Market Snapshot 8/29/2011

Not a good start to the week; treasuries and mortgage markets trading lower in price and higher yields, at 9:00 the 10 yr note -27/32 at 2.28% +9 bp, mortgage prices -9/32 (.28 bp) frm Friday's close. The global stock markets were better overnight and are propelling US stocks higher this morning. Last Friday Bernanke in his speech at Jackson Hole said he doesn't believe the US will enter another recession as the economy slowly improves. The Fed has no plans at the moment for another easing move, but he said the Fed will move if necessary. Meanwhile Bernanke turned US equity markets around on his economic outlook; the DJIA closed +134 Friday and at 9:00 this morning ahead of the open the DJIA +122.  

At 8:30 this morning July personal income and spending; income up 0.3%, June income revised to +0.2% frm +0.1%. Spending in July was a little better than 0.5% expected, up 0.8% and added a little more strength to the pre-open trading in the indexes. The July savings rate +5.0%, down slightly from +5.5% in June. The US savings rate has been strong for the past year; prior to the 2008 calamities US savings were under 1.0%; consumers unlike politicians understand the need to cut spending and increase savings.

At 10:00 NAR June pending home sales were expected down 1.3%; as reported sales fell 1.3%; yr/yr +14.4%. Pending sales are contracts signed but not yet closed, likely some of the contracts will not close. No immediate reaction to the report.

This week is employment week; Friday the August employment report will likely keep markets from substantial moves. Of course treasuries and mortgages will be impacted by trade in the stock market. Given the trading over the last week it is looking less likely the 10 yr note will break below 2.00% and that the lows in rates may have been achieved. To attract buying in treasuries that will drop the 10 yr note below 2.00% the economic outlook would have to revert to a recession view; Bernanke took some of that outlook out of the equation in his speech.

This Week's Economic Calendar;

        Today;

          8:30 am July personal income and spending (as reported, income up 0.3%, spending +0.8%)

          10:00 am June pending home sales (as reported -1.3%)

       Tuesday;

         9:00 am June Case/Shiller 20 city price index (-4.7%)

        10:00 am Aug consumer confidence index (52.0 frm 59.5)

      Wednesday;

        7:00 am weekly MBA mortgage applications

        8:15 am Aug ADP private jobs estimate (+100K)

        9:45 am Chicago purchasing mgrs index (53.0 frm 58.8)

        10:00 am July factory orders (+1.8%)

     Thursday;

        8:30 am weekly jobless claims (-10K to 407K)

                Q2 productivity (-0.5%)

                Q2 unit labor costs (+2.4%)

       10:00 am Aug ISM manufacturing index (48.5 frm 50.9)

                     July construction spending (0.0%)

     Friday;

       8:30 am Aug employment data (unemployed 9.1%, non-farm jobs +73K, non-farm private jobs +110K)

The DJIA opened +143, the 10 yr at 9:30 -24/32 at 2.27% +8 bp and mortgage prices -8/32 (.25 bp).

In Greece its stock market put in the best performance in the last 23 years on news that tow of their banks will merge, the merger supposedly will increase the ability of the merged banks to avoid defaulting. The strength in Greece fed through most European stock markets; doesn't take a lot these days to bring out bargain hunters after how badly markets have been beaten down. The Greek two year note rate is 46%, after the country was bailed out twice by European Union partners as it struggled to service its debt. Still no real progress from Europe on all of the sovereign debt problems; the ECB, the EU, the IMF, Germany and France can't get banks to write down their loans to Greece and the other four countries that can't pay their debt.

August 29: IT job; reader input on refi plan; markets are pretty quiet after hurricane's weekend

An IT person is someone who understands this joke: "The definition of

'Installation

routine': A process employed by many applications to overwrite and thereby

trash  the user's existing and painstakingly created AUTOEXEC.BAT and

CONFIG.SYS files."

Mortgage banking has become extremely dependent on computers and systems,

speaking of which...

I have been retained by an expanding residential retail lender that is

searching  for a Business Applications. The lender is looking for someone

who either lives  in California or is willing to relocate. The role is

relatively straightforward:

"to strategize and maintain the organization's business applications for

mortgage banking, accounting and customer support software applications

through best practices, appropriate integration and meaningful reporting for

the sake of the business needs, and is responsible for planning and

coordinating the processes required for the provision of user applications

and systems necessary for business operations. This individual will apply

proven communication and problem-solving skills to guide and assist the

division heads on issues related to the design, development, and deployment

of mission-critical information and software systems." The person should be

very  familiar with Document Management Systems, Citrix, Windows, DataTrac,

Point, and so on. I am happy to send anyone the description, which is too

lengthy for the commentary, so if you know of someone who might be

interested, please pass them my way: rchrisman@robchrisman.com.

