Jumbo News, Lenders & Loan Amount Changes

By rchrisman@robchrisman.com

(Thank you to Ann M. for this one.)

Did you know commas save lives? 

"Let's eat Grandma!"

"Let's eat, Grandma!"

Diving into product news, there are developments in the jumbo/non-conforming arena.

 "Anyone doing business in the Jumbo space should look at Parkside Lending's suite of Jumbo products. With four different Jumbo programs, Parkside offers aggressive pricing and robust guidelines. Products include both fixed rates and ARMs. And they offer LTVs as high as 95%. Please contact your Parkside Account executive for more information or Sales."

 JMAC Lending has a new non-agency program, with greater flexibility on LTVs. Highlights of JMAC Lending's Newport Non-Agency program include cash-out up to 90%, purchase up to 95%, loan amounts from $100K up to $2.5 million, NO mortgage insurance, and loss mitigations with seasoning as low as 2 years.

 In conjunction with the updated FHFA loan limits, Plaza's minimum loan amount on Elite Jumbo will change accordingly. Effective for all locks on or after December 1, the minimum loan amount on Elite Jumbo loans is now $424,101 or $1 above the conforming limit for the number of units.

 On the conventional conforming side of things there are plenty of changes - mostly concerning loan amounts for 2017. But there is vendor news also regarding Fannie & Freddie programs.

 Equifax Inc. announced that its "industry-leading employment verification services, provided by Equifax Workforce Solutions (a business unit of Equifax Inc.) became available Dec. 10 as part of the Fannie Mae DU validation service. Equifax will now also offer asset verification services, available through its alliance with asset technology service provider AccountChek Company, LLC. The employment and asset verification services join the instant and manual income verification services and the IRS tax transcript fulfilment service that were made available through the same program as of Oct. 24. The IRS tax transcript fulfilment services aids lenders in retrieving tax transcripts directly from the IRS and can provide added data around a consumer's additional sources of income.

 One of the cool new features of Fannie Mae's 10.0 update is the property inspection waiver. This means that if you get the findings for it when running DU, NO APPRAISAL is needed on the refinance. This will include SFR and condo's only (no 2-4 units) and up to 90% LTV. To get the PIW (property insp. Waiver) the borrowers on the refinance MUST have been on the prior transaction where the data was submitted from the prior appraisal to Fannie.

 Flagstar's Loantrac was updated on Friday, December 9 to allow registration of loans at the higher conforming loan limits.  Fannie Mae announced that the new loan limits will be updated in Desktop Underwriter on December 10. Freddie Mac announced that Loan Product Advisor was updated on December 2. Please be sure that your submitted AUS findings reflect the appropriate loan amount. There are no closing/note date restrictions. Remember that any loan amount changes that cause the product to change on an already locked loan may be subject to worse case pricing. If you are requesting a loan amount increase on an already submitted loan, submit an updated 1003.

 HomeBridge Wholesale is offering Property Inspection Waiver on Rate/Term, Cash-Out and Condo Eligible transactions. Max LTV is determined by occupancy and transaction type.

 As of Monday, December 12^th, PRMG is allowing Conventional Loans with increased standard balance limits to be submitted, locked and funded. High Balance/Super Conforming Loans with updated loan amounts must be submitted, locked and funded by January 1^st, 2017. Existing cases can be resubmitted to the applicable AUS system to take advantage of the higher loan limits but would be subject to any standard underwriting and pricing policies for loan amount changes.

 Stearns announced that the new 2017 Agency Loan Limits will be available in SNAP 2.0 on Monday, December 12^th. Watch for further announcements on Stearns Lending's roll-out of Fannie Mae's Day 1 Certainty and associated benefits that will be integrated into SNAP 2.0.

 In reference to the 2017 loan limit increase, Franklin American Mortgage Company loans may be locked using the new higher loan amounts effective 12/05/2016. For loans currently locked looking to take advantage of the new loan limits, the request must be submitted to the Lock Desk at secondary@franklinamerican.com. Standard pricing policy applies which may result in a price change.  Additionally, if a lock has expired, worst-case pricing policy applies. If the loan has been submitted to underwriting, and the borrower requests to take advantage of the loan limit increases, the loan must be re-submitted to Underwriting/AUS for consideration.  Regardless of lock status, all loans must be submitted/re-submitted to DU or LP/LPA and receive an Approve/Eligible or Accept recommendation in accordance with the time frames outlined above.  

 Ditech's documentation guidelines for borrowers who are starting new employment after the note date of the loan have been revised. This change applies to loans with an LPA decision in a Freddie Mac Eligible product with an application dated on or after December 5, 2016. All loans underwritten using the expiring guidelines with an application date prior to December 5, 2016 must be closed and delivered by January 15, 2017.

 On 10/24/2016, Fannie Mae published SEL-2016-08, announcing various Selling Guide updates, as well as DU Validation Services and Enhanced PIWs, components of Fannie Mae's Day 1 Certainty program. Review AmeriHome's recent announcement for resulting changes to guidelines.

