Flood Bill Primer; Cash Out Refi Trends; Fairway Independent and ValueQuest Do Some Good

I don't know if this short video says more about the strength of the bridge, or the IQ & preparation of those truck drivers.

Speaking of preparation, here's a note I received that is worth tucking away in the back of your mind: "Rob - I just looked at the calendar. We're nearly in the middle of November! Monday is a holiday, we have two days at Thanksgiving, Christmas Eve is on a Monday, Christmas Day is on a Tuesday, and New Year's Eve is the following Monday. When you throw in some end of year vacations with everyone, LO's had better get their rate locks & files lined up sooner than later, and expectations and schedules should be communicated clearly. Staff at headquarters, branches, closing officers - staffing will wane. And the last thing this industry needs is a bunch of upset borrowers during the holidays due to rate lock extensions or loans failing to close." Thank you!

The mortgage industry is filled with well-meaning individuals and companies, continuing to take the high road and therefore overcome the negative perceptions that much of the public and press have of our industry. There are plenty of examples, but one is Fairway Independent Mortgage: "Fairway Independent Mortgage Partners To Present Purple Heart Recipient With Mortgage-Free Home At Military Celebration In Louisiana." The lender is headquartered in Texas, the event was in Louisiana, and here is the story from California.  [READ: Fairway Mortgage puts Boots on the Ground and Keys in the Pockets of Wounded Vets]

And after Sandy, lenders need to obtain disaster inspection reports for all the properties in declared disaster areas. A Norcom Mortgage exec wrote that, "The head of the new ValueQuest AMC, Eli Pascon, made a decision to complete disaster inspection reports at cost to the company - an effort on their part that strains their time and resources so it really is great they can save money for those borrowers when they could be charging." The bulletin said, "We have decided since counties in southern Connecticut were deemed disaster zones we would do our part to help out.  Knowing that appraisers were busy, we put together a task force to visit each property that had an appraisal done in the last 60 days (prior to the storm). Our task force was down in southern CT the day after the storm and took pictures of the properties to confirm if any damage was sustained from Hurricane Sandy. ValueQuest chose to not charge the borrowers for this service since most had suffered losses already. Under any other Appraisal Management Company, the lender would have had to order a Disaster Inspection Report from the appraiser at the borrower's expense and be subjected to waiting for the appraiser to fit it into their schedule. We at ValueQuest understand that 'time is of the essence' and any delay in the closing may end up costing the borrower more." (For more information on this AMC visit www.valuequestamc.com.)

Hey, if someone is earning less than .5% on their cash in the bank, but paying 4% on their mortgage, why not refi? (The flip side, of course, if a bank is paying 0% to its depositors, but earning 4% on the mortgage portfolio, why encourage anyone to refi?) The latest figures certainly bear this out, with Freddie producing figures that showed U.S. homeowners who refinanced in the third quarter lowered their principal balance in 29% of the new loans. In the quarter, 83% of those refinancing their first-lien mortgage either kept the loan amount the same (54%) or reduced it (29%).The average reduction in interest rate came to 1.7 percentage points, "or a savings of about 31 percent in interest rate," Freddie Mac said. Here are the nitty-gritty details.

In this government-heavy environment, here's yet another department we need to follow. The U.S. Department of Homeland Security issued a Service Bulletin regarding the National Flood Insurance Program (NFIP). The memorandum outlines the provisions for homeowners to quality for an extension of the grace period for payment of National Flood Insurance renewal premiums.  Did you know that the Department of Homeland Security, through FEMA, leads the federal response to Hurricane Sandy? I didn't - shows how up on things I am. But here is the site: http://www.dhs.gov/sandy.

And let's not forget the Biggert-Waters Flood Insurance Reform Act of 2012, signed in July. The Act increases access to the NFIP for some residents whose homes were impacted by flooding from federal land that resulted from wildfire. The Act authorizes the NFIP and it's financing through September 2017. The Act impacts lenders in many areas. For example, it requires that lenders provide to all purchasers a disclosure of the availability of flood insurance under the Real Estate Settlement Procedures Act (RESPA). The Act increased penalties for lenders that fail to ensure that properties required to have flood coverage purchase such coverage. Penalties were increased from $350 to $2000 per violation, and there is no limit on annual penalties. The Act requires lending institutions to create escrow accounts for the payment of flood insurance premiums.

But wait, there's more! Termination of force-placed Insurance: within 30 days of receipt by a lender or servicer of confirmation of a borrower's existing flood insurance coverage, the lender or servicer shall terminate any force-placed insurance and refund all force-placed insurance premiums and fees charged to the borrower during any period of coverage overlap. For confirmation of coverage, a lender or servicer shall accept the borrower's insurance policy declarations page that includes the flood policy number and the insurance company. The Act increased the annual limitation on premium increase from 10% to 20%, and permits lending institutions to accept a private primary flood insurance policy in lieu of a NFIP flood policy to satisfy the mandatory purchase requirements. Lastly, it clarified that condominium owners with flood insurance policies should receive claims payments regardless of the adequacy of flood insurance coverage of the condominium association and other condominium owners.

On to some other somewhat recent agency, investor, and MI updates, along with the usual disclaimer that it is best to read the bulletin for full details, but this will give you a flavor for current trends.

