December 8: Mortgage Ops job; Lending to borrowers with negative equity: spotlight on the FHA's Negative Equity Program

If you made a Christmas wreath out of $100 bills would you have Areath-a

Franklins?

I have been retained by a very well-capitalized mortgage bank to assist in

its search for aSenior Regional Operations Manager in Sacramento, CA. It is

a national lender with a portfolio lending appetite - company-wide

production is in excess of $5 billion through its wholesale, correspondent,

retail, and direct lending channels. The ideal candidate will provide

"leadership of the continued growth, development, efficiency, and quality of

the regional operations center to support all wholesale and correspondent

operations out of assigned region, implement operational strategy and

planning execution in order to achieve operational business goals, and

should have a high core competency of understanding and practical applied

knowledge of underwriting, closing, funding, and overall wholesale and

correspondent operations processes and procedures. Experience managing a

mortgage operations center, national strategic leadership experience

preferred." Please send resumes to me at rchrisman@robchrisman.com

[mailto:rchrisman@robchrisman.com].

The Federal Reserve, the FDIC, and the OCC want your input on some proposed

rulemaking

(NPR) that focuses on "the agencies' market risk capital rules for banking

organizations with significant trading activities. The amended NPR includes

alternative standards of creditworthiness to be used in place of credit

ratings to determine the capital requirements for certain debt and

securitization positions covered by the market  risk capital rules. The

proposed creditworthiness standards include the use of country risk

classifications published by the Organization for Economic Cooperation and

Development for sovereign positions, company-specific financial information

and stock market volatility for corporate debt positions, and a supervisory

formula for securitization positions." Any time one combines Basel III with

Dodd-Frank and several government agencies, it can become a little muddled:

FDICPressRelease

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108938344683&s=8721&e=001WoFjAI

DWC0w7x2aOrtLJgXztDOyVaUUVBs9gbq0rkav7JDNnR9gGf5oBldH2JqJW_yEUl4T8IFdQADYYnC

zzQZs0HVIY3h_MOyF93uONyVYbLPCI6Z2AU4XTxeT8dZp-aQIYEAKmTi_Ew0sRyNaeedJqsFdrYh

QH].

Agencies are indeed trying to clarify their supervisory and enforcement

responsibilities for Federal Consumer Financial Laws. Remember (who can

forget) that Dodd-Frank provides the CFPB with exclusive supervisory and

primary enforcement authority over "Large Institutions," defined as

institutions with total assets exceeding $10 billion.

 The prudential regulators retain supervisory and enforcement authority over

their respective institutions falling under that threshold. But the devil is

in the details:

the Dodd-Frank Act does not specify how or when to calculate total assets

for purposes of applying the threshold. A copy of the joint statement is

available

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108938344683&s=8721&e=001WoFjAI

DWC0yGFE3Tse4Q0E-4gghk9g6aqKB7suq7m5VKzH6boO35wO1K4x8c10sGus74w0V4wtnT6OkvlJ

K1oLM2F2P90ppvzerxd5dH0H4FEC8VCXHnSpX6qEh6PsFrWRqHwF0QulzT-bzZjmCtbyHvcasxMg

aCFNkrSRJCb3MT3aHMiaFrBYvUvzNPQgLJ].

Lending to underwater borrowers, short sales, and foreclosures are a sign of

the  times. (When a borrower can come back after one of these is discussed

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==],

top right.) On November 14th the commentary discussed lending to a borrower

who owed $280k on a home worth $200k. Of course we have HARP, and, when the

AU engines kick in, HARP 2.0, but what about borrowers that aren't covered

under that? I continue to receive feedback. "I have run into this situation

several times as well. One suggestion I have had for clients is what I call

'equity borrowing' from a family relative. If all things are stable and

credit is good for this borrower, he may want to see if he can lower his

loan balance by having a relative take out a 2nd  mortgage on their property

and provide huge savings to the borrower. In this guy's case, dropping from

8% to 4.5% would save him a lot of money and he could certainly be able to

afford to pay the relative back, likely in a very rapid manner. It allows

the homeowner to take advantage of the low rates, keep their credit in tack,

and  honor their obligations. It does not work for everybody, but for some

it is a good solution."

And another: "To the AE in California who asked for advice regarding their

"good  client" who's made all their payments on time but owe $280k on a home

now worth  $200k, my advice would be keep making your payments. How is it

that so many people feel someone has to help a consumer who owes more than

their home is worth? What's next, do we the tax payers send everyone whose

retirement plan has lost value a check? If I get a loan to purchase

something and it turns out to have less value  than I expected do I simply

stop making payments and expect no consequences? Someone stop the insanity!

If I borrow x$ for whatever purpose, whether things work out or not, I pay

x$ back, with interest. Where were all these people's parents when  they

grew up? This entitlement mindset is unbelievable. Surely my dad wasn't the

only one who said no one owes you anything; you work for what you want. Earn

it.

 And you pay back what you borrow."

And lastly: There are a number of lenders that participate in FHA's Negative

Equity program. The FHA allows negative equity write downs, or 'short

refinance' where the lender agrees to write down at least 10% of the unpaid

principal balance. The program sunsets December 31, 2012.  FHA insured

loans, of course, are not eligible.

The HUD announcement can be found at HUDNegEq

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=lhsa5yiab.0.xqed5yiab.zy6u9cdab.8

721&ts=S0708&p=http%3A%2F%2Fwww.hud.gov%2Foffices%2Fadm%2Fhudclips%2Fletters

%2Fmortgagee%2Ffiles%2F10-23ml.pdf]

and a handy PowerPoint at HUDPP

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=lhsa5yiab.0.yqed5yiab.zy6u9cdab.8

721&ts=S0708&p=http%3A%2F%2Fwww.hud.gov%2Flocal%2Fnd%2Flibrary%2Ffhafaqs.pdf

].

