Oct. 8: Mortgage jobs; CFPB tools for research; 4506-T indem thoughts; parts of PHH up for sale?

Debi B. writes, "Thought for the day... We are always hearing about how Social Security is going to run out of money.  How come we never hear about Welfare running out of money?" And there is plenty of money in the agency MBS markets, and F&F, and the FHFA, are indeed working on a platform for common securitization.

Due to its continued expansion, Affiliated is looking for successful operational staff and account executives to join its team. Please contact www.affiliatedtpo.com if you wish to learn more. Affiliated recently added Mylena Evans-Alred as Executive Vice President of its Wholesale/Mini-correspondent division. Mylena joins Jerry Alred in expanding the TPO division in over 25 states and growing their current group of Third Party Originators. (Affiliated is a wholly owned subsidiary of Benchmark Bank, which has been a banking leader since 1964. Affiliated is a direct Seller/Servicer for FNMA and Issuer/Servicer for GNMA and offer a wide spectrum of programs, including Conventional, Texas Cash- Out,  FHA, VA, USDA and  Texas Veterans Land Board, and also offers warehouse lines.)

"All of the talk about lenders 'loosening' their requirements for IRS transcripts. Lenders should remember that just because an investor or aggregator does not require a customer to provide an IRS transcript for a borrower doesn't mean they are 'in the clear.' As you are aware, the agencies and many aggregators or national lenders include in their sale agreements with customers a clause saying the originating institution would have to repurchase any loan that contains fraud. For lenders that underwrite, certainly they could be in a repurchase situation for not correctly calculating a borrower's income. Let's say a lender, aggregator, or GSE executes the 4506-T as part of its post-funding Quality Control and sees unreimbursed business expenses, side jobs, or other discrepancies in the approved borrower's income. This would mean that it was not run through DU or LP correctly and potentially that there is borrower fraud since they signed a 1003 at closing not disclosing certain income or losses thereto. The question is not 'Will my lender let me close a loan without tax transcripts?' The correct question is, 'Without the transcripts from the IRS, what is the repurchase or indemnification exposure I have on this loan, if eventually the 4506-T is executed and my income figures are not correct.'" So wrote Fowler Williams, president of Crescent Mortgage Company - thank you!

(Speaking of the 4506-T question, here is what the public sees regarding Fannie & Freddie's stance on the requirement.)

Not only is the lending industry grappling with potential future liabilities regarding 4506-T issues, but lenders will still somewhat confused about the QM/non-QM question, and even what kind of loans they can originate. As a reminder, the CFPB came out with a quick reference chart. "Our newest chart maps out the types of qualified mortgages that small creditors can originate. View the quick reference charts here. These charts offer an easy way to visualize how the new mortgage rules are likely to apply to certain products or transactions in a variety of circumstances. These charts are not substitutes for the regulation text and official interpretations, but they can give you an idea of where to start."

And for fans of maps, as a reminder the CFPB also provides heat maps and illustrative graphs that detail local mortgage market trends. The tool relies on data gathered through the Home Mortgage Disclosure Act (HDMA) to offer consumers information on mortgage loan applications and originations, mortgage loan volume, and the volume of loans insured by the Federal Housing Administration (FHA) and the Veterans Administration (VA). Here you go: HMDA. OK, so maybe the guys and gals at the CFPB have a ways to go before they rise to the level of analytics of say, a Wells Fargo, or even a well-staffed originator, but at least they've made something relatively mundane (spending any amount of time on a .gov website) somewhat interesting. The CFPB is planning additional features for the site, including "easy-to-use tools" that allow users to filter HMDA records and create summary tables and an application programming interface that will allow researchers and software developers to incorporate the CFPB-provided HMDA data into other applications and visualizations.

When I learned that CFPB examiners have found mortgage servicing problems at banks and non-banks, I immediately thought about sitting in my dentist's waiting room thinking, "What are the odds he doesn't find anything and there will be no drilling?" Not good on both accounts as the older I, and Dodd-Frank, become. The agency released its recent report detailing mortgage servicing problems, which also found that many non-banks lack robust systems for ensuring they are following federal laws. Some of the mortgage servicing problems contained in the report are disorganized account transfers, poor payment processing, and loss mitigation mistakes. Some issued noted in compliance include: missing consumer compliance programs, the lack of formal policies and procedures, and the lack of independent consumer compliance audits. This is yet again, another indication of the role compliance, and compliance accountability, will play in mortgage banking moving forward. The official report can be found here, and is a useful guide for companies thinking about starting to build their own servicing portfolio.

Soon we will all be partnering with the CFPB! In late September the CFPB announced a partnership with the City of Jackson, Mississippi, to accept and respond to questions and complaints about financial products and services posed directly to the Bureau by local residents. The agreement will allow Jackson consumers to dial a local hotline and be connected with the CFPB's Consumer Response team, which will screen complaints for completeness, jurisdiction, and non-duplication. This agreement is one of several the CFPB has entered with localities around the country and is at least the second time that the CFPB has partnered with a locality on a consumer complaint hotline. We all know that the CFPB is currently accepting complaints regarding credit cards, mortgages, deposit products and services, consumer loans, private student loans, credit reporting, debt collection, and money transfers.

Yes, companies are going to merge, and the landscape is going to change - plenty or originators would rather focus on originating and not compliance. There is no doubt about it. Servicing is being transferred, personnel shifted or eliminated, originators are being courted, and companies are looking at getting bigger, smaller, or merging. For example, last week we learned that PHH was laying off hundreds of workers, and now the industry is digesting news/rumors that PHH is for sale, or at least parts of it are (http://www.chicagotribune.com/business/sns-rt-us-phh-sale-20131007,0,33289.story). So PHH is thinking about selling the company for up to $1.5 billion, which is roughly in line with the current capitalization of the company. KBW reports that the current tangible book equity of the company is $1.6 billion. The article also stated that PHH had approached both Ocwen and Nationstar about buying the mortgage company in recent months.

KBW goes on to say that, "...we believe that there are operational challenges for any buyer of the mortgage business. PHH is not a traditional mortgage company. The bulk of its mortgage volume comes through mortgage originations it makes on behalf of its partners. As part of the company's contract with its partners, PHH has to provide certain levels of service. We believe that this gives PHH somewhat less flexibility in cutting its costs, and management noted on the 2Q earnings call that it would seek to amend certain private label contracts to reflect fundamental changes in the industry. We agree that the company's $229 billion servicing portfolio ($133 billion of owned servicing) would be very attractive to both Ocwen and Nationstar. But neither company has paid meaningful premiums to book value to purchase MSRs. If we assume that the mortgage company is worth book value, the market is now valuing the fleet management business at around $140 million over book value. We believe that further upside to the current share price in a sale would largely depend on any potential buyer valuing the fleet management business at a level higher than this."

