FW: October 31: Mortgage jobs; lots of training & information from the MBA, AllRegs, & BuckleySandler; MERS in the news again; investor updates

Welcome to Halloween. On this day every year Ops managers across the nation

struggle between month-end funding and shipping more loans, or in judging

the various department's Halloween decorating contests and sampling the

potluck fare in the lunch room. Good luck!

Here's something for those Bank of America and MetLife folks who are keeping

their ears open. Caliber Funding, a Dallas-based lender licensed in 44

states with wholesale, retail, and mini-correspondent channels, is

aggressively growing nationwide.  Carolyn Poppe, formerly with TMBG and

Indymac has recently relocated to Dallas and joined Caliber's management

team as SVP of Operations.  Carolyn is looking for Senior Op's Professionals

in credit risk and operational fulfillment that are located in Dallas or

willing to relocate. Caliber is also hiring experienced underwriters,

wholesale account executives, and retail loan officers nationwide.  Resumes

should go to Phil Shoemaker at phil.shoemaker@caliberfunding.com

[mailto:phil.shoemaker@caliberfunding.com].

(I don't know Illinois' All American Bank's personnel situation, but perhaps

Caliber will receive some calls from its folks. All American was closed

Friday by the FDIC, and now its deposits are part of Bank of Chicago.)

I doomed my future in "social media" when I promised my kids I would never

go on  Facebook... Lord only knows the photos that they have on their pages.

But many LO's use tools like that, and the MBA knows it. The MBA is holding

an online workshop titled, "Social Media Marketing for Loan Officers" on

November 15th from 2-3:30.

 "This workshop presents a unique opportunity to get the training your staff

needs without incurring travel costs...a 90-minute program discussing how

loan officers can use social media tools for their marketing and business

development strategies."

It is not free, but to check prices and register go to: WillYouFriendMe?

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108416256573&s=8721&e=001ISdu4W

DiF2ApIeABRPejCC6PmrGge13ZSAhbQ_rzfF3BjzLJWNOf8vYtEdZj5Q0lHDMgIqKxxkV4L5ug9P

RNRhS6nZPj_JfuqBe0P2ok2kOwtuQk8_2PchmNV0LXA4BMPzT7_H2gmfXudZj4EzAHXnGaqNowCB

b-l18s4qlI2PhukUoPwqoxaRfhIezxjDHO]

There is no doubt that servicing is a hot topic, for a variety of reasons:

investors have backed off their servicing pricing lately (an

understatement?), community banks and credit unions want to service the

loans of their customers, capital requirements many years in the future are

making people nervous, whatever. BuckleySandler is hosting a free Webinar

titled, "Mortgage Servicing Update: Understanding and Complying with the New

and Evolving Rules and Regulations in Light of Recent OCC and CFPB

Activity." It will focus on, The new CFPB Servicing Supervision and

Examination Manual published in October 2011, OCC Bulletin 2011-29 and other

bank regulator guidance on servicing, Compliance with the "rules" and

expectations that stem from new examination procedures, recent regulatory

guidance, and enforcement actions related to mortgage servicing." So if

you're not doing anything this Wednesday,

2-3:15 EST, go to Servicing

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108416256573&s=8721&e=001ISdu4W

DiF2BHanSEHiqtW82yGKWGyaaQ3Bm8phW0MTLiVD4c8oDxgFRj0udD_hRvQDw_ZGx1oIYmpwpoRG

iU5M-byAP9trxKFHO-OGWL19X7uF3Wpaz0MxMA3fQwhors1ANNgZ3V2eQck4clCawZ0A==].

Speaking of free, AllRegs is offering a free online FHA handbook. "In

response to FHA's announcement of its online handbooks being unavailable,

AllRegs is making its online FHA Handbooks immediately accessible to the

industry at no charge. This access will be made available for a limited

time. All FHA Handbooks and archival  copies of FHA Guides, including linked

Mortgagee Letters, are available through  this offer from AllRegs.

Additionally, full search capabilities, topic outline,  alphabetical index

and other tools are being made available to respond to this industry

challenge." Go to: AllRegsFHABook

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108416256573&s=8721&e=001ISdu4W

DiF2DjLnRG8LHNG06zdCrooCilLJy8ROWtvMJIUEx5xm816J8aOVOXG2HVvthjJrDFD_ZCrDYBua

gqZFSB_NhoWMiV6nwsAuoG-9XHwWpqlNuu49-Vo3PL9t_jTOaAffJ0T48exzl9vJrrFQ==].

