Market Snapshot 3/21/2012

Take advantage of low mortgage rates while you can! Ask us about the benefits of refinancing today! Apply @ http://globalhomefinance.com/apply.php !

A better open today in the US bond and mortgage markets. Yesterday the 10 yr note ran to 2.40%, held and found a little support; last Oct. the 10 increased to 2.40% where it reversed and moved lower. As we have noted, the 10 yr from a technical perspective was oversold and due for a retracement. We don’t look for much of a rebound however, unlike last October when Europe’s debt crisis was boiling and the US economic outlook was murky at best this time the rate increases are driven by a different set of fundamentals.

The economic outlook has improved since last October, inflation fears have edged a little higher and the Fed is unlikely to increase the purchase of mortgage-backed securities (no additional QE is anticipated now). The Fed is however continuing to buy MBSs but not at an increased pace than what it is doing now. While Europe is still facing huge decisions within the EU to reduce spending in a number of countries in an effort to increase revenues and fend off defaults, at the moment markets have put Europe on the back burner. Presently the US bond market is adjusting to the better economic outlook, investors are bailing on low fixed rate investments, unwinding the huge safety trade that drove the 10 yr to lows not seen since prior to WW II. Interest rates are on the increase, although we continue to believe rates will not increase much. The definition of how much of an increase depends on what ones outlook is, but when seen in historical perspective rates will remain low.

Mortgage applications decreased 7.4% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 16, 2012. The Refinance Index decreased 9.3% from the previous week. The seasonally adjusted Purchase Index decreased 1.0% from one week earlier. The unadjusted Purchase Index was 1.9% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 2.79%. The four week moving average is up 3.25% for the Purchase Index, while this average is down 4.31% for the Refinance Index. The refinance share of mortgage activity decreased to 73.4% of total applications, the lowest since July 2011, from 75.1% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.6% from 5.8% of total applications from the previous week. The average loan size of all loans for home purchase in the US was $225,463 in February 2012, up from $216,888 in January. The average loan size for a refinance was $222,048, down from $227,563 in January. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.19% from 4.06%, with points increasing to 0.47 from 0.43 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) increased to 4.49% from 4.39%, with points decreasing to 0.38 from 0.39 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.93% from 3.82%, with points decreasing to 0.48 from 0.55 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages increased to 3.47% from 3.36%, with points increasing to 0.40 from 0.34 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs increased to 2.90% from 2.81 percent, with points increasing to 0.44 from 0.37 (including the origination fee) for 80% loans.

At 9:30 the DJIA opened generally unchanged; the 10 yr note rate at 2.32% -4 bp and mortgage prices +8/32 (.25 bp).

The only data today at 10:00 Feb existing home sales were expected to be up 0.7% frm January. As reported sales declined 0.9% to 4.59 mil (annualized) frm 4.63 mil in Jan; January sales were revised higher, from +4.3% to +5.7%. Based on sales pace there is a 6.4 month supply, the median sales price was $156,000 +0.3% yr/yr. 34% of sales were distressed sales. No significant reaction to the report in either equity markets or the bond market.

Bernanke and Geithner are testifying at the House Oversight Committee on the European debt crisis. Bernanke saying that US banks are not exposed, Geithner saying there is a huge amount of work left to do. Likely no market reaction to their comments or testimony.

We are finally getting the rebound we have been expecting; after the 10 yr held at 2.40% yesterday the 10 yr has fallen to 2.31% at 10:05 this morning; mortgage prices at 10:05 +10/32 (.31 bp) +.06 bp frm 9:30. Use this improvement as an opportunity to lock in critical loans; there is the potential to take the 10 yr back to 2.25% but it will not change the overall direction in the rates, rate markets are bearish and will continue to be so.

Market Snapshot 3/13/2012

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ADVICE:  For loans being locked for 15 - 30 days, we suggest…(more)

Feb retail sales released at 8:30 was better than expected. Estimates were an increase of 1.0%, as reported +1.1%; excluding auto sales markets were looking for an increase of 0.7%, as reported +0.9%. January retail sales were revised from +0.4% to +0.6%; excluding auto sales from +0.7% to +1.1%. The initial reaction pushed the 10 yr note yield to 2.07% and MBS prices down 6/32 (.18 bp), but by 9:00 both treasuries and mortgage prices were off their lows, MBS price on 30 yr fixed down only 1/32 (.03 bp). Retail was the highest in five months with 11 of 13 industry groups showing increases in demand.