Along those lines, Citi sent its clients a reminder that, in spite of the

"suite  of technology products that makes it easier for you to do business

with us, errors occur when using the eImaging program that can be easily

avoided." Citi goes on to explain that, "Some documents, most frequently

appraisals and HUD-1s, are locked by the provider to prevent tampering with

the contents. This 'protection' also causes problems when attempting to

image for long term storage. Please remove this security feature prior to

sending your images to Citi. A PDF print driver (or other tool that allows

printing/imaging without permitting other access to the documents) is a

great tool for this." Citi's bulletin also goes on to make recommendations

regarding naming convention errors, examining the eImaging Report itself,

acceptable file types (eImaging accepts PDF and TIFF files contained within

a zip file. Including documents of other file types like .doc, .xls, etc.,

will cause upload errors and/or omissions of loan documents.), and image

resolution (300 dots per inch recommended,

200 and below unacceptable).

Last week we had a flurry of chatter about some potential, vague

government-backed refinance plan, and I received a number of valuable

comments. "The elephant in the room that's being ignored is mortgage

insurance.  With today's PMI structure, the rate for an FHA refi loan needs

to be an average of at least 1.25% below the old  loan's rate in order to

meet the benefit to the borrower standard.  Existing underwater conventional

loans that have MI on them can only be refi'd by the servicing lender.

 Borrowers I've talked with in this situation are telling me that their

existing  lenders are in no hurry to do the refinances.  That pulls a huge

number of loans off the market. Government and elected officials can talk

all they want, but until the MI issue is dealt with, the vast majority of

quality borrowers who bought at  the wrong time are not going to receive

significant, meaningful help."

"Very few borrowers can do a Streamline Refinance do to the two recent

increases  in the monthly mortgage insurance premium (MMI). The higher MMI

eats up most of  the interest rate savings, and prevents borrowers from

achieving the '5% month's'

savings requirement. Why wouldn't the government just simply grandfather in

all borrowers current MMI premiums when they Streamline a mortgage? This

way, a borrower who took out an FHA loan prior to October 2010, when the

factor changed from .55  to .90 can lower the rate on their mortgage from

say 5% to 4% or 4.25% and meet  the 5% savings rule. The way things stand

now, they would need an approximate rate of 3.75% to achieve the savings.

The Government can actually make money on this Idea as they could simply

create new guidance that states the MMI will be grandfathered in but the

Upfront on a Streamline will increase to 2%. The Increase in the UFMIP will

have little impact on the overall monthly payment as compared to going from

 .55 to 1.15 on the MMI the way things stand now. If this window of low

rates were to last and this was implemented immediately, you would see

refinancing on an epic scale. What are the negatives in your opinion of this

idea?"

"Your reader/analyst who argues that homeowners would accept lower monthly

payments, while keeping underwater equity status is an insult to any

homeowner with an ounce of intelligence and an understanding of basic math.

Let's take an example.  A homeowner purchased a home in 2007 (at the height)

for $400,000. Fast forward 4 years, and  from their perspective that home

they thought would at least retain the original purchase price in value is

now valued at $200,000 with no drop in property taxes.

Does anyone really think they are not going to throw their hands in the air

and walk away?  What reasonably intelligent person is going to say, 'Hey!

At least my new payment is lower... deal!  I'm going to keep this place and

keep pouring money into it, because my 'rent', less 'taxes', is cheaper and

I won't have to move!'

Wrong!  Most intelligent people are going to say, 'Hmmm... $200,000

underwater.

 I wonder if I will break even in the next 30 years. This isn't an

investment, it's a money pit.  I can rent the same house down the street and

not have to pay for maintenance, property taxes and MI payments... and

finally save some money!'

"In my simplistic opinion, this market, the industry, and the economy are

not going to "correct itself" or "recover" until this mess runs its course.

Underwater properties and foreclosed properties are going to have to sit on

the market until sold, at the new, much lower price.  Banks, Servicers, and

Agencies are going to have to take heavy hits/losses and Loan Officers

selling payment, not rate, are going to  have to start getting real about

what their futures look like. Homeownership will once again become something

you work hard to earn, not something handed to you on a silver platter.

Simply put, there is no way government involvement is going to  be able to

make 'right' contracts between borrowers, lenders, servicers, and investors

without some, or all of those parties realizing losses.  You can't just make

it disappear."

Meanwhile, investors & MI companies continue to make changes. MGIC announced

changes to its underwriting requirements, effective with MI applications

received on or after today. "MGIC is revising its underwriting requirements

to allow for loans up to $750,000." Revised requirements for loans greater

than $625,500 include the $750k loan amount, primary residence, purchase or

construction-permanent, maximum LTV/CLTV of 90%, maximum DTI of 41%, minimum

FICO of 740, and so on. Consult the  MGIC bulletin for exact details.

At Bank of America, starting today, "the Agency Price Guide for Conventional

and  Government loans is updated to include the following changes: the

adjustment for Conforming 30 Year Fixed Rate High Balance loans is now 1%,"

as is the adjustment for DU Refi Plus Conforming 30 Year Fixed Rate High

Balance loans.

Turning to the markets - there isn't a heckuva lot going on. Friday's speech

by Ben Bernanke was largely as expected: no QE3, the Fed has options if

needed, growth is on track but the recovery is erratic and healing will take

time, and the Fed has limited ability to ensure long run growth. There is a

tacit warning from Bernanke that Washington need to get their act together,

and that monetary policy alone can't sustain long term growth. Treasury

10-year notes improved by about .250 in price, down to 2.19%, although for

the week 10-yr notes about 1 point and the yield was  up 12 basis points.