With MI companies coming and going, who can keep track? Try this:

ImperiledMIBiz?

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108416256573&s=8721&e=001ISdu4W

DiF2Bd__P7eq5WWeb2tuNjzRnj89POgYjDZNdWENeUNrZ0z-9iAPVl0d0XsbylGbJJ5HzAj-u7fa

hFfHVpoNBm9cjuJA6oslX-VLaGu_CQNG4aVBBFjga-3IekLFTrfx7bfsqXLYkKHLOpII08lTsgem

kXv_2CzPZ0ve8M3zbtmapPHZo0tEiemcs0LpgvtJt5rtNdM9VxSOSIGFJZWCnG1Y0q]

(Thank you to Kyra Kizirian - President of Kizirian & Associates in

Lafayette, CA.)

MERS can't seem to catch a break. Delaware Attorney General Beau Biden (does

that name ring a bell?) has filed suit against the company alleging it

repeatedly violated the state of Delaware's Deceptive Trade Practices Act.

Biden feels that MERS engaged, and continues to engage, in deceptive trade

practices that cause confusion among  homeowners, investors and other

stakeholders in the mortgage finance system, seriously damaging the

integrity of the land records that are central to Delaware's real property

system, and leading to improper foreclosure practices. These "deceptive"

trade practices fall into three broad categories. The first is that "MERS,

through its private mortgage registry, knowingly obscures important

information from borrowers and the information that MERS does provide to

borrowers is frequently inaccurate. The opacity of MERS'

mortgage registration database makes it difficult for consumers to know of

or challenge inaccuracies in the MERS System. The second is that MERS often

acts as an agent without authority from its proper principal. Because the

MERS System was both unreliable and frequently inaccurate, MERS often does

not know the identity of its proper principal.

Where the name of the owner of the mortgage loan recorded in the MERS System

does not reflect the true owner, any action MERS takes on behalf of the

purported owner is without authority. The third is that MERS is effectively

a "front" organization that has created a systemically important mortgage

registry, but fails to properly oversee that registry or enforce its own

rules on its members that participate in the registry. Rather than

maintaining an adequate staff to provide MERS' services, MERS operates

through a network of over 20,000 deputized non-employee corporate officers

who cause MERS to act without any meaningful oversight from anyone who works

at MERS."

ViewPoint Financial Group, the holding company for ViewPoint Bank, announced

its  latest quarterly financial results. Detailed results can be seen in its

Form 10-Q which can be found at VPB

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108416256573&s=8721&e=001ISdu4W

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yMpmi4hKyju7W99GKWzUH9fbylEvrYUrSCrQ==]

and VPFG

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108416256573&s=8721&e=001ISdu4W

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ajcnPJMwCuFP-KE-4jy5xiqaaGTlH81WEFUasI__IrPGIO].

Suffice it to say, due to the refinance and seasonal activity, ViewPoint's

gross  loan activity saw a $290 million increase. The warehouse side of that

picked up

 $259 million. The provision for loan losses decreased by $1.0 million (28%)

during the nine months ended September 30, 2011, compared to the same period

last year.

GMAC Bank clients were given some good news late last week, as GMACB

extended "the FICO >720 through the month of November. The site condo

adjustment for LTV >70% is decreasing from -.500 to -.250.  We will be

implementing a +.250 adjustment for purchase loans with LTV <=75 for both

Fixed and ARM products." The company also tweaked the series of price

adjustments based on jumbo loan amounts, FICO's, and  LTV - see the bulletin

for exact details.

Bank of America issued a reminder for two new state laws. In Montana, new

legislation related to notary law requirements became effective October 1 -

clients should review the legislation (Montana S.B. 337) for complete

details. In Washington, new legislation related to notary law requirements

became effective October 22, 2011. Clients should review the legislation

(Washington S.B. 5023) for complete details.

SunTrust reminded clients to confirm their Appraiser and Appraisal Company

are eligible (check with the SunTrust lists), updated the guidelines for

employment-related assets used as qualifying income (on one-unit primary or

second home transactions). The  correspondent division revised its Purchase

Review and Pended Loan policies to specifically state that missing approval

documents and AUS findings may result in a pended loan file. And check that

address: "In lieu of sending closed loan/underwriting packages back to

lenders SunTrust Mortgage will begin assessing a courier fee of

 $250.00 at time of funding for each package with the incorrect mailing

address."