Keeping on with lender and vendor news, let's take a look at some recent announcements to see the trends out there in residential lending along with some upcoming events.

Radian's management reiterated that they expect the GSEs to introduce new risk-to-capital standards as early as year-end, likely in the range of 16-18 to 1 with potential haircuts for subsidiary capital. There is expected to be a phase-in period for the new rules. Given its holding company liquidity, the company expects to be able to comply with any new requirements. "While conditions in the mortgage insurance sector remain competitive, management believes that the overall growth in private mortgage insurance relative to the FHA should help limit competitive pressure. Further, the company noted that there are meaningful barriers to entry given the long timeline to profitability so it is unlikely there will be new entrants into the industry in the near term."

Effective October 1, the new name for Secondary Interactive is now Optimal Blue Secondary Services. "We are changing our name to better integrate our secondary marketing products and services with the Optimal Blue family and brand, a recognized leader and innovator in mortgage technology." To learn more about Optimal Blue Secondary Services, visit www.optimalblue.com.

Paramount Residential Mortgage Group announced the recent expansion of its Retail Division in the South Eastern U.S. "The Southeast territory will be headed up by the recent hiring of PRMG's new Retail Regional Manager, Steve Levine. Levine brings over 13 years of independent retail mortgage banking experience to an already robust PRMG retail platform."

MBA is holding a one-day Retained Servicing Workshop on Wednesday, November 13 at the Westin - DFW Airport, Dallas, TX. "We have a strong line-up of expert speakers, including executives from mortgage companies that have ramped up their servicing in the past few years. They will discuss their major operational decisions, such as servicing loans in-house versus using an outside subservicer.  All companies that are starting to retain servicing must understand the CFPB servicing requirements that go into effect in January and what exemptions may apply to them as smaller servicers. Financially, they need to understand how to properly value servicing rights and explain their valuations process to regulators and auditors. Strategically, they need to decide if it makes sense to grow their servicing portfolios going forward. Click here to find out more: http://www.mortgagebankers.org/RSW13.htm.

In Georgia, its MBA October events will be held at the City Club of Buckhead (Financial Center) in Atlanta on October 23. FNMA will speak to the new changes (effective Nov.16^th) as it relates to QM, DU 9.1 guidelines, Rep & Warrant framework, QC Overview and ULDD Phase 2 updates: http://events.r20.constantcontact.com/register/event?oeidk=a07e8963x903d420d7b&llr=wc756jcab. There is a Free Networking event hosted by the MBAG and anyone can attend: http://events.r20.constantcontact.com/register/event?oeidk=a07e8a4orh0c8e51f7f&llr=wc756jcab. And lastly on the 23^rd is a session on understanding the impact of the CFPB's Final Rule on ATR/QM on the Broker Model. "This is a Broker-Only Luncheon sponsored by the Mortgage Bankers Association of Georgia's Membership Committee and presented by Loretta Salzano" - here you go: http://events.r20.constantcontact.com/register/event?oeidk=a07e898cnh197d75196&llr=wc756jcab

The Texas Mortgage Bankers Association is now accepting registrations for its annual Educational Seminar and Marketplace, which is scheduled for November 12^th and 13^th in Dallas, TX.  The event will focus on best practices, with breakouts in operations and sales and general sessions on technology and compliance, and culminate with a CEO roundtable.  To register, go here.

The Mortgage Bankers Association of Florida has announced the dates for the Eastern Secondary Market Conference, scheduled for February 5-7^th in Orlando, and its 61^st Annual Convention, scheduled for June 18^th and 19^th in Delray Beach.  Watch http://www.mbaf.org/ for upcoming details.

As I head to San Francisco today to give a speech, there just is not much going on out there for the markets to latch onto. Partial government shutdown...blah blah blah...light MBS flows...market nervousness...delayed government economic announcements.... There just is not much going on with interest rates, and certainly lenders have much more on their minds. The economic calendar today contained more postponed data than released ones as the government shut down continues and August Trade Balances are the latest casualty - it is not coming out. The Treasury, however, will auction off $30 billion of 3-yr notes today. The "benchmark" 10-yr yield saw a 2.63% close on Monday, and this morning it is at 2.64%, with very little change in agency MBS prices.

Here are some facts for football fans, part 2 of 2:

It takes 600 cows to make enough footballs for one NFL season. Moo!

The Dallas Cowboys haven't played in Dallas since 1971. Cowboys Stadium is located in Arlington, TX.

The St. Louis Rams were the first NFL team to use their logo on their helmets.

The Green Bay Packers are a publicly owned corporation, the only team in the NFL to have this status.

President Theodore Roosevelt radically changed American Football rules when he introduced the forward pass in 1906.

Dr. James Naismith introduced helmets to football, but he is better known as the inventor of basketball.

Former Minnesota Vikings kicker Fred Cox invented the Nerf football in 1972...he still receives royalties for every unit sold.

The NFL is considered a non-profit and is thus tax-exempt.

The NFL requires that all stadiums be built facing north/south so the sun never interferes with a play.

The average life expectancy of an NFL player is 55 years.

The league minimum for an NFL rookie in 2013 is $405,000. In 2014 it will be $420,000. Somewhere, Ricky Williams smiles.

The NFL averages 290 million television viewers a week. That is four times the population of the United Kingdom.

RateAlert Free Subscriber Snapshot 10/8/2013

What happened yesterday?

Mortgage backed securities (MBS) gained just +2 basis points from Friday's close.

It was another day of no economic data as the scheduled Consumer Credit report was not released due to the shutdown.

At first, our benchmark FNMA 3.5 October Coupon MBS shot up +39BPS by 10:00EDT and once again tested our ceiling resistance.  And once again it held - driving MBS downward (worse pricing for you) -46BPS from 10EDT to 4:00EDT.  But we once again found support at the bottom of our trading channel located at our 10 day moving average.

Be careful.  Last week, the government shutdown and corresponding temporary drag on our economy was responsible for some of the best pricing that you have seen in several months.   However, that was due to trader's sentiment that it would be short lived.

