Monday, November 24, 2014

HUD's 4 bp fee & FHA & Ginnie updates; Status of Mortgage Forgiveness Tax Act


Here is some Agency news: the Community Mortgage Lenders of America reports that earlier this year HUD had proposed that Congress authorize them to impose and collect a 4 basis points fee from lenders for each FHA loan that was insured. It is rumored that HUD has persuaded the Senate to include authority to levy and collect the fee into the Continuing Resolution needed to fund the government beyond December 11th of this year. The House will probably agree with the language in the Continuing Resolution on this fee when they eventually reconcile the different versions of the Continuing Resolution that each branch of Congress is expected to pass in the next couple of weeks.

CMLA's letter notes, "The CMLA opposes the provision as currently written in the Transportation, HUD and Related Agencies Appropriations bill S. 2438 that would authorize the Secretary of Housing and Urban Development (HUD) to retroactively assess a per loan fee on FHA single family mortgage insurance program lenders. This provision responds to a request in the Administration FY 2015 budget to levy a fee on lenders in order to fund an enhanced quality improvement program for single-family FHA insured loans. This proposed fee however would, in fact, harm home buyers as lenders will be compelled to pass the new fee onto homebuyers and the fee would thus become a federal tax on home ownership." Any questions should be directed to Executive Director Glen Corso.

I continue to be asked about the Supreme Court and HUD. The new ruling against HUD's Disparate Impact Rule makes you think twice about the validity of the laws that these agencies are creating. The federal court vacated HUD's Disparate Impact Rule stating the language of the Fair Housing Act only allows permits claims based on intentional discrimination and found that HUD surpassed its authority when it created the rule. U.S. District Judge, Richard Leon dismissed the government's argument that current laws allowed them to apply the method to fair housing laws, calling it "wishful thinking on steroids." Leon wrote, "This is yet another example of an administrative agency trying to desperately write into law that which Congress never intended to sanction." The judge stated that applying FHA law to insurance raises concerns about extensive federal infringement upon state insurance regulation. This ruling comes in the wake of the holding of the U.S. District Court for the Northern District of Illinois that HUD's response to the insurance industry's concerns regarding the Disparate Impact Rule was arbitrary and capricious and remand to HUD for further explanation.

Word is slowly spreading to those impacted of HUD's changes regarding Section 184 American Indian Mortgages that the cost is going up.

FHA revised the existing HECM Property Charge Set Aside structure, and introduced additional policy changes. Changes include origination and servicing requirements for a single Life Expectancy Set Aside that may be fully funded or partially funded if required based on the results of the Financial Assessment; policy allowing lenders to order a credit report prior to the completion of HECM counseling; and 12-month seasoning requirement for existing forward mortgages and other liens that will be paid off with HECM proceeds. Click the attached link to view the complete revisions of 2014-21. Revisions were also made to HECM Financial Assessment and Property Charge Guide. Revised list of documents required for, and the stacking order of these documents in, the Case Binder, expanded guidance on documenting and evaluating income/expenses, credit history, extenuating circumstances, compensating factors, and use of HECM funds and guidance for determining when, and in what amount, mortgagees must require a Life Expectancy Set Aside to pay property charges, based on the result of the Financial Assessment are included in the revision. The complete mortgagee letter 2014-22 is available for review.

Ginnie Mae announced it will discontinue production of the legacy HMBS Monthly Pool Disclosure file and the legacy HECM Saver Disclosure file from the Disclosure Data Download page effective February 1, 2015. To review the bulletin, click here.

HUD published information regarding FHA Refinance of Borrowers in Negative Equity Positions (Short Refi): Program Extension, which extends the expiration date of the program through December 31, 2016, and reiterates the permitted use of proceeds from government entities and instrumentalities of government to extinguish a portion of a borrower's negative equity. All loans originated under the Federal Housing Administration's (FHA) Short Refi program must close on or before that date. All other provisions announced in ML 2010-23, and amended in ML 2012-05, remain in effect. The information can be viewed with the following link: ML 2014-23.

And NAR spread the word on the Mortgage Forgiveness Tax Relief Act. "It is a bipartisan bill that would prevent homeowners from paying taxes on forgiven mortgage loan debt. This bipartisan legislation would extend an expired provision that has helped many families by allowing tax relief when lenders have forgiven a portion of the mortgage debt. There are still homeowners who are struggling to meet their mortgage obligations, about 5.3 million homes are still under water and more than 1 million are in the process of foreclosure. If the act is not passed, homeowners who did a short- sell or received a loan reduction will have to pay income tax on "phantom income." Click here to take action now and encourage congress to pass the bill.

