At this week's MBA conference in Chicago I have noticed conference
participants doing their very best to look very busy, even when standing in
a lobby, by staring at blackberry screens and squinting at name tags. There
is no indication that mortgage bankers, thankfully, will be participating in
races with artillery, worth two minutes to see just how zany British Sailors
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108059573951&s=8721&e=001wFLmBC
EsF-OTRplKLMMPoMz8yiGEMTHhvRMrowGgdGI85Qm6QyMYQsewZ8ZLCqGwiJDjXGS1MRYI1f7jBn
mA83WT02euWfgQEvHkXND3eoFJf2gkm8PD8hJY0eEX1wz1t0yAkgZTCHbYSfdgOThdXw==]
are. Don't try this at home with the kids.
While the data last week seemed to ease fears of the US economy slipping
back into a recession, European concerns remain paramount and all eyes will
be on developments coming out of meetings over the weekend and this week on
the handling of Greece's debt problems. But face it: this issue is going to
be with us for a long time.
The Treasury/bond market is closed today - so anyone sending out a rate
sheet will price "accordingly" (read: conservatively) since they have no MBS
prices in the U.S. upon which to base their rates.
Friday's positive employment (or at least not too negative) report capped
off a string of better-than-expected economic data, sending 10-year
Treasuries to the highest yield close in three weeks. It appears that we're
not charging back into a recession, but on the other hands the economy is
not doing well enough to push rates too high. Mortgage prices should be
helped with the Fed's new purchase plan, relative to Treasury prices, but
many, including Paul Jacob of Banc of Manhattan, suggest that bonds are
linked pretty closely to stock market performance at this point. "So we can
fuss and fume about the economy and the Fed - but if the Dow goes to 12,000
we're looking at higher yields, and at Dow 10,000 the rally's back on -
period."
Prepayment speeds came out last week, and they showed a big increase. Every
loan officer across the nation can tell you why: the reduction of
conforming loan limits starting October 1. September was the last month
where some of these high loan size borrowers, whose loans would no longer be
considered conforming, could have refinanced back into an agency loan. I am
sure that low rates figure in somewhere, but rates have been pretty good for
quite some time. And new borrowers seem to be the only ones who can have
their loans approved under recent guideline changes, so the newer loans are
the ones reaping the benefits.
Rates are staying low, and many believe will go lower still, given the state
of the economy. But as mortgage rates have improved, investors have
increasingly become concerned about these jumps in prepayments on lower
coupon, recently originated mortgages. However, due to the increase in
annual FHA insurance premiums, these concerns have predominantly been
restricted to Fannie and Freddie MBS. But what about prepayments on FHA & VA
loans impacting Ginnie Mae securities? A look at rate sheets show that the
FHA rate being offered by originators is now 25-50 basis points lower than
the conventional rate. The increase in annual insurance premiums only
impacts FHA prepays. Prepayments on non-FHA loans are likely to be faster
than speeds at the end of last year. Analysts point out that the impact of
the net tangible benefit test fades as the loan seasons, and that in fact
the most recent HUD outlook report showed that FHA-to-FHA refinancing
applications jumped by 70% and that delinquencies on 2009-2010 vintage
Ginnies have been increasing over the last couple of months.
All of this adds up to many investors believing that FHA & VA loans will
start to prepay at a faster rate. Uh oh.
In a related e-mail from a veteran loan agent: "I was able to provide great
deals to my FHA clients on the streamline program even with the 5% rule.
Let's face it:
if you don't have at least a 5% savings, it is not worth the cost to refi.
Too many lenders refi loans that really don't make sense to refi. The old
rule of thumb was that you must recoup the cost with savings within 2 years,
and I don't earn more than 1-1.5 points on a loan. I was able to lower their
rates and cover all the closing costs. But the killer is the new PMI. Now,
it is impossible to streamline.
In my opinion, they should go back to the lower PMI or at least on the
streamline redo at the same PMI rate as the original loan - that will save
borrowers a lot of money. Where are all these people in the CFPB that are
supposed to be watching out for the consumer? They are busy redoing forms."
Is delinquency in the eyes of the beholder? Not only are credit unions
reviewing their fee structure, hoping to pick off depositors & clients from
the big banks who are raising their fees, but now NCUA will review the way
it asks credit unions to track modified mortgages after some credit unions
complained the current policy almost makes foreclosing the troubled loans
the more practical option. In other words, "Do modified payments mean the
loan is current?" NCUA
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108059573951&s=8721&e=001wFLmBC
EsF-Pin985SSmYy7BmC1715dnrg12Ez3tcHi3HP3mnOsXR6Od_mAX4s-Ftn0VybrSmZOSIYj7uOq
depHUDzL5FDtdtSRJw3LhiVkWq_FOe3wwZR7IsDN6NB3-qLuD01JdnegNBmOi4XxR9L5A3vXbdv9
TaEOOtQU51810Moy2xCblisxu6YOUSHmzZuxRRNiCmt8A=].
We've all learned how long it can take for a bill to pass Congress and be
signed by the president. A bill has been introduced to allow struggling
homeowners to withdraw funds from their retirement accounts tax-free to make
mortgage payments.
The Home Act (that name's never been used?) would allow borrowers to
withdraw up to $50,000 from a retirement account or one-half of the current
value of that account, whichever is smaller. The limit is a lifetime cap,
and borrowers would be able to make multiple withdrawals until they reach
the cap; the money must be used to pay on their mortgage within 120 days of
withdrawal.
