Mr. Peterson, a tourist from Toronto,
arrived in Barbados. In an airport taxi cab, Peterson asked the driver,
"Say, is this really a healthful place?"
"It sure is," the cabby replied.
"When I arrived here I couldn't say one word. I had hardly any hair on my
head. I didn't have the strength to walk across a room, and I had to be lifted
out of bed."
"That's wonderful!" said the
tourist, "How long have you been here?"
"I was born here."
Yes, we change our clocks this weekend, losing an hour, although
some states have escaped this ordeal by not using Daylight Savings Time.
Different states do things differently.
This week, SocialSurvey welcomes 3 new partners, Bay Capital,
Mason McDuffie, and Service First Mortgage. Additionally, Freedom Mortgage has
expanded their partnership to include their North and South Regions. SocialSurvey
provides a platform for mortgage lenders to collect and share customer feedback
and its customers are averaging a 50% response rate and sharing each review 7-9
times online. SocialSurvey turns reviews into a profit center and a
digital transformation for your business. If you want to learn how to get
control of your online reputation, email GetStarted@SocialSurvey.com
Has the refi bubble burst in your market yet? In many markets,
it either has popped, or will be doing so soon, and many are unprepared for the
dramatic downturn in business that will come. If you're concerned about this,
then mark Thursday, March 9 down on your calendar. REMN strives to be the ultimate wholesale partner for
brokers and bankers in the industry. In line with that, REMN is hosting the
"5 High Impact Purchase Business Generators" webinar to help
industry colleagues develop strategies and solutions that can rebuild and
increase their purchase business. The free, 45-minute webinar will showcase
some proven and unique tactics that industry professionals can leverage to
quickly increase their purchase business. Space is limited and attendees must register in advance here.
The lion's share of current loan production is heading toward Fannie
Mae and Freddie Mac in the form of conventional conforming loans. Let's see
what tweaks to underwriting and policies lenders and investors have been doing
lately.
To begin with, many firmly believe that America needs a public option for mortgages - maybe not
both Freddie and Fannie. We all know that in 2008 they were placed into
receivership by the U.S. government, and everyone agreed they needed to be
wound down. Yet today, Fannie Mae and Freddie Mac are still alive and kicking
through the conservatorship mechanism under the FHFA. Yet Warren Buffett
believes government-backed mortgages are important to the U.S. economy, but
Fannie and Freddie are not. "I think the problem comes when you try to mix
up the private sector with the government because serving two masters is tough,"
Buffett said of Fannie and Freddie.
Fannie & Freddie? Yup - next year it will have been ten
years since they were put into conservatorship. Time flies, and over the years
there has been plenty of chatter, of varying degrees of authority and
intelligence, about what to do with them. The employees of F&F are not
allowed to conjecture about their fate, but they may be heading toward becoming
private. It is generally accepted that private companies can be more innovative
than government agencies (who are backed by tax payer money). They might
compete more; customer service might increase. Perhaps they'll buy more types
of loans. Why not jumbos?
But without a government guarantee, will investors still want to
own F&F securities? Investors around the world rely on the liquidity of
their securities; without that, rates would go up, right? If you think that the
gyrations caused by the FHA MIP reversal last month were tough to deal with,
just see what happens to conventional conforming rates if the U.S. government
doesn't back those securities in some form. We can expect to hear a lot about
risk sharing, adequate capitalization, lenders of different sizes being
impacted differently by any proposed solution, and so on.
Fannie Mae has issued a Selling Notice regarding future
changes to the use of Mortgage Electronic Registration System (MERS) for
properties in the state of Maine. Please view the Selling Notice for details.
Fannie Mae posted a FAQ and answer
about Day 1 Certainty: Q. Is there a cost associated with using the DU
validation service? A. Fannie Mae does not charge a fee for using the DU
validation service. Lenders should contact the vendor(s) of their choice to
discuss their product pricing. (See the Current Data Vendor List
for report vendors.)
Wells Fargo Funding has removed its overlay
for mine subsidence now aligning with Fannie or Freddie requirements for
conventional conforming loans. "Mine subsidence insurance is provided to
cover a loss suffered when the land on which improvements are located
'subsides' due to the collapse of mining tunnels below the surface."
AmeriHome announced that Fannie
Mae loan transactions have been updated and tax transcripts are not required
for income sources validated through the DU Validation Service. AmeriHome will
accept "Validated" income findings without overlay.
Plaza's Freddie Mac eligible programs have been
updated to align with Freddie Mac's revised income qualification requirements
as announced in Bulletin 2016-19. One change worth noting is the updated
documentation requirement to base the number of years of tax returns required
(business and personal) on the number of years the business has been in existence.
Freddie Mac announced 2016 top regional multifamily lenders. The
Top conventional seller offices by Freddie Mac Multifamily Region: Western
Region: Berkadia Commercial Mortgage, Los Angeles, Central Region: CBRE Capital
Markets, Inc., Dallas, Southeast Region: Walker & Dunlop, LLC, New Orleans,
Northeast Region: Capital One Multifamily Finance, New York.