Now, we are entering into that "brackish" period where the concern is tilting towards a prolonged shutdown and hitting our debt ceiling without a real solution.  If that would ever to occur then our debt would not be as attractive to foreign investors and cause our rates to rise.  Think of it this way....the U.S. would go from an 800 credit score down to a 580.  Would you lend more money (ie buying Treasuries) to a country that is in default?  That is like giving a mortgage to someone that is default of their auto loan, student loan and currently in foreclosure.

As a result, MBS and Treasuries are becoming less attractive and are losing some pricing.

So far, we are still trading in the same channel as all of last week but just be prepared...there is a point where this negative news out of Washington is no longer beneficial to your rates.  We are not there yet...but it is only 9 days away. 

Why Can't The US Be More Like Texas

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Fed's Fisher: Why Can't the US Be More Like Texas?

Monday, September 30, 2013 09:00 AM

By: John Morgan

Richard Fisher, outspoken president of the Federal Reserve Bank of Dallas, believes government and mega banks both should be whittled down to size, and that the Texas model of encouraging small business growth is what the rest of America should get behind.

In a wide-ranging interview with Euromoney, Fisher kept his mantle as a tireless advocate of taking a scalpel to the investment activities of "too big to fail" banks.

Don't count Fisher among fans of the Dodd-Frank Act. "They did what they could in the crucible of a crisis, but over 9,000 pages of regulation are too much. And now there is more concentrated power in fewer hands than before the crisis," he maintained.

Editor’s Note: Retired Americans Slammed by Obama’s Redistribution Plans

Fisher's solution is not so much to break up the mega banks like Bank of America and JPMorgan Chase as it is to put a firewall between their banking activities and their investment activities.

According to his thinking, federal deposit insurance and access to the Fed discount window should only be available to the commercial banking arms of the big banks, while any transaction involving any other segment of their businesses, including their investment arms, "be accompanied with a clear agreement between counterparties that it will never, ever be bailed out by government or the taxpayers."

But would this scenario play out in Washington? "The large financial companies and their proxies are spending millions of dollars to buy congressmen and congresswomen and protect their interests," he told Euromoney. "You can quote me on that. We will see how that plays out."

Small businesses should be the engine of U.S. growth, but they are being thwarted by lack of direction from Washington, and the fact there has been no federal budget for five years, Fisher explained.

Neighboring Mexico has a sounder fiscal policy than the United States, according to Fisher. "Mexico has a balanced-budget rule. Its percentage of debt to GDP is minimal. They get things done. And they have an independent central bank that is truly independent."

In a speech in early September in Dallas, Fisher said Republican and Democratic lawmakers have "sold our children — and our grandchildren — down the river," according to The Wall Street Journal.

Fisher said the central bank has done everything it can to revive the U.S. economy, but members of Congress on both sides of the aisle have failed to finish the job.

He also does not spare the White House from his barbs. In a separate speech last week to the Independent Bankers Association of Texas, Fisher said the White House has "terribly mishandled" the process of picking the next Fed chair, and instead allowed the central bank to be politicized in the very public process of finding a successor to Fed head Ben Bernanke, Reuters reported.

Rate Changes and Volatility

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Today's Rate Volatility: HIGH What happened yesterday? Mortgage backed securities (MBS) gained +22 basis points from Tuesday's close.  On Tuesday, we lost -32 BPS so, Wednesday's gain simply got us back to close to par for the week. Once again, the benchmark FNMA 3.5 October coupon traded in a very narrow range.  ADP Private Payrolls came in with an increase of 166K new jobs vs market expectations of 178k.  Plus, August was revised downward (worse than originally thought).  Yesterday's jobs data certainly will not give traders reason to think that the Fed would have what it needs to start Tapering and therefore, was slightly positive for your pricing. The European Central Bank left their key rate alone which matched market expectations and had no impact on pricing. What is on the agenda for today? Don't miss out on the mortgage industry's premiere insight and commentary. Subscribe to RateAlert Executive today and get today's lock advice, complete market commentary and forecast for today, and watch the full Morning Coffee Update video with Bryan McNee - all available only to our Executive subscribers.

