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
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108367847797&s=8721&e=0010-QDVS
RaD-3w6UB78mFKTezf07o-ZugF2CzCCaFo0Dspl2cdk-ConvSMrIg5bJy3n3Z7TChbcLUwOp2U8S
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:
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://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]
[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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