Treasury Explores Plan to Assist Non-Agency Borrowers; Flood Insurance Extension; Mini-Correspondent Programs

"If you make a general statement, a Secondary Marketing Manager says, 'Yes, but...' while a loan officer says, 'Yes, and...'"

Sometimes I wonder if Laurence Yun, the chief economist with the National Association of Realtors, has a set of phrases which, when NAR announces numbers, he draws out of a hat and uses for the press. With yesterday's release showing another drop in the sales of existing homes in June, Mr. Yun used, "problems including tight credit and low appraisals, 16 percent of NAR members report a sales contract was cancelled in June, up from 4 percent in May, which stands out in contrast with the pattern over the past year." Last month it was partially attributed to, "Even with recent economic softness, this is a disappointing performance with home sales being held back by overly restrictive loan underwriting standards. There's been a pendulum swing from very loose standards which led to the housing boom to unnecessarily restrictive practices as an overreaction to the housing correction - this overreaction is clearly holding back the recovery."

(In an interesting twist, however, NAR President Ron Phipps also said the lower conforming loan limits that are scheduled to go into effect on October 1 are also likely playing a role as some lenders are already placing the lower limits on current contracts in anticipation they won't close by the end of September. "As a result, some contracts may be getting cancelled because certain buyers are unwilling or unable to obtain a more costly jumbo mortgage," said Phipps.)

Here's a trivia question for you. "Which lender received the largest fine ever issued by the Fed under its consumer-protection authority and is the first action taken against a bank for predatory lending practices related to the housing bubble?" The answer is Wells Fargo.

The U.S. Treasury Department is exploring a plan that could help 1 million or more homeowners avoid foreclosure. It applies to non-agency (in securities not issued by government agencies) mortgages, and is an attempt to promote modifications of delinquent or defaulted home loans, including write-downs of principal, by bringing fresh private capital into the market. Non-agencyHelp

It has been several months since we had the usual last-minute flood insurance bill haggling. In a preemptive move, after several years of short-term extensions, the House of Representatives has passed a bill that would extend the National Flood Insurance Program (NFIP) through September 2016. (It is currently set to expire on September 30, 2011.) The House's bill would make numerous reforms to the NFIP, including provisions related to coverage terms, premium rates and flood area mapping, and also reduce current rate subsidies and increase the maximum annual premium increase from 10 percent to 20 percent. Minimum deductibles for consumers with subsidized coverage would be set at $2,000, and consumers with actuarial rate coverage would have a $1,000 minimum deductible. The reform bill would also index maximum coverage limits for inflation. The bill is now before the Senate for consideration.

Genworth Financial reported a second-quarter loss of roughly $100 million on "worsening trends" in its mortgage-guarantee business. More homeowners fell further behind on their mortgage payments, and the company added to reserves as it tallied more than 39,000 insured borrowers who had slipped into default by 12 or more payments. That's an increase of about 7,000 from a year earlier.

Yesterday the commentary noted the various business channel volume estimates (retail, wholesale, correspondent), along with mentioning several mortgage companies that had recently begun correspondent lending channels. Regarding volume estimates, I received this note: "Your commentary has, in the past, discussed how volume estimates are skewed. Basically, if a broker originated a loan, and sold it to ABC wholesale, who sold it to XYZ wholesale, who then sold it to one of the Big 5 all companies each company involved were calling it an origination. Further, HAMP and loan mods were being called originations. Their data was coming from calling about 5-7 banks. Everyone I spoke to was in agreement that the numbers are cooked. Now NMLS could give more accurate broker and lender originations, but they will not release the info. Since this number is becoming so critical to how upper non-wholesale experienced management is deciding the future of the industry, everyone needs to work to develop an honest reporting of true 'originations' and not secondary purchases being counted as originations."

