New Refinance Program Unlikely. What About a 21st Century Homestead Act?

Warren Buffett's Berkshire Hathaway, who owns about 10% of Wells Fargo, announced that it is investing $5 billion in Bank of America. $100,000 per share for 50,000 shares...as one would expect, BofA's stock is up over 20%. Buffett stated that BofA is a "strong and well-led company." That is a big chunk of change, and already at a profit given this morning's stock move. He now owns big chunks of the two largest mortgage lenders.

The mortgage herd is spooked again, as it was last year (or maybe the year before) with a story making the rounds about a government-sponsored major refinancing program. Brian Collins with National Mortgage News seems to be the source of this, although "industry officials" are quoted. But "at this point in time there are few specifics on the table regarding the plan." The story goes on to say, "Mortgage executives say the White House is finally realizing they cannot get the economy rolling again until they provide some payment relief for the estimated 11 million under water borrowers...'My best guess is the administration will offer incentives to lenders to allow borrowers who are current, but under water, refinance,' one source said. This source also added the refinancing program will focus on Fannie Mae and Freddie Mac guaranteed loans as well as mortgages in private-label securities.  The GSEs already have a special refinancing program for borrowers with loan-to-value ratios above 105% -- but the effort has not reached many underwater borrowers."

Tom Harmon, a mortgage trader with Cantor-Fitzgerald, quickly wrote, "The National Mortgage News ran a headline, 'White House Contemplating Major Refinancing Program?'  Prior to today, I have not heard of the National Mortgage News. Their 'sources' offered no details. There is nothing new here.  The administration and some in congress will continue to make headlines of home issues.  As the administration has run out of economic bullets, this is likely to be a talking point ahead of the elections.  Don't be distracted.  Focus on handicapping any major enhanced streamline refinancing program rolled out by Fannie or Freddie or one mandated by congress without substantial GSE reform/changes. Congress has had a few years to tackle the tough housing issues we face.  None may be tougher than the ultimate fate of the GSE's and guidelines under which they operate.  A national refinance program makes a nice headline; however, the implementation is not a simple flip of the switch.  This is not a 'no cost' fiscal stimulus as many claim.  Presuming the government is willing to let the private investment community take the hit on the trillions of 30-year Fannie & Freddie-issued MBS's currently trading over a 109 dollar price, don't forget the $542 billion agency MBS at the GSE's. While one could argue that the GSE credit book would be in a better position, the GSE itself may not be.  For the above reasons, we are unlikely to see an endemic large scale enhanced refinance program.  Thus, we return to a congressional solution.  The budget debate renews in the fall and will take the front and center position.  While it is likely we will see continued focus and execution on HAMP/HARP type programs, do you think congress will introduce and pass a major GSE bill ahead of next year's elections?" Well said.

MND's Managing Editor Adam Quinones adds, "We've heard these rumors in the past and we'll likely keep hearing them in the future. Unfortunately they'll be of little use in the real world where the main obstacle is finding someone to foot the tab on MBS losses. And as we've already seen, investors are pushing back against that proposal en masse.  That leaves the brunt of the bill to be shouldered by either servicers/banks or the U.S. taxpayer with the latter option highly-unlikely given the sensitive political environment and already weak household balance sheets. So guess who gets stuck with the loss, banks! I foresee some sort of resolution trust authority being set up to liquidate these 'assets'. It's going to be like tearing a band-aid off for home prices, they'll be some gushing at first but negative price movement will eventually find bottom. That's what it'll take to stop the negative feedback loop in the housing market and get the economy back on track for growth. Hey, we've got to start somewhere."

Even the New York Times picked up on the article: RefiProgram.

I wish that I was smart enough to come up with a plan "to reduce the housing glut AND put Americans back to work, incentivize investments in real estate, encourage self-sustaining growth in the depressed housing-market and help clear the inventory of over three million of the unsold existing homes." But I am not, and have to rely on a Congressman's proposal.

Appraisers everywhere know that the deadline for implementing new Uniform Appraisal Dataset (UAD) requirements has been pushed back to January 1, according to Mortgagee Letter 2011-30. The new UAD requirements will go into effect for all case numbers assigned on or after January 1, 2012 and for all appraisals performed on HUD real estate owned (REO) and Pre-Foreclosure Sale (PFS) properties with an effective date on or after January 1, 2012. Previously, the implementation date for the UAD was September 1, and AMC's are shifting their processes in advance of the deadline: HUD.

