Originator HARP Chatter, and HARP's Impact on Refinances; Investor/Originator Updates

Kids - Father's Day is coming up! The idea of Father's Day was conceived in 1909 by Sonora Dodd of Spokane, WA, while she listened to a Mother's Day sermon. Dodd wanted a special day to honor her father, William Smart, a widowed Civil War veteran who was left to raise his six children on a farm. A day in June was chosen for the first Father's Day celebration June 17, 1910, proclaimed by Spokane's mayor because it was the month of Smart's birth. The first presidential proclamation honoring fathers was issued in 1966 when President Lyndon Johnson designated the third Sunday in June as Father's Day, and it was made permanent by Richard Nixon in 1972.

"So what?" you ask? Well, fathers are borrowers and Realtors and lenders too! In fact, according to our friend the Census Bureau, there are about 70 million fathers in the U.S., 25 million of who are fathers who were part of married-couple families with children younger than 18 in 2011. There are about 2 million single fathers and 176,000 "stay-at-home" dads in 2011. These married fathers with children younger than 15 have remained out of the labor force for at least one year primarily so they can care for the family while their wives work outside the home. These fathers cared for upwards of 332,000 children.

HARP (including HARP 2.0) continues to be a conversation topic in the industry, especially with investors scaling back on LTV's (see Stearns' news below) or adding overlays, and recently I received this note. "I was hoping you might write a blurb in a future daily report about 'unlimited' HARP 2.0.  In fact, I'm finding that most lenders are putting so many additional overlays on the program just 45 days into it, that the program may fail to help as many people as the government expected.  For example, if a borrower is lucky enough to have his loan serviced by an entity that also lends, then many restrictions are waived. Easy breezy.  However, just this week I know of 6 lenders that capped DTI at 40 or 45% if the LTV exceeded 105% or 125% (pick your combination). I was helping a friend to secure a HARP 2.0 loan.  He has $50K in liquid assets, no other debt except his mortgage, 799 credit score, 155% LTV, loan was owned by FNMA prior to May 2009, etc. BUT... his property is a condo in Palm Springs."

The note continued: "My broker friend has been tweaking around with this scenario in FNMA DU and after several Ineligibles, finally upped the estimated value to $200K and lowered the new term from 30 to 25 years, was able to get an EAIII Eligible without any pricing adjustments!  However, my friend's DTI is now a problem as many lenders don't want a combo of high LTV and high DTI.  Things may have become worse with the April 28 update to FNMA DU whereby FNMA DU automatically assigns a value to the property rather than the user inputting it manually.  The effect of that ultimately determines LTV which determines a full appraisal vs. PIW condition.  And condos - forget about it; every overlay from every lender seems to apply to those property types, i.e., nobody wants the risk of a condo that is significantly underwater despite an excellent credit profile of the borrower, so lenders/servicers are doing whatever they can to be overly conservative/restrictive."

Yet FHFA figures show that the quarterly number of loans refinanced through the HARP has nearly doubled since HARP 2.0 was rolled out in January. HARP refinances topped 180,000 in the first quarter of this year compared to approximately 93,000 in the fourth quarter of 2011. Last fall, of course, was when several changes took place: the removal of the LTV ceiling and the elimination/lowering of fees for certain Fannie or Freddie borrowers. Per the FHFA, one in seven refinanced loans during the quarter was through HARP - in March alone, there were nearly 80,000 HARP refinances, a quarter of them on loans with LTVs greater than 105 percent. More than 4,400 loans with LTVs greater than 125% were refinanced since the beginning of the year; over half these loans were refinanced in the states of California, Florida and Arizona.

And the prepayment speeds out yesterday added to that. Speed pickup is most notable in premium "HARP-able" coupons, which accelerated their prepayments (refinances). But will it continue? Balancing the recent pickup is news from lenders that capacity constraints at remaining HARP origination shops are tight, and a sentiment of burnout beginning to take place in the post-HARP vintages. Investors are watching the potential impact that the Boxer-Menendez bill may have on speeds, of which the most significant impact is the extension of eligibility date for HARP loans into 2010 and further efforts to encourage refinancing across servicing books.

Through it all, lender/investor updates continue:

Stearns' wholesale told broker clients that, regarding its "Portfolio DU Refi Plus (2089-25) and Portfolio DU Refi Plus High Balance (2099-25)": "The maximum LTV on all Portfolio DU Refi Plus programs will be reduced to 105%, with loans > 105% treated according to the following timeline: No new submissions over 105% LTV will be accepted as of the end of business Tuesday 6/5,  Locked pipeline over 105% LTV will be honored; the advance lock policy will be strictly enforced. ALL pipeline loans over 105% LTV, regardless of status, must be locked by the end of business on Friday June 8, 2012.   There will be no extensions offered.  Loans must fund by the end of the lock period.  All loans over 105% LTV that are in Approved status may continue as approved. Loans that are in Registered, Submitted or Underwriter Received status (in other words, locked or submitted but not yet Approved by underwriting) that are > 105% LTV MUST have Property Inspection Waiver. Reminder that any loans > 105% LTV must have 2nd signature. Note, CLTV/HCLTV policy will remain unchanged:  Unlimited CLTV for owner occupied properties, 105% CLTV/HCLTV for 2nd home & Non Owner Occupied (2089-25 only)."

