Investor, Agency, Lender, and MI Updates

Investors, those left, have been somewhat busy recently, adjusting underwriting and documentation guidelines to continue to make current production the cleanest ever. (Many may just skip to the joke.) As always, it is best to read the full bulletins, but here are some recent happenings:

Several institutions, including Wells Fargo, Citibank, and Affiliated Mortgage, are adopting a new policy on insuring attached condos and PUD projects.  Along with the walls-in insurance required for attached condos and PUDs whose loans closed after March 1^st, attached PUDs are subject to additional Hazard Insurance requirements.  All post-April 2^nd registrations will need walls-in coverage that is at least 100% replacement as determined by the borrower's insurance provider; that is, it should be sufficient to repair the interior of the unit and any additions, improvements or betterments to their original condition in the event of a loss. 

Original Mortgagee (MOM) loans registered on the MERS now require the Org ID of the MERS member who originated the loan in the relevant field.  For smaller organizations that will continue closing loans in their name but don't have the ability to perform transactions or review reports, MERS has created the Third Party Originator category.  Non-member clients can still originate loans on standard security instruments and assign them to MERS, which would register the loans as non-MOM.

HUD has addressed FHA Approval Expiration date on condos pertaining to loan level requirements: the loan level certification must be executed both 30 days before the note date and before the date on which the FHA approval expires.  HUD has also clarified Fidelity Insurance requirements for condo projects managed by a management company.  Both the HOA and management company must carry separate Fidelity/Employee Dishonesty Insurance policies that must be submitted for loan level review.

On March 11^th, Freddie Mac will update its LP program such that lenders will be able to assess Relief Refinance mortgages with new requirements that take into account the enhancements to HARP 2.0. And in the wake of the Temporary Payroll Tax Cut Continuation Act, Freddie will implement a 10 basis point increase on all single family mortgages sold to them with settlement dates that fall after April 1.  This includes an increase to the necessary spreads for Guarantor and MultiLender Swap executions, amongst others, and a commensurate pricing change in Cash execution.

Fannie Mae  now has blanket delegation of authority on behalf of all PMI Insurance and Essent Guaranty servicers, and servicers won't need separate mortgage insurer approval from PMI to process a foreclosure sale or deed-in-lieu foreclosure in connection with Fannie-owned or guaranteed loans.  This applies to all contracts in Fannie's review inventory dated after 2/1 and is worth watching, as additional revisions are predicted.

With the discontinuance of the National Monthly median Cost of Funds index that was used in certain negotiated ARM plans, Fannie is requiring servicers to use the Federal Cost of Funds Index starting on March 15^th.  Delinquency status codes have also been updated and are detailed in the "Delinquency Status Codes exhibit on the website.

Fannie has updated its Loan Workout Hierarchy Fact Sheets following policy changes to four announcements from the past few months.  The front page provides several loss mitigation options and indicates that servicers should determine the best loss mitigation possibility for each individual delinquency. The Fannie Selling Guide has been updated to include changes to the Project Eligibility Review Service (PERS), a new policy that addresses recapture of premium pricing, and an increase to maximum buyup of MBS guaranty fees.

Citibank has revised its pre-purchase review process in the name of efficiency.  Loans with a Medium or High Business Risk weighting score whose complete package was submitted on or prior to February 8, 2012, will undergo the comprehensive review outlined in the January 16^, 2012 Quality bulletin, while the process remains unchanged for loans with Low Business Risk scores.  Loans whose package was submitted after February 8^th will also undergo the process detailed in the Quality announcement. Citi has designed a Quality Control Environment assessment that it encourages lenders to use to review controls put in place to detect possible holes in origination and delivery that may lead to post-purchase defects.

Wells Fargo reminds lenders that electronic signatures are not allowed on any third party of Wells-generated documents, although the purchase contract can be signed with an electronic signature if certain criteria depending on loan type are met.  Lenders are also requested to complete the Mortgage Broker Fee Disclosure addendum if the compensation option or loan amount changes and if broker information or signatures are added.

As the Department of the Treasury's FinCEN has ordered non-bank residential mortgage lenders and originators to establish anti-money laundering (AML) programs and file suspicious activity reports (SARS) as outlined by the Bank Secrecy Act, Wells reminds sellers that they should have an approved AML program in place by August 13.

Kinecta Federal Credit Union has issued updated guidance on processing IRS Form 4506-T that applies to all FHA loans, salaried and self-employed borrowers seeking an agency ARM, and self-employed borrowers seeking an agency FRM.  Contact Kinecta directly to see the full requirements.

In compliance with the FHA's revised TOTAL Mortgage Scorecard User Guide, Guild has updated its policies on Cash-out Refinance transactions.  Lenders are now required downgrade the application to a "refer" and manually underwrite such loans if the applicant has less than 6 months of payment history on their existing mortgage, is currently delinquent, or has a record showing any mortgage delinquencies in the past 12 months.  If the applicant doesn't meet those conditions and hasn't been employed by the same outfit for the previous two years, they must supply W-2s, VOEs, FHA-approved electronic verification, or college transcripts/military discharge papers to verify their employment history.