Today we had Personal Income and Consumption. (In the old days it was called

"Consumption, now it is called "Spending.") Personal Income was +.3% and

Spending was +.8%, neither of which really moved the markets. PCE prices

were +.4%. Later we have Pending Home Sales. Tomorrow is yet another housing

measure with the Case-Shiller 20-City Index, and Consumer Confidence.

Wednesday is some ADP job information (private sector only) and the Chicago

Purchasing Manager's number, Thursday is Jobless Claims, Productivity, Unit

Labor Costs, an ISM Index, and Construction Spending. Friday is the Big

Daddy:

unemployment. In the early going the 10-yr.'s yield is up to 2.25% and MBS

prices are worse by about .125.

(From 9/1 through 9/9 I will be out of the country. I have lined up several

very  knowledgeable "guest writers" of varying mortgage backgrounds who will

be taking my place every day.)

Here's some hurricane advice for the next one, I believe thanks to Dave

Berry:

First, you need to understand two basic meteorological points: (1) there is

no need to panic.

(2) We could all be killed.

You need to consider these important hurricane preparedness items.

Homeowner's insurance:

If you own a home, you must have hurricane insurance.   Unfortunately, if

your home

is located in Florida, or any other area that might actually be hit by a

hurricane, most insurance companies would prefer not to sell you hurricane

insurance, because then they might be required to pay you money, and that is

certainly not why they  got into the insurance business in the first place.

If you live in a low-lying area, you should have an evacuation route planned

out.

 (To determine whether you live in a low-lying area, look at your driver's

license; if it says "Florida" you live in a low-lying area.) The purpose of

having an evacuation route is to avoid being trapped in your home when a

major storm hits.  Instead, you will be trapped in a gigantic traffic jam

several miles from your home, along with two hundred thousand other

evacuees.

If you don't evacuate, you will need a mess of supplies.  Do not buy them

now! 

Tradition requires that you wait until the last possible minute, then go to

the supermarket and get into vicious fights with strangers over who gets the

last bottle of water.

Of course these are just basic precautions.  As the hurricane draws near,

it is  vitally important that you keep abreast of the situation by turning

on your television and watching TV reporters in rain slickers stand right

next to the ocean and tell you over and over how vitally important it is for

everybody to stay away from the ocean.

If you're interested, visit my twice-a-month blog at the STRATMOR Group web

site  located at www.stratmorgroup.com . The current blog takes a look at

the recent news sweeping the MBS investor market regarding a new mass refi

plan by the government.

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://www.mortgagenewsdaily.com/channels/pipelinepress/default.aspx

or www.TheBasisPoint.com/category/daily-basis. For archived commentaries, go

to www.robchrisman.com. 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.)

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

~~~~

Join My Mailing List

[http://visitor.r20.constantcontact.com/email.jsp?m=1102827910937]

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

~~~~

Forward email

http://ui.constantcontact.com/sa/fwtf.jsp?llr=zy6u9cdab&m=1102827910937&ea=b

cahoone@globalhomefinance.com&a=1107373607110

This email was sent to bcahoone@globalhomefinance.com by

rchrisman@robchrisman.com.

Instant removal with SafeUnsubscribe(TM)

http://visitor.constantcontact.com/do?p=un&mse=001gYuebWlSSZMa7X7_YCXY1pkylq

TmggCt&t=001DCzQDilTLheCL1XBjEUrTg%3D%3D&llr=zy6u9cdab

Privacy Policy:

http://ui.constantcontact.com/roving/CCPrivacyPolicy.jsp

Online Marketing by

Constant Contact(R)

www.constantcontact.com

Chrisman Inc. | 24-G West Main Street #386 | Clinton | CT | 06413

Market Snapshot August 26th

Content Provided by: Sigma Reseach


The rate markets started better this morning prior to the preliminary Q2 GDP report at 8:30. Q2 GDP was widely expected to be revised lower from last month's first look on the advance release; as reported GDP was revised lower to +1.0% frm +1.3% on the advance look. Q2 deflator at +2.5% while personal consumption up 0.4%. A month from now we will see the final Q2 GDP, probably won't see any change. Prior to the data the 10 yr traded up 12/32 to 2.19% -3 bp and mortgages +7/32 (.22 bp); treasuries did slip back a touch but still held price gains then moved higher in price. At 9:00 the 10 yr +17/32 at 2.18% while mortgage prices at 9:00 +12/32 (.37 bp frm yesterday's close.

Today is Bernanke Day; he is about to begin his long-awaited speech at 10:00 with some expecting another easing announcement while an equal number not expecting anymore easing. Most emerging-market stocks fell before his speech on concerns that the central bank will take further steps to boost growth in the world’s largest economy. On the flip side; the dollar weakened against most of its major counterparts on speculation Bernanke may disappoint investors betting on added stimulus and a report forecast to show U.S. growth slowed. European stocks retreated for a second day as investors waited to see whether he will signal further steps to support the economy. Asian shares rose and U.S. index futures fell. Mass uncertainty prior to 10:00 this morning.

