A pig and a chicken are walking down a road. The chicken looks at the pig
and says "Hey, why don't we open a restaurant?" The pig looks back at the
chicken and says "Good idea, what do you want to call it?" The chicken
thinks about it and says "Why don't we call it 'Ham and Eggs'?" "I don't
think so" says the pig, "I'd be committed, but you'd only be involved."
LO's committed to refinances continue to be encouraged by the mortgage
application numbers. The latest numbers (this morning, for last week) from
the MBA show that applications for refinancing on home mortgages were up
over 9% last week versus a drop of about 8% for purchases. Overall, apps
were up 4.1%. The refinance share of total mortgage activity rose to 79.7
percent of applications from 76.0 percent the week before. How long have we
heard, "Well, those refi's are going to go away at some point!"? That is
true, but not quite yet.
Who is refinancing, and how are they doing it? Math and statistics majors
have been slicing and dicing the numbers for us. Prepayments have been
concentrated in the largest, best-credit loans, with TPO (broker biz/
providing a substantial boost.
"The money doesn't get any hotter than 15-years (outstanding credit) and 5/1
hybrids (serial refinancers)" said one analyst. LO's know that they have
already rifled through the easiest loans in their rolodexes. What's also
interesting is that the primary-secondary mortgage rate spread (rate sheet
versus MBS + servicing value) has been holding around 80 bps (based on the
Freddie survey rate), indicating that originators are maintaining healthy
margins. But correspondent lending capacity continues to be a big problem -
and there's no way that this phenomenon translates into a more competitive
origination environment or faster prepayments.
Sterne, Agee & Leach, Inc. produced an extensive research piece (not for
redistribution by me, so if you're interested in learning more about Sterne
Agee and the analysis contact Kevin Cavin at kcavin@sterneagee.com
is, of course, not as simple as it was 20 years ago, when, if current rates
were .5% lower than the borrower's rate, it made sense to refi. "Information
is king." Prepayment speeds are not only based on rate, but also loan size,
current LTV, owner occupancy, TPO versus retail, servicer ((Provident, Fifth
Third, and Citi are very efficient), state, loan type (rural housing, for
example), and so on.
In Georgia (where in Gainesville, the Chicken Capital of the World, it is
illegal to eat chicken with a fork), the deal between Flagstar and PNC Bank
closed, with "Flag" selling its 27-branch retail bank franchise to PNC. The
deal was announced earlier this year, and follows Flagstar's December
decision sell off of its Indiana branches. (The total number of bank
franchises sold stands at 49.) And over in Washington, remember WAMU?
They're baaaack... or are they? Check out
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108960374947&s=8721&e=001L6CxmD
csdY0sQwSiEz-EQ4rIlGQP2-bz-r9eDPY7GSde_m9e5Z66v9WZHAepJCBIHsKppiKeUBRDUfnsLN
W9yubp7AbojzWi5i3vFn1JkoN4qBk3fHrKbgNXsc7PxkAFtrDc4egP6jh8MOmn_Ji4z4HPeeefcI
YI9TR6rJqtD-pUj-tUzyuaXw==].
Occasionally I am asked about credit scores for FHA loans (remember that
many underwriting criteria are determined by the investor/aggregator). Here
is a site for those wannabe government underwriters out there:
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108960374947&s=8721&e=001L6CxmD
csdY2sj_NgdfECra0qQ9p5BuhyV540IR1MlF75mqtSk6pRBHNW8zCoy6UxAHJGh4KUR_Er-Q8mBT
2xLn-22qV_CENwE4tkNQyQIrabgA0ruR5hmefrPsrDQ_RuNZUQ1_z-LEher_OYYKu1UC06Nt0nHt
XsObRWZ9fURJE=].
