CFPB Turns to Reverse Mortgages; Banks Making too Much on HARP? Builders Coming Back; FHA Streamline Investor News

Do we really need Congress writing or approving the industry's disclosure forms? Can't it pick on the rental car agreement forms that no one reads, or maybe rafting or sky diving forms? Or maybe worry about our impending "fiscal cliff" at the end of the year? Okay, that is a bit of an exaggeration, but the House, with two interesting sets of panels, is hearing about disclosures - Go Bill!

Pssst! Want a cool Census site on wealth trends in the U.S. with which to impress your co-workers or Realtors?. Your tax dollars at work, going to pay actuaries. Seriously, U.S. median household net worth declined 35% between 2005 and 2010, from $102,844 to $66,740 (in 2010 constant dollars), according to a set of detailed tables released by the U.S. Census Bureau. However, excluding home equity, median household net worth increased by 8% between 2009 and 2010, from $13,859 to $15,000. The Net Worth and Asset Ownership tables show household net worth ─ the value of assets minus debts ─ by a variety of demographic characteristics in 2005, 2009 and 2010.

Want to comment on the pros and cons of reverse mortgages? "I don't want the Gray Panthers picketing in front of my office" versus "This program is God's gift to anyone who remembers Lawrence Welk's accordion solos!" The CFPB wants to hear from you! The agency said it will look into the financial abuse of the elderly, particularly reverse mortgages and will collect comments from the public until Aug. 13th. And once again the CFPB has scored public relations kudos - but does the name of the site ("protecting older Americans from financial abuse") assume guilty before proven innocent?.

When in doubt, order a probe. Fifth grade humor aside, the ResCap bankruptcy could take a very long time to sort out.

I love unintended consequences - but should the press be upset about making a profit in mortgage banking? Honestly, I haven't figured out if Wells Fargo is a "big" bank or a "regional" bank, but when it comes to mortgages, it is a big bank. The Wall Street Journal noted that "big banks" are netting unanticipated financial gains from the Home Affordable Refinance Program, with Nomura Holdings estimating that mortgage servicers could pocket up to $12 billion in revenue this year and borrowers could save $2.5 billion to $5 billion. However, critics worry that changes making HARP easier for borrowers to refinance with existing lenders could create what HUD Secretary Shaun Donovan calls "a monopoly on refinancing." "The contrast is the latest illustration of the competing demands policy makers must juggle when they devise responses to the housing bust, now in its sixth year. Federal officials last year revised the HARP program in a bid to encourage banks to refinance borrowers who were current on their payments but owed more than their properties were worth. The revisions have driven a sharp increase in refinancings, following years in which the program fell short of government projections. But some critics, including members of the Obama administration, say the changes risk making HARP a giveaway to big banks. That is because the new HARP rules make it easier for borrowers to refinance their loans with existing lenders. That, the critics say, allows large lenders to charge a captive customer base above-market interest rates on the refinanced loans. Borrowers refinancing through their existing lender make up about 75% of HARP refinancings, according to government figures."

Builders...remember them? The National Association of Home Builder's (NAHB)/Wells Fargo Housing Market Index (HMI), a measure of confidence, ticked up one point this month to reach its highest point since May 2007. The June increase in the HMI came from increased optimism over current sales while builders remain cautious about future prospects. But, the WSJ reports, "The recent rise in home building could be thwarted by an unlikely factor, a shortage of land in desirable locations." It seems that a sizable portion of developed lots (paved roads, sidewalks, ditches for sewage pipes, etc.) are often are in distant suburbs of cities and still owned by banks, builders or developers. The problem is that they are in places where few home buyers want to live. "In fact, builders are running low on land in suburbs that have well-regarded school districts and reasonable commutes to city and job centers...'Of all the lots out there, probably 95% of them are unbuildable,' said Patrick Malloy, an Atlanta-area builder. Mr. Malloy said home prices are recovering-but only in the city and nearby suburbs...That means the recovery in both home construction and new-home sales could be held back until developers replenish their supply of land, especially in areas where buyers want to live."

Soon, the borrowers who make up about $2.5 billion of performing servicing will receive a letter saying, "The company servicing your loan has changed - please send your payment to..." Yes, for various reasons, the transfer of servicing continues. "Mortgage Industry Advisory Corporation (MIAC), as exclusive representative for the Seller, is currently marketing a $2.47 Billion FNMA A/A mortgage servicing portfolio. The portfolio is being offered by a West Coast Mortgage firm, with loan originations primarily concentrated in the Pacific Central, Pacific Northwest, and South Central regions. The Seller will be providing full representations and warranties for the loans included in this offering." Key portfolio characteristics include: $327,894 Average Loan Size, 99.89% Fixed Rate loans, Weighted average interest rate of 4.325%, Weighted average delinquency rate of 0.05%, Weighted average loan Age of 9 months, 100% Retail, 100% Full Doc, Weighted average FICO 778, Geographic concentration in California and Colorado." (Anyone who wants to bid by June 25^th should contact Dan Thomas at dan.thomas@miacanalytics .com.)

Huh? The FHA has temporarily rescinded its policies on "Disputed Accounts and Collection Accounts" in order to clarify them. They were to become effective July 1. Go here and click on 12-10.

