Some will call this a useful tool and a time saver - others will say it is another sign of our privacy going away and "Big Brother" seeing everything. Enter an address, and it displays a map of the area showing all residences/businesses, including their phone numbers: http://neighbors.whitepages.com.

In Northern California, WBC Lending is looking for experienced wholesale AE's to call on brokers. WBC Lending has "an aggressive product offering, including a super jumbo portfolio product with start rate 1.625% and life cap of 6.25%, up to $2 million dollars with a 50% DTI, and a 40-year term." With over 65 years of combined wholesale mortgage banking experience, the executive management team at WBC Lending believes they have put together a wholesale platform that is second to none, and would prefer that candidates have a minimum of 2 years' experience. WBC has local underwriting, docs and funding all out of the San Jose based corporate offices.   If interested, please inquire today by contacting John Giagiari at jg@westernbancorp.com, and for more information on the company visit http://www.westernbancorp.com/.

Perhaps Bank of America home loans president Barbara Desoer could apply - she will retire this month after being at the bank since 1977! Her most recent assignment was the "integration of the Home Loans business into Consumer Banking" after the 2008 purchase of Countrywide.

HUD, and the FHA, is definitely a big part of the home mortgage environment. In the name of further learning, HUD is offering a variety of training programs, including an online course on the new HOPE LoanPort (HLP) enhancements.  You can register for classes, which are take place every Tuesday and Thursday.  Also available is a series webinars on Loss Mitigation, offered in conjunction with the FHA.  Some of the upcoming courses cover HUD's Neighborhood Watch System, loss mitigation, default reporting and FHA claims.  See the HUD website to register.

Early pay-offs (prepayments) of Ginnie Mae securities, made up primarily of FHA and VA loans, is causing some concern among investors. Besides the initiatives announced by President Obama in his Plan to Help Responsible Homeowners and Heal the Housing Market, more changes, such as tweaks to the FHA mortgage insurance premiums (MIP), could be unveiled in the next few weeks. President Obama's plan describes "Streamlined Refinancing for FHA Borrowers" by excluding streamline-refinanced loans from comparison ratio calculations. Most believe that this plan will be implemented and has the potential to raise GNMA prepayment speeds. (There has been a recent increase in early pay-offs; most attribute this to the "GNMA universe" becoming a lot more refinanceable after the improvement in FHA rates this year.)

(As a quick refresher, the compare ratio is the serious delinquency rate of all loans originated by a lender during a one or two-year period relative to the average of all lenders operating in the same region. If this ratio rises above 150%, the lender may lose the ability to make new FHA loans out of that region or branch - 200% is almost a sure thing. As higher coupon and seasoned loans have a weaker credit and greater default risks, lenders worry that streamline-refinancing them could push up the compare ratio.)

If Streamlines are excluded from the compare ratio calculation, this should remove a disincentive for streamline-refinancing higher-risk borrowers. This argues for an increase in GNMA prepayments, particularly on higher coupons and pre-2009 originations since these have the worst credit quality. But data from HUD suggest that the compare ratios of most national lenders are now significantly below the 150% threshold (see below), implying that this is not the only binding condition for refinancing riskier loans. In addition, FHA's indemnification rules essentially grant put-back amnesty for loans originated before 2009 - refinancing these loans would reset the clock and put the lender on the hook for fresh rep & warranties. Unless FHA grants put-back amnesty for all streamline refinances, lenders are likely to remain skittish. And let us not forget the various overlays that most investors have in place on FHA Streamlines.

So where are the compare ratios of "the big boys"? The current national compare ratios for the big lenders, from research piece I read from a large broker-dealer, are all below 130% - well below 200% recommended by FHA. Only 6% of lenders have a compare ratio of above 200% and these lenders comprise of only 2% of the total loans outstanding (that are considered for calculating compare ratios). BofA has 126, Chase 39, Wells 79, Quicken 78, US Bank 69, Fifth Third 59, PHH 66. Bank of America 90+ delinquencies have been steadily rising and there are concerns that they will be forced to do a one-time buyout as their 90+ delinquencies hit 5%, and/or, similar to GMAC, BofA starts buying out just enough delinquent loans to maintain delinquencies at that level.

Critics of the compare ratio ask, "Isn't it more of a long term snapshot of performance than short term?  If a lender tightens up their guidelines would you see an immediate impact to the compare ratio?" Some liken it to turning a cruise ship, and only looking in the rear view mirror. And further complicating things is the theory that most delinquencies are caused by unforeseen job losses, rather than other reasons that might have been caught during the underwriting process - unless one's underwriters were very poor and the company was seeing a first payment default problem.

