15. November 2010 by admin.

Orange County Housing Report:  Wrong Expectations

November 11, 2010

Good Afternoon!

Many buyers and sellers alike have the wrong expectations when it comes to the Orange County housing market.

Wrong Expectations:  Many buyers expect GIANT discounts while a lot of sellers overvalue their homes.

I have talked about it before; this IS a perfect time to buy: record low interest rates, prices down 30% off of their peaks, less competition during the holidays.  However, this does not translate to writing up an offer at 10% off of the asking price.  It just ends up being a giant waste of time for everybody involved.  Similarly, overpricing a property is a major waste of time for all involved as well.  Many homeowners, who heard that homes were flying off of the market in the lower ranges, multiple offers were the norm and that the year over year median price had increased, translated that it was the perfect time to sell.  The bottom line remains the same; the more realistically priced homes sell near their asking prices.  Most buyers and sellers have just had the wrong mindset in their approach to the housing market.  It is time to take a close look at the facts:

FACT:  for all homes sold in October, the average sales price was 3% less than the asking price.

For a home listed at $500,000, that’s a sales price of $485,000.   

FACT: short sales ultimately sell for less than traditional sellers who have equity in their homes. 

Short sales, on average, take months to sell.  If a home takes six months to close and it is not until the fifth month that short sale approval is granted, a buyer is going to want a discount in order to wait that long for an answer.  The trouble with short sales is that a close date cannot be determined upon writing an offer.  Also, most short sale sellers are cash strapped so there is typically deferred maintenance.

FACT:  foreclosures sell for less than traditional sellers who have equity in their homes because most are in need of TLC.  When buyers need to replace the carpet, paint, replace a dilapidated roof, repair the plumbing, replace missing fixtures or appliances, they are ultimately going to want to pay less for a home.  Foreclosures are priced accordingly. 

FACT:  for all foreclosures sold in October, the average sales price was 2% less than the asking price. 

For a foreclosure listed at $500,000, that’s a sales price of $490,000.

FACT:  for homes sold in October, the average seller had to reduce the asking price by 3% prior to procuring a successful offer.

Most sellers are being overzealous in placing their homes on the market initially.  It ultimately is a waste of market time.  It is better for sellers to take the time in arriving at the price, carefully scrutinizing the most recent comparable sales and pending sale activity.  Actively listings do not carry much weight in pricing unless the home is underpriced.

FACT:  homes in poor condition, or poor locations, sell for less than homes in good condition or a good location.

Successfully selling in any market is determined by a home’s price, location and condition.  Sellers cannot change their location, so they only have control over the asking price and the home’s condition.  Homes that back to busy streets or power lines sell for a lot less than a home that is in the center of a subdivision.

The housing market would be a lot simpler if buyers approached the market with the knowledge that the market will not budge much off of asking prices.  In turn, sellers need to be aware that their unrealistic original, initial asking prices will only result in future reductions until ultimately successfully achieving their goal of selling.

After shedding 4% a couple of weeks ago, demand, the number of pending sales over the prior month, dropped by only two pending sales since then and now totals 2,670.  Last year at this time demand was at 3,241 pending sales, fueled by a first time home buyer tax credit that was expiring in November 2009.  

Foreclosures and Short Sales:  In the past two months, the active distressed inventory increased by only 38 additional homes.

The active distressed inventory increased by 3 homes over the past two weeks and now totals 4,064 foreclosures and short sales.  The distressed home market is not changing much, adding less than 1% in the past month.  It is apparent that the distressed inventory has hit a peak for the year.  The distressed inventory now represents 36% of the current active inventory.  Last year at this time, there were 2,462 distressed homes on the market, 1,602 fewer than today.  The number of foreclosures within the active listing inventory increased by 31 homes in the past two weeks, from 688 to 719.  The expected market time for foreclosures is 1.68 months, an exceptionally HOT seller’s market.   Short sales, where a homeowner attempts to sell a home for less than the total outstanding loans against a home, requiring lender approval, decreased by 28 homes over the past two weeks and now total 3,345.  The expected market time for short sales is 3.47 months, not as hot as foreclosures, but better than the Orange County housing market as a whole.

Have a wonderful weekend.

Sincerely,
Steven Thomas
Altera Real Estate

President
“Pride Begins at Home”
Office   949.389.7816
Cell      949.874.8221
www.AlteraProperties.com

Copyright 2010 - Steven Thomas, Altera Real Estate - All Rights Reserved.   This report may not be reproduced in whole or part without express written permission by author.

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17. October 2010 by admin.

