USDA Program Improving Pricing; Oil and World Budgets; World Rates Continue Lower
Everyone's thoughts and prayers are with the victims of the horrible shooting in Orlando. But yes, Father's Day is coming up, and the first presidential proclamation honoring fathers was issued in 1966 when President Lyndon Johnson designated the third Sunday in June as Father's Day. There are nearly 75 million fathers across the nation, over 25 million of whom are part of a "married-couple families with children younger than 18." And 21% were raising 3 or more children younger than 18. There were 1.9 million single fathers in 2015 but only16% of all single parents are men. About 45 percent were divorced, 33 percent were never married, 17 percent were separated, and 6 percent were widowed. There was an estimated 199,000 stay at home dads.
In USDA news, the rural housing biz is abuzz over the United States Department of Agriculture (USDA) announcing lower upfront and monthly fees for its home loan program, starting October 1. Those who offer the program know that this mortgage type is extremely popular with first-time home buyers since some of its program require zero down payment. And the Rural Development (RD) loan program, as it is also known, is a favorite because it comes with cheaper monthly mortgage insurance fees than do FHA loans.
USDA fees are about to drop even further by Halloween, and many believe the USDA loan will become one of the most affordable home loans available, second only to the veteran-exclusive VA home loan. And of course this will entice renters since a USDA home loan can make owning a home less expensive than renting one. As the housing market recovers, the USDA program costs less to operate and sustain. The savings are passed on to USDA program borrowers.
For those of you who don't know, the purpose of the USDA mortgage is to promote homeownership in rural areas. But what is "rural?" Many suburban neighborhoods are eligible for USDA financing. Buyers often use this program just outside of major metropolitan areas. The loan offers 100 percent financing, meaning no down payment is required. Some lenders may have overlays, but straight guidelines indicate that applicants with credit scores down to 640 are eligible.
Similar to FHA loans, the USDA mortgage requires two types of fees: an upfront guarantee fee and a monthly fee. The term "guarantee" simply refers to USDA's loan backing that allows lenders to issue loans according to its guidelines. The upfront guarantee fee stands at 2.75 percent of the loan amount, and the "annual fee" is currently 0.50 percent, paid in twelve equal installments and included in each mortgage payment.
As mentioned above, however, we learned in mid-May the upfront fee will be reduced from 2.75% to 1.0%. And the monthly fee will also drop from .5% to .35%. Lenders who do rural loans know that the upfront fee is typically added to the loan balance so that home buyers do not have to pay it in cash. And the monthly fee rate is dropping to 0.35 percent annually, or about $30 per $100,000 in loan balance.
The new fees apply to USDA applications for which USDA issues a "Conditional Commitment" on or after October 1, 2016. A USDA-issued commitment happens near the end of the home buying process and as lenders know most home purchases take between 30 and 90 days to complete.
As a result of last month's Federal Register snipped about the USDA (it announced a qualified mortgage - QM - definition. As a result, Wells Fargo is removing its residual income evaluation (RIE) requirements for Guaranteed Rural Housing (GRH) Loans applicable on conditional Commitments issued on or after June 2nd. Although the Federal Register also included a USDA Rural Development (RD) final rule making the Streamline Assist Refinance pilot a permanent program and part of Rural Development policy, effective June 2; Guaranteed Rural Housing (GRH) streamlines remain ineligible at this time. As specified in Seller Guide Section 750.04: Eligible Transactions, Wells Fargo Funding does not currently purchase RD Streamline Refinances of GRH loans. In addition, Wells issued a reminder, with the exception of primary residences subject to age-related resale deed restrictions, Wells Fargo Funding will purchase Conventional Conforming and Non-Conforming Loans subject to resale deed restrictions only after Wells Fargo has approved the resale deed. This includes delegated underwritten loans.