The Federal Reserve Bank of New York announced that Mischler Financial Group, Cabrera Capital Markets, LLC, G.X. Clarke & Co., and Loop Capital Markets LLC have been selected to participate in the recently announced Agency Mortgage-Backed Counterparty Pilot Program. (MFG is the securities industry's oldest investment bank/institutional brokerage owned and operated by a service-disabled veteran's business enterprise.) "According to the New York Fed, the intent in conducting this pilot program is to explore ways to broaden access to open market operations and to determine the extent to which firms beyond the Primary Dealer community can augment the New York Fed's operational capacity and resiliency in its monetary policy operations." The New York Federal Reserve Bank formal announcement can be found at the NYFRB website.

Yes, it is certainly hard to say that housing is wallowing. Yes, we had some mediocre numbers in the first half of 2014, but since then things have picked up somewhat. Existing home sales rose more than expected in October and are now back above year-ago levels. The median price is up 5.5 percent from a year earlier. Housing Starts fell 2.8 percent in October but the drop came from the volatile multifamily component. Single-family starts increased 4.2 percent and are now up 15.4 percent over the past year.

It is the last funding week of the month, and plenty of companies are seeing good fundings. For news, stocks are rallying strongly pretty much everywhere on the planet due to news headlines (Draghi's speech and the China PBOC actions). Here in the U.S. - Wednesday is the Big Day if anyone on Wall Street is still at work to move bond prices. There is zip today. Tomorrow is GDP, Personal Consumption Expenditures, and the FHFA House Price Index, Consumer Confidence, and the S&P Case Shiller series of numbers (showing values from two months ago). On Wednesday, November 26th are Jobless Claims, the University of Michigan Consumer Confidence number, Pending Home Sales, New Home Sales, Durable Goods Orders (new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods), Personal Income and Consumption, and the Chicago Purchasing Manager's Survey. There is no scheduled news of consequence for Friday, although the markets are open.  

Executive Rate Market Report:

Thanksgiving week is generally a strange one for markets. The markets will traded all day Wednesday, closed of course on Thursday and then close early on Friday. Typically by Wednesday afternoon there is an exodus for the long weekend; in the meantime though the economic calendar has a lot to digest. Today no reports are scheduled; tomorrow and Wednesday loaded with potential market-moving data points. This week also has more Treasury buying; this afternoon at 1:00 $28B of 2 yr notes, tomorrow $35B of 5s and Wednesday $29B of 7 yr notes. This morning the rate markets opened a little weaker with stock indexes looking like another better open at 9:30. At 9:00 the 10 yr note yield up to 2.34% after Friday’s 3bp decline in rate to 2.31%. 30 yr MBS prices on Friday, up 14 bps, this morning starting down 11 bps. Nothing in the bond and mortgage market has changed, the 10 still trading in its narrow range for the 20th session with hardly any change since the end of October. At 9:30 the DJIA opened +23, NASDAQ +12, S&P +4; 10 yr 2.34% +3 bps and 30 yr MBS price -13 bps.

US markets remain bullish on the idea the ECB will begin turning up the spigot to attempt to increase the inflation levels in the EU and keep that region from declining further. China last week cut its lending rates, also a plus for US equities. The interest rate markets are watching closely but since the end of October there has been on interest in either buying treasuries or selling them; that is keeping mortgage interest rates very stable the last three weeks. ECB President Mario Draghi said last week that policy makers would be willing to widen the scope of purchases should the inflation outlook diminish. The yield on Chinese government bonds due September 2024 fell 17 basis points to 3.53% in Shanghai, according to prices from the National Interbank Funding Center. That’s the biggest drop for a benchmark 10-year yield since October 2008, a China Bond index shows. A report showed German business confidence rose in November for the first time in seven months. The Ifo institute’s business climate index, based on a survey of 7,000 executives, climbed to 104.7 from 103.2 in October. Europe’s stock markets better fueling a better US market so far.

Trading volume will be lower this week with the holiday and people taking advantage of a few additional days off. Markets will trade and there are a number of key economic releases as well as Treasury auctions. The 10 continues to hold present levels, neither improving or worsening. The number of analysts that were sure interest rates would be 40 basis points higher by now, have been exiting the building. The 10 is not likely to increase much between now and the end of the year. For all of the talk and discussion, the fixed income market is not buying into the idea the US economy will grow quickly enough to increase inflation concerns. It isn’t something you hear about, but one of the key forces keeping rates low is hedging against the increasing potential of a decline in the equity markets. Large investors and hedge funds should the moving into treasuries; there is very little risk in doing so, and there is an increasing sense the stock market may be close to a big correction.

