Last night my wife met me at the front door. She was wearing a sexy
negligee. The
only trouble was, she was coming home.
The correct perspective is important. For example, are property values in
Phoenix
rebounding, or still mired down in quicksand? And what could Phoenix tell us
about
cities in the rest of the US? Sales are moving higher, but certainly at
lower prices
than a year ago: They point to strong existing home sales in June, up 22%
according
to the NAR. It was the second consecutive month of strong sales, with the
June figure
the strongest recorded since December 2006. But while sales may be up,
prices are
not. The NAR report says the median price of a home sold in the Phoenix area
in
June was down 13% from the same month in 2010, and many expect expects
prices to
remain weak because distressed properties are accounting for 64% of sales:
ADryHeat
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107062507759&s=8721&e=001f1Xj2R
3YTqQNeygu5LLwR-lamdg2BUJKXDOXsohiHVd4JY4C1QBnA2tvdV2gLVUiQyjF8l-liQgYEGnErn
qd9NYrZrJok_3V1PhjxPjItiLxfxIDOGx6EVlVfP1HRE-NnQjK-HXvh4TSt2nPRGWxTTp63pNJ9Y
ltMQSTlCQ9W--KdVfsOr-uDs6LVPsZe6nxUBSOFrTleKkh0Q8KojUJfUcO0xkgSoxN5lauzZoDFK
-u0DNE8Z85BstW-eAdL7zs].
Phoenix's "fun with numbers" reminds us that it is easy to be confused, or
misled,
with seemingly simple numbers. For example, imagine you are saving for your
child's
college costs, expected to amount to $100,000, and that you are 80 percent
of the
way there with $80,000 in your account. The next year, the value of your
investment
account drops 25 percent, to $60,000. The year after that, it bounces back
25 percent.
Are you back to where you started? No, because now you have $75,000 in your
account.
Next, assume college costs are rising 8 percent per year. Now how close to
paying
for college are you? The answer: 64 percent, because you have $75,000 toward
$117,000
of costs. Even though your investments rose the same percentage as they
fell, you're
further from your goal than before. This is the same situation faced by
pension
funds.
I've lost track - is this the week that the government wants out of mortgage
banking,
and to dissolve Freddie & Fannie, or is this the week when they want to
continue
to control securitization, underwriting, and servicing? I guess it is the
latter:
The Obama administration, through FHFA, Treasury, and HUD, will seek
investors'
ideas for turning thousands of foreclosed properties owned by
government-backed
entities into rental homes, thus, in theory, helping values and lowering
inventories
(?). Heck, Fannie Mae and Freddie Mac sold a record 100,000 homes during the
second
quarter - I bet they're becoming adept at it. Fannie + Freddie + FHA =
250,000 homes
at the end of June, or around half of all unsold, repossessed properties.
According
to the WSJ, there are another 830,000 homes through the three agencies in
the foreclosure
pipeline - and they will all pass through the same 12 Realtors nationwide.
(Just
kidding.) Owners of non-owner occupied properties across the nation are
protesting
the move. (Just kidding again.) Seriously, anything is better than a vacant,
deteriorating
property, and given many ex-owners' credit reports, their only choice is to
rent.
For more: Where'sMySecurityDeposit?
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107062507759&s=8721&e=001f1Xj2R
3YTqRIWtz7xdEbYh3cpM5aTMYuLjeJKhy4AYA1qW0XlQx_yQjOHnAmu_fgpLTeuzaqeDB2vz2GZO
yyH-liZ8euTQ6hAX-NfgB68hZf2nqqqhikzCNL0RiHNWRlB5NjIQqmTDLiM2ZYZmIfq4M_k5pIhv
dNHW4nyyjOgCg=]
More on the LO comp issue, Kevin Iverson with Reed Mortgage Corporation
wrote, "Regarding
the recent posts about LO Compensation and renegotiations - actually the new
LO
compensation rules should help with maintaining pipeline and reducing
fallout. Previously,
prior to the new LO comp rules, if rates dropped a mortgage broker LO could
increase
their compensation by simply pulling the loan from locked lender and placing
with
another lender - maybe give the borrower better pricing and at the same time
increase
his/her compensation. Now, assuming everybody is following the rules (which
might
be a leap of faith), the LO is going to get paid the same regardless of
where loan
is placed. Thus the LO has no incentive to pull loan and place with some
other lender,
especially if a lot has already been done on the loan (who wants to do more
work?).
