Special Holiday Edition Dedicated to the Mortgage Tax

Remember in the old days when all you had to worry about was trying to decipher lyrics from folks like Mick Jagger and Van Morrison? Instead we are "privileged" to have received dozens of investor updates in recent days, most dealing with the congressionally mandated g-fee increases. "I've been in the mortgage industry for 25 years as a broker and banker. I've been getting these letters and emails all day long. I don't think I have ever seen lenders send me detailed explanations about why they are increasing interest rates on a specific day and time in the future. America now has a National Mortgage Tax. It would be interesting to see how many in Congress voted for this, who had previously vowed never to vote for a tax increase."

The bulk of the announcements began in a similar fashion. "As many of you are aware, the FHFA has mandated an increase in the Fannie Mae and Freddie Mac guarantee fees in order to finance the extension of the temporary payroll tax cut." And then they went on from there. As always, it is best to view the actual announcements, but this should represent a good cross section of pricing news for lenders big and small, complicated and simple, effective immediately or phased in, in no particular order.

USA Direct Funding told brokers, "There will be a gradual effect to these changes that will start taking place effective immediately and apply only to conforming fixed programs, including high balance. They do not apply to conforming ARM's, jumbo, or government programs. Effective immediately, 58 day locks will be priced .625 worse than 43 day locks. Effective on Wednesday, January 18th, 43 day locks will be priced .625 worse than 28 day locks (58 day locks will then be back to .250 worse than 43 day locks on that day). Effective on Monday, January 23rd, 13 and 28 day locks will worsen by approximately .625 to fee, outside of any market movement that may be occurring at that time (43 day locks will then be back to .250 worse than 28 day locks on that day).For all loans locked before the deadlines shown above on those specific time frames, extension fees will increase as follows: 7 days = .500, 14 days = .625, 21 days = .750, 28 days = .875, and the relock fee will increase from 25 bps to 50 bps."

Franklin American Mortgage will "implement increases to rate lock extension fees for all conforming and high balance conventional loans that fall under the specific extension timeless. These changes to not affect FHA, VA, USDA, or jumbo loan lock extensions. All conventional conforming loans and high balance conventional loans with an original lock date prior to January 12, 2012 that require an Extension and that results in an updated lock expiration date beyond February 24, 2012. All loans that meet the criteria described immediately above will incur a -0.500 pricing adjustment in addition to the standard extension fee."

Home Savings of America spread the word that, "An additional .50pt cost will be added to locks as follows: 30 day and 45 day locks: effective on Tuesday, January 17, 2012, 15 day locks effective January 20, 2012. This additional cost will be included in our posted pricing on the effective dates listed above. Extensions on existing locks expiring January 31 or later will be charged the standard extension fee plus .50 pt. All loans locked without the additional G-Fee pricing, must fund no later than Friday, February 3, 2012, regardless of lock expiration date."

Wells Fargo's wholesale told brokers, "In order for a loan to meet the April settlements, it must fund by Feb. 29, 2012. The G-fee increase will worsen prices by up to 80 bps depending on note rate. Wells Fargo Wholesale Lending is staggering the impacts of that increase by Rate Lock Period in an effort to offer lower rates to consumers in the market for as long as possible. On January 31 the g-fee increase will impact 30-day pricing and on February 13 the g-fee increase will impact 15-day pricing...Requests to extend rate locks on a loan priced without the g-fee to a date after Feb. 29 will be subject to a charge of 55 bps plus standard extension fees.
Note: The g-fee increase does not impact Government products."

A Citi wholesale AE told brokers that the increased g-fee has already impacted the 60-day and 45-day pricing by being built into the rate sheet. "The g-fee will be implemented on 30 day pricing on January 26, 2012 and will be implemented on 15 day pricing on February 10, 2012.  These dates are important as you will see a pricing deterioration of approximately .50% (50 basis points) on these dates respectively (30 day rate commitment option on 1/26/12 and 15 day rate commitment option on 2/10/12). To avoid the .50% pricing deterioration due to the g-fee increase, all conventional pipeline loans locked prior to the dates in the table listed below and not extended beyond the original expiration date must be funded on or before February 29, 2012.  Extension requests for loans locked prior to the dates in the table listed below will be subject to a .50% price adjuster (hit to pricing) if the new expiration date is on or after February 16, 2012 or the extension is executed on or after February 16, 2012."

