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
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
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
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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