And HVCC (or whatever they call it these days) makes it problematic to place
a loan
with a new different lender, as many lenders are not taking transferred
appraisals."
I received this note from a much respected attorney who specializes in
mortgage
banking. "I am seeing some companies allowing an 'overage' account for
marketing
expenses while others are not. And there is the perception that an
'overage' account
is illegal. The terms 'overage account,' 'points bank,' and 'bonus account'
are
all non-specific, non-legal terms. Accordingly, whether any one is 'legal'
or,
more precisely, whether any one is permissible under the Truth in Lending
Act's
new Loan Originator Compensation Rule and other applicable state and federal
laws,
depends of course on the individual situation. However, as a general
statement,
it is certainly possible to set up such an account in a manner which is
fully compliant
with all applicable laws, including the new LO Comp Rule. If properly set
up and
implemented, it is also possible, within limits and subject to certain
restrictions,
to use funds in that account for certain bona fide business expenses of the
affected
LO."
Don't forget that effective July 29, 2011, depository institutions were
required
to become registered in NMLS under the SAFE Act. According to the Board of
Governors,
the S.A.F.E. Act imposes additional requirements upon MLOs who are not
employees
of agency-regulated institutions, including state licensure and testing
requirements
and character and fitness standards. In this regard, employees of bank
holding companies
and their non-bank subsidiaries who act as MLOs are subject to state
licensure and
associated state regulation. CanISeeYourLicense?
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107062507759&s=8721&e=001f1Xj2R
3YTqTVEYGsA7bZh2QyxVRFpZa4R7HBcu6rxKH5c1QzC3R40AoPNNpvEvNzUq737d3vPqowxSdHjt
I8or-F984QNtZa7c_2ov9vfu5CwxOr0anTUFs7p0D7POR5Fo4YOjx45iKo_YmxurU_VzGfJ1FReS
vLZri7oNqSkSXz2kOojeRv0A==]
The National Reverse Mortgage Lenders Association has announced its 2011
Annual
Meeting & Expo which will focus on the role reverse mortgages can play in
retirement
planning and the emerging opportunities for realignment of the industry
following
the departure of such entities as Bank of America and Wells Fargo. "As some
companies
exit the sector, it creates room for others to enter and grow," says Peter
Bell,
NRMLA president and CEO. The gathering will be held October 24-26 in
Boston. Additional
information can be found at www.nrmlaonline.org
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107062507759&s=8721&e=001f1Xj2R
3YTqRFlXxVaOV2RNjdB-zv42a7ADG1b4eLSthIze8ZY__uAHefjRP6ExpLMDeLgG1njcKX6LovJ9
6PavuC9bNSAYlbyHi3OlPtJ_uD8eLdjvvGdQ==]
or by contacting Marty Bell of NRMLA at mbell@dworbell.com
While we're on reverse mortgages, the AARP filed another suit: AARPSuit
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107062507759&s=8721&e=001f1Xj2R
3YTqRowx_frohazMpQpsX9u6lH23MrMWIuPISfJxmJ_v7yvi7mlLWjsPXWoDhC2mo2VaM8ycAzv8
NFkkMNAkyz5Sq9GoBra2Kakl8-khmbNhhPeUyk_63X4CF0UcFQO0qp4J-rNStVAcTdD4LxTCXTDD
ZfFTqfkfy3YW03e8vtM81IMy1QZJ3yMiiBCirHdIGoNjc=].
According to Reverse Mortgage Daily, AARP filed a class action lawsuit
against Wells
Fargo Bank and Fannie Mae on behalf of reverse mortgage borrowers and their
survivors
who have faced foreclosure and eviction - that Wells Fargo has illegally
foreclosed
upon reverse mortgage borrowers who were not notified and were not given the
opportunity
to purchase the property for 95% of its appraised value after the loan
becomes due
and payable. The lawsuit is the second suit filed by AARP this year
concerning reverse
mortgage borrowers and their heirs. The original suit was dismissed by the
court
in July.