Yesterday Germany reported its economy had slowed in Q2; the U.K. economic growth also slowed in the second quarter as manufacturing shrank and services showed signs of losing momentum. U.K. gross domestic product rose 0.2% from the first quarter, the same as estimated a month ago, the Office for National Statistics said today in London. Output rose 0.7% from a year earlier. A separate report showed services fell 0.1% in June, the final month of the quarter. All of Europe and the US economies are faltering, US interest rates will stay very low as long as the global economies suffer another setback. Bernanke will likely refrain from saying a double dip is on the way, but he has to admit growth worldwide has slowed.

At 9:30 the DJIA opened -55, the 10 yr +21/32 at 2.16% -7 bp and mortgage prices +13/32 (.41 bp).

At 9:55 the U. of Michigan consumer sentiment index expected at 56 was 55.7 frm 54.9 at mid-month; the expectations index increased to 47.4 frm 45.7 and the 12 month outlook remained unchanged at 40. The various indexes are still very low compared to those when the economy was stronger. No direct reaction, but as 10:00 closed in treasuries and mortgages were backing down from their best levels but still quite good on the session.

Stay tuned this morning; Bernanke speech may move markets. Depends on what he says and how markets will interpret it.


http://globalomefinance.com

August 26: Clarification on UAD rollout dates; odds of mass refi plan actually happening

Don't you always wonder how much the guys standing at the
stoplights take



home, tax-free? It is a little farcical, but:
HowMuchTaxFree?


[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107327540158&s=8721&e=001J5TbiJ

Vr9isVGek6kXZ_sdi4_hehjMOmLmP0vEfJDL0V4fX7cGxaIF_SRFmbjql4I5_7Z0-M18dSTWp79k

GeJyav52B2pj3C6Bfgn_GdcPF7xhfoCWowGeq5sMeDB3sWGwevWplj3ifXQxfNWWG_wL_Z2YgOoy

Tf].




A doctor examining a woman who had been rushed to the
Emergency Room took



the husband aside and said, "I don't like the looks
of your wife at all."


"Me neither doc,"


said the husband. "But she's a great cook and really
good with the kids."



Life often involves dealing with misunderstandings and
confusion, and the



rumors surrounding a mass refi plan certainly fit into
that category. In



general markets trade off of future prospects and the
prospects of a huge



government-sponsored refi plan is roiling the markets. (I
even set out some


more in-depth thoughts at MassRefi

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107327540158&s=8721&e=001J5TbiJ

Vr9itDzQuzJMGH3zuKOTPhGacpfFwTMBdrM_0YtSIeScpIm9yadCB5tGMY2tDWB0aj4JOOJzI7Dn

GSlA4ehzaVfANWX76x2Kgpx9RPA9zXX0dyFw==].)


Any plan must help a broad group of homeowners, stimulate
the economy, and


cost next-to-nothing.




One trader mentioned that, "after HAMP and HARP the
U.S. is now ready to



launch a new program called Helping Underwater Mortgage
Performance" and



that the market "went toxic after it heard that
Obama was getting "REFI.GOV"



vanity plates for his new limo." As one would
expect, the prices of



premium/older production are suffering compared to
current/rate-sheet



production. Yesterday, for example, Fannie 6's
(containing 6.25-6.625% 30-yr



mortgages) were down .5 in price versus Fannie 4's which
improved nearly


.250.




One proposal would allow millions of homeowners with
government-backed



mortgages to
refinance them at today's lower interest rates, which in turn



would lower their mortgage bills and, in theory, help the
economy since


they'll take the money and spend it elsewhere. Homeowners who have been


unable to refinance their loans either because they owe
more than their


houses are now worth or because of bad credit.


Other suggestions include a large-scale home rental
program that would keep



foreclosures off the market. What is lacking, of course,
are any concrete



details about any of this. Items such as how delinquent
borrowers would be



treated versus on-time borrowers, who would administer
the program, and how


would investors be made whole are immense issues.




In the meanwhile teams of researchers at all the investment
banks are



sending out educated guesses as to the pros and cons of
various plans. (I



bet this is what they really live for!) How are reps and
warrants for



existing loans handled? What about non-government loan
borrowers? If



borrowers who have their loans modified, or refinanced,
stop making their



payments, can investors go back to originators under buy
back provisions?



When did HARP become a verb? ("If you HARP these
seasoned loans you are



exposed to new put-back risk. If these borrowers default
in their current



form, it is very difficult for the agencies to put them
back given servicers



can argue the
loans have been paying for 3+ years and therefore were issued


as clean loans.


However, once its HARPed that argument is no longer
applicable and they are



exposed to new put-back risk.") And with Republican
control, what are the


odds of anything like this happening?




It seems that conjecture is focusing on basic plans. One
is to make a low



mortgage rate available to all borrowers. Another is a
blanket settlement



between originators and FHFA that settles all existing
and future reps and



warranties liabilities, and the originators will just be
agents for the GSEs


and will not be responsible for the credit performance of HARP refied


loans. Another option is an expansion of HARP which will
remove the



origination date restriction for HARP eligible
loans, thus allowing



borrowers to do HARP multiple times and will make recent
production HARP



eligible. And the last seems to be implementing parts or
all of the changes


in Senator Boxer's bill.