US stock indexes are stronger this morning on the solid retail sales data; at 9:30 the DJIA opened +44, NASDAQ +20 and S&P +7. 10 yr note -8/32 at 2.07% +4 bp and MBS 30 yr price -3/32 (.09 bp). Better US retail sales and gains in Germany investor confidence pushing equity prices higher. German investor confidence jumped to a 21-month high in March. The index of investor and analyst expectations, which aims to predict economic developments six months in advance, advanced to 22.3 from 5.4 in February. That’s the fourth straight increase and the highest reading since June 2010. Economists forecast a gain to 10.

At 10:00 Jan business inventories were thought to be up 0.6%; as reported inventories increased 0.7%. Final sales up 0.4% suggesting businesses are stock piling inventories; the growth in inventories is the largest since last October.

1:00 this afternoon brings Treasury back to the borrowing window with $21B of 10 yr notes to be auctioned. Yesterday’s 3 yr seemed OK to me but the consensus thought it didn’t meet expectations. Normally the farther out the curve investors are less aggressive, however at 2.07% the 10 may be attractive since it has held at 2.10% five times since mid-January. Today’s auction is in the face of the FOMC policy statement at 2:15.

The FOMC policy statement (2:15) will likely reiterate the Fed will continue to keep the FF at present levels through the end of 2014 even with employment improving and consumer confidence improving. Bernanke, in his semiannual monetary policy report to Congress, said maintaining monetary stimulus is warranted even with employment gains and a lower jobless rate. While there are “some positive developments in the labor market,” Bernanke told lawmakers on March 1, “the pace of expansion has been uneven.” The rise in gasoline prices “is likely to push up inflation temporarily while reducing consumers’ purchasing power.” Curious that he talked about gasoline prices increasing inflation since the Fed generally discounts food and energy prices when judging inflation.

There is still somewhat of a belief that the Fed will do another easing move; while not close to a consensus some still hold that the Fed will increase purchases of MBSs and treasuries to keep long term rates at these low levels. We do not believe the Fed is ready to launch another buying spree, while it will remain on the radar any potential easing isn’t likely as long as the economy is improving. The idea of another easing move comes from comments Bernanke has made more than a few times that the economic recovery has been “uneven”. Keeping the FF rate at 0.25% for another almost two years is sufficient to keep interest rates from increasing much, it fuels demand for long term rates.

March 13: Mortgage jobs; companies acquiring, entering into agreements; reps & warrants matter

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Everyone wants feedback these days: the CFPB, Burger King (I got a free $3

chicken sandwich after spending 30 minutes filling out a survey!),

servicers, even the MBA.

It has come up with a snazzy new report, and the MBA wants feedback from

users of the product to improve it. The MBA's new report has state-level on

retail/consumer direct applications "near real-time data on how your

applications compare with the totals for your area. Do you wonder whether

you are getting your share of purchase applications or how fast FHA apps are

growing?  Do you wonder how aggressive your competition is in pushing

15-year refi's? (It) gives you the ability to benchmark your applications

volumes by purpose, loan size, term, FHA share and other characteristics.

 You will be able to quickly see how a particular state is growing relative

to nearby states and the rest of the country." If you're not an originator,

though, don't

bother: this report is being made available only to MBA members who

originate loans.

The prices are tiered based on time and region: write to the MBA to see a

sample  report and for more info at MBAResearch@mortgagebankers.org

[mailto:MBAResearch@mortgagebankers.org].

On the job front, Mission Hills Mortgage Bankers is seeking underwriters for

its  Orange County headquarters. MHMB has been around 42 years (!) and is a

retail mortgage originator and is currently in the process of being acquired

by Pacific Trust Bank, and future plans call for aggressive expansion

throughout the western U.S. This position would be responsible for the

regional underwriting of loans from several production offices.  Experience

requirements include FHA Direct Endorsement and VA SAR certifications and a

minimum of five years underwriting history. Interested parties may forward

resumes to hr@mhmb.com [mailto:hr@mhmb.com].