Confusion over 4506T/ Tax Transcripts

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Craig B. sent this one in, discovered when doing some research on prepaid interest: "Prepaid interest is interest that you pay in advance. Prepaid interest can only occur at the closing of a loan. It is a one-time thing...What most people don't realize is that they are paying the lender for the previous month's interest (your Aug. 1 payment is applied to the interest owed for July). In other words, interest on a mortgage is paid in-the-rears. I could explain why but, that would take way to long and isn't necessary for this explanation." Here you go, bottom of first paragraph. Roseanne Roseannadanna would be proud.    MGIC, a private mortgage insurance company, is looking for an Account Manager and an Account Representative. The Account Manager position is based in Southern Louisiana and the Account Representative position is based in the Dallas market. The individuals hired will provide programs to our customers, and maintain a strong sales relationship while offering problem-solving services. The ability to work closely with internal and external customers including National Accounts, Underwriters, and our Regional Processing Centers is critical. The primary focus of the Account Manager/Representative will be to identify opportunities for MGIC to enhance its customer relationships using appropriate customer needs analysis and program execution. The ideal candidates will have a college degree and 3+ years of experience in a sales capacity, ideally in the mortgage lending industry. Excellent communication and presentation skills are a must, and the person will represent MGIC at seminars, local and national conventions. Qualified individuals should contact Kris Osborne at kris_osborne@mgic.com and for more information visit MGIC. New Penn Financial, which just announced the creation of its mini-correspondent channel, is actively seeking production opportunities.  Founded in 2008, New Penn is nationally licensed and originates agency and non-agency loan programs, providing opportunities for a wide spectrum of qualified borrowers. The company is looking to add to its distributed retail network through acquisition, merger or joint venture. "If you are a high performing retail business, we should talk." For more information visit NewPenn or email Brian Simon, COO at bsimon@newpennfinancial.com.  All inquiries will be kept confidential. As a reminder, because the CFPB is not subject to the appropriations process, it remains open during the federal government shutdown. For the same reason, the Federal Reserve, the FDIC, and the OCC also remain open. However, the FTC, which is subject to the appropriations process, is closed. Regarding one of the apparent issues that lenders might have with the partial shutdown, I received this note: "Regarding the need for Tax transcripts...The requirement for the actual transcripts is an investor overlay, the Agencies only require that the form to pull transcripts is in the file, not that transcripts have been pulled, that said, most pull them as part of the QC process." Wells Fargo's retail originators are "full speed ahead," and yesterday received, "Good morning everyone. I wanted to send you all a quick note on how we will be directing fulfillment when they are not able to obtain the 4506T transcript and the loan is scheduled to close. Credit Policy has come to the agreement that all we need in the file is the signed and dated form 4506T. Here is the process we would like fulfillment to follow: If your loan was selected for audit, is scheduled to close today, and a transcript is not in file then; 1. Fulfillment Underwriter should enter the following note: 'Loan is scheduled for closing today, due to the government shut-down we are unable to obtain the required 4506T transcript. There is a signed and dated form 4506T in file. Per credit policy, it is acceptable to close the loan without the transcript during the government shutdown.' 2. Fulfillment Underwriter should waive the condition and proceed to closing. No MLM Waiver is required." (This was sent by Kathy Smith, Retail Loss Prevention Lending Manager.) Wells' correspondent clients received, "Wells Fargo Funding will not make any changes to documentation requirements in the event that a shutdown occurs and will continue to require documentation including, but not limited to: Tax Return Transcripts for all borrowers which must be included in the Loan file if income was used in the underwriting decision." U.S. Bank Home Mortgage (USBHM), on the 4506T IRS Tax Transcript situation, wrote, "The IRS will not issue tax return transcripts (Form 4506 T). For the short term, we will temporarily cease the requirement for tax transcripts. However, we will require that the form 4506 T still be executed by the borrower(s) and contained in the file for future use. Please note: USBHM will re verify income with the IRS on all files delivered without tax transcripts due to the shutdown. This policy will be strictly adhered to. Direct Social Security Number Verification: Direct SSN verification may be not be available. If you are not able to establish SSN ownership, we will not be able to move forward with the transaction until this service is available. Rural Housing: USDA has ceased all but essential functions therefore USBHM will not purchase any USDA / Guaranteed Rural Housing (Program #3001) loans without a guarantee and/or Conditional Commitment." Stearns Lending broadcast, "The four (4) areas of our business that are most affected by this shutdown are: USDA Rural Development, obtaining IRS Transcripts, Social Security Number verification, and obtaining flood insurance. USDA Rural Development...Effective immediately, we will begin requiring copies of borrower's tax returns for all borrowers utilizing income to qualify. All Underwriters will begin conditioning loans for same. This will not apply to loan products that do not utilize income to qualify. The tax returns will enable us to identify self-employed borrowers; borrowers that claim 2106 expense and borrower's that own multiple properties. We will not require an executed 4506T prior to funding on W2 salaried borrowers to be included in the loan file. Stearns will verify all income with the IRS utilizing the executed 4506T and obtain the tax transcripts once the shutdown is over. We reserve the right to change this temporary policy at any time. The following loan types will require IRS transcripts in the file before we can close the loan: Jumbo Loans, loans where the borrower owns multiple properties, and self-employed borrowers. There will be no exceptions." Fairway Independent Mortgage Corporation originators received, "Agencies that have been deemed essential with no likely impact on lending: Federal Reserve Banks - expect zero impact on our ability to send and receive wires through Fedwire, FNMA & FHLMC - MBS trading, security issuances, guaranty, loan purchasing and loan servicing functions should all remain intact. Desktop Underwriter, EarlyCheck, and Uniform Collateral Data Portal should all remain functional, GNMA - expect no impact to security issuances or MBS trading functionality, VA - announced in circular 26-13-20 that the VA Home Loan Program would function as normal in the event of shutdown..." Fairway goes on to say, "Agencies where there can be minor impacts on production: Social Security Administration - the SSA has indicated their staff will be reduced significantly and the service they offer to verify identity/social security numbers via the SSA-89 form, IRS - We will not have the ability to verify Tax Transcripts, however, we have made a Corporate decision to proceed without verifications on loans we are able to underwrite internally. And Agencies where there can be significant impacts on production: USDA -Effective immediately, USDA Rural Development office personnel