This Week’s Economic Calendar:

1:00 pm $28B 2 yr note auction

8:30 am Q3 preliminary GDP (3.3% from 3.5% on the advance a month ago; deflator +1.3%)
9:00 am Sept. Case/Shiller 20 city annual increase (4.7%, down from 5.6% in August)
Sept. FHFA housing price index (+0.4% from August)
10:00 am Nov consumer confidence index (96.5 from 94.5 in Oct.)
1:00 pm $35B 5 yr note auction

7:00 am weekly MBA mortgage apps.
8:30 am weekly jobless claims (-5K to 286K)
Oct durable goods orders (-0.5%; ex transportation +0.5%)
Oct personal income and spending (income +0.4%, spending +0.3%; Sept income +0.2%, spending -0.2%)
9:45 am Nov Chicago purchasing mgrs. index (63.2 from 66.2 in Oct.)
9:55 am U. of Michigan consumer sentiment index (90.0 from 89.4)
10:00 am Oct new home sales (+0.7% to 470K units (ann.)
Oct pending home sales (+0.6%)
1:00 pm $29B 7 yr note auction


1:00 pm Stock markets close
2:00 pm bond and mortgage markets close

PRICES @ 10:00 AM

  • 10 yr note: -5/32 (15 bp) 2.33% +2 bp
  • 5 yr note: -2/32 (6 bp) 1.62% +1 bp
  • 2 Yr note: -1/32 (3 bp) 0.52% +1 bp
  • 30 yr bond: -9/32 (28 bp) 3.03% +1 bp
  • Libor Rates: 1 mo 0.155%; 3 mo 0.232%; 56 mo 0.328%; 1 yr 0.561%
  • 30 yr FNMA 3.5 Dec: @9:30 103.53 -13 bp (-7 bp from 9:30 Friday)
  • 15 yr FNMA 3.0 Dec: @9:30 103.85 -11 bp (-3 bp from 9:30 Friday)
  • 30 yr GNMA 3.5 Dec: @9:30 104.40 -10 bp (+5 bp from 9:30 Friday)
  • Dollar/Yen: 118.37 +0.58 yen
  • Dollar/Euro: $1.2427 +$0.0036
  • Gold: $1198.60 +$0.20
  • Crude Oil: $76.32 -$0.19
  • DJIA: 17,826.05 +15.99
  • NASDAQ: 4738.67 +25.70
  • S&P 500: 2067.56 +4.06

Friday, November 21, 2014

Possible changes for NY Lenders; Fannie & Freddie changes will help lenders


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


Wednesday, November 19, 2014

MBA offers health care to members; Freddie & Fannie updates; New jumbo security


“I don't like making plans for the day because then the word 'premeditated' gets thrown around in the courtroom." We don't want that, but one thing Realtors and lenders want is young folks with less debt. (There is one company that I know of that is refinancing student debt and helping potential first time home buyer's credit: Social Finance.) A Wells Fargo survey of Millennials finds 47% spend at least 50% their paychecks servicing debt related to credit cards, student loans, mortgages and others. 

With the majority of the millennial generation already saddled with debt it may be surprising to find that more millennials are moving to larger and more expensive metropolitan areas.  While these cities do attract young adults for their cultural attractions and public transportation, these cities offer more job opportunities for millennials than other areas. Zillow's analysis of U.S. Census data suggests that there is an inverse relationship between a city's unemployment rate and its share of millennial movers. There are outliers in the data that include Chicago, San Francisco and New York that are attracting a large number of millennials even though the unemployment rate is high. Also, cities like Miami, Las Vegas and Phoenix should be attracting more millennials, since rent is affordable and unemployment rates are low, but they are not. In fact, older movers are more inclined to move to Arizona or Florida and may outnumber younger movers in these areas. Since millennials are moving to cities where home prices are very expensive, more young adults may not intend to a buy a home in the near future as it is out of their reach. Instead, they are moving to these cities because of income growth and employment opportunities.


The Mortgage Bankers Association (MBA) announced a new private exchange which will offer healthcare and other employee benefits for its member companies. The announcement noted that, "Addressing the challenges of maintaining a competitive employee benefit program, 'MBA Health Link' will provide an easy solution for employers wanting to control costs while offering more benefit options to meet the varied needs of their employees. The creation of MBA Health Link is being made possible through an exclusive partnership with Arthur J. Gallagher & Co., a US-based global insurance brokerage and risk management services firm. 'MBA is pleased to partner with Gallagher to create MBA Health Link and thus offer healthcare and employee benefits that are exclusively for our diverse membership,' said MBA Senior Vice President, Residential Policy & Member Engagement, Pete Mills." Companies that adopt MBA Health Link will utilize a defined contribution (DC) strategy.  Unlike the defined benefit approach, a DC strategy allows for transparency in total employee compensation and makes it possible for employers to link their long-term benefits budget with metrics relevant to their business.  A DC strategy works best in a private exchange environment, where employees have a choice on how to spend their benefits dollars. For more information, contact Tricia Migliazzo.