Speaking of California acquisitions, Union Bank, a wholly owned subsidiary

of The Bank of Tokyo-Mitsubishi UFJ, which is a subsidiary of Mitsubishi UFJ

Financial Group, and California's fourth biggest bank by deposits, is buying

the parent of  the state's 20th biggest deposit holder, Pacific Capital

Bancorp. Pacific Capital owns Santa Barbara B&T, giving it some

representation on California's Central Coast.

(Got that straight?) Pacific Capital has $5.9 billion in assets and 47

branches,  compared with UnionBanCal's $90 billion in assets and 414

branches. (For deposits in California, BofA is #1 with 26%, Wells is #2 with

19%, Chase has about 7%, and Union Bank has 6%.)

I don't know if this acquisition will result in layoffs, especially on the

mortgage side of things, but that seems to be the trend. A close examination

of Friday's jobs numbers from the Bureau of Labor Statistics showed that

mortgage companies cut 3,200 full-time employees from their payrolls in

January. The total went from

265,300 in December to 262,100 positions in January. Overall, the number of

jobs  in the mortgage banking and broker sector fell nearly 4% from a year

ago, with some big chunks coming from MetLife and Bank of America.

GMAC's Northeast Correspondent Team told everyone far and wide that GMAC is

back  lending in Massachusetts. That is good news for the state's borrowers,

who all know that Fig Newtons were named after one of their towns, and for

GMAC, rumored  to be very carefully examining whether or not it wants to be

in the warehouse business.

And if Massachusetts' Barney Frank has his way, the FHFA's Edward DeMarco

would be replaced since he has been "too rigid" in his approach to

foreclosure prevention and should be replaced: IsFrankStillAround?

[http://r20.rs6.net/tn.jsp?et=1109516253173&s=8721&e=001NI9mFmSdtj-k9Ay0M-We

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EE3jmE9oXt_268GIWah9YbGla3vr1C8HajqZqWjVOA5StbIumRHpOLo9uU7YxtzktWidpZ01Pc9d

y93z4UqyTn4LbVdNpeR3uNVHBjcPRKFmcI3xmx3y8Q6MBBkJNGsn6rlR-2NGNrc=]

KB Home has announced that it has entered into an agreement with Nationstar

Mortgage, with Nationstar becoming KB's "preferred mortgage lender." Under

the agreement, Nationstar, headquartered in Texas and owned by Fortress,

will offer a wide array of financing options and mortgage loan products to

the KB's homebuyers. Nationstar has attracted some notice lately since it is

one of the largest non-bank mortgage servicers in the country with a

portfolio of approximately $107 billion: KB

[http://r20.rs6.net/tn.jsp?et=1109516253173&s=8721&e=001NI9mFmSdtj-QD0Mm6UAt

0uujaSq3gPJO24mcz2jnsmL5muBPaRmXppMVgy-y0Fi98hbJSTp7cWwYbyEFh00qImTGFQJpmQBF

lnzTRIuGqqmb6aBr6uegFvCHMe-6HZ7OGpyf0Ja-Bgeebp8oZ_uTtpxc0yiEHqtz].

Yesterday the commentary mentioned the RESPA-related case of Freeman vs.

Quicken  Loans, now under consideration by the Supreme Court. Although I do

not have a statement from Freeman, I do have one from Quicken Loans:

"Quicken Loans has never charged  unearned fees and never will.  The company

won this case on summary judgment in  Federal Court on undisputed evidence

that the fees Quicken Loans collected were, in fact, earned. The ruling in

favor of Quicken Loans was upheld on appeal by the U.S. Court of Appeals for

the Fifth Circuit. Quicken Loans, like all lenders, has and continues to

offer clients the option of 'buying down' their interest rate by paying loan

discount points.  This practice is a universal standard across the lending

industry and is in accordance with state and federal laws.  It was proven

the loan discount points collected were earned and resulted in a lower

interest rate for the borrowers."

Mortgage banking is mired in legal issues everywhere. Barclays Capital notes

that with the Countrywide settlement case now back in New York state court

and with some clarity on its progress, "we look at potential non-agency rep

and warranty related recoveries for other sponsors/originators. We estimate

that the overall non-agency market could see $44 billion of rep and warranty

related payouts. Of that amount,

$10 billion is already included in proposed or completed settlements. We

continue to think that larger originators/sponsors provide the greatest

opportunity for rep and warranty related payouts or repurchases, even

through collectively negotiated settlements.  On the other hand, many

smaller originators are already defunct or  do not have the resources to

make significant settlement payments to investors...