As of Monday, June 6, Pacific Union's standard state adjusters for FHA, VA, USDA and Agency loans will be replaced by a new schedule. At this time, all of Pacific Union's search engine partners are aware of the update and will have the updated price on Monday. In order to enable customers to prepare their pricing tools, Pacific Union will provide a sample template of the schedule. This change is only applicable to FHA, VA, USDA and Agency products. In addition, Pacific Union Financial announced it is offering USDA sponsorship through the GUS Lender Agent Security Role. Under the new role, recently announced by USDA, approved Lender Agents will have access to create applications, order new or reissue existing credit reports, and complete preliminary GUS submissions.
First Guaranty Mortgage posted information to assist its clients with the June 2, 2016, USDA final rule for 7 CFR Part 3555 and the revised technical handbook, HB-1-3555, which will be effective for all conditional commitments issued by USDA. To help fully understand the program enhancements and the changes to its guidance, the Agency has prepared two documents: the 3-Part Rule and Handbook Revision and the 502 Guarantee Refinance Options Job-Aid. These documents explain in detail the regulatory and handbook changes made to the sections cited below. If you would like to learn more about First Guaranty and its slogan, We Know Gus! Click here.
Effective with loan commitments issued on or after June 2, 2016, PennyMac is aligning with USDA Rural Housing's release of the Streamlined-Assist refinance program.
Switching gears, although they've leveled off somewhat oil prices have fallen quite a bit since last year. Over the prior two years, crude oil, which saw a high in the summer of 2014 of $110 per barrel, is currently trading at around $50 per barrel. So what do oil producing countries do when their export income impacts their budget? They turn to the international debt markets like the rest of us. Recently Qatar sold $9 Billion in Eurodollar bonds, and encouraged by the strength of the sale, Saudi Arabia is weighing a sale of at least $10 billion in five-, 10- and 30-year bonds after Ramadan ends in July, according to Bloomberg.
"Governments in the six-nation Gulf Cooperation Council, which includes the two-biggest Arab economies of Saudi Arabia and the United Arab Emirates, are turning to public markets after the plunge in oil prices punched holes in their budgets. Qatar last week attracted $23 billion in orders for its $9 billion sale, the biggest-ever from the Middle East. Abu Dhabi raised $5 billion from the sale of five- and 10-year securities in April, while Dubai is also said to be preparing an international bond sale this year." How does this impact the United States, you ask? Well, geo-politics aside, when countries sell debt instruments they need ratings agencies, market makers, traders for buyers, traders for sellers, etc. HSBC, JPMorgan Chase & Co., Citigroup Inc., Goldman Sachs Group, Morgan Stanley, Deutsche Bank AG and Bank of Tokyo-Mitsubishi UFJ are all expected to pitch for a role in organizing the bond issue.
How 'bout these rates! The refi boom just won't dissipate, despite industry experts saying it would be long over with by now. And even if rates stay here, plenty of areas are appreciating to the point where cash out refis are becoming popular again. Using houses as piggy banks... uh oh.
Regardless, rates here in the United States are attracting investors from overseas. And why not with the German 10-year Bund now trading at 2 basis points and the Japanese Government Bond yields negative 13 basis points? Swiss and Japanese government securities, already carrying negative yields have fallen further, and benchmark US Treasuries have plunged to their lowest yields since 2013
We have a fresh new week of titillating economic news from various government departments and private research firms. The fun never ends! There is nada today, however, but tomorrow we'll have some NFIB Small Business Optimism number of little consequence, and, more importantly, the Import Price Index and Retail Sales. On Wednesday we have the MBA's application numbers from last week, and also the Producer Price Index series. And let's not forget Empire Manufacturing for June and the Industrial Production & Capacity Utilization couplet.
The Federal Reserve's Open Market Committee puts out its rate decision on Wednesday. There will be no change, but that won't stop all the financial news folks from talking about it endlessly. There is too much worldwide nervousness, too much nervousness about the US economy after the poor recent jobs number.
