Mary
Clancy goes up to Father O'Grady after his Sunday morning service, and she's in
tears.
He
says, "So what's bothering you, Mary my dear?"
She
says, "Oh, Father, I've got terrible news. My husband passed away last
night."
The
priest says, "Oh, Mary, that's terrible. Tell me, Mary, did he have any
last requests?"
She
says, "That he did, Father."
The
priest says, "What did he ask, Mary?"
She
says, "He said, 'Please Mary, put down that damned gun...'"
Regarding
the darned time change Sunday, from Georgia Jim Bedsole writes, "Which is
why I continue to advocate that, if we are going to be forced to 'spring
forward,' that it should happen at 4PM on Friday, not 2AM on Sunday."
Something else that is springing is the "refinanceable population."
The big drop in interest rates has bumped up the refinanceable population to
6.7 million borrowers from 5.2 million last month, according to Black Knight Financial Services.
An additional 15 basis point drop in rates would add another 2.1 million borrowers.
This data is based on mid-February numbers, with a FHLMC 30 year rate of 3.65%.
Just another reason why 2016 might be a little better than expected. Now, if
borrowers actually remembered what their rate was...
A story
earlier in the week in the Wall Street Journal caught my eye. In 9/08, the
government took over Fannie and Freddie after investing $116 billion and $71.5
billion in them respectively. In exchange, the government initially took a 10%
dividend on bailout monies and since 2012, against stockholders wishes, has
been taking all profits. In 2015, Fannie earned $10.3 billion, Freddie $5.5
billion, dividend rates of 8.9% and 7.7% respectively, significantly less than
the 10% dividend. This is bad news for stockholders since it means the common
stock in both is worthless.
This
from an industry vet: "Fannie Mae just published DU Version 10.0
release notes. Multiple inquires made by multiple creditors? That will no
longer be viewed by DU as multiple inquiries! The use of 'Trended Credit Data'
would probably push DU toward 'Refer with Caution.' FNMA says a mortgage late
will no longer be viewed as a higher risk than any other late. DU 10.0 will
treat a DQ as a DQ. Late= Late - check out Appendix A in FNMA's release notes.
There's a few example of credit relaxation and a few examples of credit
tightening.
This Announcement
communicates the following updates to the Fannie Mae Selling Guide:
eliminated the continuity of obligation policy, clarified lender reporting
obligations related to a breach of compliance with laws, simplified the Selling
Guide to use consistent language as it relates to the types of losses for
which lenders must indemnify Fannie Mae, clarified when recourse is required on
HomeStyle Renovation mortgage loans, adopted a simpler definition of relocation
loans, and other miscellaneous updates. For a summary of key updates in this Selling
Guide Announcement, view the executive perspectives
video presented by Jude Landis, Vice President, Credit Policy, and/or
the executive overview
provided by Carlos Perez, Chief Credit Officer for Single-Family.
Fannie Mae has
created a centralized webpage that gives lenders easy access to
Spanish origination resources all in one place. Easily find Spanish versions of
many helpful loan origination documents, including the loan application, loan
estimate, verification forms, closing disclosure, mortgage, note and more.
Spanish and English versions are offered side-by-side on the page. Bookmark the page today
Freddie Mac's new Workout Settlements
website goes live on March 1.
This new interactive website guides Workout Prospector through the automated
settlement process from start to finish - from preparing a transaction for settlement,
to completing and monitoring the settlement, to making post-settlement
corrections. The new website also provides links to Freddie Mac training
opportunities, additional resources, and tips to help you avoid potential
roadblocks. Please note the reorganization did not involve a rewrite of
existing policies or requirements, or the introduction of new ones. Click here for
redirection to Freddie's interactive website.
Effective
for mortgages with settlement dates on or after March 28th, Freddie
Mac is removing the separate maximum LTV/TLTV/HLTV ratio requirements for Super
Conforming Mortgages. To reflect these changes, the Super Conforming Mortgages post-settlement delivery grid
has also been updated. Freddie Mac is also aligning the eligible
LTV/TLTV/HLTV ratio for no cash-out refinance transactions and purchase
transaction for mortgages secured by a 1-unit Investment Property.
Effective August 1st, 2016 is the prohibition of the sale of
Mortgages secured by a Condo Unit in a Condo Project or a property in a PUD
with a master or blanket insurance policy that combines insurance coverage for
numerous unaffiliated Condo Projects or PUDs.
On
or after March 7th, Wells Fargo is permitting borrowers
delayed financing (i.e., cash recoupment) for investment properties under its
Non-Conforming program. Effective April 4th, Wells is removing
several policy overlays for Conforming Loans and expanding its policy for
Non-Conforming Loans in order to align more closely with Fannie Mae cooperative
requirements. Also, Wells has a new
Streamlined Condominium Review allowing Sellers to have an additional
condominium review option for Non-Conforming Loans.
In
order to meet agency requirements that non-U.S. citizens are lawfully residing
in the United States, Wells is updating its requirements to include
residency documentation for all permanent resident alien borrowers on the Loan,
regardless of whether or not their income and/or assets are being used to
qualify. On or after March 7th for all permanent resident aliens, a
copy of the front and back of the green card must be included in the Loan file
on Conventional Conforming loans.
A while
back Wells Fargo removed its conventional Conforming policy overlay
requiring rent loss insurance for 1- to 4-unit investment properties, effective
March 7th, and adjusters for Super Conforming and High Balance ARM
Loans with LTVs/CLTVs greater than 75% (including HARP loans) changed. Its'
Best Effort and Mandatory rate sheets for ARM Loans will reflect
a separate adjuster for LTVs/CLTVs greater than 75% up to 90% and new
adjuster for LTVs/CLTVs greater than 90%.