The results from the 2013 American Housing Survey is a detailed report that presents a summary of statistical data in the form of a spreadsheet covering a variety of housing figures.  Topics include single-family homes, apartments, manufactured homes, vacant units, family composition, income, housing and neighborhood quality, housing costs, appliances, fuel type, remodeling and repair, and recent moves. The American Housing Survey is conducted biennially and is sponsored by HUD. This year, new topics to the survey include disaster planning and emergency preparedness, public transportation, household involvement in neighborhood and community activities, and the presence of adult children living at home.   

Zillow analyzed U.S. home construction by decade and state, beginning in 1900 up to the current decade. The analysis grouped homes according to the decade they were constructed, encompassing a total of 12 decades, excluding homes that were previously built and then destroyed or rebuilt. Nationally, the greatest portion of existing homes was constructed between 2000 and 2009, representing 16% of all homes built during that decade. Eleven percent of all U.S. homes were built before 1950 and the majority of U.S. homes were constructed in 1950 or later. Homes constructed before 1920 only account for 3% of the current national housing stock, whereas the largest portion of Washington D.C.'s housing stock was built before 1920. Nevada and Arizona saw the largest amount of homes built from 2000 to 2009, at 36% and 29% respectively. Construction has waned since the beginning of the current decade, and is below par the rate set in the latter half of the 20th century and previous decade. 


Let's move on to Freddie and Fannie updates from the last few weeks - they never stop!


I have been asked recently about Fannie's HomePath product. No, it is not discontinued. Rather than offer HomePath as a negotiated variance, Fannie created a new version of HomePath is now available to all lenders as guide-eligible product. This was done in response to feedback from lenders who wanted direct access to some of the flexibilities in HomePath. Lenders should review the guide and the announcement at in order to be familiar with the differences and/or speak with your rep. 


Fannie Mae is accepting delivery of HUD-guaranteed Section 184 (HUD-184) Native American mortgage loans and Rural Development (RD)-guaranteed Section 502 (RD-502) loans as standard products for whole loan committing and delivery, with no variance required (MBS execution will be available at a later date).For more information, click here.

Fannie Mae updated policies related to project standards requirements, including changes and clarifications to fidelity/crime insurance and liability insurance for certain projects. In conjunction with these policy changes, the Condo, Co-op, and PUD Eligibility web page has been enhanced and new and updated resources are available. Policy change pertaining to how loan-level price adjustments are applied to certain mortgage loans for borrowers without credit scores, allowing for applicable loan-level price adjustments to be applied based on the credit score of a co-borrower, if applicable, rather than the lowest credit score range. To view the entire announcement 2014-13, click here.


Fannie Mae posted Advance Notice of Future Changes to Investor Reporting Requirements
This Lender Letter provides advance notification to servicers of changes to certain investor reporting requirements that will become effective in or around the third quarter of 2016. To view the letter, click
Fannie Mae announced the publication of the new Single-Family Servicing Guide, which will replace the 2012 Servicing Guide in its entirety. For details, view the announcement by clicking

Freddie Mac and Fannie Mae have rescheduled the update to the Submission Summary Report (SSR) in the Uniform Collateral Data Portal® (UCDP®) for December 7. To review the planned UCDP changes, click here.


Fannie Mae has provided notification of upcoming changes related to the assessment of compensatory fees for delays in the liquidation process. To view the Lender letter, click here. Additionally, servicers are notified of changes to two Servicing Guide Exhibits, Foreclosure Time Frames and Compensatory Fee Allowable Delays, and Allowable Foreclosure Attorney Fees.


Freddie Mac's recent bulletin covers several servicing requirement changes including MI delegation of authority for foreclosure sale bidding and requirements for handling insurance loss settlements when the mortgage premises is located in an eligible disaster area as well as properties that are not. To view the complete bulletin, click here.