Posted to: Mortgage Rate Watch
Friday, October 15, 2010 4:23 PM

Ok so record low mortgage rates stayed around for about a week. But they’re gone now.

Did you get it while the gettin was good?

Since last Friday, par loan pricing offered by lenders has worsened by nearly 1 point. 

1 point = 1% of your loan amount

If your loan amount is $200,000. 1 pt= $2,000. Consumer borrowing costs increased by about $1,000 for every $100,000 in loan amount this week.

I could go through all the economic data and attempt to tie a rational explanation to the bond market’s every move,  because data does matter, but I think we can break it down in a much more simple manner. I hope…

Plain and Simple: Energized, Exuberance, Over-Exuberance, Exhaustion, Uncertainty

Energized: Another Federal Reserve “Quantitative Easing” (QE) program

Exuberance: Think of “QE” as a strategy employed by the Federal Reserve to force the economy into a sustained recovery. This strategy might include large scale open market purchases of Treasury debt or MBS (Bernanke has indicated MBS purchases were possible). If that scenario played out, it would be very supportive of  mortgage rates touching 3.75% again.

Over-Exuberance:  Too many investors piled onto the same side of the bond market. When investors learned the Federal Reserve was seriously considering the idea of another QE program, they upped the ante by purchasing more government bonds, which pushed Treasury prices higher and higher and Treasury yields lower and lower. This is what led mortgage rates to new record lows last Friday.

Exhaustion: Mortgage rates touched new lows and bond prices touched local highs last Friday, but when the market came back from a long holiday weekend on Tuesday, investors wanted more details on the next QE program. Without further details, the bond rally stalled and the trading environment turned stale. We had three ugly Treasury auctions withthe ugliest of all on Thursday. That was the straw that broke the camels back. Lender repriced for worse late yesterday.

Uncertainy:  The Fed Chairman spoke today. He was the primary motivation of the bond market’s behavior. Investors needed to hear more details about the Fed’s preferred QE strategy, specifically the tools they would utilize and the timing of such a program, unfortunately nothing of the sort was offered by Bernanke. In fact, Ben made it seem like the Fed might not buy Treasuries and he gave a great deal of attention to “nonconventional policy approaches”, which raised several skeptical eye brows in the bond market.  That sentiment combined with the “pain trade” (see over-exuberance comments above) pushed benchmark Treasury yields to levels not seen since late September, which consequently led mortgage-backed securities prices slowly lower. Lenders repriced for the worse this morning, and then again this afternoon.  Mortgage rates have moved off record lows.

And here we are…

Now do you see why last night I wondered if  maybe we’ve gotten too comfortable with record low mortgage rate quotes?

NOW WHAT?

The best par 30 year fixed mortgage rates remain in the 4.000% to 4.250% range for well-qualified consumers. 3.75% is gone, 3.875% is very hard to find, 4.00% is available but the points/buydown structure is not homeowner friendly, and 4.125% is really where it’s at for a perfect borrower.  3.75% was on the board last Friday. Did you get it while the gettin was good?

Mortgage Rate Disclaimer:  Loan originators will only be able to offer these rates to borrowers who have perfect credit profiles and enough equity in their home to qualify for a refinance. If the terms of your loan trigger any risk-based loan level pricing adjustments (LLPAs), your rate quote will be higher. If you do not fall into the “perfect borrower” category, make sure you ask your loan originator for an explanation of the characteristics that make your loan a riskier investment. (investment properties and second homes are a riskier investment )

If you’re riding the float boat and starting to get a little sea sick, I don’t feel now is the time to jump overboard. The Fed is planning another QE program and they’ve made it clear they intend to keep monetary policy extremely accommodative. The environment might get a little choppy over the next two weeks, but in the end I believe the Fed will announce a program that will be supportive of record low mortgage rates. 

November 3, 2010 will be the date….if the Fed is to keep their credibility.

PLAY THE RANGE UNTIL BERNANKE PLAYS YOU

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17. October 2010 by admin.

Posted to: The Garrett Watts Report
Friday, October 15, 2010 8:36 AM

I’m not a naysayer and just like everybody else I’ve been rejuvenated by the stellar year the industry is having. Most of our clients are making boatloads of money on refinances today,  but rates will eventually rise from these historic lows and mortgage bankers will once again become the proverbial  “deer in the headlights”.

We’ve all been down this road before but I think we need to remind ourselves what happened in the past so we’re prepared for a potential shift in business models. Let’s take a look at how the environment might shift….