A list of negative equity lenders can be found at HUDNeighborhoodWatch

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=lhsa5yiab.0.hygujqdab.zy6u9cdab.8

721&ts=S0708&p=https%3A%2F%2Fentp.hud.gov%2Fsfnw%2Fpublic%2F]

after clicking through some menu options. It is interesting to note that

Negative Equity loans do not affect the GNMA Seller/Servicer's compare

ratio, but layering additional risks (FHA minimum score is 500) may not be

advisable." (Thank you very much to Susan Kahler at kahler.susan@gmail.com

[mailto:kahler.susan@gmail.com] for this information.)

GMAC Bank (GMACB) Correspondent Funding Approved Correspondent Clients

please note that "effective December 1, 2011 GMACB implemented a new set of

adjustment caps on DU Refi Plus products. The previous cap was -1.75.  The

new caps are: for Primary Residence >80 LTV and Term <=20 years cap will be

+.250, for Primary Residence >80 LTV and Term >20 Years cap will be -.500,

for Primary Residence <=80 LTV or Second Home or Investment Properties the

cap will be -1.75."

Wells Fargo let its brokers know that a few days ago the USDA Rural

Development office announced an increase in the Upfront Guarantee Fee that

will be charged on Refinance transactions using the Guaranteed Rural Housing

program (which is also  known as the Single Family Housing Guaranteed loan,

Rural Development or Rural Housing). "The Upfront Guarantee Fee will

increase from 1% to 1.5%, effective Dec.

7, 2011. To support the fee increase, updates are needed to the Broker's

FirstR website and LPS. Because of the required updates, Wells Fargo will be

temporarily unable to accept Refinance Guaranteed Rural Housing loans after

Tuesday, Dec. 6,  2011. Purchase Guaranteed Rural Housing loans continue to

be accepted." Wells went

on: "According to the industry update from the national USDA Rural

Development office, the fee increase will generate more than $1.1 billion in

refinance funds available to eligible homeowners. Interest rates for these

loans continue to be low and the fee increase provides responsible

homeowners with an opportunity to refinance their existing mortgage for

lower monthly payments."

Franklin American clarified its stance on FHA loan limits. "The maximum

(ceiling) loan limits will increase from $625,500 back to $729,750 as well

as increase many county loan limits. For Case Numbers assigned before 11/18,

these loans are subject to the lower limits in effect during the time period

of 10/1-11/17 unless they meet criteria for certain exceptions. Case Numbers

Assigned 11/18-12/31: the loan limits that were in effect from effect from

1/1/11 through 9/30/11 as referenced in ML

2010-40 and reiterated in ML 2011-39 will apply. For Case Numbers assigned

in 2012, the loan limits that were in effect from January 1, 2011 through

September 30, 2011 as referenced in ML 2010-40 and reiterated in ML 2011-39

will apply, with the exception of six counties." And on 11/7 FAMC has

acknowledged the HARP/DU Refi Plus enhancements as announced by FHFA. We are

currently performing a risk analysis, and evaluating secondary marketing

opportunities in anticipation of the AUS update scheduled for March 2012.

Prices of mortgage-backed securities have been improving relative to

"risk-free"

 Treasury prices for the past few weeks, which also means that mortgage

rates have been coming down relative to Treasuries. Currently, the yield on

the current coupon Fannie 30-yr MBS is higher than blend of the 5-yr and

10-yr T-notes by 1.57%. This is .13% "tighter" than at Thanksgiving. Over

that same time frame, the Ginnie 30-yr current coupon is .14% tighter to 128

bps. Prepayments have been flat, and there  has been relatively little

supply of mortgages: originators just do not have any paper to sell now that

we've been at these mortgage rate levels for over a month.

We closed Wednesday with the 10-yr improving to 2.02% and MBS prices

improving as well by roughly .250.

Volatility could pick up a little tonight/tomorrow, however, given the

various EU headlines and the EU summit. Eurozone officials will likely agree

to loan EU150B  to the IMF via bilateral loans from Europe's central banks

(this sum is a bit smaller than some would have liked to see) but giving the

ESM a banking license is "off the table." In this country we've had Initial

Jobless Claims, reported at 381k down from 404k, a drop of 23k. That is some

good news for the economy. Later we have Wholesale Inventories and Sales for

October along the Treasury announcing details of next week's auctions of 3-

and 10-year notes and 30-year bonds - estimated unchanged at $66 billion. In

the early going we have the 10-yr at 2.07% and MBS prices worse by about

.125.

Overheard in a retirement community diner:

"My arms have gotten so weak I can hardly lift this cup of coffee," said

one.

"Yes, I know," said another. "My cataracts are so bad; I can't even see my

coffee."

"I couldn't even mark an "X" at election time, my hands are so crippled,"

volunteered a third.

"What? Speak up! What? I can't hear you!"

"I can't turn my head because of the arthritis in my neck," said a fourth,

to which several nodded weakly in agreement.

"My blood pressure pills make me so dizzy!" exclaimed another.

"I forget where I am, and where I'm going," said another.

"I guess that's the price we pay for getting old," winced an old man as he

slowly shook his head.

The others nodded in agreement.

"Well, count your Blessings," said a woman cheerfully. "Thank God we can all

still drive!"

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 discusses the time frames for borrowers returning to

A-paper status after a short sale or foreclosure. 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=lhsa5yiab.0.epg7qedab.zy6u9cdab.8

721&ts=S0708&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=lhsa5yiab.0.v7uif6dab.zy6u9cdab.8

721&ts=S0708&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=lhsa5yiab.0.fpg7qedab.zy6u9cdab.8

721&ts=S0708&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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