This commentary is not meant to take the place of the Scotsman Guide for figuring out "who is doing what", but as has been mentioned several times in this commentary, several smaller lenders/investors are starting up competing correspondent channels, mostly targeting small banks and credit unions. They view it as a less risky way to obtain residential loans since small banks and credit unions are viewed as a better credit risk than brokers when it comes to buybacks and reps & warrants. I listed some yesterday, and a few others wrote in.

"Freedom Mortgage has joined the fray with a Mini-Correspondent program that's garnering much interest from brick and mortar banks and mortgage bankers: sign the Wholesale agreement, sign a form that says you'll comply with HVCC rules, and you're done.  We underwrite and draw documents in the correspondent's name and then will purchase the closed loan within 48-72 hours.  There are added SRP incentives above our posted daily price sheet, reduced admin fees and reduced long term contingent liability for the correspondent." For information write to Hank Arnold at hank.arnold@freedommortgage.com.

Another bank working on a correspondent platform rollout is Aurora Bank. ("Like most re-entering this space we are primarily focused on banks and credit unions, but will also work with well capitalized, established mortgage bankers. We will initially be purchasing Agency and FHA loans with a "coming soon" Jumbo product line...") For more information contact Brian Vieaux at Brian.Vieaux@aurorabankfsb.com.

And Plaza Home Mortgage: "Plaza Closed Loan Purchase: Call for more info, or log in to www.plazahomemortgage.com and click on 'Closed Loan Channel' in the top menu bar." Or shoot an e-mail to Kurt Lewis at Kurt.Lewis@PlazaHomeMortgage.Com.

Bank of Oklahoma is rumored to be "the only correspondent lender who not only services everything we buy, issues our own Ginnies, but also reps and warrants we will NOT cross sell our banks or CU's customers for any products and also refers their customer back to them from our servicing shop if they want to engage in a new transaction." For more information on specifics, contact Rob Ross at RRoss@bokf.com.

The volume of mortgage sales picked up somewhat yesterday (about 83% 30-yr, 17% 15-yr securities) as 10-year T-notes worsened about .375 (2.93%) and MBS prices finished down/worse by about .125. "MBS experienced another session of widespread participation that included banks, money managers, hedge funds, REITs and overseas with a buy/sell ratio reportedly at 3:1." There's been a bit of a lull in the flight to safety trade as the EU has been more in the background this week, while news out of Washington on the debt crisis seemed more encouraging.

Here is a telling statistic: according to the BLS, only 48.9% of workers aged 16 to 24 could find summer jobs this year. That is the lowest on record (going back to 1948) and the first time it has dropped below 50%. Today we've had the weekly Initial Jobless Claims, which were expected to slide higher which they did (408k to 418k).

(This is an old one, but with the summer heat, I couldn't resist.)

The Goldberg Brothers - The Inventors of the Automobile Air Conditioner!

The four Goldberg brothers, Lowell, Norman, Hiram, and Max, invented and developed the first automobile air-conditioner. On July 17, 1946, the temperature in Detroit was 97 degrees.

The four brothers walked into old man Henry Ford's office and sweet-talked his secretary into telling him that four gentlemen were there with the most exciting innovation in the auto industry since the electric starter.

Henry was curious and invited them into his office. They refused and instead asked that he come out to the parking lot to their car.

They persuaded him to get into the car, which was about 130 degrees, turned on the air conditioner, and cooled the car off immediately.

The old man got very excited and invited them back to the office, where he offered them $3 million for the patent.

The brothers refused, saying they would settle for $2 million, but they wanted the recognition by having a label, 'The Goldberg Air Conditioner,' on the dashboard of each car in which it was installed.

Now old man Ford was more than just a little anti- Semitic, and there was  no way he was going to put the Goldberg's name on two million Fords.

They haggled back and forth for about two hours and finally agreed on $2.5 million and that just their first names would be shown.

And so to this day all Ford air conditioners show "Lo, Norm, Hi, and Max" on the controls.

If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com . The current blog takes a look at early actions taken by the new CFPB and the political situation affecting it. If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what's going on out there from the other readers.