Eminent Domain Embraced by California City; No Mel Watt Vote until September; Libor Lawsuits
I used to look at my dog and think, "If you were a little smarter, you could tell me what you were thinking." And she'd look at me like she was saying, "If you were a little smarter, I wouldn't have to." There are plenty of smart people who do lending in banks - not all of it on residential or commercial real estate. SNL Financial reports that the top 10 largest bank auto lenders as of Q1 (loans outstanding) were, in billions: Ally Financial ($60), Wells Fargo ($47), JPMorgan Chase ($40), Capital One Financial ($28), Bank of America ($27), TD Bank US ($15), US Bancorp ($12), Fifth Third ($11), SunTrust Banks ($10) and USAA ($10). That is a heckuva lot of car loans outstanding!
(And a quick note about banks. Who knew, way back when Norwest Mortgage bought Wells Fargo, but kept the name due to brand identity, and five years after Wells purchased Wachovia, it would become the world's most valuable bank. San Francisco-based Wells passed the Industrial & Commercial Bank of China as the largest bank in the world by market capitalization. Wells Fargo's market cap hit $237 billion as of last week, surpassing ICBC's $225 billion market cap. It is hard for Wells to tell the world it is a regional bank with those kinds of stats.)
Hopes any LO had that HARP 3 would be right around the corner, with a new cut-off date, were dashed when it was announced that Mel Watt's Senate vote would not happen until September. Mr. Watt is up for confirmation to replace Ed DeMarco has the head of the FHFA, which oversees Freddie and Fannie. (read more...)
Opponents of eminent domain were dealt a blow this week as Richmond, California embraced the plan. From The New York Times: "A City Invokes Seizure Laws to Save Homes" "With recent gains in home prices doing little for some blighted neighborhoods, Richmond, Calif., is about to become the first city in the nation to try a novel way to stop foreclosures." (read More...)
And here's an interesting set of lawsuits: cities suing banks over manipulating Libor. (I remember when it was "LIBOR", but I guess that is too hard to type.) Philadelphia has sued nine banks, including Deutsche Bank, Royal Bank of Scotland and UBS, regarding losses incurred because of possible manipulation of the London Interbank Offered Rate. Houston and other US municipalities have taken similar action. (read more...)
Let's keep going on some recent investor, M&A, and agency updates.
PHH has updated the maximum acceptable DTI for both Conventional Conforming products, both fixed rate and ARMs, to allow ratios of up to 45% for loans with an LTV over 80%. This replaces the current guideline, which caps DTI at 41% and only allows 45% with additional FICO, occupancy, transaction type, and AUS findings restrictions, and will go into effect for all new registrations on and after July 12th.
Wilmington Savings Fund Society, FSB ($4.3B, DE) will buy residential mortgage banking company Array Financial Group and a related entity, Arrow Land Transfer Company (an abstract and title company) for an undisclosed sum. Array originated $150mm in mortgage loans in 2012. And I am sure Wilmington is watching any QM-related affiliate news.
Mountain West Financial is now requiring that all Power of Attorneys be reviewed and approved by the Closing Manager/designee before any of the documents are executed. Once prepared by escrow, the POA must be submitted to MWF for approval, at which point the borrower can execute the documents and have them notarized so long as fewer than 90 days elapse before funding. All files will be conditioned accordingly by underwriting.
MWF has released the full wholesale product guides and underwriting manuals for its Conforming and High Balance Conventional, FHA, VA, DU Refi Plus, HASP Open Access, HomePath, MyCommunity Mortgage, and USDA Rural Housing programs. These can all be found here.
Franklin American has opened up the same rates for its GNMA II products as for its FHA/VA 15-year product.
Per FEMA's recent announcement that disaster aid is available for certain counties in Illinois following the storms and flooding in late April, M&T's disaster policy is in effect for Brown, Bureau, Calhoun, Cook, Crawford, DeKalb, Douglas, DuPage, Fulton, Grundy, Henderson, Henry, Kane, Kendal, Knox, LaSalle, Lake, Livingston, Marshal, Mason, McDonough, McHenry, Peoria, Pike, Rock Island, Schuyler, Stark, Tazewell, Whiteside, Will, Winnebago, and Woodford Counties. All properties with appraisals dated May 5th or before must be re-inspected by the original appraiser. FHA, VA, and SONYMA products all require interior and exterior re-inspections (apart from FHA Streamlines without an appraisal, which require a borrower or lender cert), while FNMA, FHLMC, HASP Open Access, and HARP DU Refi Plus only require an exterior re-inspection.
