New Reverse Mortgage Program for Correspondents; Caliber's non-agency Rollout

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How's it going with "private money" and mortgage-backed securities? Not so hot. The creation of MBS is down, as one would expect, and of course cash purchases don't create MBS, and in fact retire them. Cash deals account for 29% of all sales, according to Bloomberg. Retiring baby boomers are choosing to own homes outright, as opposed to having a mortgage. Historically that number has been closer to 20%, but heck, given the current paperwork and underwriting burden, why would anyone go through the mortgage process if they didn't have to?

The reverse mortgage program - specifically the reverse for purchase and the line of credit for long-term financial planning objectives - is highly under-utilized. More and more traditional lenders are adding this product to not only help their customers, but to retain and attract top Loan Officers and to decrease the cost per loan to originate. As one of the largest reverse mortgage players in the industry - RMS can help banks, mortgage bankers and credit unions launch this program through their expertise in training, marketing assistance, and ongoing support.

Speaking of reverse mortgages, Reverse Mortgage Daily reports that "Reverse mortgage stakeholders are working together to delay the impact of Massachusetts legislation that will require face-to-face counseling for some reverse mortgage borrowers beginning August 1, and could deter lenders from conducting business in the state. During 2010, an amendment to a bill was passed into law that included the mandatory provision for certain low income seniors. Since then, the industry has worked toward postponing the mandate-succeeding in that effort twice. It is now scheduled to take effect August 1, following the end of the current fiscal year in Massachusetts. While the face to face counseling would be required only of those deemed qualifying as low income, lenders have said one of two outcomes would take place as a result of the mandate: either all borrowers in Massachusetts would need to receive the counseling in person or lenders would cease lending in the state. 'There are housebound seniors, transportation issues, language issues and a host of restrictions,' says George Downey, founder of Harbor Mortgage Solutions in Braintree, Mass., noting a past brief face to face counseling mandate in Massachusetts that brought wait times for borrowers to two to four months. 'The bottom line is it effectively will shut down reverse mortgage lending as we have known it in Massachusetts.'"

While the issue is pressing currently in Massachusetts, it could have implications for other states, like California, that have also seen legislation introduced-though not passed-including similar requirements. Currently, North Carolina has mandatory face-to-face counseling, but also has some state funding available to help agencies bear the costs involved.

Let's keep going with some specific product, investor, lender, vendor news. I don't know how folks keep up with all this!

The WSJ reports that Wells Fargo is "overhauling its offerings of home-equity lines of credit so that most new customers will be required to pay principal and interest over the life of the loan, a significant shift by the nation's largest home-equity lender. By restructuring the product, Wells eliminates the prospect of future payment-shock issues. Wells says that it will continue to offer interest-only HELOCs only for customers with significant assets. While the vast majority of homeowners today take out first-lien mortgages that are fully amortizing, most HELOCs allow borrowers to make only interest payments typically for 10 years."

Citibank Correspondent Lending has updated general credit policies including pooled funds and calculating rental income. Loan specific, FHA fixed rate transactions regarding rebuttable presumptions and safe harbor policies have been updated as well. Contact your account executive for the most recent bulletin enhancements to Citibank products.
Caliber Home Loans Inc. has announced the launch of its new Non-Agency Mortgage Program which adds four new products to the company's product line-up. Caliber's new Non-Agency Mortgage Program focuses on the needs of four types of borrowers. It includes Caliber's "Fresh Start" Program (a credit re-establishment program is for borrowers who may have experienced a credit event, but cannot find a program in the marketplace that meets their needs as they re-establish a strong credit history), a Foreign Nationals program that offers greater flexibility to qualified borrowers who are not citizens of the United States and whose mortgage needs are not being met by the market's current offerings, a Non-Warrantable Condos program for borrowers who currently have limited options because they are looking to finance condos in projects that are not currently eligible for loans backed by the government sponsored agencies, and a Non-Agency alternative that offers expanded guidelines and qualifying considerations for asset depletion to eligible, qualified borrowers, including expanded debt-to-income ratios, an interest-only option and no prepayment penalties.