Speaking of which, the serious delinquency rate for FHA mortgages reached 9.6% in December, and the highest level in more than two years, HUD recently announced. More than 711,000 FHA-insured loans were seriously delinquent, up almost 19% from one year earlier, according to the HUD report, and up 3% from November. At the same time, mostly for pricing reasons, originations are down. In December, the FHA insured 93,700 mortgages, a nearly 30% decline from the 133,000 insured in December 2010. Analysts are most concerned with the FHA's insurance fund: in its fiscal year 2011, the FHA Mutual Mortgage Insurance Fund slipped to a 0.24% capital ratio from 0.5% the year prior. By law, the fund must remain above 2%. Lenders should not be surprised if the FHA insurance premiums go up again this year.

Here in Miami, and everywhere else condos exist, condo buyers are having a hard time obtaining FHA mortgages, and often it's down to the building's financial status, not the borrower's.  Since February 2010, the FHA have required that the whole building be deemed financially viable rather than just the single units, which has resulted in a proliferation of rejected buildings, a headache for condo sellers who rely on the FHA stamp of approval as a marketing mechanism, impeding the housing market's recovery. FHA regulations now dictate that buildings must be 50% owner-occupied, that no more than 10% of the units are owned by one entity, that no more than 15% of the units are 30 days past due on their monthly assessments, and that at least 10% of the association budget be set aside for capital expenditures and deferred maintenance.  The general consensus in the housing industry is that, given consumer demand for FHA-backed mortgages, the regulation is short-sighted.

FHA mortgagees participating in the Lender Insurance ("LI") program will be required to indemnify HUD for self-endorsed loans that HUD deems ineligible for FHA insurance based on a final regulation published by HUD on January 25. The regulation finalizes changes to the LI regulations and will take effect on February 24. In addition to the significant changes to HUD's indemnification authority for self-endorsed loans through the LI program, the final regulation also amends mortgagee eligibility criteria to participate in the LI program, including acceptable default/claim rates, amends HUD's authority to monitor lenders participating in the LI program, and implements a process for FHA lenders terminated from the LI program to request reinstatement of their LI authority.

HUD made clear that these amendments are designed to improve and expand the risk management activities of the FHA and to strengthen the FHA Insurance Fund by limiting "unnecessary and inappropriate risks" to the Fund associated with loans that the Department determines should not have been endorsed through the LI program. As HUD notes, this is the latest in a series of steps the Department has taken to strengthen the financial soundness of the FHA program and mitigate the risk of possible insolvency of the FHA Insurance Fund as HUD continues its efforts to increase FHA's capital reserve ratio to meet the congressionally mandated threshold of two percent.

Last week was not kind to fixed-income U.S. securities, especially after that strong jobs number Friday. But the U.S. economy is not setting the world on fire, and Europe still poses a threat - and could for years. So we can all expect rates to drift and drift down. Rates are holding record lows as mortgage bonds (MBS) rally ever higher. Any modest improvement in our economy would nudge investors into equities and out of bonds - but the overhang of the Eurozone debt crisis proves to be too much. Our 10-yr T-note closed Friday at about 1.94%

The economic calendar will be very light this week - so watch for Europe to perhaps regain center stage. We do, however, have some Bernanke testimony and Treasury auctions tomorrow, Wednesday, and Thursday; the Trade Balance and Consumer Sentiment will be released on Friday. Ahead of that rates and prices are nearly unchanged from Friday.

HIGH SCHOOL -- 1957 vs. 2010 (Part 1 of 2)
Scenario 1:
Jack goes quail hunting before school and then pulls into the school parking lot with his shotgun in his truck's gun rack..
1957 - Vice Principal comes over, looks at Jack's shotgun, goes to his car and gets his shotgun to show Jack.
2010 - School goes into lock down, FBI called, Jack hauled off to jail and never sees his truck or gun again. Counselors called in for traumatized students and teachers.
Scenario 2:
Johnny and Mark get into a fist fight after school.
1957 - Crowd gathers. Mark wins. Johnny and Mark shake hands and end up buddies.
2010 - Police called and SWAT team arrives -- they arrest both Johnny and Mark. They are both charged with assault and both expelled even though Johnny started it.
Scenario 3:
Jeffrey will not be still in class, he disrupts other students.
1957 - Jeffrey sent to the Principal's office and given a good paddling by the Principal. He then returns to class, sits still and does not disrupt class again.
2010 - Jeffrey is given huge doses of Ritalin. He becomes a zombie. He is then tested for ADD. The family gets extra money (SSI) from the government because Jeffrey has a disability.
Scenario 4:
Billy breaks a window in his neighbor's car and his Dad gives him a whipping with his belt.
1957 - Billy is more careful next time, grows up normal, goes to college and becomes a successful businessman.
2010 - Billy's dad is arrested for child abuse; Billy is removed to foster care and joins a gang. The state psychologist is told by Billy's sister that she remembers being abused herself and their dad goes to prison. Billy's mom has an affair with the psychologist.
(Part 2 tomorrow.)

