To celebrate American Indian and Alaska Native Heritage month (November), the U.S. Census Bureau tells us that in 2013 there were 5.2 million American Indians and Alaska Natives, and the projected population for this group is 11.2 million by 2060. The median age for American Indians and Alaska Natives in 2013 was 31 years old, which is lower than the median age of 38 for the U.S. population as a whole. There were 1.7 million American Indian and Alaska Native households in 2013 and only 53.9% of these householders owned a home, which is below the national average of 64%. Unfortunately American Indians and Alaska Natives have the highest poverty rate of any race group at over 29% versus the national poverty rate of 16%.
In New York, the New York Mortgage Bankers Association's website is now live. The group is functioning and has already had meetings with DFS, so lenders looking for things to be done on an "industry vs. company" level should reach out to the NY MBA to make their industry issues known. And by visiting the site one can read comments about Benjamin Lawsky stepping down from the NY Department of Financial Services post he now holds.
Speaking of which, the NY MBA spread the word to members that the NYDFS proposed regulation of force-placed insurance. "Under the proposed regulation, insurers and servicers are prohibited from: obtaining insurance in access of borrower's last known amount, unless that amount did not comply with mortgage requirements, issuing force-placed insurance on mortgaged property serviced by a servicer affiliated with the insurer, receiving compensation with respect to the force-placed insurance, including the cost of insurance tracking in the insurance premium, providing tracking services to the servicer at no cost or at a reduced fee.
It also posted information on proposed NMLS changes to the Mortgage Call Report. The National Mortgage Licensing System (NMLS) has issued a proposal that would make significant changes to the Mortgage Call Report (MCR). The NYMBA has signed on to a letter urging a postponement of the proposed changes.
And New York is considering a "borrow and save" pilot program as an alternative to high-cost mortgage programs. President Jim Bopp writes, "Although this pilot program is not directly related to mortgage loans, the NY MBA would support any program that helps NYS residents establish traditional credit histories that would enable them to build a credit rating that would help them qualify for the most competitive rates and terms available based on an established or improved credit score. This program executed correctly could result in more people being able to purchase a home and for the borrowers to realize the American dream of homeownership and all of the benefits related to achieving it."
Turning to agency news, Fannie Mae and Freddie Mac announced significant revisions to their respective rep & warrant frameworks. These revisions provide lenders with greater clarity concerning the post-sunset enforcement of Life of Loan exclusions, as well as certain other reps & warrants. Look for higher thresholds for "Life of Loan" breaches with numerical triggers for misstatement & misrepresentation and data inaccuracy. Perhaps the reduction of uncertainty to Life of Loan breaches will encourage lenders to expanding lending with larger players likely unmoved by the clarity with smaller ones set to fill the void. Fannie Mae's announcement can be found here; Freddie Mac's can be found here. FHFA Director Watt's statement concerning these revisions can be found here.
As this commentary has mentioned many times, lenders say, "We can play by the rules - just tell us what they are." This is an effort to do that by F&F, and may lead to an expansion of the credit box. For example, under the new rules seen by clicking on the links above, if there is a defect but the loan still would have qualified for purchase by F&F, the lender will have to cover the difference once the loan is re-priced but will not face a repurchase request. Dave Stevens of the MBA writes, "These changes build off the revisions announced earlier this year and are intended to provide lenders with clarity regarding R&W enforcement after a loan qualifies for repurchase relief. Life of loan exclusions concerning misstatements, misrepresentations, & omissions and data inaccuracies have been revised to state that the GSEs will only issue repurchase requests for significant violations that reflect a pattern of activity involving multiple parties to the transaction." The guidelines require that the same lender has 3 or more loans with qualifying misstatements, misrepresentations, or omissions prior to a life-of-loan R&W kicks in and the threshold is higher for data inaccuracies as the same lender/entity must have 5 or more inaccuracies before triggering the life-of-loan R&W.
For purposes of the life of loan exclusions, the definition of fraud has been revised to clarify the distinction between fraud and misstatement under the Guides. These revisions are applied retroactively to loans delivered to a GSE on or after January 1, 2013. The GSEs will lengthen the expected foreclosure timelines in 47 out of the 55 covered jurisdictions effective for all foreclosure sales completed on or after November 1, and will temporarily suspend compensatory fee assessment in four states (New York, New Jersey, Maryland and Massachusetts) for at least six months until more data can be gathered to determine an appropriate timeline effective for foreclosure sales completed on or after January 1, 2015. In addition, both GSEs have raised the de minimis exception- a threshold where there will be no compensatory fee invoice-from $1,000 per month to $25,000 per month, effective for foreclosure sales completed on or after January 1, 2015. This will provide significant relief for smaller servicers. Changes to both of these frameworks could not have occurred without the diligent work put in by MBA staff and a number of very engaged MBA members."
"There are qualified borrowers who are not being served in today's market," Andrew Bon Salle, a Fannie Mae executive vice president, said in a statement. "With this clarity, lenders should have greater confidence in lending to Fannie Mae's full credit standards and making mortgages available to more borrowers."