 Arch MI is all-in with Fannie Mae's 10.0 update. It will support the following: DU Validation for Income (effective immediately) DU Validation for Assets, and Employment (effective December 10^th, 2016) and Property Inspection Waiver (PIW) (December 10^th, 2016). Arch's EZ Decisioning program follows DU requirements, the DU Validation Service changes do not imp as an acceptable type, in addition to a full appraisal. As per the announcement, use of a PIW requires a DU Recommendation of Approve/Eligible, and is applicable for limited cash-out refinances up to a maximum 90% LTV. All the announced changes will be accepted under Arch MI's EZ Decisioning program. Arch MI's EZ Decisioning Program applies to loans with a DU approval.act our guidelines and will be eligible on their effective date, with no guideline changes required. For the PIW change, Arch MI will update our EZ Decisioning^SM guidelines to include this

 Parkside Lending began accepting locks and submissions with new loan amounts beginning December 5. Loans previously locked or submitted can be changed to the new higher limits, after December 5, using the standard change request process. In addition, loans may fund and be purchased effective December 5. The 2017 loan limits will be implemented in FNMA DU for Version 9.3 or Version 10.0 loan casefiles as follows: Loan casefiles submitted on or after the weekend of December 10, will be underwritten with the new general loan limits. Loan casefiles submitted on or after January 1, 2017, will be underwritten with the new high-cost area loan limits. 

 Regarding the new loan limits, NewLeaf Wholesale will accept applications and locks at the new loan limits for FNMA/FHLMC (NewLeaf 1 and NewLeaf 2) products effective immediately. Its manual lock process must be followed until January 1, 2017 to lock the loans impacted by these increased loan limits. Effective December 1, 2016 through December 31, 2016, when requesting a lock under the increased loan limits, the Broker must request the lock online with the highest loan amount currently allowed and then send an email to the Wholesale Lock Desk requesting the loan amount be changed to the higher loan amount.  The Lock Desk will update the loan amount and send a lock confirmation.

 Looking at rates, the U.S. Treasury market took some minor losses Monday with the 10-year hitting 2.53% but ended well above its worst levels. Agency MBS prices ended unchanged - that's good, right? The Treasury auctioned 3-year and 10-year notes. Demand for the sale of $20 billion 10-year notes was mediocre and this week's new Treasury issuance ends with the $12 billion 30-year reopening today. Overseas to start the week Chinese stocks had their worst sell-off in six months as concerns about trade frictions as well as a regulatory crackdown on insurance companies buying equities spooked investors.

 Today we've had the NFIB Small Business Optimism Index for November (which shot up to 98.4 from 94.9 as a result of the election) and November's import and export prices (-.3% and -.1%). The U.S. Treasury will auction off $12 billion in 30-year bonds. Day one of the FOMC's two-day meeting also starts today, with the rate decision tomorrow. For rates the 10-year note closed Monday yielding 2.48% and this morning its at 2.44% with MBS prices better nearly .250 versus Monday's closing levels.

Credit Trends, Capital Markets News, and Plenty of New Acronyms for the Industry

By rchrisman@robchrisman.com

A man being tried for murder happens to know one of the jurors. Before jury deliberation, the man finds a way to contact his friend and emphatically demands that he vote for life in prison with the possibility of parole. The friend agrees.

The jury deliberates for a week and returns a verdict of guilty with life imprisonment. The convicted man phones his friend and asks why it took so long for the verdict.

His friend says, "It took me a long time to convince the other jurors for life imprisonment."

"Why is that?"

"Because they wanted to acquit you!"

 Fannie Mae offers a best efforts committing option available through its Pricing & Execution - Whole Loan. Fannie Mae helps you manage your pipeline and interest rate risk and eliminates the fall out risk in a best efforts commitment, allowing you to focus your attention on other critical business priorities and activities. Join account executives from Fannie Mae's Capital Markets Sales Desk for an overview on why best efforts may fit your business and a live demo.

 "The agenda at MBA's upcoming 2017 Independent Mortgage Bankers Conference, taking place January 23-26, is deeper than ever before. With IMBs now accounting for HALF of the single-family market, the agenda is packed with sessions on business and technology strategies designed to ensure your company is poised to maintain that edge and build your market share in the challenging market ahead. Registration savings ends December 13^th!"

 Changes to lenders' view of credit?

 Questions surrounding credit scoring models continue. There is talk of Freddie and Fannie switching to a new credit scoring model. Challengers to FICO, like VantageScore, have already done the difficult work of proving the math to investors, establishing trust within DC's regulatory community, and selling the value proposition to the industry. The difficulty is the weighting of underlying assumptions behind the data. It will always be a subjective measure no matter how scientific it becomes.

 Franklin American Mortgage announced that loans originated using the DU Income Validation Service will be eligible for purchase.