In a similar fashion, Flagstar got the word out to its brokers on changes to

its  "Reserve Requirements for Second Homes and Investment Properties" - the

Conventional Underwriting Guidelines should be consulted for full details.

Chase clarified it's "Non-Agency product guides define documentation

requirements as Full/Alt Doc. While the industry has moved almost

exclusively to the use of alternative documentation like paystubs, W-2 forms

and bank statements as documentation standards, the use of Full

Documentation like written Verifications of Deposit and Employment are

permissible under Non-Agency policy. While all credit documentation must be

carefully analyzed, even closer attention should be applied to the review of

written verification forms."

Roiling the markets this morning is the news that the Federal Reserve Bank

of New York has informed MF Global Inc. that it has been suspended from

conducting new business with the New York Fed.  This suspension will

continue until MF Global establishes, to the satisfaction of the New York

Fed, that MF Global is fully capable of discharging the responsibilities set

out in the New York Fed's policy.

Today we have the Chicago Purchasing Manager's Survey. Tomorrow is

Construction Spending and an ISM number, along with the start of the FOMC's

two day meeting.

(Did someone pick up Danish? Ok, whose turn was it?) Wednesday brings us the

ADP  employment data, always of questionable predictive ability for non-farm

payroll, and the end of the FOMC meeting. (Don't look for any change in

rates, but we'll all be watching the verbiage.) Thursday is a productivity

number, and on Friday the always-important NFP report on Friday. (Remember:

jobs and housing, housing and jobs!) As a proxy, the 10-yr T-note closed

Friday around 2.30% but this morning the yield has dropped to 2.24%, MBS

prices are better by roughly .250.

An old man is walking home alone late one foggy night when behind him he

hears, "Bump....BUMP...BUMP...."

Walking faster, he looks back and through the fog he makes out the image of

an upright casket banging its way down the middle of the street toward him.

"BUMP...BUMP...BUMP..."

Terrified, the man begins to run toward his home, the casket bouncing

quickly behind him, FASTER...FASTER...BUMP...BUMP...BUMP...

He runs up to his door, fumbles with his keys, opens the door, rushes in,

slams and locks the door behind him.

However, the casket crashes through his door, with the lid of the casket

clapping,

"Clappity-BUMP...clappity-BUMP...clappity-BUMP...clappity-BUMP...clappity-BU

MP..."

On his heels, the terrified man runs.

Rushing upstairs to the bathroom, the man locks himself in.  His heart is

pounding; his head is reeling; his breath is coming in sobbing gasps.

With a loud CRASH the casket breaks down the door, bumping and clapping

toward him.

The man screams and reaches for something, anything, but all he can find is

a bottle of cough syrup!

Desperate, he throws the cough syrup at the casket...and, the coffin stops.

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 Fannie & Freddie & the FHFA, and the

changes they have in the hopper. 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=6rwdmjiab.0.epg7qedab.zy6u9cdab.8

721&ts=S0696&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=6rwdmjiab.0.v7uif6dab.zy6u9cdab.8

721&ts=S0696&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=6rwdmjiab.0.fpg7qedab.zy6u9cdab.8

721&ts=S0696&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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Market Snapshot 10/31/2011

This Week; two things dominate. Wednesday Bernanke will hold a press conference at the conclusion of the two day FOMC meeting, and Friday the October employment report. Interest rates have increased from the 21st of Sept FOMC meeting at which the Fed Started Operation Twist, buying long dated treasuries and MBSs with the intent of keeping long term (mortgage rates) low in an effort to help the housing sector. Bernanke said he expected the Twist would  push the 10 yr note rte down 50 basis points. It worked for one day but at the moment the 10 yr note is 30 basis points higher than the day the Twist was announced. The Fed has to be concerned, there are no real fiscal efforts in place and lower interest rates have had little positive impact.

The employment report on Friday is expected to be weaker than last month, non-farm jobs up 88K (last month +103k), non-farm private jobs +114K (last month (+137K), the unemployment rate at 9.1% unchanged. There has been no improvement in the unemployment rate this year, Congress and the Administration are impotent and it doesn't seem to phase them as politicians are now only concerned whether they can keep their cushy jobs and huge retirement benefits.