If history repeats itself, the first thing to happen will be tighter primary/secondary loan pricing spreads. Lenders will deploy aggressive pricing to help maintain current production levels. Without thinking about margins and return on capital, some operators will reduce margins in order to maintain volume.  Rather than cutting expenses, most will accept a compromise on earnings.  The companies that started the ball moving will start dragging more and more players into this strategy.  Eventually, we will see margins decrease industry wide. 

Another bi-product of higher rates might be a modest comprise on loan quality.  You would think after what we all went through over the past three years that no one in the business would originate any less than stellar quality loans. However, in order to keep production rolling in, we might see a few players start approving and closing loans that are a bit outside the lines.  Again, after one major player starts this tactic, more players might follow just to keep production rolling in.  

The problem with both of these strategies is that aggressive pricing and underwriting is not going to help.  Rates will eventually rise and the overall market will still shrink.  We ask the CEOs of every company we review today the same question:  What is plan B?  What will you do if and when rates rise and volume drops by 50%?  What is your breakeven production number? 

Today more than ever, managers should be generating granular reports on branches, loan officer and employee performance to determine were the cuts can be made. Marginal branches and loan officers will not survive in a tough market.  Review employee productivity to help determine employees you need to keep when production declines.  Ditch the deadwood quickly when the market turns. 

Our industry is cyclical and we need to be reminded of the need for a “Plan B” quite often.  When things are really good, chances are they will turn ugly sooner than you think. Don’t get complacent, be prepared and have a plan when rates turn higher.

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14. May 2010 by admin.

Posted to: MND NewsWire
Wednesday, May 12, 2010 10:57 AM The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending May 7, 2010. Michael Fratantoni, MBA’s Vice President of Research and Economics says: “The recent plunge in rates on US Treasury securities, due to a flight to quality as investors worldwide sought shelter from the Greek debt crisis, benefited US mortgage borrowers last week. Rates on 30-year mortgages dropped to their lowest level since mid-March. As a result, refinance applications for conventional loans jumped, hitting their highest level in six weeks….In contrast, purchase applications fell almost 10 percent in the first week following the expiration of the homebuyer tax credit, as the tax credit likely pulled some sales into April that would otherwise have occurred in May or later.” The Mortgage Banker’s application survey covers over 50% of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a look into consumer demand for mortgage loans. In a low mortgage rate environment, a trend of increasing refinance applications implies consumers are seeking out a lower monthly payments which can result in increased disposable income and therefore more money to spend in the economy or pay down other debts like credit cards and car loans. A rising trend of purchase applications indicates an increase in home buying interest, a positive for the housing industry and the economy as a whole.From the Release…The Market Composite Index, a measure of mortgage loan application volume, increased 3.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 3.4 percent compared with the previous week. The four week moving average for the seasonally adjusted Market Index is up 4.4 percent.The Refinance Index increased 14.8 percent from the previous week. The four week moving average is up 4.4 percent for the Refinance Index. The refinance share of mortgage activity increased to 57.7 percent of total applications from 51.9 percent the previous week.The seasonally adjusted Purchase Index decreased 9.5 percent from one week earlier. The unadjusted Purchase Index decreased 8.9 percent compared with the previous week and was 0.6 percent lower than the same week one year ago. The four week moving average is up 4.5 percent for the seasonally adjusted Purchase Index.
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.96 percent from 5.02 percent, with points decreasing to 0.91 from 0.92 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also decreased from last week.The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.32 percent from 4.34 percent, with points increasing to 0.81 from 0.80 (including the origination fee) for 80 percent LTV loans. The effective rate also decreased from last week.The average contract interest rate for one-year ARMs decreased to 6.86 percent from 7.03 percent, with points increasing to 0.35 from 0.28 (including the origination fee) for 80 percent LTV loans. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 6.3 percent of total applications from the previous week.The homebuyer tax credit has expired and the housing industry is scrambling to refocus its marketing efforts on the core fundamentals of sustainable homeownership. From a CNBC story titled: “