Toll Brothers, viewed by some as a barometer for demand for housing demand for high-end residences, reported tepid quarterly order growth (+2%) and a rise in cancellations (up to 7.4%) and warned that stock market volatility and economic uncertainty continue to weigh on homebuyer confidence: TollBros.

When it comes to LO training & licensing, it is always good to have a chart, right? Fortunately I am not licensed - there is no way that I could keep track of the requirements. But the NMLS folks try to make it easy for loan reps to track the necessary education: 
NMLS.


Here is something of interest: financial websites for sale. It seems that four years ago Parkside Lending (CA) purchased a set of domain names with the expectation of purchasing a depository institution, possibly one specializing in wireless banking. Now the company is offering some of them to the industry to interested buyers - most likely banks. Available are names like bankbillpay.com, depositmobile.com, mobile-billpay.com, myhandheldbank.com, mywirelessbank.com, and so forth. For the complete list and more information, contact Matt Ostrander at matt@parksidelending.com.

Flagstar reminded its clients that the FHA prohibits borrowers from having more than one FHA-insured mortgage at a time. "FHA has clarified to Flagstar that this policy includes all borrowers who are on title to a property encumbered by an FHA-insured mortgage, regardless of whether they are also obligated on the FHA-insured mortgage. The four exceptions below are the only 'exception situations' in which FHA will permit borrowers to have more than one FHA loan and/or an interest in more than one property encumbered by an FHA-insured mortgage: relocations, increases in family size, vacating a jointly owned property, and a non-occupying co-borrower. Also, "The Flagstar Bank Loan Requirements have been updated to reflect the following change: Effective immediately, the 4506-T Execution Criteria have been updated to reflect that two years of tax transcripts will be required on all conventional loans. This change however excludes Freddie Mac Relief Refinance- Doc. #5354, which does not require results."

Franklin American addressed its PMI stance. "To be eligible for sale to FAMC, loans with PI certificates must have a note date on or before September 9, 2011, must be delivered to FAMC no later than September 19, and must be purchased by FAMC no later than September 30. Any loan failing to meet these deadlines will be ineligible for sale to FAMC." Over at Bank of America, "Bank of America Correspondent Lending suspends PMI as an approved mortgage insurer" as did GMAC and Chase.

Chase also sent a reminder out to its correspondents that they "must promptly verify the accuracy of the information on the Mandatory Trade Commitment Confirmation to avoid possible pair-off fees." Look for more verbiage early next week.

GMAC has been busy. It sent out several underwriting changes dealing with borrower types ("The following has been removed from the Non-occupant Co-borrower section of the Client Guide: 'Non-occupant Co-Borrowers who are not Borrowers on the current mortgage and do not hold title cannot be added to a Cash Out Refinance as a means to qualify for the loan.' The evaluation of the occupant borrower's qualification is determined by automated underwriting, or is capped at a 43% DTI for manually underwritten loans."), loans to trusts, types of transactions that delay financing, a conversion of a primary residence to a second home or investment property, and so on. As with any investor update, it is important to read the actual changes.

Retailer & wholesaler Real Estate Mortgage Network (REMN) announced the launch of its new consumer direct lending division. Doing business under the name FinanceMyHome.com (www.FinanceMyHome.com), this new lending division will service the needs of home buyers over the internet - quite the trend.

Looking at the markets, yesterday we had Durable Goods, always a volatile number, shoot up 4%, but we also had the FHFA note that its index of housing prices drop .6% during the 2nd quarter. The FHFA's numbers show that over the last year prices have dropped 6% - but of course all real estate is local, right? As the day wore on, the 10-year UST note yield rose to highest level in a week, and finished the day worse by more than 1 point and at a yield of 2.26%. Mortgage-backed security prices declined over .5 in the lower coupons, and about .25 in the higher note rates, resulting in intraday price changes from many lenders.

As far as today's calendar goes, Initial Claims (for w/e 8/20) shot up 5k to 417k, far above expectations, although continuing claims dropped. At 1PM EST the Treasury concludes its latest round of monthly auctions with $29 billion 7-year notes.

You're An EXTREME Redneck When... (Part 1; part 2 tomorrow)

1. You think a woman who is out of your league bowls on a different night.

2. The Blue Book value of your truck goes up and down depending on how much gas is in it.

3. You've been married three times and still have the same in-laws.

4. You let your 14-year-old daughter smoke at the dinner table in front of her kids.

5. You wonder how service stations keep their rest-rooms so clean.

6. Someone in your family died right after saying, "Hey, guys, watch this."

7. You think Dom Perignon is a Mafia leader.

8. Your wife's hairdo was once ruined by a ceiling fan.