The Fourth of July is Monday...the
date of the Declaration of Independence (quibble all you want about late
signers); the next commentary will be Tuesday. The U.S. Census Bureau
tells us when the U.S. became an independent nation on July 4, 1776 there only
2.5 million people living here; last 4th of July there were 321.4 million. And
everyone is talking about the UK & Brexit: $114.1 billion was the value of
trade with the UK. Back in 1776, they were our enemy; now they are our 8th
leading trading partner.
A quick correction to a note
yesterday in the commentary fortunately pointed out by several readers. BHLB,
the buyer of First Choice Bank, is not Berkshire Hathaway. It's Berkshire
Hills Bancorp in Western Massachusetts.
Are there changes in
the Freddie Mac, Fannie Mae, and investor conventional conforming policies and
procedures? You bet there are!
First of all, Fannie Mae
and the Mortgage Bankers Association (MBA) released updated forecasts. Fannie's
updated forecast reflects slightly higher single family new home purchase origination
estimates for 2016, and slightly lower origination estimates for 2017
relative to the May forecast. Fannie Mae expects single family purchase
originations of $1 trillion in 2016, representing a YoY increase of 10%.
According to Fannie Mae, "Housing activity is gaining strength heading
into the summer, with pending home sales rising to a decade high." The MBA
kept its $1.01T and $1.05T 1-4 family purchase mortgage origination estimates
for 2016 and 2017 the same relative to the May forecast. New home purchase
mortgage originates are the primary driver for mortgage insurance volume given
the 4x penetration rate relative to refinance volume.
And housing & banking groups announced opposition to the
Fannie and Freddie recapitalization plans. The battle over the future
of housing finance is heating up. Five major housing and finance trade
groups on Wednesday sent a letter to Federal Housing Finance Agency Director
Melvin Watt, urging him to reject recent calls for his agency to take actions
to allow Fannie Mae and Freddie Mac to build capital. (The FHFA is the
regulator of Fannie and Freddie.)
The 25 stakeholder
organizations including real estate, financial, and consumer organizations who
have called on the FHFA to take action on overly burdensome fees charged by the
GSEs (Fannie and Freddie). The letter itself asks Director Watt to direct
the GSEs to reduce or eliminate loan level price adjustments - another effort
to make conventional mortgage credit more affordable for consumers. The
consensus contained in the letter is that G-fees have increased sharply since
2009, and that when combined with LLPAs, GSE income has increased substantially
without achieving broad access to credit. The result is arbitrarily high prices
for consumers, which are felt particularly by minority, young and first-time
homebuyers with low-and moderate-incomes.
The letter argues that
LLPAs aren't necessary to cover risk that is already covered by g-fees and
other forms of risk sharing. I'd also note the diversity of opinions included
here and the tremendous number of stakeholders who have signed on in agreement.
For example, NAR
President Tom Salomone wrote, "If the FHFA is serious about reducing the
burden on creditworthy borrowers trying to enter the market, then it's time to
address the fees that Fannie Mae and Freddie Mac charge consumers looking to
purchase a home. Loan-level price adjustments and g-fees simply lock too many
creditworthy borrowers out of the conventional mortgage market, particularly
minority, low-income, and first-time homebuyers. FHFA can direct the GSEs to
reduce or eliminate those fees right now, in recognition of the good work
that's been done to manage risk at the GSEs. We believe that should happen so
more responsible borrowers can take the step towards homeownership."
In a recent bulletin, M&T
Bank noted it prefers all condo properties to be prepared on Form 1073
(even Fannie/Freddie site condo properties), Fannie and Freddie will accept
Form 1004 or 1073. Note - if using Form 1004, the appraiser must include an
adequate description of the project and information about the homeowner's association
fees and the quality of project maintenance. M&T also sent a reminder
that on FNMA HomeReady HomeStyle loans that utilize non-borrower income (as a
compensating factor to exceed 45% DTI), the non-borrower income worksheet and
certification (Fannie Mae Form 1019) is required.
Fannie Mae made the following updates in June: updated the Guide
to simplify the way income limits are applied for HomeReady, updated policy on
self-employed income, removed the policy that limits refinances of restructured
mortgage loans, and updated the policy on project insurance specifically as it
relates to mortgagee clause on a project master policy.
Flagstar Bank is now
offering the Freddie Mac Home Possible program, Doc. #5335. This program
includes enhanced borrower eligibility and improved mortgage insurance
requirements. The program incorporates a general income limit of 100% of area
median income (AMI) and provides no income limits for properties located in
designated underserved areas.
The Fannie Mae HomeReady
program is available in Pacific Union's FLOW and can now be accessed by
Quick Pricer in Price My Loan and Lending QB.
As everyone knows by now,
Desktop Underwriter Version 10.0 release has been rescheduled for the weekend
of September 24, 2016. More information on DU Version 10.0 can be found in the Release Notes and other resources on
the DU web page.
Fannie
Mae's The Principal
Reduction Modification Servicer FAQ document has been updated and
posted to the business portal. Question 16 has been added.