is on furlough until further notice. GUS underwriting engine has been placed in inactive status. Pending mortgage loan transactions, where a USDA Conditional Commitment (RD 1980-18) has not been issued by the agency, will be unable to proceed to closing until the USDA office is operational and able to issue Conditional Commitments. How will this impact a USDA loan transaction? Fairway Independent Mortgage Corporation has delegated underwriting authority for USDA's Guaranteed Rural Housing loan program. A USDA loan transaction is underwritten by our in house underwriting staff for qualification purposes. Use of GUS, USDA's automated underwriting engine, is a part of the underwriting process. FIMC's underwriting staff will continue to review USDA mortgage loan transactions and will render a conditional decision based on being able to update the GUS underwriting engine and receipt of USDA Conditional Commitment RD 1980-18. Due to the government shutdown, the GUS system is inactive and USDA personnel are not able to facilitate the issuance of a Conditional Commitment. A USDA loan is unable to proceed to closing until the USDA offices are reinstated which will only happen upon Congressional resolve." Stratis wrote, "While the IRS is not completing IRS Form 4506 results, most of our loans that we fund as Stratis Financial will not be impacted.  The requirement is suspended with exception of non-owner occupied loans under the Fannie Mae multiple property program. As well with these same files approval and funding will not be slowed down waiting for Social Security number verification with the exception of files in which the Fannie Mae or Freddie Mac AUS results indicate some discrepancy. With the few files Stratis Financial brokers, approximately 10%, delays are likely to occur due to the lack of IRS and Social Security Administration verifications." Nationstar correspondents received, "As referenced in the Correspondent Seller Guide, IRS Tax transcripts using the 4506-T are required to validate the income for all borrowers. Additionally, Nationstar correspondent requires the number of years of income documentation as indicated in the Income Section of the Sellers Guide. Due to the recent United States Federal government shutdown, federal employees across the United States may be affected, including employees who work for government contractors, vendors, and other businesses that rely on work from government agencies, or that offer goods and services to members of the government work force. To that end, effective immediately, Nationstar Correspondent will temporarily suspend the requirement for IRS Tax Transcripts using the 4506-T until further notice, unless the transcripts are a requirement by the agencies (i.e. AUS requirements). Nationstar Correspondent will continue to purchase closed loans submitted for purchase provided all borrowers have executed a 4506-T form at the time of application and again at loan closing. As a reminder, signed tax returns are still required for all self-employed income and income that requires tax returns by AUS findings. Borrowers are still required to sign IRS form 4506-T." In California an LO for Pinnacle Capital sent out, "Due to the governmental shutdown the funding of most residential mortgage loans, across most lenders platforms, is going to come to a dramatic halt. This will affect the close of escrow of purchase and refinance loans with closing dates in the immediate future. Most mortgage lenders, Pinnacle included, have agreements with their investors that require the receipt of a validated 4506-T form from the IRS to be in the file at the time of funding. The 4506-T form is what lenders send the IRS to confirm that the tax returns in a borrowers loan file are the same as those filed with the IRS. Unfortunately, the division of the IRS that processes 4506-T is not open for business. At Pinnacle, we continue to process, underwrite, and approve loans - but we, like most major mortgage lenders in the Country, are not funding mortgage loans without a validated 4506-T, as our investors will not purchase the loans." Affiliated reported, "The Following guideline changes regarding Validated Tax Transcripts only affect loans with properties located in the following states. If your property is in a state not listed below, Tax Transcripts are still required in order for Affiliated to purchase the loan. Acceptable States for Exception for Tax Transcripts: AR, AZ, CO, CT, DE, FL, GA, IA, ID, IN, KS, KY, LA, ME, MN, MO, MS, MT, NC, ND, NE, NM, NV, OH, OK, OR, PA, SC, SD, TN, TX, UT, VA, VT, WI, WV, WY. Since the U.S Government is not issuing Validated Tax Transcripts currently, until further notice Affiliated will take the following in lieu: DU/LP Eligible - If DU/LP does not require tax returns (typically when the borrower(s) are salaried and W-2'd) then AMC will accept the findings; however, in addition to any requirements by DU/LP, Affiliated will accept if the loan file also includes a signed and dated copy of the Borrowers' 2012 Federal Tax Returns (1040) along with all Schedules and Forms. In addition the loan file must include a fully executed 4506-T form signed and dated at closing. If DU/LP requires tax returns we will adhere to those findings, but the fully executed 4506-T form still must be provided as well. If the subject property is a Second Home or an Investment Property AND the borrower has more than four (4) financed properties (including the homestead) the loan is ineligible without validated Tax Returns. This is a direct FNMA ruling until further notice." CitiBank correspondents were alerted, "Form 4506T: IRS transcripts are not available during the shutdown period. During the shutdown period the IRS Form 4506T should continue to be signed at application and closing, and the tax returns should be used to calculate income per current policy. During the government shutdown period tax transcripts are only required in accordance with the 5-10 financed properties policy when the loan is delivered to Citi (per Correspondent Manual Section 809.) Refer to Correspondent Manual Section 805 for current policy for Processing and Analyzing the 4506T. Social Security Number Validation: There is no change to current process. Loans that require Social Security number validation must include Social Security Administration (SSA) Form SSA-89 when delivered to Citi for purchase consideration. Refer to Correspondent Manual Section 807 for Social Security Number Validation Requirements. In spite of all the posturing, jawboning, and energy spent around the shutdown, the markets are not doing much. Markets, and most individuals, don't like uncertainty. But in this case, no one is arguing that a government shutdown is going to improve the economy, which means that GDP or employment will not increase, which means that the FOMC will hold off tapering until the December meeting rather than at October's, and this buoyed fixed income securities. MBS prices were better by a shade, and the 10-yr closed at a yield of 2.63%. Today, despite the government shutdown, Initial Jobless Claims will be released as usual at 8:30 a.m. with the median at +313k versus +305k previously. At 10 a.m. is ISM Services (Sep), which is projected lower to 57.4 from 58.6. Bambi, a blonde in her fourth year as a UCLA Freshman, sat in her US government class. The professor asked Bambi if she knew what Roe vs. Wade was about. Bambi pondered the question; then, finally, said, "That was the decision George Washington had to make before he crossed the Delaware." If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog is, "Reverse Mortgages: Companies Need to Know What is Changing". 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 or www.TheBasisPoint.com/category/daily-basis. For archived commentaries or to subscribe, go to www.robchrisman.com. Copyright 2013 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)