View the original article here

Here we are in February already, which has Valentine's Day. Some guys out there look forward to that day with about as much anticipation as hugging their girlfriend's cat, or picking out a costume at Halloween. Comparisons aside, the most popular theory is that Valentine was a clergyman who was executed for secretly marrying couples in ancient Rome. Per the census bureau, there are 1,177 U.S. manufacturing establishments that produced chocolate and cocoa products in 2009 (it is its own food group, right?), employing 34,252 people. California led the nation in the number of chocolate and cocoa manufacturing establishments, with 135, followed by Pennsylvania, with 111, with the total value of shipments totaling nearly $13 billion. And Americans consumed almost 25 pounds of candy per capita.

As much as the government talks about staying out of housing, it can't. President Obama is expected to unveil a new refi plan today in Virginia at 11AM CST. Whatever plan it is, no one expects it to pass through Congress, IF Congressional approval is required. Recall that this plan was previewed by Obama during his SOTU address last week.  The plan would allow non-agency mortgage holders (so those mortgages not backed by Fannie/Freddie) who are current to refinance into a lower-interest federally insured mortgage (via the FHA).  Borrowers could qualify even if they had negative equity.  The plan could help as many as 3.5M homeowners refinance.  The plan is expected to cost ~$5-10B and Obama will call for a new fee to be charged to banks to pay for the proposal - because they have all the money, right?  Watch his speech live here.

Rates can do whatever they want, but if large investors go away, and the government does away with Fannie & Freddie, is the borrower better off? (Remember borrowers?) As was mentioned in this commentary earlier this week, there have been rumors about PHH Mortgage and SunTrust. PHH especially, after the S&P downgrade and the CFPB probe being revealed, was rumored to be having funding problems and being forced to downsize.  Sources indicate that those rumors are true, and that PHH Mortgage has eliminated twelve account rep positions and retained only six.  In addition, clients are suggesting that PHH is cutting back on pricing and increasing internal requirements for loan purchases. And at SunTrust, the entire mortgage channel is indeed going through reorganization, making the business "flatter" and cutting costs.

"In reaction to the Federal Housing Finance Agency statement released December 29, 2011 regarding guarantee fee increases, Chase Lock Extension fees will increase by 0.25% for all extension terms." So reads the latest release from Chase. So, for example, a 7 day extension will cost .625 instead of .375 (which many viewed as steep to begin with); 30 days will now cost a point.

Needless to say with all this, the mortgage herd (especially those companies that sell to them) is spooked. Competitors are warily watching, not really wanting a huge increase in volume coming their way. And smaller shops are wondering, "When is this going to end?" Or "What am I supposed to do?" Some lenders with a minimum net worth of $2.5 million have begun selling loans directly to Fannie and Freddie, with the servicing either being retained (in house or with a subservicer) or sold released to a servicing counterparty of F&F (such as Central, USB, PHH, and so on). But that is not a sure thing either, as the FHFA, not content to leave well enough alone, has offered two options to revamp the economics of mortgage servicing rights - which brings up the issue of how the market values servicing versus how the lender values servicing.

Retaining mortgage servicing isn't a matter of just saying, "Sounds good, let's crank it up." CFO's and owners need to be fully aware of the capital it requires, both in pricing the loans, in carrying them on the books, and in setting aside reserves for delinquencies. Depending on the arrangement (actual-actual or scheduled-actual) the servicer must fund principal and interest payments to investors, which can quickly eat up cash.

(By the way, SunTrust will buy FirstAgain LLC for an undisclosed sum, as it seeks to increase direct online lending. FirstAgain specializes in providing direct unsecured loans to super-prime borrowers via the Internet and operates proprietary technology offering clients' completely digital and paperless origination, underwriting and servicing.)

It can't be any fun to be a large financial institution any more - not like the old days. A new federal task group set up to investigate residential mortgage-backed securities (RMBS) fraud signed off on subpoenas for 11 undisclosed financial institutions. New York Attorney General and co-chair Eric Schneiderman did not name any of the financial institutions subpoenaed by the group but said that the group has "jurisdiction to go after every aspect of the artificial inflation... and the crash that brought down the economy" over the last several years. He said that the group would levy "appropriate civil and criminal charges" against financial institutions as investigations moved forward under the auspices of the Financial Fraud Enforcement Task Force. (What about the borrowers who abused the system?) Of course the SEC has already "issued scores" of their own subpoenas, obtained millions of documents, and interviewed dozens and dozens of key witnesses related to mortgage-backed securities. Officials said that the unit will include in its ranks more than 55 Justice Department attorneys and investigators, 15 civil and criminal attorneys, and 10 agents and analysts with the Federal Bureau of Investigation. Thirty more attorneys and personnel will take up positions in the group in the weeks ahead. Critics point to job growth at the Federal level rather than the private sector - our tax money at work!