In order to enhance
policy, Fifth Third Mortgage's refinance transaction requirements have
been clarified including, but not limited to the following: escrow account
requirements when proceeds are used to pay real estate taxes for both rate and
term and cash-out transactions. Property Assessed Clean Energy (PACE)
loan payoff requirements for rate and term transactions. Refinance of previous
cash-out transactions within 6 months. Living trust irrevocable eligibility
provision for continuity of obligation (Freddie Mac Only). Refer to its
Correspondent Underwriting Guidelines for additional information.
Fannie Mae's Quarterly Compass is now
available highlighting news and updates for Q2 2016. This edition summarizes
what's new with several Uniform Mortgage Data Program (UMDP) initiatives, the
summer launch of its new integration platform, plus Fannie Mae Connect news,
HomeReady enhancements, and more.
AmeriHome's
Fannie Mae program guides are updated to support changes announced in Fannie
Mae Desktop Underwriter Release Notes - DU Version 10.0, dated February 23,
2016, and last updated June 10, 2016.
Fannie
Mae continues to provide enhancements to make Connect easier and more efficient. Recent enhancements include
its Report Survey Tab which allows users to provide quick feedback
on report content and usability. Export and Print Instructions providing
informative details about how to best optimize each report's view. Interactive
Quick Tips Demo to view instructive tutorial to navigate users through Tableau
reporting functionality.
M&T has
received updated communication from Fannie Mae that HomeStyle kitchen
renovation work plans may include the following appliances: Ranges/Ovens/Cook
tops - free standing or built in. Refrigerators, free standing or built-in. Built-In
microwave ovens (affixed to wall/over stove/etc. and built in dishwashers. If
any are not included at the time of the original work write-up, eligible
appliances may be purchases with contingency funds at the end of the project.
Franklin American Mortgage clients be advised that effective Monday, June 27th
the LLPA on FHA/VA loans with FICO's between 620-639 is increasing from -1.750
to -2.000. This applies to all best effort locks and loans registered to
trades Monday and beyond. Also noted, all manual chapters under its Compliance
heading have been reviewed and updated with new formatting and a table of contents to improve
ease of use. Conventional products have been updated to include the release of
FNMA's HomeReady Product, expanded maximum LTV/CLTV/HCLTV limits for High
Balance products and updated guidelines to follow the current VA policy for student
loans in repayment.
PennyMac
announced non-delegated Eligibility Review will be available for
conventional loans with Best Effort locks as of May 23rd. Applicable
LLPAs for non-delegated loan will be made available on Best Effort rate sheets
only. An executed Underwriting Service Agreement is required for all sellers
that wish to participate in the program.
PennyMac announced
non-delegated Eligibility Review will be available for conventional loans with
Best Efforts locks, effective Monday May 23, 2016. Read more here.
And although the share of overall originations covered by
private mortgage insurance products only ranges around 15%, the products
are tied in to conventional conforming business.
Arch MI will
support and insure eligible loans that are approved through Fannie Mae 10.0
Score Card via its EZ Decisioning program which will incorporate the additional
guidelines applying to borrowers with non-traditional credit.
Essent announced
the launch of its new online tool designed for loan officers navigating the
next generation of homebuyers. EssentIQ shows millennials and other first-time homebuyers how
Essent MI can help them become homeowners now so they can start building equity
faster. Using a data-driven design, the tool: shows the opportunity cost of
waiting to save 20% down vs. buying now with Essent MI, calculates the monthly
payment for a loan that has Essent MI, and projects how quickly homeownership
will build equity and wealth accumulation
EssentIQ
also creates personalized, easy-to-understand presentations that can be saved,
printed and shared via email.
MGIC
is spreading the word to its customers about "Deep Coverage." "Deep Coverage Mortgage
Insurance" refers to extending the use of mortgage insurance, both by
using deeper coverage on loans that currently require mortgage insurance (loans
with less than a 20% down payment) and by using MI on loans that do not
currently require it. There are many obvious benefits to this approach,
including: Mortgage insurance pricing is transparent and available to all
lenders, regardless of size. Competition among 7 mortgage insurance companies
brings an immediate increase in competition for pricing mortgage credit risk.
Deeper coverage brings an immediate decrease in taxpayer risk, putting
substantial additional private capital in front of taxpayers before the GSEs
purchase the loans. Deep Coverage Mortgage Insurance can play a significant
role in bringing additional private capital to housing finance, reducing
taxpayer risk before the loans arrive at the GSEs.
Yup,
today is a Friday, Monday is a holiday, and today is a shortened trading day in
the bond market. Lenders may price conservatively since locks can't be hedged, although
many will make estimates about afternoon volume and sell a portion this
morning. But who the heck would lock in a loan's interest rate on a summer
Friday afternoon? I'm sure some will...
With one week after
Brexit analysts are already talking about the EU making some concessions to the
United Kingdom about wooing them back, and the UK being receptive.
Yesterday news made the rounds that the ECB was considering moving away
from the capital key (which governs how much of each country's bonds are bought
in Quantitative Easing), citing the lack of available float which set off a
rally in peripheral EGBs - and nudging U.S. Treasury security prices down (.125
on the 10-year) and rates up (closing at 1.49%).
For news today there are
no "first tier" numbers normally out at 8:30 AM EDT, but we will see
the Markit Manufacturing PMI at 9:45AM EDT, and at 10AM the June ISM and May
Construction Spending. Rates sheets will be better; the 10-year is back down
to 1.41% with agency MBS prices +.125-.250.
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