Mortgage Jobs

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Yes, the government is closed. It is always good to have video evidence.  In spite of the shutdown, lenders continue to expand. "If there's one thing we get excited about at Hometown Lenders, it's helping our branches grow! When we say that 'We help you grow your branch and skyrocket your income' - we mean it! Most companies provide ZERO recruiting and marketing support for their branches. At Hometown Lenders, we work with our branch managers to put producers in their branch, and to help them create winning marketing strategies. We have a team of corporate recruiters and marketing gurus that do the heavy lifting for our branch managers because we understand the time demands that come along with running a branch. Call us today and let us show you some examples of how we have helped others BLOW IT UP and how we can help you grow your branch and skyrocket your income! Call us right now (before you forget about it) at 888- 606-8066 or check out our Frank and Brian video here: http://www.hometownbranch.com/." I have been retained by a nationally ranked lender located in the Washington, DC area in its search for a Processing Manager.  The ideal candidate will have over a decade of experience of processing in a lender environment with at least three years' experience managing processors. The company funded $1.5 billion in 2012 and has grown rapidly since its inception in 2008. "The company fosters a team culture in which every employee supports each other with the ultimate goal of first-in-class service to our clients."  Please send confidential inquiries/resumes to me at rchrisman@robchrisman.com. And GFI Mortgage Bankers (www.gficap.com), with 30 years of experience in the residential mortgage industry and over a billion a year in fundings, is looking for licensed MLOs to join its growing team. GFI is actively looking in NY, NJ, and FL. to fill its existing branches. GFI is a Licensed Mortgage Banker in NY, NJ, CT, PA, and FL. "We offer a wide variety of loan products that benefit a multitude of borrowers, including Conforming, Non-Conforming Loans, Jumbo Loans, Co-op's, Condo's, Fixed Rate Loans, ARM's, Reverse Mortgages, FHA, VA, HELOCs, and we are direct lenders with an in-house Marketing team." Please send resumes & inquiries to Jayne Connell at jconnell@gfimortgage.com. Anthony Bird, owner of Michigan's Riverbank Finance, writes, "I have done some research regarding the shutdown and how it will affect government agencies. My article is available here." Thanks! The CFPB is funded by the Federal Reserve, not Congress. It is pretty much business as usual. For USDA loans, this government department has shut down its operations and will not issue any Commitment until funding has been restored. Don't expect any lenders to close or fund any USDA loan until funding has been approved and USDA is operational. The IRS staff is also staying in bed today, and lenders are telling staff that it is doubtful that Tax Transcripts can be obtained and therefore they can process and underwrite loans without the Tax Transcripts but will not be able to close or fund until the Tax Transcripts have been obtained. "Does anyone know whether FNMA is offering relief on validation of tax returns since the IRS is not validating returns during the shutdown?" Fannie just issued a new selling guide announcement. It provides details on a number of underwriting considerations for lenders with regard to the shutdown. It is posted on www.fanniemae.com. The mortgage market, including Fannie Mae and Freddie Mac, should not be affected by the government shutdown, SIFMA Managing Director Chris Killian said. "Fannie and Freddie should be unaffected by the government shutdown (Freddie Mac went so far as to issue a client update stating this), Ginnie Mae informs us that their [mortgage-backed securities] and Multiclass Securities Programs and operations continue uninterrupted, and [the Federal Housing Administration] appears to be able to endorse loans," Killian said. "However, SIFMA urges Congress to come to a resolution as soon as possible." Wells Fargo's correspondent clients received, "We expect that most Loan processes will continue with business as usual in the event that a shutdown occurs. This includes the following Loan types: Conventional conforming, Non-Conforming, FHA, VA, GRH. We will continue to monitor the situation and evaluate for potential impacts and will communicate any identified changes in Wells Fargo Funding requirements. Tax Return Transcripts: Wells Fargo Funding will not make any changes to documentation requirements in the event that a shutdown occurs and will continue to require documentation including, but not limited to: Tax Return Transcripts for all borrowers which must be included in the Loan file if income was used in the underwriting decision." A Mountain West AE sent out, "Due to the government closure, and their inability to process IRS transcriptions in a timely fashion, our corporate office has authorized us to make the 4506 results a Prior to Funding condition on all loans.  We are still able to send in orders and get them in line but they will not be processed until the shutdown is over.  Please keep in mind that if there are any red flags where we might be questioning the validity of the tax returns, our underwriters have the option to not move the condition to a PTF." And Cole Taylor Mortgage wrote, "As you are probably aware, due to the federal government budget expiration, certain government programs are at risk of shutting down beginning tomorrow, October 1, 2013. There are several agencies that could potentially be impacted by this shut down, some of whom we rely upon for the processing of mortgage applications. The following is a list of impacted areas and how it may affect your transactions: FHA Case Numbers - FHA Connection will be operational if there is a government shutdown. Case numbers will only affect manual processing requests at this time. Flood Insurance - Flood insurance through FEMA will not be obtainable. Cole Taylor Mortgage is unable to close a loan without the proper flood insurance in place. IRS 4506T Processing - Vendors through RealEC will continue to accept your IRS Income Verification requests, but hold them until the IRS begins operating again. There will be a delay in the processing of these requests and we are unable to close any loan without 4506T results. USDA Underwriting Approvals - Final approval on USDA transactions may not be issued if the government shuts down. We will continue to accept and send the loan files to USDA; however, there may be a delay in the approval process as USDA approval is required prior to closing. VA and FHA Case Binder Insuring - Fully approved VA and FHA loans will be allowed to close although there may be a delay in the insuring of these transactions." The "sixth sick sheik's sixth sheep's sick" is said to be the toughest tongue twister in the English language...try it! How about the tongue twister, "My legislation led to