Bank of America and JPMorgan have by far, the largest exposure to loan-level

rep  and warranty related liabilities. While settlement recoveries or court

awards are likely to be lumpy, they can represent a considerable source of

cash flow for non-agency investors. In particular, deals that have

historically exhibited weak collateral  performance are likely to benefit

the most from rep and warranty settlements that are similar to the

Countrywide deal. Second-lien securitizations, where many of the losses have

already been realized, could be significant beneficiaries as well."

The Union Bank news points to the fact that banks, and central banks around

the world, have more cash and liquidity than they've ever had before.

Focusing on country's central banks, because of collective quantitative

easing, the balance sheets of the Fed, ECB, BOE, BOJ, Bundesbank, and others

are all at record levels. The total size of the 8 largest balance sheets

have almost tripled in the last 6 years from

$5.4 trillion to more than $15 trillion (and still growing). The result of

this build up in central bank reserves is that it artificially lowers rates

and makes  asset classes like fixed income securities, relatively

overvalued. One would hope that the low rate environment also provides

incentives for banks to take on riskier assets in the form of loans. And to

some degree this is taking place, although not as much as many would like,

but if one looks at the recent performance of different bank asset classes

(commercial and industrial loans, credit cards, mortgages, and so on - even

stocks) they're all doing pretty well return-wise - even though they're not

necessarily related! Economists believe that this unprecedented correlation

in returns is due to the availability of cheap money, and it is overriding

most microeconomic aspects of various industries.

For bankers, this presents a huge future risk: "Will this unwind?" At some

point  central banks have to pull trillions of dollars out of the economy,

both in terms of physical money and in terms of leverage. Smaller banks'

management needs to understand that until a global exit strategy is

articulated, volatility will remain high because of leverage, which also

means that risk management becomes more important than ever.

To sum things up, some smart folks out there think that credit is being

artificially supported (look at the Fed buying agency MBS's every day,

helping to keep prices  high and mortgage rates low) thus if given the

choice between quality assets at  low spreads and riskier assets at wider

spreads, the former is preferred but the latter is often chased to support

margin. Many asset classes and geographies are  performing at above zero

return levels only because of this liquidity support.

In addition, excess liquidity will keep commodities and equities well

supported

- asset classes that will also act as bellwethers when this reverses.

Yesterday was "much ado about nothing" as there was no real economic news in

the  U.S., the 3-yr T-note auction went off, Europe and Asia were pretty

quiet, and the Fed and the usual suspects were in buying agency

mortgage-backed securities.

 On the supply side, however, things seemed pretty quiet - perhaps locks are

slowing as the thrill of lower rates wears off and all the easy refi's are

done?

Today we've had some news with Retail Sales +1.1%, with a January revision

higher

- perhaps slightly better than expected (but a good chunk of the number was

due to sales at gasoline stations). This +1.1% was the highest jump since

September,  which is of mild interest. Later we'll have a $21 billion 10-yr

T-note auction at 1PM EST and the FOMC's statement release at 2:15PM EST -

don't look for anything from the Fed. In the early going the 10-yr is now up

to 2.06% and MBS prices are  worse about .125.

(Parental discretion advised.)

Mick, from Dublin, appeared on 'Who Wants to Be a Millionaire' and towards

the end of the program had already won 500,000 euros.

"You've done very well so far," said Chris Tarrant, the show's presenter,

"but for a million euros you've only got one life-line left, phone a friend.

Everything is riding on this question.  Will you go for it?"

"Sure," said Mick. "I'll have a go!"

"Which of the following birds does NOT build its own nest? A. Sparrow  B.

Thrush

  C. Magpie  D. Cuckoo

"I haven't got a  clue." said Mick, ''So I'll use last lifeline and phone my

friend Paddy back home in Dublin."

Mick called up his mate, and told him the circumstances and repeated the

question to him.

"Fookin hell, Mick!" cried Paddy. "Dat's simple - it's a cuckoo."

"Are you sure?"

"I'm fookin sure."

Mick hung up the phone and told Chris, "I'll go with cuckoo as my answer."