Tree.Com Inc. announced the closing date for the purchase by Discover of substantially all of the operating assets of Tree.com's Home Loan Center subsidiary business for June 6, 2012, subject to the satisfaction of customary closing conditions. Home Loan Center, which operates as LendingTree Loans, originates and processes residential mortgage loans in all fifty states and the District of Columbia. Financial terms were not mentioned. (Here is the story.)

Wells Fargo Correspondent has updated its Mandatory and Best Effort options in an effort to simplify pricing and provide more options for government loans.  When locking Best Effort FHA, VA, and Guaranteed Rural Housing loans, sellers no longer have to select either GNMA I or II, as the Wells Funding website will display only one government price.  Mandatory commitments should still be registered as either GNMA I or II, however.  Interest rates on FHA and VA 15-year fixed loans are now permitted in increments of 0.125% instead of the previous 0.5%.  Wells' High Balance FHA Loan Program has also been enhanced to allow 15-year fixed rate and 5/1 ARM transactions, while 30-year fixed rate transactions may include amortization terms of 240-360 months.

The Wells Fargo Funding Market Classification List has been updated and is available in the Client Tools section of the website.  The Authorized eSignature and eDelivery Vendors list (Exhibit 22) has been updated as well and now lists CSi as approved for both electronic signatures and delivery and updated contact information for DocuSign®.

In light of the increasing number of non-conforming transactions where the departure residence is retained by the borrower and is in a negative equity position, Wells has issued a reminder that underwriters must weigh any and all risk factors evident in the loan file.  Each case should be weighed individually, as there are only so many situations underwriting guidelines can predict.  The Wells Seller Guide now states that, in a case where the departure residence won't be sold at the time of closing and is in a negative equity position, paying down the lien or using additional reserves to cover the negative equity may be required to reduce overall risk.

Wells has issued another reminder that a signed Borrower Appraisal Acknowledgement is required for all loans.  The Acknowledgment, whether it's the Wells-issued form or a custom document, must include the property address, complete lender name, borrower name, borrower signature, and borrower signature date.  If the form has checkboxes where the borrower can make a choice, these boxes must be ticked.

Due to changes to FHA Single Family Annual Mortgage Insurance and Up-Front Mortgage Insurance Premiums announced by HUD back in March, one of which requires lenders to determine the endorsement/insured date of the FHA loan as part of a Streamline Refinance transaction, Refinance Authorization results will need to be submitted to Wells with the closed loan package.  These results are necessary to ensure that the accurate MIP was applied.  This applies to all FHA Streamline Refinances with case numbers assigned on or after June 11, 2012, while loans purchased through Pass-Thru Express^TM are excepted.

The 0.750 price improvement on non-conforming loan purchase transactions will be discontinued for Best Effort locks made on or after June 4th.  This doesn't affect loans purchased through Pass-Thru Express.

Wells' government pricing adjusters are set to change on July 2nd.  For VA loans with scores between 620 and 639, the adjuster will go from -0.750 to -1.500.  The adjuster for loans with scores between 640 and 679, currently at -0.250, will change to -0.500.  This affects Best Effort registrations, Best Effort locks, Mandatory Commitments, Assignments of Trade, and Loan Specified Bulk Commitments.

Wells Wholesale clarifies that the Return Transcript (Box 6A), Record of Account (Box 6C), and Box 8 of Form W-2, Form 1099 series, or Form 1098 series must all be checked and/or completed for all loans.  If these fields aren't completed, the loan will remain in the receiving department until a fully filled-out form is received.

A new Wells Wholesale policy on lock timelines requires a minimum of seven calendar days to C20 a Purchase transaction or NON-rescission impacted refinance (second home or investment).  Eight calendar days are required to C20 a rescission impacted refinance transaction

Yesterday was not a good day for rates, and many lenders had intra-day price changes. I wish that I could point to some specific news that pushed rates higher, but there was very little. U.S. stocks certainly shot up - something about "expectations that more assistance will be provided to Europe to stave off recession and shore up financial stability" and "QE3 is probably going to happen." The Fed's Beige Book also helped by noting continued domestic growth. Tradeweb reported volume was above normal at 175% of the 30-day moving average with buyers' interest outnumbering sellers' willingness to sell. Price-wise, agency MBS prices held in well, though, and finished the day roughly only worse slightly while the 10-yr. took a .75 price hit and closed at 1.66%. Treasuries have now given back all the gains from the rally last week.

Today we've seen the weekly Initial Claims which was projected lower to 377k from 383k, and it did indeed come in at 377k from a revised 389k. But all eyes will be on Bernanke's testimony to Congress this morning at 10AM EST. If anyone sees any early price changes, Bernanke's notes are the likely cause. Prior to that the 10-yr yield is basically unchanged at 1.65% as are MBS prices.

A little girl, dressed in her Sunday best, was running as fast as she could, trying not to be late for Bible class.
As she ran she prayed, "Dear Lord, please don't let me be late! Dear Lord, please don't let me be late!"
While she was running and praying, she tripped on a curb and fell, getting her clothes dirty and tearing her dress.
She got up, brushed herself off, and started running again!
As she ran she once again began to pray, "Dear Lord, please don't let me be late...But please don't shove me either!"