS prices finished the day roughly unchanged, and the 10-yr closed at 3.35%, but it was almost as if folks didn't care.  There just isn't a lot of locking and hedging going on right now. The market opened up slightly better bid overnight and into the New York open aided by a weaker than expected GDP (2.6% versus an expected 2.8%), but then gradually faded throughout the day.

One picture, or series of them, is worth a thousand words, or at least a few chuckles: http://www.buzzfeed.com/melismashable/the-most-awkward-family-holiday-photos

(The commentary will not go out tomorrow, but will return Monday. Merry Christmas!)