"Is that your final answer?" asked Chris.

"Dat it is."

There was a long, long pause and then the presenter screamed, "Cuckoo is the

correct answer!  Mick, you've won 1 million euros!"

The next night, Mick invited Paddy to their local pub to buy him a Guinness.

"Tell me, Paddy?  How in Heaven's name did you know it was da Cuckoo that

doesn't build its own nest?"

"Because he lives in a fookin clock!"

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 possible future roll of Freddie Mac and

Fannie Mae as the FHFA might model it. 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?t=v46efkjab.0.epg7qedab.zy6u9cdab.8721&ts=S0744&p

=http%3A%2F%2Fwww.mortgagenewsdaily.com%2Fchannels%2Fpipelinepress%2Fdefault

.aspx]

or www.TheBasisPoint.com/category/daily-basis

[http://r20.rs6.net/tn.jsp?t=v46efkjab.0.v7uif6dab.zy6u9cdab.8721&ts=S0744&p

=http%3A%2F%2Fwww.thebasispoint.com%2Fcategory%2Fdaily-basis].

For archived commentaries, go to

www.robchrisman.com

[http://r20.rs6.net/tn.jsp?t=v46efkjab.0.fpg7qedab.zy6u9cdab.8721&ts=S0744&p

=http%3A%2F%2Fwww.robchrisman.com%2F].

Copyright 2012 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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March 12: Mortgage jobs; a legal take on Fannie-BofA; RESPA in the Supreme Court; Freddie's performance

Wanna save money? Let our professionals show you the benefits of refinancing today! Apply http://globalhomefinance.com/apply.php !

Here's some good news for some: The Financial Times reports that, "The

Federal Reserve is this week expected to pave the way for a doubling of bank

dividends and share  buybacks when it unveils the results of stress tests on

the largest US financial groups. If Citigroup passes the test, as expected,

it will be in a position to pay more than a notional 1 cent a share dividend

for the first time since the financial crisis...Analysts expect JPMorgan

Chase, among the strongest of international banks, to pay more than 70 per

cent of its earnings in the form of dividends and share buybacks, close to

pre-2008 levels." Anecdotally, I was in a group a few weeks ago that John

Stumf of Wells Fargo addressed, and he was practically giddy about its

stock price and dividends...

And there is good news on the hiring front: a $2 billion Mortgage bank in

Northern California is looking for a SVP of Compliance. This position will

be responsible  for developing risk management policies and advising company

leadership of new and changing regulatory risks; developing and implementing

company's policies and procedures for compliance based on all federal

regulations and state laws , including Financial Reform, NMLS, SAFE Act,

AIR, MDIA and RESPA Reform; managing all federal, government, and/or state

applications for licensing, lending and/or brokering for company and

affiliates; and coordinating internal compliance review and monitoring

activities. Resumes should be sent to me at rchrisman@robchrisman.com

[mailto:rchrisman@robchrisman.com].

And in Southern California, JMAC Lending is looking for experienced

underwriters  and funders for its Irvine location. JMAC has been around for

over twenty years, and has expanded operations to include licensing in seven

states. For more information about the company, visit www.jmaclending.com

[http://r20.rs6.net/tn.jsp?et=1109506847027&s=8721&e=001Mxa3V8gbtUmDafto3RrH

yv9QHXqwmDe75ctXTas6sBkGGINjaFLZkpPlWfg_buSlusVjg7rBe9uGzqSfonWfTQb0EUReNpPF

2Hzp7WDnTrZjrI08XNtsaA==],

and resumes should be directed to career@jmaclending.com

[mailto:career@jmaclending.com].

Freddie Mac announced that it has posted a net income of $619 million for

the quarter ended December 31, 2011 and total comprehensive income of $1.5

billion. For the entire year of 2011 Freddie Mac had a net loss of $5.3

billion and comprehensive  income of $(1.2) billion compared to $(14.0)

billion and $0.3 in 2010. The shift from a net loss to a net gain in the

fourth quarter reflects lower derivative losses due to a smaller decline in

long-term interest rates and a decrease in the provision for credit losses

on single-family loans.  Freddie had a net worth deficit of $146 million at

the end of the quarter and will submit a request to the Treasury Department

for a draw in that amount.  This will be more than offset by a quarterly

dividend payment of $1.7 billion to Treasury on its holdings of Freddie Mac

Senior Preferred Stock.  With this draw Freddie Mac will have received $7.6

billion from Treasury  for 2011 and paid $6.5 billion in dividends. For

those playing along at home, since August 2008 Freddie Mac has drawn $72.3

billion from Treasury and paid dividends  of $16.5 billion.