 FAMC Correspondent National Bulletin 2016-24 includes information on Product and Guideline Updates, Clarifications and Reminders including removal of overlays.   Log into FAMC website to view its bulletin for additional information and all lock, delivery and purchase by dates, if required. 

 Fannie Mae's Selling guide has been updated with the following changes: Includes information on asset and employment validation offered through the Desktop Underwriter (DU) validation service starting on December 10. Introduces freedom from reps and warrants on property value for loans with a Collateral Underwriter risk score of 2.5 or lower effective December 10. Removes the Property Inspection Waiver fee for loans delivered to Fannie Mae on or after January 1. The fee for the DU Refi Plus Property Fieldwork Waiver is also discontinued for loans delivered on or after January 1. Clarifies when lenders must update appraisers of changes to a sales contract.

 Wells Fargo removing its overlay for saving cash to close for down payment and closing costs on conventional Conforming Loans - specifically its requirement that the Monthly Savings Plan Worksheet (Form 27) be used to document the borrower's savings plan.

 In reference to Fannie Mae's PIW offering, M&T Bank is reminding correspondents that the underwriter is still required to represent and warrant all data submitted to DU is complete and accurate. Before Sales opt to use PIW, they must review the ineligible transaction list and specifically confirm that the property is not located in a current disaster impacted area.

 And there is continued news coming out of the capital markets. Without them non-depository lenders wouldn't have an outlet for their product.

 First off, the GSEs (Government-Sponsored Enterprises, namely F&F) are moving closer to issuing a single mortgage security.The FHFA tells us that development on the Common Securitization Platform has reached a point where Fannie Mae and Freddie Mac may be able to issue a uniform mortgage-backed security sometime in 2018.

Last month Freddie started using the Common Securitization Platform (CSP - another acronym for us to memorize) for bond issuance and bond administration, which the FHFA said is a critical milestone. Yes, Freddie has implemented the CSP for certain single-family fixed-rate mortgage-backed securities (MBS). This development, commonly called Release 1, paves the way for, logically, Release 2, which will enable a combined Freddie Mac and Fannie Mae $3.5 trillion market of to-be-announced (TBA) MBS.

 Will it help borrowers and therefor loan officers? It should, at least through a more liquid and uniform secondary market. "The successful implementation of the CSP's core infrastructure and operations is a critical milestone on the path to the implementation of the Single Security Initiative. Freddie Mac and Fannie Mae have been working together - along with their joint venture, Common Securitization Solutions, LLC (CSS - another acronym) - under the direction of the Federal Housing Finance Agency (FHFA), to create a common fungible security that will be issued and guaranteed by either of the government-sponsored enterprises (GSEs). So, Freddie and Fannie teamed up to create Common Securitization Solutions, LLC, with its own CEO (David M. Applegate).

 

In a challenge to put as many acronyms in a couple sentences Freddie Mac (itself a nickname for an acronym) sent, "Release 1, now operational, enables Freddie Mac to transfer certain securities operations for its Gold participation certificates (PCs) and Giant PCs to CSS and the CSP. This will enable both GSEs to implement the Single Security Initiative by issuing the new Uniform Mortgage-Backed Securities (UMBS) and commingled resecuritizations through CSS and the CSP.

 "The Single Security Initiative will result in both GSEs issuing the new UMBS. Commingled resecuritizations of UMBS, which can combine UMBS issued by Freddie Mac and/or Fannie Mae, will be called Supers. (Supers are the UMBS counterpart to Freddie Mac's Giant PCs.) There are approximately $1.4 trillion in Freddie Mac 45-day PCs, of which an estimated $1.1 trillion are expected to be exchangeable by PC holders for 55-day UMBS once the new security is officially launched.

 "UMBS and Supers have the potential to transform the separate multi-trillion dollar TBA markets for Freddie Mac and Fannie Mae MBS into a single TBA market of $3.5 trillion, second in size only to the global market for U.S. Treasuries."

 The next goal is the issuance of mortgage-backed securities from Fannie and Freddie in a single commingled security. This will ensure that Fannie and Freddie enjoy the same pricing on their MBS.

 Turning to rates, any lender whose entire 2015 or 2016 profitability was based on rate and term refis are certainly growing nervous. For other companies, changes in the marketplace represent opportunities. It will be an interesting first quarter. On Friday U.S. Treasury, and agency MBS, prices fell to near their December 1 lows, and the yield curve is as steep as it's been since 2015. It didn't help the bond market that consumer sentiment climbed to an 11-month high. It is totally "risk on" as money is flooding into the equity markets. And oil prices are on the rise. Are we having fun yet?