An analyst wrote, "I'm not sure I understand the
economics/logic of a



streamline
refinance program. Assume for the moment that borrowers with



high LTV's, i.e., LTV's >100%, a result of home price
decline, could do a



rate and term refinance from say 6% to 4.25%. Assuming an
average remaining



term of 25 years, the monthly P&I payment would drop
by 16%. So, in real


economic terms, how worse off is FNMA or Freddie? Before the rate/payment

drop, the lender/investor has a loan on the books that is underwater and at

high risk of default. After the drop, while the loan is underwater by the


same amount, cash flow has dropped but the probability of
default has



arguably declined. Now I know that studies show that
negative equity is the



key driver of default, but I would argue that although
the borrower's equity



position has not change the borrower's perception of the
situation has. Once



a borrower is in a deep negative equity position, they
probably view their



monthly payments (after tax) as rent, not as payments on an
investment. So,



a drop in monthly payments is like a drop in rent which
improves their


likelihood of continuing the lease.


Does the reduced likelihood of default compensate for the
reduced cash flow?



I haven't analyzed this but I bet it's significant and
for some borrowers



actually increases the economic value of the loan. And,
the same argument


would apply to loans in securities."




Yesterday's commentary discussed HUD's note about the
implementation of UAD.



I should clarify that this is from HUD (mostly FHA), not
Fannie & Freddie. I


received a few


notes: "In the newsletter you mention that UAD has
been pushed back to Jan


1, 2012 per HUD mortgagee letter 2011-30. Although HUD has pushed the


implementation to
1/1/12, to the best of my knowledge FNMA and FHLMC are



still implementing UAD as of Sept 1, 2011."
"The UAD implementation date for


the GSE's is still September 1, 6 days from now. Everyone managing this


process, including the aggregators, has been waiting on
HUD's policy



concerning UAD.
The word from HUD was that they were going to adopt UAD


requirements, but didn't specify when. The mortgagee letter addresses HUD's


acceptance of UAD and their requirement for appraisals
with a case number


assignment date of January 1, 2012. This doesn't push back the GSE

implementation date."


Yesterday the commentary noted a memo from Flagstar
regarding 4506-T


requirements.


In turns out that Flagstar sent out another memo:
"Effective with



underwriting submissions on or after September 1, 2011
the 4506-T Execution



Criteria have been updated for conventional loans to
reflect that one year



of tax transcripts results are required, or the most
recent two years


results if required per AUS findings. For Delegated underwriting customers,


these requirements are for all loans delivered on or
after September 12,



2011. Please note this excludes Freddie Mac Relief
Refinance, Doc.



#5354, which does
not require results."





But while we're on Flagstar, it announced that on August
18 the NYSE



provided notice to the Company that it did not satisfy
one of the NYSE's



standards for continued
listing applicable to the Company's common stock.



More information on the status, and how it can be repaired,
can be found at:


NYSEFlagstar

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107327540158&s=8721&e=001J5TbiJ

Vr9is0gpDdqdaexr8b2tpF1pXbPaKQZJ9sv0ikSHVStDp2ctFobXeIWOXgs2_zk4ff2HNfB-nPSF

-UsJtBa39M6TBoLe4uMg6co7XjhBpD2vIZLXIvXhlNawI5Kru_jdsji2BuWVkzT7Aff7i90nVK-2

KwFeGW3TBich19xk3_pLrjJH7CbMo49csK96ZiKAiFyWm9G3VIgEhO_MIZHlkVj_e1].




The stock and bond markets had plenty to chew on
yesterday, between Steve



Jobs leaving, Berkshire Hathaway's purchase of $5 billion
of BofA equity,



and the conjecture on everyone with a government loan
suddenly ratcheting



down their mortgage rates. (Would we be talking about
this if the employment



picture was better? MBA's chief economist Jay Brinkmann
stated in a press



call on Monday that increasing employment was the most
important thing that



the government could do to help the housing market.)
Thursday we were



reminded that hedging "like for like" makes
sense: Fannie 3.5's were better



by about .375 in price, but Fannie 4's (with 4.25-4.625%
30-yr mortgages)



were only better by .125. The 10-yr ended the day around
2.22%.





This morning talk seems more focused on Hurricane Irene,
and a stormy



weekend along the Eastern Seaboard. But we did see GDP
for the 2nd quarter



which came in at +1.0% versus a prior estimate of +1.3%.
We also have



Chairman Bernanke's much anticipated speech at the Fed's
annual Jackson



Hole, Wyoming symposium. His topic is "Near- and
Long-Term Prospects for the



U.S. Economy" and investors will be tuned into
actions the Fed may take to



help economic and jobs growth. Last year, he introduced
QE2 at this meeting.



In the early going stocks are pointing lower, the 10-yr
is at 2.17% and MBS


prices are better by roughly .250.




You're An EXTREME Redneck When... (Part 1 was yesterday;
part 2 today) 9.


Your junior prom offered day care.