Fannie Mae released its new Servicing Guide that would replace the 2012 Servicing Guide in hopes of making it easier for servicers to do business with Fannie Mae. The new guide is intended to make locating policies and requirements easier, has created a separate Servicing Guide Procedures and allows for real-time updates. All announcements issued through October 17, 2014 have been incorporated into the new guide. The Servicing Guide has been rewritten to exclude policies and requirements that are not required or duplicative and content has been revised to be consistent with the selling guide. Other changes include submitting the term "lender" for "seller/servicer", "seller", or "servicer", there is a separate Balloon Mortgage Loan Servicing Manual and Investor Reporting Manual.


Turning to the secondary markets, Cerberus' FirstKey is coming to market with an MBS. Besides being guilty of being yet another company with a midDle letTer capitalized, the security is of interest to the market since it is a jumbo deal, rated by Kroll, and backed by loans from CMG and Cornerstone.


Market Report:

The 19th day that the bellwether 10 yr has traded in an 8 bps yield range; this morning the 10 opened at 2.34% then increased to 2.36% when October housing starts and permits were reported at 8:30. October starts were -2.8% on the headline but the details were good for single family starts; single family starts increased 4.2% in October while the volatile multi-family starts were down 15.4% from Sept. Sept starts were revised from 1010 mil to 1040 mil. Through the first 10 months of the year, single family starts are up 5.3%. Multi-family starts have increased 19.6% so far this year, compared with the first 10 months of 2013. That is an improvement, but not the breakout year that some had forecast. Building permits, a bellwether of future construction, increased 4.8% last month to a 1.08 million rate, estimates for permits was an increase of 1.7%. The decline in multi-family October starts masked the nice increase in single family, a more significant sector. Single family permits increased 1.4%, the best rate for the category since November 2013. Yesterday the NAHB housing market index jumped 4 points to 58 from 54, a much stronger report than had been expected.

The bond and mortgage markets took the report hard but in the context of the wider perspective the 10 is still well-contained in its19 day trading range between 2.30% an 2.38%; at 9:30 the 10 traded at 2.36% up 4 bps from yesterday’s close and 30 yr MBS price down 20 bps from yesterday’s close and down -15 bps from 9:30 yesterday. The DJIA opened down 32, NASDAQ -10, S&P -5.

Nothing else on the calendar to be concerned with until the FOMC minutes from the October meeting are released at 2:00 this afternoon. At that meeting the Fed decided to finally end the monthly purchases of MBSs and treasuries, it was not a surprise though, it was widely expected. The debate will be interesting; there is an increasing view that the Fed is falling behind the curve in terms of increasing the FF rate, recent data like today’s starts and permits will add to that thought but it is still likely the Fed will begin increasing rates until at least mid-2015.

After the elections two weeks ago we thought the first major vote would be to approve the Keystone pipeline; wrong…last night the Senate defeated the legislation by one vote 59 to 41, it takes 60 to win. Republicans, who won a Senate majority on Election Day, are already planning to bring the pipeline up for a vote as one of their first acts when they take control in January. It is of course not a market mover but does suggest even though the Senate went to Republicans they don’t have a walk over on any legislation.

As long as the 10 remains in its 19 day range between 2.30% and 2.38% we consider the market neutral; all of our technicals are essentially flat (or neutral); not bullish or bearish. In this kind of activity floating is more a guess for anticipating interday changes. We have tried floating a few time recently; in every case we didn’t benefit, however we didn’t lose either. In a trading pattern like we have now the problem is we can get whipped-sawed (floating when we should lock, and locking when we should float). Best to keep locked as long as the equity markets hold gains.

PRICES @ 10:00 AM

  • 10 yr note: -9/32 (28 bp) 2.36% +4 bp
  • 5 yr note: -6/32 (18 bp) 1.65% +4 bp
  • 2 Yr note: -2/32 (6 bp) 0.54% +3 bp
  • 30 yr bond: -16/32 (50 bp) 3.06% +3 bp
  • Libor Rates: 1 mo 0.154%; 3 mo 0.231%; 6 mo 0.325%; 1 yr 0.561%
  • 30 yr FNMA 3.5 Dec: @9:30 103.33 -20 bp (-15 bps from 9:30 yesterday)
  • 15 yr FNMA 3.0 Dec: @9:30 103.74 -14 bp (-10 bps from 9:30 yesterday)
  • 30 yr GNMA 3.5 Dec: @9:30 104.17 -20 bp (-15 bps from 9:30 yesterday)
  • Dollar/Yen: 117.63 +0.77 yen
  • Dollar/Euro: $1.2552 +$0.0016
  • Gold: $1196.70 -$0.40
  • Crude Oil: $74.65 +$0.04
  • DJIA: 17,650.95 -38.87
  • NASDAQ: 4675.48 -29.96
  • S&P 500: 2045.26 -6.54