Overall in 2011 Freddie financed 1,859,072 residential properties of which

320,753 were multi-family units, down from 2,115,302 mortgages in 2010. In

its release Freddie noted that the loans it acquired after 2008 accounted

for only 1% of its credit losses while loans originated between 2005 and

2008 represent 90% of those losses (with nearly a 9% delinquency rate).

Multifamily originations by FNMA and FHLMC are at record highs, indicating

that the rental market is indeed strong. Sales of properties totaled $3.8

billion in January, a 53% increase from a year earlier, with rates for this

type of product in the low 4% range.

(Turning to underwriting for a moment -most updates were posted in the

Saturday commentary - LO's are especially interested in the fact that Fannie

has recently  updated DU to include when a loan is over 75% LTV and the DTI

is greater than 45%, DU is now asking for 12 month reserves. In a split,

however, Freddie Mac has not  made this same change to LP. So one can expect

LO's to take advantage of this on a small number of loans if they can go to

both agencies.)

Fannie announced an initiative to make loan-level data for single-family MBS

accessible as a move towards transparency. The agency will start releasing

loan-level data beginning the first quarter of 2012 and will provide data

updates regularly. Obviously investors in agency MBS, and all MBS, want to

know what they're buying, and this  is another step in the direction of

restoring investor confidence. The first release of loan-level data files

for single-family MBS will be downloadable and published under the "New

Issues Statistics" tab in PoolTalk, which is a tool that retrieves

pool-level information and data on Fannie Mae securities. Concurring with

the release of the loan-level data will be new features on PoolTalk,

including the ability to view data on a specific pool and monitor data for

specific securities at a glance.

Daily issuance files, month statistics, and MBS-related documents will be

accessible through PoolTalk.

But the top 70 executives at F&F were told by the FHFA that their salaries

would  be limited to $500,000, and bonuses would be eliminated. The change

came after Congressional leaders ridiculed the high million-dollar salaries

of many executives at the two firms. No date has been set for when the pay

changes will go into effect.

Many believe that no member of Congress wants anyone related to government

to earn more than they do - maybe they should check out the Cal football

coach's salary of over $2 million.

The industry continues to ruminate on the Fannie-Bank of America rift.

Attorney Phil Stein writes, "Now, Fannie Mae is pressuring lender Bank of

America to cover losses incurred by insured home loans that have defaulted,

but on which the PMI company is refusing to pay.  Bank of America, to its

credit, is resisting these demands, perhaps weary (and wary) of making such

payments after having already entered into a multi-billion dollar settlement

with Fannie only a little more than one year ago."

Mr. Stein continues: "But the kudos to BofA end there.  It is notable to

those of us who regularly represent correspondents that BofA is not merely

refusing to repurchase additional loans from Fannie, but is doing so on the

grounds that there was no adequate reason for the PMI companies to fail to

pay out mortgage insurance when these loans defaulted.  This is consistent

with the stance that BofA took as early as its lawsuit against MGIC, but

BofA nevertheless routinely makes repurchase demands to correspondents based

on the mere fact that PMI has been rescinded (whether it has been rescinded

rightly or wrongly is of no particular concern to BofA in such cases). This

is yet another important instance of BofA taking public positions that are

directly contrary to its assertions when it makes buy-back demands on

correspondents. Correspondents can use this inconsistency to their distinct

advantage in contesting demands made by BofA.  It is also interesting,

incidentally, that Fannie has now claimed that  it cut off purchases from

BofA, rather than BofA deciding to stop selling to Fannie.

While they sort out who broke up with whom, let's hope that the

correspondents will be given a well-deserved respite from BofA's unfounded

buy-back demands." (If you'd like to follow this and other mortgage legal

issues, Phil's writings can be found at www.mortgagecrisiswatch.com

[http://r20.rs6.net/tn.jsp?et=1109506847027&s=8721&e=001Mxa3V8gbtUkXsEi4bwH7

1tGMTVFktqIqiqrXmt1DrYUQdYHeCvEAHGrJ067in5ueU9N7QGEfcXrJ8UqpYksoREFu42u59bU7

x5nrUfIPCKIRC84qeCdhd28j22iHXfbC].)