10. You think the last words of the Star-Spangled Banner
are, "Gentlemen,


start your engines."


11. You lit a match in the bathroom and your house
exploded right off its


wheels.


12. The Halloween pumpkin on your porch has more teeth
than your spouse.



13. You have to go outside to get something from the
fridge.


14. One of your kids was born on a pool table.


15. You need one more hole punched in your card to get a
freebie at the


House of Tattoos.


16. You can't get married to your sweetheart because
there's a law against


it.


17. You think loading the dishwasher means getting your
wife drunk.





If you're interested, visit my twice-a-month blog at the
STRATMOR Group web



site located at www.stratmorgroup.com . The current
blog takes a look at



the recent news sweeping the MBS investor market
regarding a new mass refi


plan by the government.


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://www.mortgagenewsdaily.com/channels/pipelinepress/default.aspx


or www.TheBasisPoint.com/category/daily-basis.
For archived commentaries, go



to www.robchrisman.com.
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.)

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

~~~~



Join My Mailing List

[http://visitor.r20.constantcontact.com/email.jsp?m=1102827910937]



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

~~~~

Forward email

http://ui.constantcontact.com/sa/fwtf.jsp?llr=zy6u9cdab&m=1102827910937&ea=b

cahoone@globalhomefinance.com&a=1107327540158






This email was sent to bcahoone@globalhomefinance.com
by


rchrisman@robchrisman.com.



Instant removal with SafeUnsubscribe(TM)

http://visitor.constantcontact.com/do?p=un&mse=001gYuebWlSSZMa7X7_YCXY1pkylq

TmggCt&t=001EF0TDxB3LxxJWURgx0fouQ%3D%3D&llr=zy6u9cdab





Privacy Policy:

http://ui.constantcontact.com/roving/CCPrivacyPolicy.jsp





Online Marketing by

Constant Contact(R)

www.constantcontact.com






Chrisman Inc. | 24-G West Main Street #386 | Clinton | CT
| 06413

August 23: PMI stops MI issuance - who's left? Accenture & Zenta merger; appraisal process in the news; FHA training

Who is Deven Sharma? He is the latest person to quit his job. Ordinarily

this wouldn't

be a big deal, but he was the president ofStandard & Poor's - the rating

agency

that stripped the United States of its AAA credit rating. The newspapers

cite people

familiar with the matter (why am I never familiar with any matter?) who say

Sharma's

move was in the works well before S&P downgraded its rating on the U.S., is

purely

due to organizational changes and does not have anything to do with the

Justice

Department investigating whether the agency improperly rated dozens of

mortgage

securities in the years leading up to the financial crisis in 2008.

Citibank's now

ex-COO Douglas Peterson will replace him.

It is hard to talk about the government removing itself from the residential

mortgage

process when one sees a headline like, "FHA Endorses $10.5 billion in

Multifamily

Rental Housing Loans." Demand through the FHA has skyrocketed for

FHA-insured financing

to build, rehabilitate or refinance multifamily apartment properties. FHA

has announced

that it has endorsed 1,100 loans for multifamily rental housing loans since

last

 October, with another month-and-a-half remaining in the fiscal year.

HUD sends its apologies to those who traveled to Puerto Rico this week for

FHA training

- it was cancelled due to bad weather. (How come "traveled" has one "l" and

cancelled

has two "l"'s?) But don't worry, there are more sessions on FHA appraisals,

HECM's,

processing, etc.: tomorrow in Portland (OR), 25th Indianapolis, September

7th Anchorage,

21st Birmingham, October 24th Boston... Most of it is paid for by the

taxpayer and

therefore free to the attendee, but for more information go to

HUDFHATraining

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107271229005&s=8721&e=001HodoEa

ObbgY30Kt-oK_Q9W4z646bEVdklSuSOUfd01pSngzPmTOAFrMLBJ2WuEP40xjjUD2JxsNqLonlZx

Wdy9n09i-4eN1wNALc82Pjotm_ZwZwPfOSqc75-4z4mGQD-WM9wIflXIdr6h9VjjvFlqNfyCa-S0

NoFjl6XgDbPQ3n158UcmlrhVPyt5Iy0iXwX1ycI3z7TANPCxirArNEdw==].

I swear that I did not start any appraisal controversies in the press last

week

when I brought up valuation problems, but there was a coincidental flurry in

the

 press about the subject. Maybe it was the appearance that NAR keeps blaming

"bad

appraisals" for the lack of appreciation in the housing market. Regardless,

the

Wall Street Journal came out with one article: WSJValue

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107271229005&s=8721&e=001HodoEa

ObbgaOEfXf3HdD0DwmfXi4ubWJTMRABDxtwJuTCOjVKEgvPfvhi6S2qeBI7VnUGyrktwuB8uGMyW

jaazd7fgxMe69OwxgW80AAyHhAtbsEF2pxrQfxzHOFrNjYwS1BiqyPzEHPJ4lme8YoMtSHRLuFUo

WHiHdjVbZ8IOMUkA-PS6MbJzAESfT87-Rd].

At which point the appraisal industry appears to have raised up its head and

cried

out, "Don't blame us, we're just doing our jobs!" ValueofWSJ?