 With two weeks until Christmas we have a full plate of scheduled economic happenings in the U.S. this week. Today there's no news but we'll have a $24 billion 3-year note auction and a $20 billion 10-year note sale. Tomorrow we have some November Export & Import Price figures, and a $12 billion 30-year bond sale by the Treasury. Wednesday, we have the MBA's Mortgage Index, November Retail Sales, November Producer Price Index, the Industrial Production and Capacity Utilization duo, October Business Inventories, the Bank of Japan decision and (drum roll please) the Federal Open Market Committee Rate Decision.

 Thursday, we complete the usual inflation news with the November Consumer Price Index numbers, and also Initial Jobless Claims, December Philadelphia Fed, Empire Manufacturing Index, NAHB Housing Market Index, and October Net Long-Term TIC Flows. We finish it off with Friday's November Housing Starts and Building Permits.

 If you want some numbers here you go. Friday the 10-year worsened .625 to close at 2.46%. The 5-year Treasury note sold off roughly .250. Agency MBS prices worsened .250-.375 depending on security and maturity. This morning the "the economy is strengthening so rates are going to go up" thinking is continuing: the 10-year is at 2.51% with agency MBS prices worse .250-.375 versus Friday afternoon.

Bus. Development, CFPB Targets Reverse Lenders, MBA Reports on Lender Profits

By rchrisman@robchrisman.com

"I find it ironic that the colors red, white, and blue stand for freedom, until they're flashing behind you." The OCC doesn't have flashing lights, but the feeling in one's stomach is probably like being pulled over. The OCC is set to downgrade WFC's fair lending scorecard by two notches, a move that would give regulators an even greater say in the bank's day-to-day operations.

If you work for a lender that lost money in the 3^rd quarter, you're "special." And if you've lost money this year, do you really think you're going to improve your bottom line in 2017? The Mortgage Bankers Association reported that its study of independent mortgage banks and mortgage subsidiaries of chartered banks showed companies had a net gain of $1,773 on each loan they originated in the third quarter of 2016, up from a reported gain of $1,686 per loan in the second quarter of 2016.

 Including all business lines, 94 percent of mortgage lenders in our study reported pre-tax net financial profits in the third quarter of 2016, compared to 90 percent in the second quarter of 2016," said Marina Walsh, MBA's Vice President of Industry Analysis. Heck, what about that other 6%??

 Ms. Walsh observed that, "An increase in production volume and slight decrease in expenses in the third quarter kept production profits relatively stable. These profits would have been even higher were it not for a decline in net secondary marketing income, primarily income related to mortgage servicing rights."

 "For the first time since the second quarter of 2015, production expenses were below $7,000 per loan, at $6,969 per loan. These expenses, however, remain elevated by historical standards.  Given the increase in loan count and the higher pull-through rate compared to the second quarter, we would have expected an even larger reduction in production expenses." Average production volume increased, as did loan count.

 The MBA said that, "The average pre-tax production profit was 74 basis points (bps) in the third quarter of 2016, compared to an average net production profit of 73 bps in the second quarter of 2016. Production profits for the third quarter of 2016 are also up from production profits of 55 bps in the third quarter of 2015. Since the inception of the Performance Report in the third quarter of 2008, net production income has averaged 53 bps."

 One key to profitability is not paying large fines. The Consumer Financial Protection Bureau (CFPB) has taken action against three reverse mortgage companies for deceptive advertisements, including claiming that consumers could not lose their homes. The companies sanctioned are American Advisors Group, the largest reverse mortgage lender in the United States, Reverse Mortgage Solutions, and Aegean Financial. They were ordered to cease deceptive advertising practices, implement systems to ensure they are complying with all laws, and pay penalties totaling more than $800,000.

 

The CFPB fined Orange County's American Advisors Group $400,000, the nation's biggest reverse-mortgage lender, for falsely telling customers that they weren't at risk of losing their homes, and that they could live in them for the rest of their lives. Bloomberg reports that Reza Jahangiri, American Advisor's chief executive officer, said in a statement the company has "made a significant investment in our compliance and legal infrastructure to ensure we fully conform to all marketing laws and rules." American Advisors didn't admit to or deny the CFPB's findings.

 Certainly, residential lenders and the court system are tied inexorably together. Recently a federal judge in Las Vegas blocked implementation of a Department of Labor rule that would have taken effect December 1st, increasing the salary level that an employee can earn and still be eligible for an exemption from overtime under the Fair Labor Standards Act (FLSA). The government is expected to appeal the decision.

 We had a little bond rally yesterday, and a big rally in stocks, once again proving they don't always move in opposite directions. WTI (West Texas Intermediate) crude fell 1.94% to $49.94/bbl. In mortgage land, the MBA Mortgage Market Index fell to its lowest level since January while the average 30-year mortgage rate rose to its highest since October of 2014. JOLTS - Job Openings fell to 5.534 million in October from 5.631 million in September, indicating less slack in the labor market - no surprise there. We had a report on consumer credit, the key takeaway from the report being that consumer credit (both revolving and nonrevolving) continues to expand, which is a supportive element for the U.S. economy

 Agency MBS closed the day "tighter vs. both treasuries and swaps" as the treasury market was better bid, curve flatter, ahead of Thursday's ECB decision. For the day, the risk free 10-year T-Note improved .375 in price closing with a yield of 2.35% - not much higher than where we were last December at this time. Agency MBS prices improved about .250.