The FHA Streamline changes continue, begun last week by Wells Fargo. The numbers are staggering. In Wells Fargo's case, it currently services more than 500,000 customers with FHA home loans that could qualify to save money by refinancing under changes at the agency.
Wells' demand for this product is such that they can focus on it, and forget the other servicers - it helps keep turn times down. FHA, in a recent monthly report, has undertaken more than 126,000 refinance applications under the streamlined program, along with projections that it could see close to 224,000 by year end. Other investors such as PHH, it seems, doesn't want/need the influx of business either.

But some investors are staying the course. "With the recent industry news regarding FHA Streamline Refinances, Franklin American Mortgage Company (FAMC) is pleased to announce that it will continue to provide liquidity to the marketplace, free of servicer restrictions. In an effort to manage market exposure, a loan level price adjustment of 50 basis points will be applied to all FHA Streamline Refinance transactions effective with loans locked on a best-efforts basis starting Tuesday June 19, and effective with all mandatory trades executed on June 19, and forward. This streamline price adjustment applies to all FHA conforming fixed, FHA jumbo fixed, and FHA adjustable rate products. Please review FAMC's online lending manual for detailed product descriptions and other requirements."

"In response to the recent investor pull back of FHA Streamline Refinance transactions, Mountain West Financial wants to reiterate their commitment to the FHA Streamline Refinance product.  We will continue to offer FHA Streamline transactions, regardless of servicer, for all of its business channels. It's business as usual here at Mountain West. We do not require an AVM and will not cap your LTV at 110%. We still need a 640 score and a full credit report with a 12 month mortgage rating. And don't forget, we waive the normal $975 underwriting fee for our FHA Streamlines."

Pacific Union sent out a note to brokers, "With all the banks changing their Streamline programs, they should know Pacific Union Financial is here to help. They can find us at Corr.PacUnionDirect .com."

Last week I mentioned First Mortgage, also "standing pat" on this program: http://www.firstmortgage .com/

And M&T is sticking around. "As announced last week, effective today we will accept FHA Streamline Refinances on loans where M&T Bank is not the current servicer.  As many lenders in the market are scaling back, M&T is remaining true to the goal of making home ownership more affordable." There is some fine-tuning on maximum loan amounts, a manual LTV calculation for pricing purposes, and some other criteria lenders should be aware of - there is a conference call at 1PM CST tomorrow to answer specific FAQ's related to this product.  The dial-in number is 1-800-851-0194, code # 6821340.

With all the investor chatter, one would think that FHA Streamline product is the entire mortgage market - but it isn't. Freddie and Fannie issuance is still strong, as is "regular" FHA & VA. From a hedging perspective, traders report that the 3.5% coupon (the "bucket" containing 3.75-4.125% loans) still represented the majority of hedge activity from last week at 65% of all 30-yr flows.  However, liquidity in the 3.0% coupon remains steady with prior week levels at 29% of activity.

Last week, of course, the MBA application numbers showed a sharp increase in week-over-week mortgage application volume. Total refinance applications increased 19%, with the conventional refinancing applications increasing 18% and government refinancing applications surging 28% resulting in the highest level on these indices since May 2009. After ruminating on it a bit, analysts suggest that there are three factors that could have led to the surge in the index. The impact of the shorter week, since the index reported in the prior week was adjusted for the Memorial Day holiday. Mortgage rates rallied to new historic lows in the prior week (week of May 28th to June 1st), and although rates were unchanged to slightly higher for the most recent MBA reporting period, it is possible that borrowers were waiting to see if rates would rally further but decided to apply for a refinancing seeing rates were holding steady or trending upwards. Lastly FHA premiums: the higher FHA premiums for jumbo loans and the lower FHA premiums for loans with endorsement date prior to May 2009 went into effect on June 11th. There is a possibility that there was some front running of the increase in premiums by FHA jumbo borrowers. However, this would only impact the government refinancing index and the fact that average loan size on those applications went down suggests that it may not have impacted application volume. That said, the lower premiums for pre-May 2009 borrowers could have led to the larger increase in the government refinancing index.

Continuing on with the temporal markets, we didn't see too much volatility yesterday, given the Greek election news. In fact, it is a pretty light calendar this week although today we have Housing Starts - expected +.4% but generally not an interest-rate moving number, and Building Permits. (Tomorrow we have the results of the FOMC meeting, Thursday Jobless Claims, Existing Home Sales, and the Philly Fed.) The focus is on the verbiage of the Fed meeting and then Bernanke's press conference afterward, with some believing that the odds of QE3 at better than 50/50. It would appear that rate locks are stable, or so one could believe given that MBS supply from originators is about average at between $1.5-2.0 billion. With little news, we find the 10-yr nearly unchanged from Monday's close at 1.58%. MBS prices also appear nearly unchanged.

 
Men are like... (Parental discretion advised; Part 2 of 2)
7. Men are like department stores. Their clothes are always 1/2 off!
8. Men are like government bonds. They take soooooooo long to mature and have limited interest.
9. Men are like mascara. They usually run at the first sign of emotion.
10. Men are like popcorn. They satisfy you, but only for a little while.
11. Men are like snowstorms. You never know when they're coming, the intensity, or how long it will last.
12. Men are like lava lamps. Fun to look at, but not very bright.
13. Men are like parking spots. All the good ones are taken, the rest are handicapped.