Rock on...Farmer Mac? Federal Agricultural Mortgage Corp. (AGM), commonly
known
as Farmer Mac, around since 1988, reported second-quarter earnings more than
doubled
on higher interest income. Credit quality continued to improve: 90-day
delinquencies
were 1.27% of its portfolio, improving from 1.3% a year earlier, and new
program
business volume was $608.1 million, though it added $1 billion in the first
quarter.
What happened to Option One? It became Sand Canyon, and it announced a
resolution
of claims of unfair and discriminatory lending practices by modifying
thousands
of Massachusetts homeowners' loans and making a significant payment to the
Commonwealth
of Massachusetts as part of a settlement valued at $125 million. It requires
the
mortgage originator, a subsidiary of H&R Block Inc., to pay $9.8 million to
the
Commonwealth and to direct American Home Mortgage Servicing Inc. (AHMSI),
the current
servicer of approximately 5,500 Option One loans in Massachusetts, to
institute
an aggressive loan modification program that will provide an estimated $115
million
in additional relief. The suit alleged that the risk-layered loans were
unfair because
they posed an excessive risk of default and foreclosure, and that Option One
knew
that loans with such risk characteristics were doomed to fail but that it
originated
them nonetheless in order to sell them to the secondary market and realize a
profit.
I have a clarification regarding Wells Fargo's wholesale cut off dates for
locks,
given the impending loan limit changes. "Temporary loan limits scheduled to
expire
Sept. 30, 2011: Deadline for 45-day locks is Aug. 16.The deadlines for
locking loans
using the temporary loan limits is: For 45-day locks: Tuesday, Aug. 16, 2011
For
30-day locks: Wednesday, Aug. 31, 2011 For 15-day locks: Thursday, Sept.
15, 2011.
Reminder: Only the temporary loan limits are expiring - permanent limits
remain
available after Oct. 1. Therefore, transactions not impacted by the
expiration
of the temporary loan limits may be locked at any time."
Just so we're clear here: Fannie 3.5% securities (which generally contain
3.75-4.125%
loans) are now above 101 (a 1 point premium). Add some servicing (this is
clean,
low coupon stuff!) and suddenly a 4% conventional mortgage is earning the
seller
102 (2 point premium) in the MBS market. What is passed on, through
originator rate
sheets, is up to the lender. There are profit margin, overhead, hedge costs,
and
so on that must be accounted for - but still, these are record mortgage
price levels.
Today is a new day, with more potential volatility. Given the comments I am
seeing,
folks would be happy with a quiet summer Thursday & Friday heading into the
weekend.
Yesterday prices quickly gained as EU fears related to French banks and
their exposure
to Greek debt sent investors to the safety of the AA+ rated US (as opposed
to AAA-rated
France!). We had a solid 10-yr note auction in the US, and yield hit a low
of 2.10%.
But things worsened slightly, and we closed around as the stock market
plummeted
(again). Mortgage banker selling has been much muted - almost as if
companies are
afraid to sell their new locks, instead using them to fill older unfilled
positions
with investors and Wall Street.
Today we've had Jobless Claims, and some trade numbers, and will have a $16
billion
30-yr T-bond auction. New U.S. claims for unemployment benefits dropped to a
four-month
low last week, a rare dose of good news - initial claims for state
unemployment
benefits fell 7,000 to a seasonally adjusted 395,000 from 402k the week
before.
MBS prices are worse .375-.5.
(Parental discretion advised!! Don't read it and then write to grouse about
it.)
From a teacher -- short and to the point.
"In the world of hi-tech gadgetry, I've noticed that more and more people
who send
text messages and emails have long forgotten the art of capitalization. For
those
of you who fall into this category, please take note of the following
statement:
'Capitalization is the difference between helping your Uncle Jack off a
horse and
helping
your uncle jack off a horse.' Is everybody clear on that?"
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://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=phscbbhab.0.epg7qedab.zy6u9cdab.8
721&ts=S0660&p=http%3A%2F%2Fwww.mortgagenewsdaily.com%2Fchannels%2Fpipelinep
ress%2Fdefault.aspx]
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=phscbbhab.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=phscbbhab.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.)
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