 Franklin American's wholesale channel alerted brokers to the ECOA counteroffer clause. "The Equal Credit Opportunity Act (ECOA) allows financial institutions to make counteroffers to the applicant when original terms requested would result in an adverse action. Notification of the counteroffer is required within thirty (30) days of a completed application (Wholesale utilizes the underwriting received date to start the 30 day clock) in which underwriting has received all necessary documentation to evaluate the application for the amount and type of credit requested. This is the same notification requirement for a credit decision made on a completed application. Examples of counteroffers may include: (1) a debt-to-income (DTI) ratio that exceeds agency guidelines and FAMC counters with lowering the rate to reduce the DTI; (2) the appraised value is too low and FAMC counters to reduce the loan amount; or (3) if the applicant cannot meet loan program criteria, then FAMC may counter with an alternative loan program (a new loan number is required if switching loan types). NOTE: Counteroffers may include adding a borrower to qualify, but removing a borrower is not an acceptable counteroffer. If the applicant does not accept or respond to the counteroffer, the applicant must be provided an adverse action (notice) based on the original loan terms requested. 

AM Tracking Quote
FNMA 4.0% 105.51 now -15 bps

09:31 -15
Open 105.66

Should you Lock or Float? Contact me for Lock Advice! 

Turning to the Rate Market Report:

 

Treasuries and MBSs opened weaker this morning and early activity in stock index futures also weaker. Setting up for the ECB on Thursday and May employment on Friday; markets adjusting positions going into what is likely to be a busy Thursday and Friday. Thursday the ECB is widely expected to announce that it will lower interest rates and probably a bond buying program. The EU economies, except Germany and France, are struggling but the big concern is the region is moving toward deflation; Mario Draghi has made that his major fear. Deflation in the region will further reduce any economic growth potential. Markets believing Draghi will lower the 18-nation currency bloc’s official rate toward zero and take the deposit rate negative for the first time. While the central bank’s lending survey showed conditions for new loans stabilized in the first quarter, lending to companies and households has been contracting for almost two years.

Euro-area inflation slowed in May more than economists forecast, cranking up pressure on the ECB to deploy a range of measures to kindle prices and drive growth. The rate fell to 0.5% from 0.7% in April, the European Union’s statistics office in Luxembourg said today. The median forecast in a Bloomberg News survey was for a decline to 0.6%. The euro-area jobless rate fell to 11.7 percent in April from 11.8 percent a month earlier, according to Eurostat. Economists had forecast an unemployment rate of 11.8 percent, according to a Bloomberg News survey.

No improvement in China’s purchasing mgrs. index. SBC Holdings Plc and Markit Economics reported China’s purchasing mgrs. index at 49.4 in May down from 49.7 in April. Similar to the ISM manufacturing and service sector indexes, a reading lower than 50 indicates contraction.

The May employment report on Friday is expected to show NFP job growth at +213K and private job growth +215K, tomorrow ADP will report its private jobs data with estimates at +210K. The ADP report, pending how it is reported, many times causes analysts to revise the BLS outlook. Based the present forecasts, if they are reported as estimates suggest job growth in May will be less than April improvements. In April NFP jobs from BLS were +288K and private jobs were +273K. May unemployment is thought to have declined to 6.3% from 6.4% in April. The unemployment rate is largely ignored these days as a reliable indicator of employment; more are simply dropping out of the work force for various reasons (retirement, many just giving up looking), if a person surveyed says he/she has not looked for a job in the last month, he/she becomes invisible as far as the BLS is concerned. What continues to amaze though, is how much the Fed and media continue to make out of the unemployment percentage.

At 9:30 the DJIA opened -34, NASDAQ -12, S&P -5; 10 yr note 2.56% +3 bp and 30 yr MBS price -17 bp from yesterday’s 24 bp decline.

At 10:00 April factory orders were expected to have increased 0.5%; as reported orders increased 0.7% and  March orders were revised from +1.1% to +1.5%.

It never hurts to remind; the US economy is tied directly to global economies, there is no such thing in the world today of an independent economy. The US growth is tied to how China, Europe, and emerging markets are doing. Our economy can only grow to a limited degree if Europe and China are slowing; China is slowing to about a 7.0% growth rate from 14% a couple of years ago, Europe’s growth is about to go negative and deflation is a real possibility, reducing any growth potential. Meanwhile the US stock indexes continue to make new all-time highs with Q1 GDP -1.0%. Q2 is expected to be positive and economists (those that have about a 35% rate of success on forecasts) continue to expect US growth at 3.0% to 3.5% this year. That will not happen—period!

It is unlikely that the interest rate markets will improve much from present levels this morning unless the stock market comes under severe pressure, and that is unlikely also. Interest rates fell faster than the fundamentals suggest without more soft economic data and that won’t happen unless key reports indicate slowing. The magnitude of the fall in rates was driven by heavy short-covering from investors and traders that were betting on rates increasing. Those big positions have been lessened now. To move rates lower it will take weakening economic data or some global event that drives investors to safety. For the moment forget the Ukraine/Russia situation; while still a hot button, there is not much fear at the moment over what may occur.

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