Europe's problems persist but this week likely not much of substance will come out of the region. That said, any news from Europe has a direct impact on US markets. While employment and the FOMC meeting are hardliners this week, there are also a number of key data points to consider. Expect volatility with only minor changes in the bond and mortgage markets with wide swings. Technically the bond market is bearish but somewhat over sold while the stock market is technically bullish but also overbought. 

The only scheduled data today, Oct Chicago purchasing mgrs index; expected at 58.9 was weaker at 58.4. The new orders component at 61.3 frm 65.3, prices paid 66.0 frm 62.3 and employment at 62.3 frm 60.6. No real change in markets on the data; although weaker not by much and employment index increased a little.

This Week's Economic Calendar:

        Monday,

            9:45 am Oct Chicago purchasing mgrs index (expected at 58.9 frm 60.4; as reported 58.4)

        Tuesday;

            10:00 am Oct ISM manufacturing index (52.1 frm 51.6)

                          Sept construction spending (+0.3% frm +1.4% in August)

             3:00 pm Oct auto and truck sales (N/A)

        Wednesday;

             7:00 am weekly MBA mortgage applications (N/A)

             8:15 am ADP Oct non-farm private jobs estimate (+100K)

             12:30 pm FOMC policy decision

             2:00 pm Bernanke press conference

        Thursday;

             8:30 am weekly jobless claims (unch at 402K)

                          Q3 productivity (+2.8%)

                          Q3 unit labor costs (-1.1%)

             10:00 am Sept factory orders (-0.2%)

                          ISM Oct services sector index (53.7 frm 53.0)

        Friday;

             8:30 Oct unemployment rate (9.1% unch)

                     Oct non-farm jobs (+88K, non-farm private jobs +114K)

The stock market is opening weaker this morning after a big week last week. Time to consolidate after the very powerful Oct; investors not likely to be too interested in jumping in at the present levels. Same trade today; buy treasuries when stocks are weak, sell treasuries when stocks rally. With Europe still unable to come up with details but sending off positive vibes the US markets sighed a huge relief last week that maybe Europe is getting serious. Markets believed that a number of times over the past year or so, only to be disappointed on no progress follow-through.  At 9:30 the DJIA opened -115, the 10 yr note +27/32 to 2.23% -9 bp, mortgage prices +13/32 (.41 bp).

As noted last week after the spike higher in rates, volatility in the market will increase. Fundamentally at the moment investors have increased their bullish outlook for the economy; it may be a huge leap of faith and is fueled to some extent that the Fed will do something that will keep rates low and in turn force investors to increase the risk trade buying equities. Technically, the bond and mortgage markets continue their bearish bias, however with increased volatility can move bond prices in wide ranges as we have already this morning.

Market Snapshot 10/28/2011

Wednesday and Thursday hit hard on the bond and mortgage markets; the 10 yr note in the two days increased 25 bp in yield, mortgage rates up about 18 bp. The 10 yr price drop was 75/32, mortgage prices fell 34/32. The stock market measured by the DJIA increased 500 points in two days. This morning the 10 yr at 9:00 +12/32 at 2.34% -3 bp, mortgages at 9:00 +11/32 (.34 bp). It is not unusual that markets are trading a little better early this morning after the huge moves since Wednesday. Of course the moves were triggered by what on the surface has been taken as a fix for Europe's debt problems----at least for the time being; That China is saying it may be interested in buying some of the debt from the EFSF has been greeted with optimism (maybe too much), and the increase in the EFSF fund to 1T euros announced yesterday and get banks to take a 50% haircut on Greek debt was likely overdone but it was a little step forward.

 In the meantime European officials are studying the idea of an International Monetary Fund channel for money for their enlarged rescue fund, as China said it needed more detail on any potential plan before deciding whether to contribute. China will want a lot from the EU, ECB and IMF before it actually commits; that country is in the driver's seat and will likely extract a lot of guarantees to step into the swamp of debt.

The last couple of months were marked with doom and gloom, savvy investors were heavily short equity markets expecting the US and Europe would fall back into recession. The current news out of Europe that sent US stock markets up yesterday was in part fueled by shorts having to cover as the computers were screaming to get out. Putting some perspective on all of it; Europe's problems are far from being under control, the US stock market has moved to anticipate the end of Europe's problems is at hand; the bond market is simply tracking moves in equities with no confidence on the Fed or economic outlook-----letting stock traders set the tone.