Thursday will be Initial Jobless Claims and also the Philadelphia Fed Business Outlook, the Consumer Price Index, Real Average Weekly Earnings, and the National Association of Home Builder's Index. We wrap up Friday with more housing news in the form of Housing Starts & Building Permits.
If you're trying to figure out rate sheets, we closed the 10-year at 1.64% and this morning it is sitting around 1.63% with agency MBS prices slightly better - but lagging due to investors wondering about existing loans refinancing.
Upcoming Events
Banc Home Loans TPO Division is currently undergoing an exciting, rapid national expansion that will require it to add additional Operations staff in its Irvine, CA office. To meet this need, Banc Home Loans management will be hosting a job fair on June 14th from 3-7PM PDT at the Irvine Marriott Hotel located at 18000 Von Karman Ave, Irvine, CA. They will be hiring experienced Conventional and Government Underwriters, Wholesale Closers and Funders, Account Managers, File Set Up and Correspondent Purchasers to help fill over 40 positions in the coming weeks. As a division of Banc of California, Banc Home Loans provides the strength of a national bank at the local level. They were recently named one of America's Top Mortgage Employers by National Mortgage Professional Magazine and were included in Mortgage Executive's Top 100 Mortgage Companies in America 2015. To register for the event, please fill out the registration form, or contact Greg Armstrong (SVP, TPO Division) or Erin Steffen (VP, TPO Division).
Learn everything you need to know about LO Compensation, MSAs, and RESPA in XINNIX, The Mortgage Academy's, latest Leadership Lessons webinar on Wednesday, June 15th at 1:00 PM EDT. During this live webinar, mortgage regulation expert, Mitch Kider, Managing Partner of Weiner Brodsky Kider PC, will share how to keep you and your organization within regulatory guidelines. This live webinar is complimentary, but registration is required. Click here to learn more and register.
The BakerHostetler Financial Services Industry team is partnering with the Indiana Mortgage Banking Association, the Mortgage Banking Association of Kentucky, the Ohio Bankers League and the Ohio Mortgage Bankers Association to host a complimentary, one-hour webinar with key state mortgage regulators. This webinar will include two prominent members of the Multistate Mortgage Committee - Kirsten Anderson of Oregon and Jedd Bellman of Maryland. They will share their insights on current trends in examinations, coordination between state agencies and multistate enforcement efforts, as well as best practices for preparing for mortgage audits and examinations.
Jobs and Announcements
On the job front, CMG Financial Wholesale Lending is expanding and is looking for Account Executives nationwide, but is particularly interested in hiring a well-seasoned and highly ambitious AE to take over the existing Nevada market. The territory comes with an established client base and is producing over $125M annually. "If you are looking for a rewarding career opportunity, look no further. CMG Financial is a nationwide mortgage lender and an approved GNMA/FNMA/FHLMC Seller/Servicer whose Wholesale AEs can sell both wholesale and non-delegated correspondent business. If you are interested in joining our employee-friendly, growing organization, please send an updated resume in confidence to Tom Meyer." If you are interested in Account Executive opportunities in other parts of the country, please contact Adam Millstein. CMG Financial is headquartered in San Ramon, California. For more information visit CMG Financial Wholesale Lending.
On the retail side, Security National Mortgage Company is among the TOP 50 mortgage lenders in the country and they are looking for LIKE-MINDED people to join the team. "SNMC is searching for an Area Manager over Production/Recruiting in Minnesota and Wisconsin. "Security National is on solid ground and has been in the financial business for over 50 years and is backed by a public traded parent company, Security National Financial Corporation, (SNFCA-NASDAQ). The company is approved with FNMA, FHLMC, and offers many non-agency products, superior customer service, in-house processing and underwriting, and a full service marketing and advertising department. Don't just take their word for how great it is at Security National. The company has won a variety awards including the Best of State, Top Places to Work, Scotsman Guide 'Top Mortgage Lender', CEO of the Year, Sales and Marketing Team of the Year (SAMY Award), and more." Contact Director of Business Development Justin Pater (801.864.2240).