In some news for internet-based lenders, Google has suspended its rate
search and lead generation tool in all but four states and the District of
Columbia. I am always the last to hear, but although it made news yesterday
the "scaling back" of Google Comparison Ads took place on 11/21. Mortgage
rate searches from Google are still available in Alabama, Alaska,
California, Pennsylvania and Washington D.C. Supposedly Google is preparing
a reboot of the service (by hitting control, alt, delete). "It was explained
to me as being a temporary transition to allow them to better focus in on a
smaller market and then once they've proven out the enhancements that they
want to make, they want to thoughtfully broaden it back to the stage where
it is national again," Bruce Backer, the president of LoanSifter,
explained.
In vendor news, DocuTech (mortgage compliance services for mortgage
documents) has acquired the assets of Lender Support Systems (LSSI) Docs3D
mortgage document software from parent company, Emphasys Software. "The
acquisition of LSSI's Docs3D software and customer base enables DocuTech to
continue growing its existing presence among regional banks and credit
unions. Current LSSI customers will see no disruption of services and can
look forward to benefitting from the expanded compliance services offered by
DocuTech, including dedicated legal staff tracking all regulatory changes
and monthly updates to ensure all systems are up-to-date."
MIAC sent out news yesterday to the industry focused on FHFA's proposals to
modify the structure of mortgage servicing fees. FHFA is requesting public
input on the two proposals and the comment period expires on December 25.
"MIAC is strongly recommending that you contact FHFA to voice your opinion
on this matter. Written materials may be submitted to FHFA at
MIAC believes that the changes are bad news for small servicers. "In the
existing servicing compensation model, servicers retain an economic interest
in the performance of the loans they are servicing. Since non-performing
loans are more costly to service than current loans, the servicer is
incentivized to reduce the level of delinquencies in order to maximize
profits. Any proposal that compensates a servicer with additional fees for
non-performing loans simply doesn't make sense, since it encourages
servicers to allow performance to deteriorate. Furthermore, a flat
fee-for-service model would represent a net decrease in overall servicer
compensation and would ultimately cause mortgage servicing to become nothing
more than a business requiring massive
economies of scale. The obvious result is that the industry would undergo
further
consolidation, forcing smaller and medium-sized servicers to exit the
business completely.
The adoption of the FHFA proposal will have a major impact on the mortgage
industry and will dramatically change the economics of servicing residential
mortgage loans.
While this may be beneficial for mega-servicers to help them comply with
capital requirements under Basel III, it will have a negative effect for all
other small and medium-size servicers, and would effectively reduce the
role of all servicers to that of a subservicer for Fannie Mae and Freddie
Mac." The original paper can be found at:
df
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108960374947&s=8721&e=001L6CxmD
csdY3KUF93jVxJWooEK1fpaUuHFy326cd6ZpeHStWQNuSh0835T3qIThbPn13x7ZvmhnmuA09Ujt
6aUJvFPTVToE6UTlP9g14t7yYTqdLxwbCFr957_q-gY58ORBSiqZNp253pZrCm4Y0uLdmsZZrg8x
Wf-Dq-DMvWVCI2oWdedQihEvqIRgWOKmpy].
For investor news, SunTrust announced that e-mail will soon replace webdocs
and faxing. Also, starting a few days ago, SunTrust eliminated Agency
Affordable Lending Loan Programs MyCommunity and "Teacher, Healthcare Worker
and Safety 1st Loan".
ING sent word out to its broker clients that, "Open enrollment to revise
your company's 1st Quarter Lender-Paid Compensation plan runs through
December 23rd. If your plan will not be changing, you DO NOT need to do
anything. Your current comp plan will remain in place if your company does
not elect to make any changes. If your company chooses a new plan it will
take effect on loans submitted January 1st and after.
You must confirm with your company's authorized officer or owner which plan
has been selected before submitting a loan as Lender-Paid. Any applications
Advance-Locked prior to January 1st, and submitted on or after January 1st,
will be subject to your new 1st Quarter Lender-Paid Compensation plan."