Down the hall at Citi's correspondent group, similar to the Wells Fargo correspondent announcement, a differentiation was made between best efforts and mandatory single loan and bulk sales. "For best efforts and single loan mandatory, new g-fee price increase effective with locks on and after 60 day (1/6), 45 day (1/16), 30 day (1/31), and 15 day (2/16). Conventional loans extended that are locked on or after the dates noted above will follow our standard extension costs. Extension requests for loans locked prior to the dates in the table above will be subject to a 50 basis point price adjuster if the new expiration date is on or after February 16, or the extension is executed on or after February 16. To avoid the pricing deterioration due to the g-fee increase, all conventional pipeline loans locked prior to the table dates and not extended beyond the original expiration date must be purchased on or before February 29, 2012."

A MSI AE told brokers, "Effective Friday, January 13th our pricing will have the cost of the Temporary Payroll Tax Cut Continuation Act built into it. Extensions done for loans locked and/or relocked on or after January 13 will have no change to the extension policy of .020 per day. Extensions done for loans locked prior to January 13 that will have a new expiration date of February 14th and/or after will be subject to a 50 bps price adjustment in addition to the regular extension cost of .020 per day. There will not be any exceptions to this policy as our investors are all implementing similar practices."

Pinnacle Capital told brokers, "Any Conforming loan product locked before January 11 that requires an extension or relock beyond February 17 will have a fee of 40 basis points applied in addition to the current extension/relock fee noted in the PCM Pricing Policies and Procedures document."

GMAC correspondents learned that, "Any FNMA or FHLMC product loan commitments locked before January 9 that require an extension beyond February 21 to fund will have a fee of 40 basis points applied in addition to the current extension fee as noted on the daily rate sheet.
This includes relocks and all other extension scenarios. All other extensions costs for loans locked on or after January 9 or that close, and disburse prior to February 21 will be subject to the current extension fee as noted on the daily rate sheet."

At Bay Equity in San Francisco, "This fee is applicable to all Conforming Agency and Orange Label Product 25 and 40 day locks which occurred on or before Friday, January 13th:   All lock extensions or relocks that result in a February expiration date will be subject to an additional charge of 0.50 points on top of the standard extension fees. This fee is applicable to all Conforming Agency and Orange Label Product 12 day locks which occurred on or before Friday, January 20th:  All lock extensions or relocks that result in a February expiration date will be subject to an additional charge of 0.50 points on top of the standard extension fees."

Mountain West Financial told brokers, "Effective immediately, any lock period equal to 45 days or 60 days will be worse by a .50 in price, effective on or after January 16 any lock period equal to 30 days will be worse by a .50 in price, effective on or after January 30 any lock period equal to 15 days will be worse by a .50 in price. Any relock or lock extension with a new expiration date falling on or after February 13, 2012 will be subject to an additional .50 price adjustment."

A PennyMac AE told clients that, "On Tuesday, January 17^th, the rates on the 19 day lock will increase.  If you have any loans that you KNOW will close by 2/10, I would recommend locking today.  This new Guaranty Fee is resulting in an increase in the fee associated with each rate and the re-lock and extension fees will also be negatively impacted.  Please look at your pipeline very closely and carefully today and lock those loans that will close by 2/10. This does not apply to government loans."

Plaza Home Mortgage noted, "Effective Wednesday, January 11 with all new locks, Plaza will increase 45 and 60 day lock fees on all Agency loans by .50 to offset the additional cost associated with Fannie and Freddie's increased g-fees.  Within 2 weeks, the 30 day price will also be increased by .50. Pricing will affect all Agency products including all High Balance, DU Refi Plus, LP Relief Refi, and Home Path. Government pricing will not be affected. Relocks with new lock expiration dated on or after February 15 will be subject to an additional charge of .50 to the relock fee.  (In addition to standard relock fees.) Lock Extensions with a new expiration dated on or after February 15 will be charged an additional .50 to the standard extension fee (in addition to standard extension fees).

As always, it is best to view the lender's bulletins for complete details.

A Virginia State trooper pulled a car over on I-64 about 2 miles south of the Virginia/West Virginia State line. When the trooper asked the driver why he was speeding, the driver said he was a magician and juggler and was on his way to Beckley, WV to do a show at the Shrine Circus. He didn't want to be late.

The trooper told the driver he was fascinated by juggling and said if the driver would do a little juggling for him then he wouldn't give him a ticket.
He told the trooper he had sent his equipment ahead and didn't have anything to juggle. The trooper said he had some flares in the trunk and asked if he could juggle them.

The juggler said he could, so the trooper got 5 flares, lit them and handed them to him.
While the man was juggling, a car pulled in behind the patrol car. A drunken good old boy from West Virginia got out, watched the performance briefly, then went over to the patrol car, opened the rear door and got in.
The trooper observed him and went over to the patrol car and opened the door asking the drunk what he thought he was doing.
The drunk replied, "You might as well take me to jail, cuz there ain't no way I can pass that test."

If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog discusses the time frames for borrowers returning to A-paper status after a short sale or foreclosure. 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.