Next week the FOMC will meet, after the meeting and the policy statement Bernanke will hold a press conference, given recent events in Europe and the increase in US interest rates, especially mortgage rates his press conference will be one of the more critical ones he has held in months.

At 9:30 the DJIA opened down 14 points, the 10 yr note -12/32 at 2.34% -3 bp and mortgage prices up 10/32 (.31 bp). 

At 8:30 Sept personal income was weaker than expected, up 0.1% against estimates of +0.3%; spending was on the mark, up 0.6%. Q3 employment cost index, expected up 0.6% was better in a sense up 0.3% and +2.0% yr/yr. There was no noticeable reaction to the two releases.  At 9:55 the U. of Michigan consumer sentiment index was expected unchanged at 57.5, as reported the index was 60.9; current conditions index 75.1 frm 73.8, expectations index 51.8 frm 47.0 and the 12 month outlook at 45 frm 37. A better read than the consumer confidence report on Tuesday but there was no reaction to it in equities or the bond market.

For three weeks we set 2.30% on the 10 yr as support that must hold; yesterday the note ran through it to a high of 2.41% before closing at 2.37%. Now we look at 2.30% as a resistance level. Yesterday's breakout over 2.30% can't be confirmed yet, we want to see a day or two over that level; short covering yesterday may have exaggerated the move higher. That said, the bond and mortgage markets have been technically bearish for weeks and will not likely change unless there is a major change in sentiment over Europe OR what Bernanke might do at next week's FOMC meeting to drive long rates lower. So far the Fed's moves have failed to keep rates low as the fed had expected.

October 28: There are indeed HARP 2.0 unintended consequences; Old Republic re-entering the MI biz?

For those out there that like maps, who are Native American or Alaskan, or

who live in Native American areas, here is a nifty illustration (Oklahoma

really stands out!):

MapIt!

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108367847797&s=8721&e=0010-QDVS

RaD-1uy6VQA2_Ad1DbQkTntJLLjA_YYziyCWJdQCMDoqP-ul66kbEZklL18Xiby9Bk8EHrZdOPZC

6hhH_lymSoIu6l41zsw4lO_GuxR6LXXq1OYDLfYcVG_wA9jNB_77YAP599a3DxW-8eop4zvzbGex

FPeY_f0xtlOAUuDjCzT3RnGHtsh0uaH5RG]

You know you've become mainstream when you have a conference, whether it is

the MBA or Burning Man. In this case, in Arizona in February, NMLS'ers will

be dancing through the hallways: YesThereAreActualSessions

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SSRiIVM4VI5VDKDsFnf7sEoKIcttnt0T9y9XFAQ-B3puTsLdc77vq1weV-2HbDasWBx-bS-44ja5

pALwsQWwMRDPd1rnTZKNw440Obsw-eI3yFwkwgMjdkYaU7PDZZIzxD4TmI-qUaqOX3d8ZoZi1MbS

8=].

At a different conference (the National Reverse Mortgage Lenders Association

(NRMLA)

2011 Annual Conference) Carol Galante, acting FHA Commissioner and Assistant

Secretary for Housing, noted, the FHA Home Equity Conversion Mortgage (HECM)

program "is a  very important tool for seniors.  We want to make the HECM

program the best program it can be." She sees no immediate reason to reduce

HECM loan limits below the current limit of $625,500. There are many

originators out there who specialize in the loan, available to seniors 62

years-old and older with significant home equity. They are designed to

enable elderly homeowners to borrow against the equity in their homes

without having to make monthly payments as is required with a traditional

"forward"

mortgage or home equity loan. Under a reverse mortgage, funds are advanced

to the borrower and interest accrues, but the outstanding balance is not due

until the last borrower leaves the home, sells or passes away. Borrowers may

draw down funds as a lump sum at loan origination, establish a line of

credit or request fixed monthly payments for as long as they continue to

live in the home.

Perhaps by then Old Republic International will be writing MI again. The

company  stopped selling MI less than two months ago when a waiver that had

allowed it to stay open for business expired at the end of August. But, per

a story reported by the WSJ, "the company plans to seek approval from Fannie

Mae, Freddie Mac and state insurance regulators to re-start the operation

using fresh capital and a new subsidiary, said Christopher Nard, the head of

Old Republic's mortgage insurance business."