Wells
Fargo has removed its overlay that requires a minimum of two comparables
from outside the subject project for condominiums under its Prior Approval High
Balance Conforming Loan Program. In order to simplify requirements for
documenting and calculating rental income for Non-Conforming Loans, Wells is
making several changes, including, but not limited to: aligning income
stability, property management experience, and documentation requirements to a
two-year timeframe. Eliminating the baseline method for calculating rental
income. Adding requirements for tax returns aged nine months or more.
Wells
Fargo Funding is updating its Conventional Conforming Loan policy to
require eligibility review of properties with solar panel systems that are
leased or subject to a Power Purchase Agreement (PPA), prior to delivering the
Loan for purchase. Wells is removing its policy overlay for short refinance and
restructured mortgages for conventional Conforming Loans. Wells will require
2015 Tax Return Transcripts for Loans Closed on and after June 15.
Regarding High balance loans with expanded LTV, its systems have been updated
to fully support Registration and Lock processes, the temporary processes are
no longer required.
M&T
Bank updated the FNMA Standard Fixed Rate program has TO ALLOW co-op
properties to 97% LTV on primary residences and 90% on second home. These
changes were a part of the FNMA updates previously announced. New York State
co-ops' are still limited to 80% LTV.
NationStar
Mortgage has released its updated Seller Guide.To download the complete update, please click here.
Effective
immediately, Ditech's conforming underwriting guidelines for Desktop Underwriter,
Loan Prospector, and Manual Underwrite transactions are being clarified or
updated. Continuity of Obligation (DU and Manual Underwrite) as Fannie Mae is
no longer requiring that Continuity of Obligation be met; therefore the
Continuity of Obligation policy for Desktop Underwriter and Manual Underwrite
transactions is being eliminated. LP guidelines are being updated to clarify
the Employee Business Expenses filed on IRS Form 2106. It must be deducted from
commission income when calculating commission income used for qualification
(regardless of the amount of the commission earned). A wage earner who files
IRS Form 2106 is not required to deduct those expenses from income.
NYCB Mortgage has added an additional
-0.125% price adjustor factor (PAF) to be applied to Conforming Fixed High
Balance transactions in California as of March 1st.
Effective for all conventional loans with
application dates on or after February 1, Sun West began requiring the
following documentation when business income is reported on Schedule K1 and
used for qualification: Income documents must include the most recent two years
individual tax returns (Form 1040) with all schedules, most recent two years
business tax returns - with Schedule K-1, Form 1065 for Partnerships/LLCs, and
form 1120S for S-Corporations/LLCsv. For Use of Self-employment income from
Partnership or S Corporation business: Ordinary income, net rental real estate
income, and other net rental income reported on Schedule K-1 may be included in
the borrower's cash flow provided: the borrower can document ownership share
(using Schedule K-1); and the borrower can document access to the income (such
as a partnership agreement or corporate resolution); and the business has
adequate liquidity to support the withdrawal of earnings.
As
we ease our way into 2016, 4Q15 housing and banking numbers continue to flow in
from various agencies and bureaus. Recently the FDIC released profit numbers for federally insured
institutions. Commercial banks and savings institutions insured by the
Federal Deposit Insurance Corporation reported aggregate net income of $40.8
billion in the fourth quarter of 2015, up $4.4 billion (11.9 percent) from
earnings of $36.5 billion a year earlier. The increase in earnings was mainly
attributable to a $6.8 billion increase in net operating revenue and a $2.7B
decline in non-interest expenses. The reduction in non-interest expenses is
attributed to a drop in litigation expenses at a few large banks.
What's
good for the goose is good for the gander. What the heck is a
"gander," you ask? I didn't know either, but according to my mechanic
it sits next to the Johnson rod, and needs to be replaced just as frequently.
If the Federal Reserve is the goose, then investment bankers and institutional
investors are the gander....and contrary to the above axiom, rate hikes rarely
are viewed as a positive. We ended 2015 with expectations of four Fed Fund Rate
hikes due in 2016; the probability is we'll probably experience only one
(insert dismal economic data here). According to the CME Fed Watch Tool the probability of the FOMC adjusting
the target rate for 2016 is: March (12%), April (22%), June (38%), July
(39%), September (43%), November (44%), December (57%). These percentages
obviously reflect current data and economic realities and are based upon Fed
Fund Futures contracts.
Shifting
to the daily markets, we were reminded yesterday that we're a global economic
village when all the focus was on Europe. The ECB (European Central Bank)
statement over-delivered versus expectations by cutting all three overnight
rates by 5 to 10bp, and increasing & expanding its Quantitative Easing
program. They're even going to start buying corporate securities! Mario Draghi
said, "Rates will stay low, very low, for a long time period of time and
well past the horizon of our purchases (currently March 2017). From today's
perspective and taking into account the support of our measures to growth and
inflation we don't anticipate that it will be necessary to reduce rates
further."
Don't
forget that in the United States QE is basically alive and well, and the
government continues to buy agency MBS with the proceeds from loans that pay
off early. The NY Fed released the estimate for MBS reinvestment purchases
covering the March 11 to April 12 period: about $23 billion agency MBS.
For
news today we'll have the US Labor Department's February import and export prices
- look for declines on both. We wrapped up Thursday with the 10-year's yield at
1.93%.
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