Bankers Advisory writes, "The changes to the framework are effective retroactively for whole loans purchased, and mortgage loans delivered into MBS with pool issue dates, on and after January 1, 2013, except that these changes do not apply to any loans for which Fannie Mae has issued a repurchase request prior to November 20, 2014. The changes to the Selling Guide provisions regarding compliance with laws are effective for whole loans purchased on and after November 20, 2014, and for mortgage loans delivered into MBS with pool issue dates on and after December 1, 2014. It is Fannie Mae's expectation that any future modifications to the framework will apply prospectively.
"In addition to the above changes to the framework, Fannie Mae is also updating the Selling Guide, A3-2-01, Compliance with Laws, which among other things requires lenders to comply with applicable federal, state and local laws. These changes are effective for whole loans purchased on and after November 20, 2014, and for mortgage loans delivered into MBS with pool issue dates on and after December 1, 2014, without regard to whether the loan has obtained relief under the framework."
Fannie Mae is offering sessions designed to help servicers understand Fannie Mae's updated (Property) Hazard and Flood Insurance policy. This course explains the new guidance for handling insurance losses based on the mortgage loan status at the time the servicer receives notification of damages, regardless of the cause. The sessions are scheduled on December 9th and 10th, to register, click here.
It becomes harder and harder to argue that housing is still in a slump. Yesterday we learned that Existing Home sales rose (+1.5%) in October for the second straight month and are now above year-over-year levels for the first time in a year, according to the National Association of Realtors. Sales are at their highest annual pace since September 2013. The median existing-home price for all housing types in October was $208,300, which is 5.5 percent above October 2013. This marks the 32nd consecutive month of year-over-year price gains.
Rate Market Report:
US stocks are roaring early this morning on reports frm the ECB and China. Mario Draghi saying, he European Central Bank can’t hold back in its fight to revive the economy. “We will do what we must to raise inflation and inflation expectations as fast as possible, as our price-stability mandate requires.” Some inflation expectations “have been declining to levels that I would deem excessively low,” he said. The take away, the ECB may now be willing to take the steps necessary after moving too slow in the past to drive inflation higher in the region that is edging closer to deflation as the EU economies falter. The ECB is trying to boost the size of its balance sheet to early-2012 levels, signaling an increase of as much as 1 trillion euros ($1.24 trillion).
Overnight China announced it would cut its base lending rate for the first time since July 2012. The one-year lending rate was reduced by 0.4% to 5.6%, while the one-year deposit rate was lowered by 0.25 percentage point to 2.75%, effective tomorrow, the People’s Bank of China said on its website today. China is now lining up with the ECB and the BofJ in adding additional stimulus to bolster its economy that has lost about half of its growth over the last two years. “This interest rates adjustment is a neutral operation and doesn’t mean any change in monetary policy direction,” the central bank said in a statement on its website explaining the rate cuts.
Those two announcements have fueled a strong open this morning in the US stock indexes. The DJIA opened +152, NASDAQ +43, S&P +16. At 9:30 MBS price holding small gain, up 8 bps while the 10 yr note at 2.33% was down 1 bps. That the bond and mortgage markets are holding nicely with the stock market roaring ahead, is because both the ECB and China today have added more evidence that the level of inflation is not likely to increase quickly. With the Fed now outwardly concerned that it has been unable to move the level of inflation to its 2.0% target and saying in the FOMC minutes the progress is likely to take longer than most Fed officials had thought. No inflation concerns has a quieting effect on traders.
There are no scheduled economic reports today.
Nothing new in the bond and mortgage markets; the 10 is still in “the range”. The 20th day and not likely to exit it today. As long as the 10 trades in the narrow range we are reluctant to float overnight on the reality we would take on risk with little potential reward. No one is interested in selling their bonds and no one is willing to buy; how long that will last is hard to predict. A good thing really, lenders have more certainty about closings as long as there isn’t a significant improvement. For traders like us, it is extremely boring however. Traders need volatility to put food on the table, no movements means less opportunity.
PRICES @ 10:00 AM
10 yr note: 4/32 (12 bp) 2.33% -1 bp
5 yr note: +2/32 (6 bp) 1.62% -1 bp
2 Yr note: unch 0.51% unch
30 yr bond: +12/32 (37 bp) 3.04% -1 bp
Libor Rate: 1 mo 0.155%; 3 mo 0.231%; 6 mo 0.324%; 1 yr 0.562%
30 yr FNMA 3.5 Dec: @9:30 103.59 +8 bp (+4 bp frm 9:30 yesterday)
15 yr FNMA 3.0 Dec: @9:30 103.88 +2 bp (-3 bp frm 9:30 yesterday)
30 yr GNMA 3.5 Dec: @9:30 104.35 +3 bp (unch frm 9:30 yesterday)
Dollar/Yen: 117.81 -0.40 yen
Dollar/Euro: $1.2424 -$0.0115
Gold: $1202.50 +$11.60
Crude Oil: $76.48 +$0.63
DJIA: 17,866.58 +147.58
NASDAQ: 4736.00 +34.14
S&P 500: 2069.72 +16.97