But even though the company may "like" the business, Old Republic had a $515

million operating loss in its MI segment in the first nine months of 2011.

Apparently the higher MI prices and tighter underwriting standards of the

current environment are enticing.

Thoughtful HARP 2.0 comments continue. Kevin I. from Reed Mortgage writes,

"The one item that seems to be obviously missing from the recent discussion

of "improvements"

is addressing loans currently owned by Fannie or Freddie that otherwise

would be  eligible but are not eligible because the loan being refinanced

was sold to Fannie or Freddie under some type of 'credit enhancement

feature.' My experience is that at least 50% of the recent refinances I have

attempted are not eligible under HARP because of this.

"For example, you run the loan through DU and receive this message: 'This

limited cash-out loan casefile was not underwritten according to the DU Refi

Plus expanded eligibility guidelines because the subject property was not

identified as a Fannie Mae loan that is eligible to be refinanced with DU

Refi Plus. Refer to the Selling Guide for additional information regarding

why an existing loan may not be eligible to be refinanced using DU Refi

Plus.' So an originator goes to the Selling Guide  which states ineligible

loans for DU Refi Plus are 'Existing mortgage loans with certain types of

credit enhancement' which is sort of a non-answer answer. My research

indicates that some lenders (large volume lenders) sold loans to Fannie and

Freddie under some type of captive re-insurance arrangement...which provided

lower G-fees in exchange for this additional insurance although there may be

other reasons for what constitutes a 'credit enhancement.'

"On one hand this is a negative for the consumers: through no fault of their

own  they cannot participate in this program simply based on the way their

loans were sold to Fannie/Freddie. On the other hand, if the basic theory

behind HARP is that the new loan would (should) put both the borrower and

Fannie/Freddie in a better  position, I guess one understands why these

loans would not be eligible. It would be interesting to find out from Fannie

and Freddie how many loans are excluded from HARP because of this credit

enhancement exclusion. My guess is that it is in the  millions."

Another wrote, "The concept of HARP 2.0, or any plan to allow underwater

borrowers who make their payments, is very good: it allows people who have

been making payments on their homes on time the ability to refinance their

loans at much lower interest rates, despite the fact that their home value

has dropped significantly. The program would benefit loans guaranteed by

FNMA, FHLMC, the VA and FHA. Under the program, debt to income ratios, loan

to value and credit would be ignored; as long as the  borrower was current

for 3 months. This would be a boost to the economy in theory, because it

would put money into the pockets of consumers that own homes and help  the

11mm or so who have negative equity. One key problem for banks is that they

hold billions of dollars of MBS's that produce a return. Given the drop in

interest rates over the past few years, MBS prices have soared to $105 to

$108 premiums.

When loans that feed those securities refinance or pay off, they do so at

$100, so the bank suffers a $5 to $8 immediate hit to performance. Currently

about 75%  of Fannie & Freddie mortgages carry interest rates above 5%, so

the impact of a  major refinancing wave could be substantial. One problem

with this is that a mortgage is one person's liability and another's asset,

so if one gets more cash from this event, the other must inherently pay, so

things balance out. In other words, the  gains the homeowner get come at the

cost of bondholders.

"In addition to banks, other stakeholders, such as the Agencies, could

themselves take a hit of $40B to $60B (which could reverberate with an OTTI

impairment for banks); the Fed could see a $4.5B reduction in interest

payments on MBS it holds  (hitting taxpayers with $600mm in expected

losses); REITs could be severely impacted (and their stocks could get

dumped, since they borrow money and invest the proceeds in MBS); those who

lent money to REITs could be hurt; pension funds, insurance companies,

mutual funds and foreign investors would also be at risk. All this would add

further uncertainty and risk. This confluence of unintended consequences

would also likely change the future. Investors that have been burned by such

an event are likely to demand much higher returns going forward to hold MBS.

That could reduce liquidity, decrease lender interest in originating new

loans and push up rates for all borrowers (as investors demand higher yield

to compensate for increased uncertainty). It could also increase the

difficulty of managing refinancing forecasts as part of normal  IRR work at

banks, so that could further impact bankers."