Things continue to be fine on the interest rate area. Reuters noted, "A
strong 10-year note auction and uneventful FOMC statement rallied the bond
market following a lower start as supply and uncertainty kept investors
cautious. 10-year notes recovered from an intraday low of -14/32nds this
morning to be marked 14/32nds higher to
100-11 (1.962%)." This accounted for several investor rate sheet price
improvements, and MBS prices closed higher/better by over .250. As expected
the FOMC notes said little new: "Strains in global financial markets
continue to pose significant downside risks to the economic outlook." The
FOMC said it would keep its target range for Fed Funds holding at 0 to 1/4
percent through at least mid-2013, while principal paydowns from agency debt
and MBS securities would continue to be reinvested in MBS.
For thrills and chills today we have a $13 billion 30-year bond auction that
goes off at 13:00. We also saw Import Prices for November, called at +0.9%
from a revised -0.5%, were +.7%. But few seem overly concerned with
inflation at this point in the economic cycle. The focus continues on
Europe, and some debt auctions over there.
So far this morning we're unchanged in bonds from Tuesday afternoon with the
10-yr at 1.96%.
Boudreaux, a furniture dealer from downtown New Iberia decided to expand the
line of furniture in his store, so he decided to go to Europe to see what he
could find.
He arrived in Paris in early morning, but had an afternoon appointment with
the furniture maker, so he decided to visit a small bistro during his wait.
As he sat enjoying his wine, he noticed that the small place was quite
crowded, and that the other chair at his table was the only vacant seat in
the house. Before long, a very beautiful young Parisian girl came to his
table, asked him something in German (which Boudreaux couldn't understand),
so he motioned to the vacant chair and invited her to sit down.
He tried to speak to her in English, but she did not speak his language.
After a couple of minutes of trying to communicate with her, he took a
napkin and drew a picture of a wine glass and showed it to her. She nodded,
so he ordered a glass of wine for her.
After sitting together at the table for a while, he took another napkin, and
drew a picture of a plate with food on it, and she nodded. They left the
bistro and found a quiet cafe near-by that featured a small group playing
romantic music. They ordered lunch.... after which he took another napkin
and drew a picture of a couple dancing.
She nodded, and they got up to dance. Boudreaux never had so much fun!
Back at their table, the young lady took a napkin and drew a picture of a
four-poster bed, which reminded Boudreaux of his appointment, so he abruptly
left.
To this day Boudreaux still has no idea how she figured out he was in the
furniture business.
If you're interested, visit my twice-a-month blog at the STRATMOR Group web
site located at www.stratmorgroup.com
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1106435366068&s=4179&e=001SVt-lj
bp53436QjxD9vbwURtIPPjV05jEcEKyBN3SjS2forXe0C_foO8RjEV-Uye0N7Z_Sh1il0SRXPx6P
jQauayNXQjni-Hc9Sseu-hhZcR1ujeZyAEpw==]
. The current blog discusses the time frames for borrowers returning to
A-paper status after a short sale or foreclosure. If you have both the time
and inclination, make a comment on what I have written, or on other comments
so that folks can learn what's going on out there from the other readers.
Rob
(Check out
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=df7atziab.0.epg7qedab.zy6u9cdab.8
721&ts=S0708&p=http%3A%2F%2Fwww.mortgagenewsdaily.com%2Fchannels%2Fpipelinep
ress%2Fdefault.aspx]
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=df7atziab.0.v7uif6dab.zy6u9cdab.8
721&ts=S0708&p=http%3A%2F%2Fwww.thebasispoint.com%2Fcategory%2Fdaily-basis].
For archived commentaries, go to www.robchrisman.com
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=df7atziab.0.fpg7qedab.zy6u9cdab.8
721&ts=S0708&p=http%3A%2F%2Fwww.robchrisman.com%2F].
Copyright 2011 Rob Chrisman. All rights reserved. Occasional paid notices
do appear.
This report or any portion hereof may not be reprinted, sold or
redistributed without the written consent of Rob Chrisman.)
Chrisman Inc. | 326 Mission Ave. | 326 Mission Ave. | San Rafael | CA |
94901
There is a lot to consider when looking into mortgage rates in pa. Great post!
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