Following the release of a bulletin earlier this year, US Bank clarifies that premium pricing may be used to pay for the Upfront Mortgage Insurance Premium (UFMIP), which must be paid either entirely in cash or fully financed. US Bank is no longer accepting new registrations or locks on any Primary or Investment 2-4 Unit loans for properties in New York, though active locked loans will be processed as normal. And what makes a deposit officially "large"?  For US Bank purposes, it is defined as a monthly deposit that exceeds 10% of the borrower's gross monthly salary, excluding Social Security, retirement or other documented income, and the investor requires verification of the source of funds in such deposits.

MGIC has new guidelines and rate adjustments that went into effect last week.  Separate construction-permanent loan guidelines are no more, and requirements for second home loans (Restricted Markets) and DTI, 97% LTV loans and second homes (Non-restricted Markets) have been expanded.  In addition, when a loan is granted either a DU or LP Accept/Eligible, MGIC will accept the reserve requirements, credit analysis, and income and asset documentation requirements as determined by DU or LP. As of March 12^th, borrowers with credit scores over 660 can take advantage of reduced monthly, annual and single premium rates on their loans.  Also effective as of that date: the DTI cap will remain at 41% for Restricted Markets, regardless of credit score, and attached housing, cooperatives and condos in the Las Vegas area will be ineligible.

Franklin American policy now states that lack of a signature or an illegible date on an application will result in the suspension of the loan for borrower attestation. FAMC is limiting the maximum DTI ratio to 45% on all Conventional Conforming loans locked after February 20. 2012; if these loans are locked through the LP system the maximum will still apply regardless of LP findings.  Non-Owner Occupied loans with locks dated March 1^st will be subject to new pricing adjustments; all current adjusters for these loans will go up by 25 bps.

Flagstar reminds lenders that the updated reserve requirements on Jumbo ARM and Jumbo Fixed loans where the borrower already has existing financial properties and the lock is dated after February 23 have gone into effect.

Second homes and attached properties in Florida are now eligible for lending by Fifth Third (investment properties are still a no-go). For all Fifth Third Conforming and Portfolio products (apart from DU Refi Plus and HASP with LTVs of more than 80%), a line of credit that remains open, balance notwithstanding, is still considered a lien on a property and is included in the total number of properties financed. Prices on Conventional loans locked before January 3, 2012 are subject to a 50 bps adjustment for any extension in addition to the free 3-day extension available and the standard fees outlined in the daily rate sheet.  As to exactly when locks expire, it happens at midnight on the day after the expiration date, and loans cannot be extended after that point.

Affiliated Mortgage has added a number of agents to its Settlement Agent List, which provides the title companies and settlement agents that are not eligible to close transactions that are delivered to Affiliated, and responding to an increase in origination volume, EverBank has added several AMCs to its list of approved vendors.

Sierra Pacific has rescinded its increase in extension and relock fees put in place due to the agency guarantee fee increase - the fees are now back to standard.

Plaza has addressed the delays experienced while submitting appraisals to the UCDP portal and extended the deadline for brokers to register as MERS members to March 31^st.  It has also implemented a new direct support system called PULSE for brokers and lenders, which can be reached either via email or phone.

Effective for all programs and delivery types, GMAC will no longer purchase seasoned loans, which includes any loans whose closed packages are received more than 45 days after the Note date.  Any loans in suspense will be processed in accord with Section B-408 of the GMAC Client Guide. Revised GFE's and Change of Circumstance Notifications are now be generated by GMAC and passed on directly to the consumer, which means that correspondent lenders shouldn't be issuing revised GFEs.  This covers changes there may be in product, loan amount, rate, final price, escrow, loan term, or LTV, as well as a shift from float to lock.  Changes of Circumstance must be filed by the lender as soon as possible using the aptly-named Changed Circumstance form, and GMAC will generate the necessary GFE along with a revised TILA. The GMAC policy for processing IRS Form 4056-T was updated on February 13^th, and the revisions apply to all financing types.  The changes have been put in a handy matrix on a Tax Information Job Aid that is available from Client Services.

Phew! Quite a bit... and now for something on the lighter side:

"In Positive Economic Sign, Republicans Starting to Say Obama Wasn't Born in US Again"

WASHINGTON - In what some experts are calling a strong indicator of improvement in the economy, Republicans in recent weeks have begun renewing their claims that President Barack Obama was not born in the United States.

While most economists agree that any significant improvement in the US economy is generally accompanied by an uptick in GOP questions about Mr. Obama's place of birth, there is now an econometric tool for measuring the increase in those claims: the so-called S & P Birther Index.

The Birther Index, established in 2008, measures the occurrences of such words as "birth certificate," "Kenya," and "wasn't born here" in Republican statements about the President, and has proven to be a surprisingly reliable tool for tracking improvements in the economy.

Harland Dorinson, the economist who devised the S & P Birther Index, said that as the economy recovers the index also shows a strong surge in statements questioning the President's Christianity.

"As unemployment started going down, we saw an increase in references to Mr. Obama being a Muslim," he said.  "This is generally a very bullish sign for the economy."

But Mr. Dorinson was quick to add that while the surge in references to Mr. Obama being "an Islamic socialist born in a mud-hut in Nairobi" is encouraging, the economy is not out of the woods yet.

"We won't be fully in a recovery until the Republicans start calling him a Wiccan," he said.  "And if they start saying he's a Satanist who practices human sacrifice and drinks the blood of children, then it'll be time to pop open the champagne."

(Thanks to the Borowitz Report for this one.)


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 role of rating agencies in the current environment. 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.