"Refi plan or no refi plan, there ain't nothin' that's gonna happen to

Fannie & Freddie until after the elections, which puts it into 2013." So

said the guy at Midas working on my brakes. But that doesn't stop them from

being in the press -  here is the latest:

http://www.businessweek.com/news/2011-10-26/garrett-seeks-to-preserve-some-f

unctions-of-fannie-and-freddie.html

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108367847797&s=8721&e=0010-QDVS

RaD-3f7fK214OSTZAOMF2eH_QdUJ7KSE6KnOubQH2IoTJtxBBGH8nBaVqPtiJ-3C60NAylpYlEiW

xJ2oQc0rMCwaNbg_wW4sAwvHrD1FFmHRfsDLq01oox3QhCkmi5MOREIXBZoACn08LWebfbI_PwG5

OrImPGvM61d50FH_jOIkLVsz_xOBsikUY56h1LF77s5k0NKAqnBStWOGlQeJrNwxVbzG-UD5x69_

w=].

Here is some fun with numbers: the Pending Home Sales Index was down over 4%

in September, but still better than where the index was a year ago. NAR

chief economist Lawrence Yun said, "America's monetary policy is

contradictory and confusing, where some consumers with the best financial

capacity and top-notch credit scores pay higher mortgage interest

rates...The Federal Reserve evidently has been attempting to lower mortgage

rates, yet more consumers are faced with taking out jumbo loans that carry

higher interest rates."  Yun emphasized the need to reinstate higher loan

limits in 42 states. "Just leaving excessive cash to sit in banks and not

work into the economy is a drag on the overall recovery," he said. "We need

a comprehensive approach to address housing issues - not additional

impediments."

"One trillion" is still a lot of money, and yesterday the news from Europe

easily overshadowed any U.S. data. Increasing the bailout fund to $1.4

trillion, for holders of Greek debt to write-off as much as 50% of their

face value, and for banks across the union to raise around $150 billion in

new capital moved to settle markets down.

A weak 7-yr auction (1.79% yield) here didn't help matters. Our 10-yr was

worse by 1.625 and shot up to a yield of 2.40%. Fortunately "everyone" was

in buying agency mortgage-backed securities, especially given the lower

prices, higher yields, favorable technicals in production coupons, a better

prepay outlook for higher coupons. Mortgage banker selling was once again

estimated at about $1.5 billion - not enough to satiate the demand

(especially with the Fed buying about $1 billion a day). So MBS prices did

well relative to Treasury prices, but were still worse by .75.

But there is no rest for the markets today. We have the ECI (Q3) and

Personal Income and Consumption for September, along with the final October

Michigan Consumer Sentiment reading. The Employment Cost Index was +.6%.

Personal Income was +.1% but Personal Spending was +.6%. That drops the

saving rate to the lowest since 2007! These aren't huge market-moving

numbers, but we find a slight improvement with the 10-yr down  to 2.36% and

early MBS prices better by .125-.250.

Boudreaux staggered home very late after another evening with his drinking

buddy, Thibodeaux.

He took off his shoes to avoid waking his wife, Clotile. He tiptoed as

quietly as he could toward the stairs leading to their upstairs bedroom, but

misjudged the bottom step. As he caught himself by grabbing the banister,

his body swung around and he landed heavily on his rump. A whiskey bottle in

each back pocket broke and made the landing especially painful.

Managing not to yell, Boudreaux sprung up, pulled down his pants, and looked

in the hall mirror to see that his butt cheeks were cut and bleeding. He

managed to  quietly find a full box of Band-Aids and began putting Band-Aids

best he could on each place he saw blood. He then hid the now almost empty

box and shuffled and stumbled his way to bed.

In the morning, Boudreaux woke up with searing pain in both his head and

butt and Clotile staring at him from across the room.

She said, "You were drunk again last night weren't you Boudreaux?"

Boudreaux said, "Mon chere, why you say such a mean ting?"

"Well," Clotile said, "it could be the open front door, it could be the

broken glass at the bottom of the stairs, it could be the drops of blood

trailing through the  house, it could be your bloodshot eyes, but mostly,

it's all those Band-Aids stuck on the downstairs mirror."

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 Fannie & Freddie & the FHFA, and the

changes they have in the hopper. 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=vlm56hiab.0.epg7qedab.zy6u9cdab.8

721&ts=S0696&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=vlm56hiab.0.v7uif6dab.zy6u9cdab.8

721&ts=S0696&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=vlm56hiab.0.fpg7qedab.zy6u9cdab.8

721&ts=S0696&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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