In October DU 9.0 was rolled out. I don't have the attention span or mental capacity to be an underwriter, but as I understand it (and this question comes up once in a while) , borrowers have no more freeloading on the divorce and child support, as it is going in their DTI! "Court assigned debt" is now included by Fannie Mae in a borrower's liabilities. There is no exclusion of any court assigned debts, co-signed debt, or mortgage assumptions for Fannie. As one person wrote, "Even if they have a divorce decree where the court has transferred the liability, it is a 'no go' under Fannie. Originators should go with LP (if the loan balance fits) or perhaps a jumbo program."

Bank M&A continued with Ohio's Incenta Federal Credit Union acquiring St. Luke Federal Credit Union.

Oh, and save that orange paraphernalia: Capital One Financial will change the name of ING Direct (which is purchased earlier this year) to Capital One 360 and will change its color scheme from orange to red and blue. (How original!)

Last month, in response the FHFA's fee increase announcement, Guild implemented a temporary extension fee increase for all conforming fixed-rate Fannie and Freddie loans that were locked before September 9, 2012.  Any such loans that require extensions to lock or re-lock after October 31st are subject to an additional 50bps on top of the standard fees, while loans with expiration dates before the 31st are exempt from the increase.  Loans locked before September 9th that have original expiration dates after October 31st are also exempt provided that they close within the original lock term.  The extension fee increase doesn't affect government, Rural Housing, or non-conforming loans.

GMAC Bank updated its appraisal fees so that appraisers can be fairly compensated for their services. Increased fees will impact appraisals in the states of AL, AK, AR, CA, CO, FL, GA, ID, IL, IN, MA, MD, ME, MI, MN, NC, ND, NH, NJ, NY, OH, RI, TX, UT, VA and WA. Fees will decrease in DE, IA, KS, MS, MT, NV, OR, SD, TN, VT, WI and WY. Fees will remain unchanged in the following states:  AZ, CT, DC, KY, LA, MO, NE, NM, OK, PA, SC and WV.

SunTrust revised pre-sale requirements for new condominium projects under Freddie Mac condominium warranties, eliminated of the Fannie Mae "T" PUD Classification Delivery Code, and updated the Key Loan Program product description to incorporate current qualifying income and documentation requirements for the following income types: rental income, retirement income, social security income, and Veteran Administration (VA) benefits. SunTrust, of course, incorporated the Fannie DU 9.0 changes, and also published a revised Government Credit Overlay Matrix.

Chase outlined additional LTV/CLTV reductions to Agency Conforming Amortizing ARM Investment transactions, clarified minimum FICO's for 2 Unit High Balance ARM transactions, clarified when an exterior appraisal is acceptable, and incorporated DU 9.0. In conjunction with recent Agency announcements, Chase Correspondent revised the following products and credit policies: Agency ARM maximum LTV/CLTVs, MyCommunityMortgage ARM maximum LTV/CLTVs, retirement of Fannie Neighbors, elimination of appraisal forms 2075, 1075, 2095 and 2055, limited project review maximum LTV/CLTV or primary residence, income documentation changes, DU Refi Plus and LP Open Access updates, other income sources, charge account policy changes, and reserve requirements for 2-4 units. (Note: These changes apply to Agency and Non-Agency loan transactions only, as specifically outlined in this bulletin, and do not apply to FHA and VA transactions.)

Flipping over to the markets, those who follow the securities markets know that even though most mortgages have 30 year maturities, most don't last that long, and are paid off much sooner. And thus 30-yr MBS markets don't exactly track 30-yr bond prices, and traders will often use 5-yr to 10-yr maturities as a proxy. But Thursday was "all about the long end." In the morning and early afternoon the sector traded "heavy" over concern about the $16 billion 30-year bond auction. But not to worry, as the auction went very, very well, after which prices did well and rates dropped with the 30-yr closing at 2.75%, the 10-yr at 1.63%, and current coupon MBS better by .125. And mortgage rates should do just fine well into the foreseeable future: the latest figures show that with the increase in prepayments, the Fed is on pace to continue to buy nearly $80 billion a month of agency MBS.

Don't forget - the bond markets are closed Monday, so watch for conservative pricing later today and from anyone who is open Monday. Prior to that, we've had Import Prices for October (expected flat, it was +.5, +.4 year over year) and the preliminary November read on Consumer Sentiment will be released at 9:55AM EST (predicted slightly higher). In the early going the 10-yr is at 1.62%, and MBS prices are down by about .125.

Yiddish proverbs.

If the rich could hire other people to die for them, the poor could make a wonderful living.
The wise man, even when he holds his tongue, says more than the fool when he speaks.
What you don't see with your eyes, don't invent with your mouth.
A hero is someone who can keep his mouth shut when he is right.
One old friend is better than two new ones.
One of life's greatest mysteries is how the boy who wasn't good enough to marry your daughter can be the father of the smartest grandchild in the world.
A wise man hears one word and understands two.
"Don't be so humble - you are not that great." (Golda Meir (1898-1978) to a visiting diplomat)

Pessimism is a luxury that a Jew can never allow himself. (Golda Meir)

Any intelligent fool can make things bigger and more complex. It takes a touch of genius - and a lot of courage to move in the opposite direction. (Albert Einstein)

Life is like riding a bicycle. To keep your balance you must keep moving. (Albert Einstein)

Intellectuals solve problems; geniuses prevent them. (Albert Einstein)

You can't control the wind, but you can adjust your sails.
I don't want to become immortal through my work. I want to become immortal through not dying.
(Woody Allen)

Imagination is more important than knowledge. (Sign hanging in Einstein's office at Princeton.)
We can't solve problems by using the same kind of thinking we used when we created them.