 That was all so... yesterday. This morning from overseas we've had the ECB decision and Mario Draghi's press conference with markets more comfortable that European QE will be extended well into 2017. In the U.S., we've seen Initial Jobless Claims for the week ending 12/03 (-10k to 258k) - and that about does it for market-moving scheduled news. Without much in the way of news the focus tends to shift on what the NY Fed is doing in terms of buying agency MBS, although it is very, very well forecast and described. Today will see the Desk of the New York Fed conduct two morning FedTrade operations: purchase up to $925mn Class B 2.5% ($450mn) and 3% ($475mn) followed by $1.5bn GNII 3% ($725mn) and 3.5% ($775mn). We find the benchmark 10-year yielding 2.39% this morning with agency MBS prices worse .250 versus last night.

Dec. 7, primer on Existing Home Sales and trends

By rchrisman@robchrisman.com

Today is the 75^th anniversary of the Japanese attack on the U.S. naval base at Pearl Harbor in Hawai'i where 2,403 Americans died and 1,178 were wounded. There are those that believe that ghosts still haunt "Pearl" but there modern day "ghost towns" in other parts of the U.S. where high vacancy rates, declining populations, and large numbers of vacant properties are creating blight. The list of 20 towns includes places in Kansas, Texas, Oklahoma, Alabama, Illinois, Michigan, New Jersey, Mississippi, and Pennsylvania, Florida, and Indiana.

.Do you know that half of the US residential property equity is controlled by people 62 and older? That's $6 trillion in equity. If you're not familiar with the Home Equity Conversion Mortgage (HECM) product, you could be losing your most valuable retiree and senior customers. Attend a FREE session available only to people new to the reverse industry February 8 at UserCon 2017 in San Diego. 

 "Pending" Home Sales, "Existing" Home Sales, and "New" Home Sales - take your pick. They all show something slightly different, and economists have their favorites. Housing and jobs play critical roles in the United States economy, thus the abundance of various statistics for each one. And trends are more informative than spot numbers every month. What have Existing Home Sales been doing during the last several months? Remember that the data reflect the number of homes that have previously been constructed (and therefore accounted for by the new home sales indicator) and are now being resold. And it is usually broken down by region.

 Back around Easter U.S. Existing Home Sales rose to a 5.45 million seasonally adjusted annualized rate in April from March's 5.36 million (revised up from 5.33 million). The uptick in April was fueled by a 12.1% increase in home sales in the Midwest. That gain, and a 2.1% increase in home sales in the Northeast, offset existing home sales declines of 2.7% and 1.7%, respectively, in the South and West.

 Back then the bulk of the total existing home sales increase was led by sales of existing condominiums and co-ops, which jumped 10.3% to a seasonally adjusted annual rate of 640K units. Single-family home sales were up just 0.6% to 4.81 mln, although they are up 6.2% year-over-year. The median price for all housing types in April was $232,500, up 6.3% y/y. The share of first-time buyers in April was 32% versus 30% in March and the same period a year ago. At the sales pace back then, unsold inventory sits at a 4.7-month supply, which is up from 4.4 months in March. Still, that is well below the 6.0-month supply typically seen during normal periods of buying and selling.

 Skipping ahead to Memorial Day, Existing Home Sales rose 18% in May to 5.53 million. This was the highest pace since February 2007. The median house price was $239,700 up 4.7% YOY. Total housing inventory was at 2.15 million units, which represented a 4.7-month supply. Inventory was still tight. The first-time homebuyer accounted for 30% of all sales, a decrease from last month and last year. Days on market dropped to 32 days, a record.

 When school let out in June they rose to a 5.57 million annual rate in June from 5.51 million in May (revised down from 5.53 million). While existing home sales in June were at a seasonally-adjusted annual rate of 5.57 million, their highest level since 2/07, sales remain 22% off the peak of mid-2005. A key reason; a low inventory that essentially hadn't budged since late 2011. And why might that be? A rise in the number of renter-occupied single-family homes (which aren't for sale) from 10.5 million in 2000 to 17.5 million!

 We sailed through the summer, back when rates were low, and in August Existing Home Sales fell 0.9% as tight inventory depressed transactions. The median home price was just over $240,000 which was a 5.1% YOY increase. Housing inventory was down to just over 2 million homes, which is a 4.6-month supply. First time homebuyers accounted for 31% of sales. Strong job growth and low mortgage rates are pumping up demand, but builders remained reticent.

