MBS MORNING: DU REFI PLUS
Yesterday we got the details on the Obama Administration's Plan to save the housing market. The initial reaction was expectantly downbeat considering the opening verbiage of the Treasury press release was....
"The Obama Administration today announced new US Department of the Treasury guidelines to enable SERVICERS to begin modifications of eligible mortgages under the Administration's Homeowner Affordability and Stability Plan."
We all know that loan mods will serve no benefit to mortgage bankers and brokers, so the initially angry reaction to the Housing Plan was quite warranted. But Fannie Mae came to your rescue late in the day with Announcement 09-04 : Home Affordable Refinance- New Refinance Options for Existing Fannie Mae Loans
DU REFI PLUS!!! (NOTE: REFI PLUS ....DIFFERENT THAN DU REFI PLUS ...IS FOR SERVICERS ONLY)
The most important feature of this program, besides the increased underwriting flexibility and reduced loan level price adjustments, is that Fannie Mae (not Freddie) will allow originators across all channels to assist in the housing recovery process.
I have gone through the entire announcement and only have a few complaints. The biggest hurdle we face is second loan subordinations....Fannie Mae will allow unlimited CLTV but that means the new lender will have to convince the current 2nd lien holder to subordinate the second mortgage behind the new first mortgage. I think we will all agree this has been a difficult/almost impossible task lately.
Also...the mortgage insurance changes that were made are a step in the right direction but the effectiveness of the program may be muted until mortgage insurers get relief.
Here is what Radian had to say about the news...
Radian Supports Government Plans to Stabilize Housing Market
PHILADELPHIA, March 4, 2009 /PRNewswire-FirstCall via COMTEX/ -- Radian Group Inc. (NYSE: RDN) commented on the plans announced today by the U.S. Department of the Treasury to help stabilize the housing market. S.A. Ibrahim, Chief Executive Officer of Radian, made the following statement:
"We applaud the efforts of the United States Treasury and Department of Housing and Urban Development, in conjunction with Fannie Mae and Freddie Mac, to prevent avoidable foreclosures and help stem the ongoing mortgage crisis. The actions outlined under the Affordability and Stability Plan will play a significant role in mitigating the potentially devastating consequences facing millions of homeowners and hundreds of communities across the country.
"As a leading private mortgage insurance provider, Radian Guaranty is working closely with our mortgage servicing partners and the GSEs in helping families restructure or refinance their debt to avoid foreclosure. The private mortgage insurance industry is a vital part of the U.S. housing finance system and remains an essential building block for a return to a vibrant housing market.
"We are pleased that the Administration is working to provide the mortgage servicing industry additional tools in our ongoing efforts to help keep families in their homes. Radian will remain responsive and flexible to the needs of the Administration and all of our partners as this comprehensive and detailed program is implemented. We also appreciate the continued recognition of the critical role of private mortgage insurance by the Federal Housing Finance Agency."
Long on rhetoric. Short on Action.
Besides that there are some AWESOME concessions made by Fannie Mae with this program. No credit score requirement, any occupancy type, reduced LLPAs (yes that pesky 75-01 to 80 adjustment was reigned in), no CLTV ceiling, no limit on multiple mortgages, document waivers, appraisal waivers, limited cash out is acceptable, no seasoning, NO CONDO PROJECT REVIEW, manual underwrites of "enhanced guidelines"...this program is aggressive.
So we will be seeing the slowing of "up in coupon". This will make the MBS market more nervous of prepays and will push market participants away from the fuller side of the stack. If this bias can stick and the mortgage market "stars align" then your pipelines should be filled with new apps.
RIGHT NOW I am writing my full analysis of DU REFI PLUS and will post this afternoon. For now get your undies unwaded and dig deep into these underwriting guidelines. This program will be your portal to participation in the Housing Recovery.
Cheer up things arent looking so bad for us....