huge flood insurance rate increases"? Huh? That's not difficult? On the eve of a multi-state rally to "Stop the Exorbitant Rise in Flood Insurance Premiums," Congresswoman Maxine Waters, Ranking Member of the House Committee on Financial Services, released the following statement: "I am outraged by the increased costs of flood insurance premiums that have resulted from the Biggert-Waters Act. I certainly did not intend for these types of outrageous premiums to occur for any homeowner. When I agreed to coauthor this legislation, our goal was to create a bipartisan solution to repair our National Flood Insurance Program. Neither Democrats nor Republicans envisioned it would reap the kind of harm and heartache that may result from this law going into effect. Plainly put, I am committed to fixing the unintended consequences of the Biggert-Waters Flood Insurance law. Since the law was enacted, we have seen a slew of confusion in FEMA mapping. In addition, many families now face increased costs that will make homeownership so expensive that many would be forced from their homes or find it impossible to sell. This is unacceptable. Not only does it undermine families, neighborhoods and the pursuit of the American dream, it would be devastating for our fragile economic recovery. Increased costs of this magnitude might kick off a similar cycle of stagnant home sales and depressed home values that was one of the leading drivers of the recent recession. As a result, I am working tirelessly with my colleagues in Congress and FEMA to fix the problem. I am pushing bipartisan legislation that would delay most rate changes for three years, to give FEMA the opportunity to ensure its maps are accurate and allow Congress to make certain rates are affordable. Earlier this year, a similar amendment, which I co-sponsored, passed by a vote of 281 - 146. However, the Senate has not even considered such a measure.  I will continue to relentlessly push them to take up the measure. With these rate increases approaching, time is running out. Congress must act quickly to ensure flood insurance rates do not make homeownership unaffordable or harm our housing market. The time is now. And I urge all those affected to make your voices heard by with your members of Congress and Senators." Mergers and acquisitions in our business are alive and well! Shellpoint Partners LLC ("Shellpoint"), which the market is watching on the jumbo securitization front, announced that its wholly owned subsidiary, New Penn Financial, LLC acquired Resurgent Mortgage Servicing from Resurgent Capital Services. RMS is already the servicer of New Penn's residential mortgage loans, and upon completion of the acquisition RMS will be re-branded as Shellpoint Mortgage Servicing, operating as a division of and servicer for New Penn. "The acquisition of Resurgent Mortgage Servicing creates a complete residential mortgage operating platform for Shellpoint as we continue to expand our enterprise in the US Residential Mortgage markets," said Bruce Williams, Co-CEO of Shellpoint. "Resurgent Mortgage Servicing adds significant franchise value to Shellpoint's portfolio of companies and diversifies our revenue stream as a full service mortgage company and strategic partner for third-party servicing clients." And Wintrust Financial Corporation announced that its subsidiary, Barrington Bank &Trust Company, N.A. through its division Wintrust Mortgage, "acquired certain assets and assumed certain liabilities" of the mortgage banking business of Surety Financial Services of Sherman Oaks, California. The acquisition opens up Southern California for Wintrust, since Surety "has served southern California with an extensive portfolio of residential real estate loan programs since its founding in January 1994. Working closely with real estate agents, relocation companies, builders, accountants, human resource professionals, business managers and attorneys, Surety's loan origination team delivers quality financing products for the diverse needs of the southern California housing market. Surety originated approximately $1.0 billion in mortgage loans during the previous twelve months through its five southern California offices." On the banking side, Bridgehampton National Bank ($1.7B, NY) will buy First National Bank of New York ($272mm, NY) for about $5.3mm in stock. Rates seem to be the least of our problems, and really haven't done much (so far) in response to the partial shutdown. A lengthy shutdown could easily lead to lower rates, but one must be careful what one wishes for. This morning we learned that last week's applications were up slightly, but any increase in MBS hedging sales has easily been absorbed by the Fed. Yesterday agency MBS prices improved slightly, and the 10-yr closed at a yield of 2.65%. Unlike the possibility that the unemployment data will be postponed by the government's partial shutdown, today's data calendar is NOT impacted. We also had the September ADP report. The correlation between this and the actual government numbers on Friday has always been suspect, but the market may rely on it as the BLS report is not likely unless Congress quickly resolves the budget crisis. The consensus on ADP was +180k from +176k in August and it came out at +166k. The 10-yr is at 2.61% and MBS prices are a shade better. Part 2 of 2 of "A Country Founded by Geniuses but Run by Idiots" by Jeff Foxworthy. You might live in a nation that was founded by geniuses but is run by idiots... If your government believes that the best way to eradicate trillions of dollars of debt is to spend trillions more -- you might live in a nation that was founded by geniuses but is run by idiots. If a seven-year-old boy can be thrown out of school for saying his teacher is "cute," but hosting a sexual exploration or diversity class in grade school is perfectly acceptable. If hard work and success are met with higher taxes and more government regulation and intrusion, while not working is rewarded with Food Stamps, WIC checks, Medicaid benefits, subsidized housing, and free cell phones. If the government's plan for getting people back to work is to provide incentives for not working, by granting 99 weeks of unemployment checks, without any requirement to prove that gainful employment was diligently sought, but couldn't be found. If you pay your mortgage faithfully, denying yourself the newest big-screen TV, while your neighbor buys iPhones, time shares, a wall-sized do-it-all plasma screen TV and new cars, and the government forgives his debt when he defaults on his mortgage. If being stripped of your Constitutional "right" to defend yourself makes you more "safe" according to the government. If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog is, "Reverse Mortgages: Companies Need to Know What is Changing". 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 or www.TheBasisPoint.com/category/daily-basis. For archived commentaries or to subscribe, go to www.robchrisman.com. Copyright 2013 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)