 Passing Labor Day Existing Home Sales were +3.2% in Sept.  Existing-home sales rebounded strongly in September and were propelled by sales from first-time buyers reaching a 34 percent share, which is a high not seen in over four years, according to the NAR. All major regions saw an increase in closings last month, and distressed sales fell to a new low of 4 percent of the market, and the annualized pace hit 5.47% from a downward-revised pace of 5.3 million in August. The median home price was up 5.6% to $234,200. The first-time homebuyer represented 34% of all sales, which is a big improvement from the 30% - 32% range it had been stuck in for the past year. Inventory remains tight, however with about 2.05 million homes on the market, which represents a 4.5-month supply. A balanced market is closer to 6.5 months.

 September, distressed sales (foreclosures and short sales) represented 4% of all sales, which is a post-crisis low. Days on market ticked up to 39 days from 36 in August. The increase in the first-time homebuyer was good news, and we may finally be seeing the pent-up demand that has been building over the past 10 years finally come to market. 

 And then around Halloween Existing Home Sales rose 2% to a seasonally-adjusted run rate of 5.6 million in October, according to the NAR. September's numbers were revised upward to 5.49 million. October's number is 5.9% higher than a year ago, and the highest reading since February 2007. The median home price rose 6% to $232,200. Total housing inventory dipped to 2.02 million units, which represents a 4.3-month supply at current levels. (NAR considers 6.5 months' worth to be a balanced market.) Days on market ticked up to 41 days from 39 the month before. The first-time homebuyer accounted for 33% of all sales, which is up a couple percentage points from a year ago. Now, if we could just get housing starts up to catch up with the increase in sales we could have a real recovery on our hands.

 Shifting to the economy and rates, data in the last few weeks, for all its faults, continues to show economic conditions continue to gradually improve. GDP was revised in the 3Q and is now estimated to have risen at a 3.2% annualized pace. While business investment was even weaker than originally reported, stronger consumer spending helped the economy to grow at the fastest pace in two years. Personal income in October rose a solid 0.6 percent; primed and ready for the holiday shopping season. Higher expected inflation, however, in the coming months will erode some of the income gains for households. The PCE deflator, the Fed's preferred gauge of inflation, rose 0.2 percent in October due to rising energy prices, pushing the year-over-year rate to 1.4 percent getting closer to the Fed's target of 2%. 

The bond market Tuesday was a snoozer. Rates hardly did anything aside from a little shuffling between coupons and maturities - barely noticeable to LOs or borrowers. I won't waste your time, other than to say that yesterday the 10-year note closed 2 ticks lower to yield 2.39%, and 5-year Treasuries and agency MBS prices were pretty much unchanged.

This morning we've had the MBA's application data for last week (a non-event at -.7%, refis -1%, purchases +4%). The October JOLTS and November Help-Wanted OnLine data will be released at 10AM ET. This morning the 10-year's yield is hovering around 2.37% with both 5-year Treasury and agency MBS prices better slightly than last night's close.

New Broker Product, Vendor News Incl. eClosing, Pending Home Sales Primer; FHA, VA, & Ginnie Changes

 

By rchrisman@robchrisman.com

Congrats to Ben Carson, Trump's nominee for HUD. Before anyone starts celebrating, here's what one person has to say that's worth a skim. Some would say its humorous.

 Vendors have been honing their offerings, making things more cost efficient given the perceived lower volumes in early 2017. Let's take a random sampling to see what they've been up to.

 Lendsnap will be doing a live demo of its unique platform at the Digital Mortgage Conference in San Francisco this Thursday afternoon. Lendsnap will be on stage showing a live presentation of its account aggregation technology that retrieves borrower documentation during mortgage application (W2s, pay stubs, bank statements, and tax returns). Management will showcase their new borrower experience (UX) and have other updates to discuss with interested

lenders. "As the only service to automatically gather authentic qualifying documents (not just VODs), Lendsnap offers account aggregation technology that fits how you originate and enhances your portfolio liquidity. The Lendsnap solution has passed the rigorous SOC I Type II auditing process for 2016. Lendsnap is live with lenders across the nation; please contact Mike Romano to learn more.

 Bradford Technologies "has been dedicated to helping the appraisal industry move from form filling to more meaningful data analysis. Its new mobile inspection app for appraisers - Inspect-a-Lot, is centered on collecting only pertinent property data and not filling out forms in the field, as has been the traditional approach. Appraisers can focus on the data that affects value and needs to be analyzed as well as speed up the inspection process by removing the clumsy forms interface. If you would like to try out the app, you can download 'Inspect-a-Lot' from the Apple App Store. It only runs on iPads now, no iPhones or Androids."

No one has a crystal ball, and can accurately, consistently predict the future. "Pending" Home Sales, "Existing" Home Sales, and "New" Home Sales - take your pick. They all show something slightly different, and economists have their favorites. Housing and jobs play critical roles in the United States economy, thus the abundance of various statistics for each one.

 Analysts are always looking for scraps of information to give them a picture of what's ahead. One tool that some economists watch is Pending Home Sales. It is an index created by the National Association of Realtors (NAR) that tracks homes sales in which a contract is signed but the sale has not yet closed. What have the numbers been showing us lately?