M&T's disaster policy is also in effect for Forest and Lamar Counties in Mississippi following the storms, tornadoes and storms from last February and applies to all loans where the subject property was appraised on or before February 13th. Following the announcement that disaster aid is available in Atoka, Canadian, Cleveland, Coal, Hughes, Latimer, Lincoln, McCain, Nowata, Okfuskee, Oklahoma, Okmulgee, Pittsburg, Pottawatomie, Pushmataha, and Seminole Counties in Oklahoma for the effects of the tornadoes and storms in late May, M&T is also requiring properties in this counties to be re-inspected accordingly if their appraisals are dated June 2nd or before.
PennyMac has announced that it will no longer be emailing rate sheets (both Best Efforts and Mandatory) but instead posting them to its online portal, where they are now available to download. Lenders should ensure that their web admin is aware of the change and configures user logins accordingly by August 5th.
PennyMac has expanded its ARM offerings and is now purchasing FNMA and FHLMC LIBOR, FNMA High Balance LIBOR, FHLMC Super Conforming LIBOR, FHA 2038 CMT, FHA Streamline CMT, VA CMT, and VA IRRRL CMT transactions with a variety of cap structures, the full details of which can be accessed through the Penny website.
Pinnacle Capital has lowered the minimum FICO requirements for its Conforming High Balance products and now allows credit scores as low as 660 for 1-unit purchase and rate/term refinance transactions with an LTV/CLTV/HCLTV up to 80, 2-4 unit purchases and rate/term refinances with LTVs up to 75, and cash-out refinances with LTVs up to 60. The 660 credit requirement changes also affect second homes and investment properties, which are eligible with LTVs up to 60 and 65, respectively. Expanded underwriting options are also available for High Balance ARMs. Full matrix here.
Pinnacle is no longer mandating that the mortgage insurance required for Conforming loans with LTV/CLTVs of 95.01-97% be obtained through a non-delegated process and has removed guidance stating that loans that fall within this LTV range are ineligible for lender-paid mortgage insurance. The Genworth delegated underwriting requirement has also been removed. Effective immediately, Pinnacle is now allowing loan amounts up to $2.5 million on its Mammoth Jumbo program.
Capitalizing on the pickup we're seeing in the Jumbo market, Denver-based Titan Capital Solutions has rolled out a new 10/1 ARM product and raised their maximum allowable loan amount to $2.5 million and maximum cash out to $300,000. Credit guidelines have been expanded to allow FICO scores down to 700 on owner-occupied loans, and the seasoning requirement for paying off subordinate finance has been reduced to six months, which allows refinance transactions to qualify as rate/term when the borrower is paying off non-purchase money subordinate liens that are at least six months old.
WesLend Wholesale has updated its Market Classification List for Non-Conforming Jumbo transactions, the changes to which are now in effect.
The economic news continues to be mixed - not such a bad thing if one wants lower rates. (If all the news was great, rates would be moving higher.) Yesterday we learned that the May S&P/ Case-Shiller 20-city home price index rose 2.4% from April. It was 12.2% higher than one year ago, which was the largest annual increase since March 2006. But confidence among U.S. consumers declined more than forecast in July after reaching a five-year high a month earlier as Americans grew more pessimistic about the outlook for the economy and employment. "Consumers' views of the economy dimmed as Americans paid more at the gas pump this month than last and as higher mortgage rates threatened to slow momentum in the housing market. At the same time, increased wealth tied to higher property values and stock portfolios are helping sustain household spending." Lastly, on the foreclosure front, Corelogic reported that completed foreclosures fell by nearly 20% from June of 2012 (68,000) to June of 2013 (55,000). Before 2007, completed foreclosures averaged 21,000 per month. In addition, there were approximately 1 million homes across the nation in some type of foreclosure, down from 1.4 million a year ago. Using this metric, the housing market continues to improve.
The markets really didn't do too much yesterday, with current coupon prices off slightly and the 10-yr T-note worsening .125 and its yield closing at 2.60%. The Fed's QE3 program easily absorbed the mortgage banker MBS supply. Today we'll have some potentially market-moving news. First up is the MBA's weekly report on mortgage applications for last week - not a market mover but informative nonetheless. At 8:15 EST is July's ADP Employment index (+180k expected versus +188k previously), the Chicago PMI for July at 9:45 EST, and then of course the results of the FOMC meeting. Don't look for a change in rates, but everyone will be looking for any kind of change to the language of the announcement.