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107271229005&s=8721&e=001HodoEa

ObbgYYIGDx-YTR30Erom4eqXsgGxcCm810sgQZWTAseYZnmtQjZiYiQefhG5Ij8_N0aPitTIwacq

J5ZDam2oqSzPLKKszPoFRPwdUgbwbBBa1InGZmg6N-hiBJtLBuJIT8dV1VSz__szZsTe9zkziaZF

5T]

And regarding RE/MAX's survey of 53 cities, "showing that July home sales

dropped

12.7% from the previous month. RE/MAX blamed tightened lending standards,

concern

about the overall economy and bad appraisals that reportedly killed many

transactions"

I received this note: "Rob, I would like to comment that just because an

appraisal

does not meet the contract price it is not necessarily a bad appraisal. If

more

appraisers had considered the market and just not the contract amount in the

past

we may not have had as steep of a fall in values. A 'good' appraisal is one

that

 accurately portrays the market value, which may not always be the contract

price.

'Low appraisals led to 13% of contracts being renegotiated below the agreed

upon

 price' is more accurate and leads to a buyer paying the market price and

not an

 inflated price.  Appraisers have a challenging job these days and too often

are

 used as the scapegoat for the loan not closing. Thank you to Vicky Thompson

at

CMI Valuation Management Group

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107271229005&s=8721&e=001HodoEa

Obbgb9oQx7EiFbf22firQdSQKxlKJIrpQycsa9Ggh2T_NPebZ26iw4BObwhctqk2CVTPOboKyvtN

u0hFQDn6mh21T0OiQDF3A73IMuajWduCqOLbXqXqzTZsA-].

After last week's appraisal notes, I received, "One way to nail down pull

through

is to watch appraisal orders and receipt of the appraisal.  I needn't

explain the

correlation between ordering an appraisal and pull-through - no appraisal,

no loan.

Additionally, we've found that beyond the ordering, the timing of the

receipt of

 the appraisal really dictates when, not if, the loan will close. I never

thought

in a million years I'd be looking at appraisal ordering and receipt as a

gage for

fundings."

"Once Fannie and Freddie have all of the information on your house, and all

of your

neighbor's houses, why would we need appraisers and not just inspectors

confirming

that the house was still standing? Statistically, the larger the group you

take

you're sampling from, the more accurate your results. AND since you are the

one

ultimately determining value and lending the money why would there be any

appreciation

allowed beyond what you had determined was an acceptable amount? Say 1-3%

for flyover

states and 3-5% for the coast?" (Anyone willing to let the government

control the

market for housing to this great a degree, step right up!)

The big story yesterday was that another MI company has stopped writing new

commitments.

"We are writing to inform you of the very recent regulatory decisions that

have

impacted our ability to write new commitments. Specifically, PMI Mortgage

Insurance

Co. ("PMI") and PMI Mortgage Assurance Co. ("PMAC") have been informed that

they

 must cease writing new commitments for insurance effective as of the close

of business

on August 19, 2011. PMI and PMAC may issue mortgage insurance policies under

pending

commitments through the close of business on September 16, 2011." There was

the

usual language about "we will support our customers' ongoing policy

servicing needs

and loss mitigation programs. PMI will maintain all systems, processes, and

contact

points for policy servicing, loss mitigation, and claims operations just as

we do

today."

Freddie Mac and Fannie Mae wasted no time. "Effective immediately, we are

suspending

PMI and its wholly-owned subsidiaries as approved mortgage insurers. With

this suspension,

mortgages insured by PMI with note dates before May 19, 2011, or after

September

 16, 2011, will no longer be eligible for sale to Freddie Mac. To help

manage your

pipeline, mortgages insured by PMI with note dates on or after May 19, 2011,

and

 on or before September 16, 2011, must be delivered to Freddie Mac on or

before

December 30, 2011, whether for borrower-paid or lender-paid insurance."

Freddie reminded clients that there are indeed other approved MI companies:

MIisAlive

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107271229005&s=8721&e=001HodoEa

ObbgZmuuEDu97DaxDONEwOUFVgvZK7MnzmHnUQxgbfYvMg40CiRxjogqodJX7xBPKe3t1_sHJSFM

p-BqmQBM4yZOFmorowo-g-4GFcK77aV8pWCmkVp9CQxK7g2uQrBQldKP5uMNnimToOA835sqw6ZX

nA].

Investors followed. CitiBank quickly spread the word to clients. "In order

to meet

the deadlines set by PMI's regulator, Citi is requiring any loan insured by

PMI

be purchased by Citi no later than September 2, 2011. Reminder:  Payments

for any

single premium MI policies must be submitted to PMI immediately upon loan

closing."

U.S. Bank Home Mortgage Wholesale Division wrote, "In-process loans, insured

by

PMI with certificate dates on or before August 19th, 2011, will be accepted

for

purchase under the following criteria: Existing loans in your pipeline, with

certificates

issued by PMI, must be closed, disbursed/funded by August 31st, 2011 and be

delivered

and purchased by USBHM on or before September 9th, 2011. Loans with PMI

insurance

certificates that do not close by the above deadlines will not be accepted

by USBHM

until new MI insurance is obtained from one of our other approved MI

providers:

MGIC, Radian, UG, Genworth, and Essent.

