Citi Dialing Back FHA/VA; Where Will Market Price HARP 2.0 Loans? Plethora of Investor & MI Changes

If you changed residences between 2010 and 2010, congratulations: less than 12% of the U.S. population moved during that time, the lowest recorded rate since the Current Population Survey began collecting statistics on the movement of people in the United States in 1948. The recent peak was in 1985 (20%). If folks move more than 500 miles, the majority do it for employment-related issues, and if folks move less than 50 miles, the majority do it for housing-related reasons ("My mudda-in-law was driving me crazy!"). Per the survey, of the 45 million people who lived in a different house within the United States, almost 7 million lived in a different state, with the top being CA to TX, NY to FL, FL to GA, CA to AZ, NJ to PA, NY to NJ, CA to WA, TX to CA, GA to FL, and CA to NV.

The Fed continues to buy roughly $1 billion a day of MBS's with proceeds from prepaying pools of loans. Do originators really think that the New & Improved HARP loans will carry the same rates as a brand-new, 80% purchase loan? Or, asked another way, where will the new securities trade since they could be filled with loans having greater than a 125% LTV? Jungle drums say +/- 3 points worse than current MBS's, based on risk and illiquidity. As one astute reader wrote, "If you convert three points to yield and bump a borrower's refi rate by 75 basis points, that definitely cuts into the refinance potential for the outstanding loans." But investors may want the new pools, given that the prepayment expectations should be very slow.

And while we're on securitizing, Freddie announced that it would take previously delinquent loans that it was required by contract to repurchase from its Mortgage Participation Certificate (PC) pools and return them to the secondary market.  The Freddie loans from those repurchased pools which are now current and have been performing for four months will be securitized and sold. Coming to a trading desk near you, they will be identified with a new "R" prefix ("R"eperforming).  The program is expected to begin this month with the first group of loans selected from among those that have been performing for at least 12 months at the time of securitization.  Freddie Mac said that these PCs may back new Freddie Mac Real Estate Mortgage Investment Conduits (REMIC) and Giant securities in the future.

And HARP 2.0 chatter continues. Brian B. with Two River Mortgage writes, "HARP 2.0 failed to address three of what I view as the most critical aspects of the recovery. First, it completely ignored all the HELOCs in existence. It is my understanding that the banks had written of somewhere over 80% of all HELOCs. If the FRB increases the interest rates by 1% the defaults will rise dramatically. Second, at the height Fannie & Freddie retained about 14% of all the mortgages. Since '07 we know where they have risen. A large number of F&F loans qualify for F&F, yet were never sold to F&F. These are the folks on the fringe. If they walk it will just further devalue the F&F owned homes. It is my understanding there are a significant number of homes in this position. Third, F&F both capped the ARM refi's at 105% LTV. Why, when these are arguably the homes in the most distress when rates begin to rise. They were also the borrowers who are at the greatest risk of default."

In recent months the mortgage biz has seen its share of company news, such as Bank of America cutting its wholesale and then correspondent channels, MetLife being up for sale, and major lenders ending their reverse mortgage programs. What would happen if a Top 5 investor stopped doing a conventional or government program entirely or only offered it to selected clients? For example, rumors, apparently true, swept the biz yesterday that Citi is suspending government delegation for many - but not all - of its clients today. The decision is driven by defect rates: perhaps the FHA/VA business that Citi was seeing showed a marked difference to that of the conventional business and it took it upon itself to act. The move is not meant to be permanent, and Citi will be working with its clients to improve quality - a good goal.

Other jungle drums are saying that Google will be shutting down its current Lead Source model. The goal might be to be able to provide lender service levels and title company costs, etc. in addition to best rate.  They will open the new model for the states of Alaska, CA, AL, PA and Washington DC, having a huge impact on internet lenders.

Earlier this week United Guaranty has expanded its underwriting requirements "to allow greater eligibility for broker TPO loans, using its risk-based Performance Premium pricing." Reference guides and documents can be found at www.ugcorp.com.

Mountain West Financial "will now accept a purchasing spouse with 'no FICO score,' as long as the remaining purchasing spouse has the minimum FICO score for the program requested and an approval through DU and the borrower without the FICO has a valid social security number. (I am no underwriter, but usually VA looks at the non-borrowing spouse as if she was a borrower, whereas FHA has no issue.) No manual underwriting is allowed. MWF also addressed the USDA situation: "Rural Development is currently operating under a Continuing Resolution (CR) which expires on November 18, 2011.  If the Fiscal Year 2012 budget is not passed by that date then a new Continuing Resolution may be issued.   During this time Mountain West Financial (MWF) will accept locks only on loans that have received a full Conditional Commitment."