DO Prices Increase

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What is bothersome for many CEOs, as we enter the 4th quarter, is profitability - or lack thereof. I received this note from the CEO of a residential lender in New Mexico. "Rob, my Secondary guy is telling me that he's not going to meet his goals that we set months ago. Are you seeing that everywhere?" Yes I am, even lenders doing mostly purchase business. Few forecast the speed at which rates moved higher and refis decreased, and the impact on profit margins. As volumes have dropped off, lenders have cut profit margins, and other lenders have to match those reduced profit margins. So not only are companies making fewer loans, they are making less per loan. (One can expect this to happen until competition is reduced with companies leaving and/or merging.) On top of that, profits are further being hit by renegotiating locks to keep the pipeline alive. So don't send your Secondary guy to the dung heap quite yet. Affiliated Mortgage Company announced the addition of seven states to their expanding servicing footprint. AMC's Correspondent, Retail and Wholesale/Mini-Correspondent divisions will now have the ability to service their customer's loans in Arizona, Connecticut, Delaware, North Carolina, Nevada, North Dakota, New Mexico and Vermont bringing their number of states to 38 in which they service Conventional, FHA and VA loans. Please visit Affiliated for a complete list of states serviced by Affiliated or to view correspondent requirements. Affiliated Mortgage Company is a wholly owned subsidiary of Benchmark Bank of Plano, Texas. In its Denver office, Redwood Trust is looking for talent in the form of a Secondary Marketing Analyst to monitor Redwood's conforming mortgage loan pipeline and warehouse. The ideal candidate should have applicable secondary mortgage market experience, well-versed knowledge of all conforming loan products, have strong analytic and quantitative skills and a background in pricing, pooling and delivering loans to the GSEs. This individual must be able to communicate effectively across all levels of the organization and participate in the development of efficient analysis and long term strategy. Must be mathematically oriented with strong database management skills, information systems background preferred. For complete job descriptions or to submit resumes visit Redwood and go to "Careers." Unfortunately shutdowns are not rare with the US. Government - but I am sure there are other things to spend on for Washington DC. George W Bush was the only president in recent decades not to experience a shutdown. The federal government closed once under Ford and HW Bush, five times under Carter, eight times under Reagan, and twice under Clinton. But yesterday the NMLS reminded us that it is not a federal government agency, and so with the shutdown of the government's non-essential services NMLS will remain open. The NMLS call center and test centers will also remain open. The CFPB's pricing rules and regulations for QM loans is a quagmire. But we're not done yet! Back in March Department of Housing and Urban Development (HUD) began the process of issuing its own qualified mortgage rule. Back then, according to HUD spokesman Brian Sullivan, the FHA has authority, under the Dodd-Frank Act, to review the CFPB rule and issue a separate ability-to-repay rule for loans guaranteed by FHA. A ways back the Office of Management and Budget had cleared a proposed rule setting qualified mortgage standards for FHA-insured single-family mortgages for issuance in the coming weeks. The OMB signed off on the proposed standards on 9/12. So now lenders can now comment on the QM's proposals from HUD, which would apply to mortgages insured, guaranteed, or administered by HUD and to single family mortgages insured by the Federal Housing Administration (FHA). But the clock is ticking - we only have until 10/30 to object to its components. But HUD says its proposal is aligned with the Ability-to-Repay criteria set out in the Truth in Lending Act (TILA) and also builds off of the QM rule from the Consumer Financial Protection Bureau (CFPB) finalized earlier this year on the conventional side. To begin with, in order to meet HUD's QM definition, mortgage loans must require periodic payments, have terms not to exceed 30 years, limit upfront points and fees to no more than three percent with adjustments to facilitate smaller loans (except for Title I, Section 184 and Section 184A loans), and be insured or guaranteed by FHA or HUD. HUD proposes to designate Title I (home improvement loans), Section 184 (Indian housing loans), and Section 184A (Native Hawaiian housing loans) insured mortgages and guaranteed loans covered by this rulemaking to be safe harbor qualified mortgages and proposes no changes to their underwriting requirements. However, per Mortgage News Daily, "for its largest volume of mortgage products, those insured under Title II of the National Housing Act, HUD sets out two categories for Qualified Mortgages which are determined by the relation of the Annual Percentage Rate (APR) of the loan to the Average Prime Offer Rate (APOR).   Both use the same formula for an APR; APOR + 115 basis points (bps) + on-going Mortgage Insurance Premium (MIP).  The first category, A Rebuttable Presumption Qualified Mortgage will have an APR greater than the product of that formula, the second category Safe Harbor Qualified Mortgages will have an APR that is lower." MND continues, "Lenders originating the Safe Harbor mortgages have the greatest legal certainty that they are complying with the Ability-to-Repay standard but can still be challenged by consumers who believe the loan does not meet the definitions of a Safe Harbor Qualified Mortgage." Under HUD's QM rule, HUD will no longer insure loans with points and fees above the CFPB level for qualified mortgages, but expects that these loans will adapt to meet the points and fees limit. In addition, HUD classifies all Title I, Section 184 and Section 184A insured mortgages and guaranteed loans, which most likely would have been nonqualified mortgages under the CFPB final rule, as safe harbor qualified mortgages. As aggregators and lenders everywhere check the rules and see how much of their recent government production would fall inside or outside these rules, it makes sense for you to view them straight from the horse's mouth: FHAQM. So the FHA needed $1.7 billion and government and conventional loans are in flux, but everything is cool on the jumbo side, right? Nope! Not only am I hearing that bank retail channels are aggressively pricing product (thus beating the pricing of independent mortgage like a rented mule), but the market for non-agency mortgage bonds (not backed by the government) is not firing on all cylinders. It suffered a setback in September when one offering was shelved and another had to slash its price amid tepid investor demand. PennyMac Mortgage Investment Trust cut prices on its debut mortgage bond at least twice to attract buyers, said investors who considered the offering. The firm sold a portion of the bonds at a discount of about 4-1/2 cents to government-backed mortgage bonds, a gap that grew by a cent or more since last week. And Shellpoint Partners LLC put its second mortgage bond on hold just before it was set to begin marketing the deal, said people familiar with the planned offering. In 2008 I had a mortgage trader respond to my email inquiring of his whereabouts by replying, "Deep inside my foxhole, waiting for daylight." According to Peter Wallison and Edward Pinto's Op-Ed in the Washington Post earlier this year, he may have to climb back in at some point. The scope of where we've been, and what we've become as an industry isn't lost to anyone still originating, underwriting, servicing, or selling a loan. It may to people who operate outside the industry, but as the writers of this opinion illustrate, the pitfalls of the current "reformers" of the industry, may very well be repeating the same pitfalls of the past. Is it accurate to say that tax-payers are still exposed to similar losses of the past five years? That's open for interpretation, but at the very least you can look at  the recent success' by the "mega-banks" to lower capital and liquidity mandates laid out in Dodd-Frank (not to mention LIBOR manipulation), as both indicators of their strength inside Washington, and their ability to sculpt "reform". Are my C-Rations still good? Yesterday the commentary brought up the question of who, the lender or the originator, owns the client database. Out in California, Rob Hirt, CEO of RPM, in a letter to his LOs wrote, "...your RPM contract shows that you have a right to your client contacts and RPM has always honored the loan officer credo ... a copy of the contact management database goes with the Loan Officer. Additionally, I am now adding an addendum to your contract that states that if you have created 'intellectual property' that is not sponsored by RPM-then you also have the right to keep that 'intellectual property'." Let's move on to some bank, agency, and investor updates, including the price change to Fannie's DO. Effective today, Fannie Mae subscribers will see a change in the Desktop Originator (DO) casefile submission price, as well as other changes, on their November invoices for October use. Notification of the price increase has been communicated via bulletin which amends the subscriber's rate sheet. New Penn Financial, LLC (New Penn) launched its mini correspondent program "which enables clients such as mortgage bankers, community banks and credit unions to expand their mortgage businesses while limiting risk and maintaining their brand credibility. Under the program, mini correspondent clients originate loans, submit them to New Penn for underwriting and clear-to-close issuance, complete the closing/funding process and sell the loans back to New Penn. The client remains the lender of record and is responsible for disclosures, closing and funding, while New Penn provides the loan decision." Bank M&A activity continues as banks expand, contract, or line up their departments to add efficiencies. One PacificCoast Bank ($280mm, CA) has received Fed approval to acquire Albina Community Bank ($121mm, OR) for an undisclosed sum. Bridge Bancorp, Inc., the parent company of Bridgehampton National Bank, announced the signing of a definitive agreement to acquire FNBNY Bancorp and its wholly owned subsidiary, the First National Bank of New York (collectively "FNBNY").  East West Bank ($23.3B, CA) will buy the parent company of MetroBank ($1.1B, TX) and Metro United Bank ($457mm, TX) for $273mm in cash and stock or about 1.7x tangible equity. The impasse in Congress on the budget and debt ceiling talks has resulted in a shutdown of non-essential functions. But this helped rates yesterday, and stronger-than-expected economic data had little impact. (The news was that the Chicago PMI rose to 55.7, above the consensus of 53.5, and the highest level since May.) The U.S. 10-yr T-note yield hit its lowest level in nearly two months, thanks to the potential slowdown in the US economy from the shutdown. And looking at agency MBS prices, "organic" supply (current production of about $1 billion a day) is more than manageable as official buying from the Fed is still going strong. Today we have some second tier economic numbers (7AM PDT's August Construction Spending and September ISM Manufacturing), but things start heating up with tomorrow's ADP numbers, Thursday's Jobless Claims, Factory Orders, and Challenger Job Cuts, and Friday's employment data. In the early going, rates have moved higher from Monday's close: 2.62% is now 2.66% on the 10-yr, and MBS prices are worse about .125. Part 1 of 2 of "A Country Founded by Geniuses but Run by Idiots" by Jeff Foxworthy. You might live in a nation that was founded by geniuses but is run by idiots... If you can get arrested for hunting or fishing without a license, but not for entering and remaining in the country illegally. If you have to get your parents' permission to go on a field trip or to take an aspirin in school, but not to get an abortion. If you MUST show your identification to board an airplane, cash a check, buy liquor, or check out a library book and rent a video, but not to vote for who runs the government. If the government wants to prevent stable, law-abiding citizens from owning gun magazines that hold more than ten rounds, but gives twenty F-16 fighter jets to the crazy new leaders in Egypt. If an 80-year-old woman or a three-year-old girl who is confined to a wheelchair can be strip-searched by the TSA at the airport, but a woman in a burka or a hijab is only subject to having her neck and head searched. If, in the nation's largest city, you can buy two 16-ounce sodas, but not one 24-ounce soda, because 24-ounces of a sugary drink might make you fat. If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog is, "Reverse Mortgages: Companies Need to Know What is Changing". 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 or www.TheBasisPoint.com/category/daily-basis. For archived commentaries or to subscribe, go to www.robchrisman.com. Copyright 2013 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)