I received this note. "Rob, who is going to regulate the regulators? They must be tripping over each other with the confusing jurisdictions and responsibilities. I have been in the real estate and mortgage business for years, and I am feeling like one of those floats in the Macy's parade and everyone shooting at it because it is such a big target." President Obama did indeed create yet another regulatory body noted above to investigate financial institutions. He directed Attorney General Eric Holder to create a new office on Mortgage Origination and Securitization Abuses.  The President said, "The American people deserve a robust and comprehensive investigation into the global financial meltdown to ensure nothing like it ever happens again." According to the Huffington Post, the new office will take a three-pronged approach to the issue, holding financial institutions accountable for abuses, compensating victims, and providing relief for homeowners, and will operate as part of the existing Financial Fraud Enforcement Task Force. Good luck working with the state Attorneys General, the Department of Justice, the SEC, the OCC, the FBI...

But we may not have Treasury Secretary Timothy Geithner to kick around much longer. He said President Barack Obama is likely to be re-elected, but he isn't likely to stay for a second term. "I'm confident he'll be president. But I'm also confident he's going to have the privilege of having another secretary of the Treasury."

Remember the little thing in NPR about Freddie betting against homeowners? "Freddie Mac stopped making investments in derivatives known as inverse floaters last year after a regulatory exam raised questions about the mortgage company's controls, the Federal Housing Finance Agency said. An FHFA examination "identified concerns regarding the controls, including risk management, surrounding the inverse floaters," the oversight agency said in a statement. 'FHFA and Freddie Mac agreed that these transactions would not resume.'"
Read all about it.

Above I mentioned the U.S. becoming a nation of renters - but often times investors and lenders do not have sufficient insight into distressed property trends at the national and local level which reduces their ability to effectively manage collateral risk and establish effective loss mitigation strategies and accurate loss projections. DataQuick has developed a Distress Property Analysis Tool called RiskFinder Distress to come up with monthly statistics for the past 10 years to help track trends and help identify geography, down to a neighborhood level, that most negatively impacted by distressed property trends. For more information contact your DataQuick representative or Wendy Barnett at wbarnett@dataquick.com.

The MBA reported that apps last week dropped about 3% after dropping 5% the week before. (Refi's dropped 3.6%, purchases down 1.7%, with refi's accounting for an even 80% of nationwide retail applications.) But at least the "Bernanke freight train bond market," as one MBS salesman noted, is rolling along. "With the Fed potentially on hold thru 2014 and QE3 being discussed," Fannie 3.5's are nearly at a price of 104 - that is a 4 point premium for 3.75-4.125% 30-yr loans, not even including the servicing! Yesterday we had a slew of news: the Employment Cost Index rose 0.4% in 4Q 2011, the S&P/Case-Shiller index showed that home prices continued to decline in November, the ISM Chicago Purchasing Managers Index fell, and the Conference Board's Consumer Confidence Index dropped as well. Most of the news out yesterday points to a slow economy in this country, and a slowing economy generally leads to lower rates.

So are LO's excited about a continued refi boom? Perhaps - but rates haven't been an issue in a long time. Investors are not necessarily excited about more refinancing - they'd like to keep the existing MBS's on their books a while longer. Thomson Reuters noted, "Traders have cautioned of the potential for increased supply in coming days as originator pipelines have been building up in response to the decline in rates." But the U.S. 10-yr T-note hit 1.80% and rate sheet MBS prices improved by another .125.

Today we've already had the MBA apps numbers out, noted above. And we've also had the ADP Employment report for January, always of questionable predictive ability for the actual government numbers Friday. The number was +170k for January, with a downward revision for December but still this is the 24th straight gain in private payrolls. Later we'll have another ISM Index and Construction Spending at 10AM EST, along with the Treasury announcing the size of next week's 3, 10, and 30-yr auctions (estimated unchanged at $72 billion). So far rates are flat to Tuesday's close with the 10-yr at 1.81% and MBS prices unchanged.

CONFUCIUS DIDN'T SAY:
Man who eats many prunes get good run for money.
War does not determine who is right, it determines who is left.
Man who fight with wife all day get no piece at night.
It takes many nails to build a crib, but one screw to fill it.
Man who drives like hell is bound to get there.
Man who stands on toilet is high on pot.
Man who live in glass house should change clothes in basement.
Man who fish in other man's well often catch crabs.
Finally CONFUCIUS SAY -
"A lion will not cheat on his wife, but a Tiger Wood!"

If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog discusses residential lending and mortgage programs around the world. 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.

View the original article here