Wells Fargo wholesale sent the word out to brokers that "registrations for purchase transactions for the Guaranteed Rural Housing (RD) program will again be accepted. Note that refinance transactions are NOT being accepted at this time. The new fee and policy changes impact the upfront guarantee fee and new annual fee changes. A two-month escrow of the annual fee will be required. This is an APR-sensitive fee and will be included in the high-cost tests when applicable."

No one can accuse Freddie Mac and Fannie Mae of not giving us enough warning as both recently sent out advanced notice on new ULDD data requirements for delivery in November 2012. Per Dodd-Frank requirements, one of the requirements is to disclose the identity of the entity funding the applicable loan, as recorded on the note, so the GSE's will require lenders to deliver the following new ULDD data points beginning November 2012: PartyRoleType="NotePayTo", and FullName, enter the name of the entity funding the applicable loan, as recorded on the note.

SunTrust enhanced guidelines for the Key Loan Program, and announced that a reference on the Portfolio Affordable Housing Mortgage Program was removed and that the FHA has no annual MIP on certain loans.

GMAC let correspondent clients know that it GMACB will require the successful submission of UAD compliant appraisals to both Fannie Mae and Freddie Mac through the joint UCDP for all conventional conforming loan applications dated on or after December 1. (Fannie Mae's DU Refi Plus loans need only be submitted to Fannie Mae through the UCDP.) Appraisals that were successfully uploaded will receive a Submission Summary Report (SSR) along with a Document File Identifier (Doc File ID). These documents must be uploaded to Image Central along with the appraisal prior to purchase. "If using GMACB's VEROS Appraisal Management System exclusively, no further action by you is necessary." In addition, GMAC addressed the changes in VA Funding Fee Rates starting with loans closed today, and the revised appraisal requirements for VA Interest Rate Reduction Refinance (IRRRL) loans.

Fifth Third is "updating our fee structure for Fannie Mae DU Refi plus adjustments and Freddie Mac Open Access adjustments on our rate sheets...for all locks effective November 18, 2011. Relocks on existing loans in the pipeline are not currently eligible for the updated pricing grids. The primary impact of the changes is on loans with an LTV > 80% is significantly improved. This is a pricing update only, product guideline changes are not effective November 18, 2011."

Flagstar announced, starting Monday, will be making changes on jumbo products, updated the FHA funding requests deadline, and updated its disaster memos (updated information regarding re-inspection requirements) for areas affected by Hurricane Irene, Tropical Storm Lee, and the Texas wildfires.

RMIC told clients that it fully supports the new HARP enhancements and "will participate in the new program when it becomes effective on December 1st. Any RMIC-insured loan that is eligible under Fannie Mae or Freddie Mac's enhanced HARP guidelines will be eligible under RMIC's HARP guidelines. RMIC offers HARP Same Servicer and New Servicer Programs. In conjunction with the HARP enhancements, RMIC is announcing a major redesign and expansion of our New Servicer Program.   The redesigned New Servicer Program will be very similar to the Same Servicer Program. (??) For both programs RMIC will simply modify the existing MI certificate, eliminating the need for any further analysis as long as the new loan improves the borrower's ability to repay the loan, has sustainable terms, and meets Fannie Mae's or Freddie Mac's HARP program requirements." "While RMIC is not currently writing new mortgage insurance coverage, our affiliated companies continue to support our customers and provide non-insurance products and solutions. We continue to offer Contract Underwriting, Credit Reporting Services, Valuation Products, Customer Relationship Management Technology, Training, Pre-Home Ownership Counseling, and other services important to our customers."

Effective immediately, HSOA no longer requires the Mortgage Broker Fee Agreement (MBFA) on wholesale loans.

MSI announced a clarification for MERS 123 Members, the elimination of MSI lending in Clark County, Nevada, underwriting chapter clarifications, and AIR requirements for FHA/VA and USDA loans.

It seems like half the e-mails I received Thursday afternoon were from lenders improving their rates. Europe resumed being on the center stage - it is a problem that is just not going to go away any time soon. So investors moved money into "riskless" U.S. Treasuries: 10-yr T-note prices improved .625 which dropped the yield to 1.96%. MBS tagged along for part of the ride improving by perhaps .250 on current coupons. (Reuters reports that for the four-day week ending November 16, the Fed bought $5.55 billion in agency MBS, or $1.4 billion per day on average, compared to $5.4 billion in mortgage banker supply over this period.)

The only news today from the U.S. is Leading Economic Indicators. In the very early going rates have slid higher with the 10-yr at 2.01 and MBS prices worse by .125-.250. - View MBS Prices


A husband reads an article to his wife about how many words women use a day...
30,000 to a man's 15,000.
The wife replied, "The reason has to be because we have to repeat everything to men."
The husband then turned to his wife and asked, "What?"


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 the impact of HARP 2.0 and the differences in the agency's programs. 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.