 In July we learned that Pending Home sales rose 0.2% the prior month. Tight inventory remained a problem, and the increase was mainly due to the Northeast which doesn't have the inventory problem seen on the West Coast. Lawrence Yun, NAR's chief economist noted, "With only the Northeast region having an adequate supply of homes for sale, the reoccurring dilemma of strained supply causing a run-up in home prices continues to play out in several markets, leading to the last two months reflecting a slight, early summer cooldown after a very active spring," he said. "Unfortunately for prospective buyers trying to take advantage of exceptionally low mortgage rates, housing inventory at the end of last month was down almost 6 percent from a year ago,1 and home prices are showing little evidence of slowing to a healthier pace that more closely mirrors wage and income growth."

 The following month Pending Home Sales dropped 2.4% in August, per the NAR. Suffering supply levels had taken the wind out of the momentum the housing market experienced earlier this year. "Contract activity slackened throughout the country in August except for in the Northeast, where higher inventory totals are giving home shoppers greater options and better success signing a contract," Yun said. "In most other areas, an increased number of prospective buyers appear to be either wavering at the steeper home prices pushed up by inventory shortages or disheartened by the competition for the miniscule number of affordable listings."

 But the summer housing market did not cool down after summer.  Housing inventory declined annually for 15 consecutive months, and properties closed 11 days quicker than August last year, according to the Pending Home sales report by NAR.  Inventory also remains down as less than 450,000 new listings came on the market in September, while the median home price rose 9% from last year to $250,000, a new high for the month.

 Which brings us to October where Pending Home Sales were +0.1%. With last month's small increase, the index is now 1.8% higher than last October. Overall, things are pretty good!

 And of course, a good chunk of those are FHA & VA loans, especially for first-time home buyers with limited down payment funds. Any changes to FHA & VA? You bet there are - they don't stop.

 FHA'sMortgagee Letter 2016-20, 2017 Nationwide Forward Mortgage Limits, provides the maximum mortgage limits for FHA-insured Title II forward mortgages. Because of the change to the national median home price this year that increased the Federal Housing Finance Agency (FHFA) limits, FHA's "floor" and "ceiling" loan limits will increase for calendar year 2017 to $275,665 and $636,150, respectively, for a one-unit property as referenced in Section II.A.2.a.ii of the Single Family Housing Policy Handbook 4000.1. Mortgagees may view this list on the Maximum Mortgage Limits web page. FHA forward mortgage limits are available by MSA and county, or by downloading a complete listing. The new loan limits are effective for case numbers assigned on or after January 1, 2017, and remain effective through December 31, 2017.

 Ginnie Mae is making available the Mortgage-Backed Securities (MBS) Multifamily Loan Level Disclosure Layout, version 2.0, for disclosure of Monthly Multifamily Loan-Level information.

 Chase Correspondent has suspended its FHA and VA 10 Year Fixed product line(s). Thus, these products will no longer be offered in the Optimal Blue system, but will be available for 30 days to secondary users.

 Impac Mortgage is advertising a limited time offer. It will underwrite FHA and VA loans with FICO scores between 600-640 for just $99.

 M&T issued a reminder that a VA IRRL Comparison Statement Lender Certification is required on all VA IRRL transactions, and must be signed by the Veteran and the VA Underwriter no later than closing. Although VA does not publish a formal version of the form, it does provide a link in the VA Lender's Handbook to a recommend a draft which lender may copy and paste onto their own letterhead. M&T also offers Form 2440 VA IRRL Comparison Statement and QM Affirmation for lender use available on MEME.

 Rates? Up some, down some, and Monday was up some - mostly due to the ISM Non-Manufacturing Index rising to a 13-month high for November. Three regional Fed presidents made public remarks that a December 14 rate hike is a virtual guarantee - no surprise there. What is also not a surprise is traders reporting that volume was light. Are there any pipelines left to sell? What will pipelines look like after the end of December when the pre-election loans fund? Conjecture aside, by the end of the day Monday rates were pretty much unchanged from Friday afternoon and the 10-year ended the day yielding 2.39%.

 Today we've had a revision to Q3 Productivity and Unit Labor Costs (3.1% and +.7%) and the October Trade Balance ($42.6 billion deficit); coming up are October Factory Orders (10AM ET). The 10-year is at 2.39% and agency MBS prices are roughly unchanged versus Monday afternoon.

MBA's Guidance on 2017 Volumes, Conventional Conforming Changes Roll On

By rchrisman@robchrisman.com

THE FOUR STAGES OF LIFE:

1) You believe in Santa Claus.

2) You don't believe in Santa Claus.

3) You are Santa Claus.

4) You look like Santa Claus.

