German Rates Go Negative

By rchrisman@robchrisman.com

 

Two older women were fussing about their husbands over coffee one day.

"I do wish my Raymond would stop biting his nails - it makes me nervous," the first one said. "Oh, my Elmer used to do the same thing," the other woman commented. "But I broke him of that habit real quick."

"What did you do?"

"I hid his teeth."

 

An Experian survey finds about 45% of first time homebuyers say they have delayed buying a home in order to improve their credit score. Speaking of credit scores, investors and lenders continue to change guidelines - see below.

 

Trends in credit scores? Yes there are.

 

PERC, as part of National Financial Literacy Month, released preliminary results of a study on the effectiveness of personalized credit counseling services showing that more than two-thirds of consumers had an increase in their credit scores after receiving a credit counseling session. This is more than seen in a comparison group. The strong results from the study support efforts underway to convince policymakers to increase consumer access to this type of credit counseling information and services. Among the interim findings of the study, within 90 days after completing a personalized credit education session with a credit advisor from a nationwide consumer reporting agency included more than two-thirds of counseling participants (68 percent) had an increase in their credit scores, with 38 percent of the increases greater than 20 points. Nearly all participants (93 percent) reported they have a better understanding of the actions they need to take to improve their credit score. If you would like to read more of PERC's initial results, download the PDF report here.

 Wells Fargo has removed its policy overlay for court-ordered debt on Conventional Conforming Loans and will follow Freddie Mac and Fannie Mae's current guidelines.

  Tongues are wagging about Fannie delaying the release of its DU 10.0. Originally slated for June 25, the talk on the street has it pushed back to August, at least. "To support a successful implementation, we are postponing the DU Version 10.0 release that was scheduled for the weekend of June 25, 2016. As we prepared for the release, we experienced issues with the testing environment and decided it would be prudent to delay the release. We are rapidly addressing this issue in order to deliver these new enhancements to our customers to help provide even more certainty and simplicity while expanding access to credit and sustainable homeownership for creditworthy borrowers. We'll let you know as soon as possible and give you ample time to get ready.

 The industry, and credit reporting companies, was anticipating the release of this since the new version of DU incorporated "trended credit data" thought to help more borrowers. As Equifax puts it, "Trended, historical, longitudinal or time-series data is an invaluable tool for gaining practical perspective into consumer behavior. It works by measuring a sequence of data points at successive points in time spaced over uniform time intervals. Analyzing the data creates the opportunity to extract meaningful statistics and help predict future values based on previously observed values. When measuring trended data within a consumer credit profile, analysis on direction, velocity, tipping points and magnitude of changes within the profile can help provide valuable insight into consumer credit behavior."

 For its part, Freddie Mac, in its Single-Family Seller/Servicer Guide (Guide) Bulletin 2016-10 from last week, revised requirements related to the Home Affordable Modification Program (HAMP) expiration, extending the Lender-Placed Insurance (LPI) deductibles mandatory effective date for certain Servicers, and more. "As the HAMP program winds down at the end of 2016, we're aligning with certain expiration dates and removing HAMP-specific forms and references from our solicitation requirements so we aren't promoting an imminently-ending program. We're extending the mandatory effective date for LPI deductibles for certain Servicers that use American Modern Insurance Group (AMIG) as their LPI provider. The revised effective date for Servicers that use AMIG is on or after July 1, 2017. Servicers must use IRS Form 1099-C when reporting a cancellation of debt in connection with a short sale."You can see for yourself at Summary of Upcoming Requirement Changes.

 In case you haven't heard, on Saturday, June 11, 2016, FHA implemented a technical change to its Technology Open To Approved Lenders (TOTAL) Mortgage Scorecard technology. Effective on June 11, the TOTAL Mortgage Scorecard will no longer return either Upfront or Annual Mortgage Insurance Premium (MIP) factors to an Automated Underwriting System (AUS) for subsequent return on the AUS's feedback certificate. Mortgagees should consult Appendix I of the FHA Single Family Housing Policy Handbook 4000.1 (SF Handbook) for applicable MIP factors. AUS vendors have been notified of this change, and are making accommodations to their systems in advance of the change.

 Do you need an avenue for a customer's major derogatory credit issue? NewLeaf's Access Product, per the company, might be your answer.

 Citadel Servicing Wholesale has partnered with Valuation Link allowing the capability to order Non-QM appraisals for 2nd MTG's. Borrowers can qualify with Up to 85% CLTV, 1-day seasoning from Short Sale, 1 year seasoning from Foreclosure or BK, Up to $1mil. combined loan amount, Loan amounts up to $500,000, Bank Statements used for income self-employed. Visit Citadel's website for complete details.

 Congrats to Credit Suisse, who is marketing the deal, Fitch, who rated it, and to Caliber Home Loan which has priced a $137 million mortgage bond deal, the industry's first rated non-prime home loan securitization in a decade. Critics quickly asked what was different about the usual rating agency being paid by the issuer to rate its deal than ten years ago, the fact that it "only" has an A rating, and to the relatively small size of the deal compared to the billions of residential loans being funded daily. But hey, its's a step in the right direction, right?

 Caliber is owned by Lone Star Funds and last year issued a string of non-rated securitizations of similar non-prime home loans. "Although the mortgage loans were originated to satisfy the Consumer Financial Protection Bureau (CFPB) ability to repay (ATR) rules, they were made to borrowers who generally do not qualify for agency, government or private label non-agency prime jumbo products for various reasons described above. In accordance with the CFPB Qualified Mortgage (QM) rules, 2.6% of the loans are designated as QM Safe Harbor, 41.4% as QM Rebuttable Presumption and 51.8% as non-QM. Approximately 4.2% of the loans are not subject to the QM rules."

 Caliber...is the originator and servicer for all loans in the portfolio. "Wells Fargo will act as the Master Servicer, Securities Administrator and Certificate Registrar. U.S. Bank National Association will serve as Trustee." That means any advances required but not paid by Caliber will be paid by Wells Fargo.

 "The 368 mortgages were originated under five programs. Jumbo Alternative (35%) - borrowers with unblemished credit seeking larger balance mortgages. These loans may have interest-only features, higher debt-to-income (DTI) and loan-to-value (LTV) ratios, or lower credit scores as compared with those in traditional prime jumbo securitizations. 2. Homeowner's Access (50%) -borrowers who do not qualify for agency or prime jumbo mortgages for various reasons, such as loan size in excess of government limits, alternative or insufficient credit, or prior derogatory credit events that occurred more than two years prior to origination.

 "3. Fresh Start (10%) - borrowers with lower credit and significant recent credit events within the past 24 months. 4. Investor (4%) - borrowers who finance investor properties where the mortgage loan would not meet agency or government guidelines because of such factors as property type, number of financed properties, lower borrower credit score or a seasoned credit event. 5. Foreign national (0.4%) - non-resident borrowers holding certain types of visas who may not have a credit score."

 As mentioned yesterday, rates continue to benefit from the world political scene, as well as our economy not going gangbusters. Put another way, U.S. fixed-income securities rallied as risk assets around the world sold off on concerns that the U.K. will vote to leave the European Union on June 23. The probability of the U.K. remaining in the EU is now 64%, according to some odds makers.

 For news today, German rates have turned negative - arguably more important than news in the U.S. today. We've had the May Export Price (+1.1%) and Import Prices (+1.4%) as well as May Retail Sales (+.5%, stronger than expected). We closed Monday with the 10-year at 1.62% and we're down to 1.59% this morning with agency MBS prices better by nearly .125.