Legal issues are now a fact of life in mortgage banking and real estate. The

Supreme Court has heard oral arguments on whether or not splitting an

unearned fee violates the Real Estate Settlement Procedures Act (RESPA). The

case is Freeman v. Quicken Loans, and is intended to settle a dispute among

the federal circuit courts regarding the statutory interpretation of Section

8(b) of RESPA which prohibits giving or accepting "any portion, split, or

percentage" of any charge for settlement services "other than for services

actually performed." The issue in Freeman is whether Section

8(b) applies to an unearned fee charged by the loan originator. Quicken

Loans charged the borrower discount points which did not go to reduce the

borrower's interest rate, and the borrower claims the charges are unearned

and not for services actually performed. All agree that if the fees were

split with a third party, the arrangement would be illegal under RESPA. In

this instance, however, Quicken Loans did not split its fees with a third

party. Will the Supreme Court accept Quicken Loans' argument that if

Congress had intended to hold settlement service providers in violation of

the Act for charging an unearned fee, it would have clearly said so (as it

has done in other instances) or will the Court find that the charging of

unearned fees violates the Act whether those fees are split between two

parties or kept in their entirety by the lender? Stay tuned for June, when

the decision is expected.

Friday was a good day for MBS prices, prompting one veteran trader to note,

"Mortgages were harder to keep than a Lindsay Lohan court date." But it's

Monday again, which means we have a week of economic data to chew upon.

There is zip for today, tomorrow is Retail Sales, Business Inventories, and

an FOMC meeting adjournment (no change to overnight rates expected),

Wednesday is Import & Export Prices, Thursday the usual Jobless Claims but

also the Producer Price Index, Empire Manufacturing, and the Philly Fed

survey. Friday is the Consumer Price Index, Industrial Production  &

Capacity Utilization, and a University of Michigan survey. In the early

going, the U.S. 10-yr, which closed at 2.04% Friday, is coming in around

2.01% and MBS prices are about .125 better than Friday's close.

An Australian, an Irishman and an Englishman are in a bar. They're staring

at another man sitting on his own at a table in the corner.

He's so familiar, and not recognizing him is driving them mad.

They stare and stare, until suddenly the Irishman twigs: "Holy smokes, it's

Jesus!"

Sure enough, it is Jesus, nursing a pint.

Thrilled, they send him over a pint of Guinness, a pint of Fosters and a

pint of  bitter.

Jesus accepts the drinks, smiles over at the three men, and drinks the pints

slowly, one after another.

After he's finished the drinks, Jesus approaches the trio.

He reaches for the hand of the Irishman and shakes it, thanking him for the

Guinness.

When he lets go, the Irishman gives a cry of amazement: "My God! The

arthritis I've had for 30 years is gone. It's a miracle!"

Jesus then shakes the Aussie's hand, thanking him for the lager.

As he lets go, the man's eyes widen in shock. "Strewth mate, the bad back

I've had all my life is completely gone! It's A Miracle."

Jesus then approaches the Brit who says, "Back off, mate, I'm on disability

benefit."

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 possible future roll of Freddie Mac and

Fannie Mae as the FHFA might model it. 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?t=tj7f7jjab.0.epg7qedab.zy6u9cdab.8721&ts=S0744&p

=http%3A%2F%2Fwww.mortgagenewsdaily.com%2Fchannels%2Fpipelinepress%2Fdefault

.aspx]

 or www.TheBasisPoint.com/category/daily-basis

[http://r20.rs6.net/tn.jsp?t=tj7f7jjab.0.v7uif6dab.zy6u9cdab.8721&ts=S0744&p

=http%3A%2F%2Fwww.thebasispoint.com%2Fcategory%2Fdaily-basis].

For archived commentaries, go towww.robchrisman.com

[http://r20.rs6.net/tn.jsp?t=tj7f7jjab.0.fpg7qedab.zy6u9cdab.8721&ts=S0744&p

=http%3A%2F%2Fwww.robchrisman.com%2F].

Copyright 2012 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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