It is probably not the case that this date is celebrated by mortgage bankers from coast to coast, and forget the jokes about it being the "Mortgage Drinkers Association." But on this date in 1933, the 21st Amendment to the Constitution was passed and ratified, ending national Prohibition. Just think about what conferences would be like if alcohol was still banned. It would certainly save a lot of money for the MI companies that always seem to sponsor the parties! Decades from now will "edibles" be in vogue?

Let's take a look at a pre-election estimate. The Mortgage Bankers Association announced earlier this year that it expected to see $1.10 trillion in purchase mortgage originations during 2017, an 11 percent increase from 2016. In contrast, MBA anticipates refinance originations will decrease by 40 percent, resulting in refinance mortgage originations of $529 billion. In total, prior to the election and rates shooting up the MBA thought mortgage originations will decrease to $1.63 trillion in 2017 from $1.89 trillion in 2016. For 2018, MBA had forecast purchase originations of $1.18 trillion and refinance originations of $410 billion for a total of $1.59 trillion.

It all made sense, pre-election. Strong household formation coupled with further job growth, rising wages, and continuing home price appreciation will drive strong growth in purchase originations in the coming years. It still does. And after the HMDA data came out the MBA upwardly revised its estimate of originations for 2015 to $1.68 trillion from $1.63 trillion, to reflect the most recent data reported in the 2015 Home Mortgage Disclosure Act (HMDA) data release.

Let's take a look at the MBA's current estimates, since plenty of lenders use those as a benchmark - although lenders never think declining volumes will impact them - it is always "the other guy" who is going to be hit. Keep in mind that 2003 was the high water mark for residential originations: $3.8 trillion. 2015 clocked in with $1.67 trillion, 2016 is shaping up to be $1.89 trillion, and the MBA predicts 2017 to be $1.58 trillion - down about 16%.

Purchase biz in 2015 was $903 billion, 2016 estimated at $990 billion, and forecast at $1.1 trillion in 2017. On the refi category, 2015 was $776 billion, 2016 expected at $901 billion and then 2017 forecast at $484 billion - a drop of 46%.

 What are people financing, or refinancing? Attom Data Solutions reports the value of the housing market has reached $26 trillion, supported by $14 trillion in mortgage debt ($10 trillion is single family residences). In order, the largest lenders as of Q2 2016 are: Wells Fargo (26,262 originations in the quarter), Quicken (18,753), Caliber (13,580), Bank of America (11,111), Fairway Independent (11,020), JPMorgan (9,862), Movement (9,796), Prime Lending (9,064), Guaranteed Rate (8,581), and Guild (8,315). Of note, 63% of the total was originated by nonbank originators.

The lion's share of loans are still destined for the agencies, and let's see what is happening to lenders & investors in their conventional conforming lineups.

 Join the webinar courtesy of Ellie Mae and representatives from Fannie Mae and Freddie Mac on December 7^th to gain vital intel into upcoming Uniform Closing Dataset (UCD) closing disclosure changes.

This year, Fannie Mae and Freddie Mac published a redesigned Uniform Residential Loan Application (URLA) along with a corresponding Uniform Loan Application Dataset (ULAD). These documents support changes in mortgage industry credit, underwriting, eligibility policies, and regulatory requirements. A new self-paced presentation can now to help you understand the changes to the URLA (i.e., Fannie Mae Form 1003), summarizing the differences between the new and old forms, what you should be doing now to get started, a high-level timeline, and more. Reference additional resources including the interactive/dynamic forms and ULAD mapping on the URLA page.

Freddie Mac released a series of disclosure specifications relating to the upcoming single agency security (UMBS). From the release: As a reminder, Freddie Mac will implement the Single Security aligned disclosure format for our current single class PC securities in the Summer of 2017. Vendors should begin to review the specification, sample files and the updated 2017 Disclosure Guide and make plans to update their systems in the first half of 2017. In the first quarter of 2017 Freddie will provide system-generated L1/L2 test files for the early Freddie Mac implementation.

Rates? The Trump victory initially sent interest rates on a dizzying ride in the days following the election. They plunged for a few hours, then roared upward. They've certainly moved higher since. Markets never like uncertainty, and the market had a Clinton win baked into its forecasts. The benchmark 30-year fixed-rate mortgage rose election week to 3.73 percent from 3.69 percent, according to Bankrate's weekly survey of large lenders. A year ago, it was 4.11 percent. Four weeks prior the rate was 3.62 percent. The last time the 30-year fixed was higher was June 8, at 3.74 percent. Over the past 52 weeks, the 30-year fixed has averaged 3.78 percent.

 Anyone who claims that the economy in the United States is not doing better than it was a few years ago is wrong. And an improving economy often leads to higher rates as the demand for capital to expand increases. We received more evidence of a solid economy at the end of last week with the employment data. Average hourly earnings growth in the U.S. fell short of expectations for November but the rest of it was solid, and yet MBS prices improved Friday, along with Treasuries:  the 10-year rallied .5 to close yielding 2.39% and MBSs improved about .250.