The Top Sellers by Freddie Mac Multifamily
Product include Top Targeted Affordable Housing Seller: Jones Lang LaSalle
Multifamily, LLC, Top Small Balance Loans Seller: Arbor Agency Lending, LLC,
Top Seniors Housing Seller: Walker & Dunlop, LLC, Top Conventional
Structured Transactions Seller: Holliday Fenoglio Fowler, L.P., Top
Manufactured Housing Community Seller: PNC Multifamily Mortgage LLC
Certainly a part of Freddie & Fannie's world is mortgage
insurance companies. As of March 1st, Arch MI and United Guaranty
have combined their underwriting requirements into a single Underwriting Manual to be used by all customers.
Please read the complete details of the changes in Credit Risk Bulletin #1-17-NR. The new Manual will have
expansions and changes to the underwriting requirements in a variety of areas.
For the Down Payment Assistance/Housing Finance Agency Program, the maximum
Combined Loan-to-Value (CLTV) will remain 105%. All underwriting changes
were detailed in a Credit Risk Bulletin.
The discussion of F&F goes back years, as does the impact of
loan limit changes. For example, going back to last summer, Black Knight
Financial Services' Home Price Index (for August 2016) reported home price
appreciation of 5.3 percent over-the-year and a median price of $266,000, up 33
percent from the market's bottom and just 0.7 percent from a new national peak.
This data is important when it comes to the discussion surrounding the GSEs'
conforming loan limits, which determine the maximum size of a mortgage that
Fannie Mae and Freddie Mac can guarantee. Aside from 234 "high cost"
counties so designated by the Federal Housing Finance Agency (FHFA), the GSEs'
regulator, the national conforming loan limit had remained at $417,000 for the
last 10 years. The Housing and Economic Recovery Act of 2008 mandated that the
"baseline loan limit cannot rise again until home prices return to
pre-decline levels," per the FHFA.
Sure enough, in late November, in most of the country, the 2017
maximum loan limit for one-unit properties will be $424,100, an increase from
$417,000. With home prices less than a percentage point off of a new national
peak and home values having reached pre-crisis levels by multiple measures, the
FHFA decided that raising the conforming loan limit for F&F was warranted.
When the FHFA raised the GSEs' conforming loan limit level to
$424,100 from $417,000, what effect did it have on mortgage originations? An
official from Black Knight at that point stated, "Our analysis shows that
there are approximately 17 times as many originations-roughly 100,000 in total
over the past 12 months-right at the conforming limit compared to preceding
dollar amount buckets, and that originations drop off by about 70 percent
immediately above the limit. In addition, the data shows that a GSE loan
originated right at the conforming limit is nine times more likely to carry a
second lien than one that is not. One example scenario shows that, with all
else being equal, raising the conforming loan limit by $10,000 could result in
a one percent increase in originations-approximately 40,000 new loans and $20
billion in new loan balances."
Black Knight's data shows that the share of originations with
second liens begins to rise roughly $15,000 before the conforming limit and
then spikes right at the conforming limit. Approximately one-quarter of
GSE-owned loans originated at the limit since 2012 carrying second liens. The
data also showed that borrowers are bringing their own money to the table to
drop first lien balances down to the conforming limit; CLTV ratios are lower
right at the conforming limit than they are immediately below the limit, which
shows that there is a demand for conforming loans above the current limit of
$417,000, per Black Knight.
The Noble Capital Markets
Many are watching the path of Paul Ryan's ACA (Affordable Care
Act) replacement bill and the initial rollout didn't go well with the
legislation encountering fierce opposition within the Republican party. The
thinking is that if healthcare gets bogged down it will imperil the chances for
tax reform, which in turn will dampen things.
But for now it is nearly impossible to argue that the U.S.
economy is not doing well, which could certainly help wages and therefore,
perhaps, more people will qualify for loans. The FOMC (Federal Open Market
Committee) knows this. Data on the labor market, inflation, and financial
conditions have presented the Committee with a compelling case for a hike at
its March meeting a week from today. Markets will be keenly focused on how the
Fed messages the path beyond, and "the smartest guys in the room"
think a more hawkish path is in store. Financial conditions have eased substantially
since the December meeting, which we expect will lead more policymakers to join
the "three" camp: three hikes in 2017.
Rates slightly worsened Tuesday, although aside from some minor
fluctuations between coupons and securities didn't move much. The MBS basis
largely repeated Monday's session with spreads tighter vs. treasuries, which
sold off modestly: the 10-year worsened about .125 in price after a
disappointing 3-year note auction.
This morning we've had the mortgage app activity from the MBA
(+3.3% last week although it is 18% lower than a year ago; ARM percentage is
the highest it's been since 2014). February ADP was also released (strong at
+298k), along with Q4 (final) Productivity and Unit Labor Costs (+1.3% and
+1.7%, roughly as expected); coming up are Wholesale inventories and sales and
a $20 billion 10-year note sale. With all this going on we find the rates
higher versus Tuesday evening with the 10-year at 2.57% and agency MBS prices
worse a solid .250.
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