Speaking of UG, it sent news out to its clients that, "We have new appraisal

guidelines

that reflect the new Uniform Appraisal Dataset from Fannie Mae and Freddie

Mac.

We'll be modifying our underwriting requirements guides to reflect these

changes,

effective 9/1: UG

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107271229005&s=8721&e=001HodoEa

ObbgbgvZKoie7TOiiJ-v8YtQbKEoe9Pv84agAshUqfd5YfISBJximYZB5ASSXGalCfGoHA7fwnBb

Z4OUWKX4IKIi_2Zi9fRlJYC_zxNPNs9Gl7RZSYtNle0GWfaSyufFToyoe96nMH8vN2kA0cyNtiH3

oFIyOpTNsOrwu4fTYIqVyaOYBW5LEHIXrYAL_HYwt_rzI=].

Accenture announced its acquisition of mortgage outsourcing provider Zenta.

The

release said, "In a move that puts the global consulting and outsourcing

provider

in the thick of the mortgage origination business and the massive loss

mitigation

efforts ongoing in the mortgage servicing industry." Zenta has 3,700

employees provide

business process outsourcing in mortgage origination fulfillment, servicing

loss

 mitigation, as well as portfolio due diligence and management for

investors.

The deal prompted one industry vet to write to me, "Mainstream origination

firms

 are clamoring for better LOS technology, not for BPO providers to take over

their

back office. The 'people challenges' involved in end-to-end BPO are huge,

especially

in purchase money transactions where sales compensation is at risk and loan

officers

are loathe to disrupt trusted personal working relationships with their

processing

team. Nor is there a magic fountain of elastic capacity - when the demand

switch

 flips and everyone needs scarce talent at the same time, exactly how will

Accenture/Zenta

instantly fill critical high skilled roles any better than anyone else? And

then

 there is there is the question of who takes repurchase risk when the

end-to-end

 process is shared with a third party and the investor's claim cites a

tangled mix

of defects whose trails cross organizational boundaries? These challenges

have 'undone'

a slew of entrants to the first mortgage end-to-end BPO space who believed

that

superior technology held the answer."

Last week stock markets declined as the euro zone sovereign debt crisis

remains

unresolved. (Germany is opposed to common euro-denominated bonds despite

pressure

from the European Commission and members of the European Union that see this

as

the solution to the debt crisis.) The big problem with euro bonds is that

the European

Union members do not have common fiscal policies. The general consensus is

that

Europe must find solutions for the current debt obligations before they can

work

 on how the Union will handle future obligations.

Over in the U.S., of course, rates remain low. A major problem, of course,

is that

current low interest rates are a result of falling confidence in the

economic outlook.

It's cheaper than ever to borrow, but that's because no one wants to borrow!

Current

coupon (whatever that is these days) MBS prices ended the day lower/worse by

.125-.250

while 10-yr Notes were nearly unchanged at 2.09%. News is limited again with

only

New Home Sales for July coming out at 9AM CST, and a $35 billion 2-yr note

auction,

and in the early going the 10-yr is at 2.11% and MBS prices are worse a

smidge.

A tourist in a bar in Florida asks an Irishman sitting at the bar, "Why do

scuba

 divers always fall backwards off their boats?"

To which the Irishman replies: "If they fell forwards they'd still be in the

darned

boat!"

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 takes a look at the recent U.S. credit downgrade by S&P,

and

whether it really matters. 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://www.mortgagenewsdaily.com/channels/pipelinepress/default.aspx

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=nsheihhab.0.epg7qedab.zy6u9cdab.8

721&ts=S0660&p=http%3A%2F%2Fwww.mortgagenewsdaily.com%2Fchannels%2Fpipelinep

ress%2Fdefault.aspx]

or www.TheBasisPoint.com/category/daily-basis

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=nsheihhab.0.v7uif6dab.zy6u9cdab.8

721&ts=S0660&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=nsheihhab.0.fpg7qedab.zy6u9cdab.8

721&ts=S0660&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.)

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

~~~~

Join My Mailing List

[http://visitor.r20.constantcontact.com/email.jsp?m=1102827910937]

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

~~~~

Forward email

http://ui.constantcontact.com/sa/fwtf.jsp?llr=zy6u9cdab&m=1102827910937&ea=b

cahoone@globalhomefinance.com&a=1107271229005

This email was sent to bcahoone@globalhomefinance.com by

rchrisman@robchrisman.com.

Instant removal with SafeUnsubscribe(TM)

http://visitor.constantcontact.com/do?p=un&mse=001gYuebWlSSZMa7X7_YCXY1pkylq

TmggCt&t=001U7rYLMFceMfdYtK_1cIbSA%3D%3D&llr=zy6u9cdab

Privacy Policy:

http://ui.constantcontact.com/roving/CCPrivacyPolicy.jsp

Online Marketing by

Constant Contact(R)

www.constantcontact.com

Chrisman Inc. | 24-G West Main Street #386 | Clinton | CT | 06413