The MBA is among the industry groups calling on Congress to "do no harm" to
the fragile housing market. It is closely watching the deficit-reduction
super committee, which has targeted homeownership tax breaks such as the
mortgage interest deduction and the capital gains exemption, Bloomberg
reports. Moreover, the MBA continues to oppose efforts by regulators to
impose minimum standards for mortgage borrowers, such as a 20% down payment,
out of concern that such a move would not lower default rates but would
prevent many home buyers from obtaining loans.
Did the folks at Fannie know about "robo-signing" eight years ago? It is
alleged that it knew about allegations of improper foreclosure practices by
law firms in
2003 but did not act to stop them. An unnamed shareholder warned Fannie Mae
of alleged foreclosure abuses in 2003, the inspector general for the agency
that regulates Fannie said in this report
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108059573951&s=8721&e=001wFLmBC
EsF-M_4fpKgPnXo4ASCt6OzXbKsBdQO9o6V7u8QNI9NPsTEmh2GDaej74CAygawvIpqULn9Crqt4
Zl0JSyBA7R80NVN5aYXiPnErwT9OAQnrOMzgw4GynEpQEJ0tPbKjgG8NE0dql6oWDtXLx_Fx9Iwc
IoJ8r9vADf3eM6XHJH2hAQ7PJPBshJQ8uHp4UTa6CZ3R01seUO7kzDV9eyQxDPjqXtENxHCJH-Fx
kCss2LddHTFRjLuk44m6M0lBoxiPGswVU=].
There are indeed new mortgage banks being formed. Bexil Corporation has
agreed with the John Robbins Group to develop Bexil American Mortgage Inc.,
a new mortgage origination company that will focus on the wholesale and
retail market. Many folks know Mr.
Robbins from his days as CEO of American Mortgage Network and past Chairman
of the Mortgage Bankers Association. In the PR piece John Robbins, now
president of Bexil American Mortgage, said, "This is a perfect time to build
a new nationwide mortgage bank. I have always felt real opportunity is born
in the vacuum created by the bottom of a cycle. While many lenders are busy
dealing with problems arising from a deep housing slump, we have the
opportunity to create a nimble, efficient company not burdened with legacy
loan repurchase issues."
If you ever want to see what the Fed is up to with its new program of buying
more mortgage-backed securities, go to: WeBuyMBS's
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108059573951&s=8721&e=001wFLmBC
EsF-MKIR06Uu59BTHkMp0CY3uK4gdgif3KgDJud3uAaxWlHFBB-til_TBL1cPmIVZAf_N1tqIbUV
FFYd_LleTvUQ_eEiHNQLNZZ4edVUYaKSWiecDoTN9KMNTMmlrrwpTIuIg=].
Friday's bank closures only had two on the roster: in Minnesota the
RiverBank's depositors now see Central Bank on their statements. And down in
Missouri Sun Security Bank wasn't secure enough and is now part of Great
Southern Bank as part of the agreement.
Fifth Third got the word out to clients that for conventional loans, "Fannie
Mae
(DU) loans with an LTV > 80% now only require a 3% minimum borrower
contribution from the borrower's own funds for 1 unit primary residences
only. (High balance product not permitted, and MI requirements must be met
of course.) Freddie Mac (LP) loans will continue to require a 5% minimum
borrower contribution from the borrower's own funds for mortgages with an
LTV > 80%.
Things quiet down this week, economic news-wise. Today's a holiday for many,
certainly for bonds in the US. Tomorrow we'll have the FOMC minutes,
Wednesday the MBA app numbers. Thursday things "hot up" a little with
Jobless Claims and some trade balance numbers. Friday we have Retail Sales
for September, import & export prices, and a University of Michigan
Sentiment number. Really, aside from the FOMC minutes and Retail Sales, it
is a pretty ho-hum week.
An eye witness account from New York City, on a cold day in December, some
years
ago: A little boy, about 10-years-old, was standing before a shoe store on
the roadway, barefooted, peering through the window, and shivering with
cold.
A lady approached the young boy and said, "My, but you're in such deep
thought staring in that window!"
"I was asking God to give me a pair of shoes," was the boy's reply.
The lady took him by the hand, went into the store, and asked the clerk to
get half a dozen pairs of socks for the boy. She then asked if he could give
her a basin of water and a towel. He quickly brought them to her.
She took the little fellow to the back part of the store and, removing her
gloves, knelt down, washed his little feet, and dried them with the towel.
By this time, the clerk had returned with the socks. Placing a pair upon the
boy's feet, she purchased him a pair of shoes.
She tied up the remaining pairs of socks and gave them to him. She patted
him on the head and said, "No doubt, you will be more comfortable now."
As she turned to go, the astonished kid caught her by the hand, and looking
up into her face, with tears in his eyes, asked her, "Are you God's wife?"
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://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=4vt5x5hab.0.epg7qedab.zy6u9cdab.8
721&ts=S0684&p=http%3A%2F%2Fwww.mortgagenewsdaily.com%2Fchannels%2Fpipelinep
ress%2Fdefault.aspx]
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=4vt5x5hab.0.v7uif6dab.zy6u9cdab.8
721&ts=S0684&p=http%3A%2F%2Fwww.thebasispoint.com%2Fcategory%2Fdaily-basis].
For archived commentaries, go to
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=4vt5x5hab.0.fpg7qedab.zy6u9cdab.8
721&ts=S0684&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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