Homebuyer Tax Credit Ends, But Other Incentives Emerge““The expiring credit—which gives first-time homebuyers and some current homeowners a tax credit of up to $8,000 if they sign a contract by midnight tonight and close the sale by June 30—has been widely viewed as helping boost home sales in recent months. For that reason, some real estate firms are pushing home sellers to offer incentives of their own, usually by agreeing to refund some of the purchase price to the buyer. Some developers are offering similar refunds to buyers of new homes or condos.”AND…“One of the larger companies pushing the new incentives is Coldwell Banker, a subsidiary of the global real estate giant Realogy. It is asking sellers to participate in a program that will give buyers 3 percent off the agreed-to sale price, up to a maximum of $8,000. The program will run from May 1 through July 31.” While I do not see any RESPA or Reg Z violations yet, these “incentives” are misleading.If the refund strategy is attempted before closing, it would be viewed by an underwriter as a reason to reduce the sales price by the size of the “refund”….which negates the refund, lowers the value of the home and increases the loan to value ratio (which could affect loan pricing). If the refund is done post-closing and the HUD is amended, the loan would be a prime “buyback” candidate as appraisals are under a great deal of scrutiny by regulators, specifically over-inflated valuations. If the refund is done post-closing and the HUD is not amended…that is when we can start talking about illegalities.The Coldwell Banker program that “gives buyers 3 percent off the agreed-to sale price, up to a maximum of $8,000″ is smoke and mirrors (not in a fraudulent way). This is nothing more than good ‘ol seller concessions. Fannie Mae calls them “Interested Party Contributions”.

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26. April 2010 by admin.

By JAMES R. HAGERTY

Tax credits sparked a big jump in home sales last month, as first-time buyers took advantage of low prices and interest rates.

But the longer-term housing outlook remains clouded, with a large inventory of foreclosed homes expected to hit the market later this year.

The Wall Street Journal’s latest quarterly survey of housing-market conditions in 28 major metro areas found that inventories of homes for sale, as well as the number of distressed borrowers, remain very high in many metro areas. That portends more downward pressure on prices from bank foreclosures.Though tax credits are providing a temporary boost, “we’re still in a very fragile housing market,” said Ivy Zelman, chief executive of Zelman & Associates, a research firm, who doesn’t expect a full recovery before 2013.

Sales of single-family homes and condominiums hit a seasonally adjusted annual rate of 5.35 million in March, the National Association of Realtors reported Thursday. That compares with a 5.01 million rate in February and was up 16% from the depressed March 2009 rate of 4.61 million.

The Journal survey found that Miami, Orlando and Tampa, Fla., Las Vegas, Phoenix and Atlanta have some of the highest concentrations of distressed borrowers at risk of losing their homes. Nearly 28% of homeowners with mortgages are at least 30 days late on payments in the Miami area, more than double the national average of 12.2%, according to LPS Applied Analytics. That rate stands at about 24% in Orlando and Las Vegas.

Neighborhood Market Watch

Although tax credits provide a temporary boost, the long-term outlook for the housing market remains clouded. See how five locales are faring.

Prudential Americana Group Realtors

A 3,601-square-foot home about 10 minutes from the Las Vegas Strip.

The supply of homes already on the market is well above the national average in Charlotte, N.C., Jacksonville, Fla., Nashville, Tenn., Chicago and Philadelphia. In Charlotte, where bank cutbacks have increased unemployment, there are enough homes on the market to last 17 months at the average sales pace of the past year. That compares with 15 months in Jacksonville, 13 in the Long Island suburbs of New York and 11 in the New Jersey suburbs. A market generally is considered balanced when the supply is around six months.

Among metro areas with relatively low rates of delinquent borrowers and for-sale inventories: Boston, Denver, Dallas, Houston, Minneapolis, San Francisco and Washington, D.C.

The median price for home resales in March was $170,700, up 0.4% from a year earlier, the Realtors reported. A price index produced by the Federal Housing Finance Agency in February was down 3.4% from a year earlier, the agency said. Realtors say prices for middle-class homes in the types of neighborhoods that attract investors and first-time buyers are flat or rising slightly, while higher-end home prices generally continue to fall.

Brandon Sullivan for the Wall Street Journal

Rebecca Ahlschwede in front of a home she has offered to buy in Scottsdale, Ariz. She hopes to strike a deal by April 30 to qualify for federal tax credits worth as much as $8,000.

For now, real estate agents have a compelling pitch: Prices have fallen an average of about 30% across the country since peaking in 2006; mortgage rates are near their lowest levels in four decades; and many people who sign a contract to buy a home by April 30 can qualify for federal tax credits worth up to $8,000. “Now is the time to do something,” said Bill Wilkerson, an agent at ZipRealty in Phoenix.

One of Mr. Wilkerson’s customers, Rebecca Ahlschwede, last week offered about $200,000 for a three-bedroom foreclosed home with a pool in Scottsdale, Ariz. Ms. Ahlschwede, a 31-year-old neurology technician who currently rents, said the $8,000 tax credit she hopes to receive would be “a huge bonus.”

The tax credit appears to be giving more of a boost to previously occupied homes than to new construction, as first-time buyers favor the short commutes of older neighborhoods. Ms. Zelman said the rise in sales of new homes appeared more moderate than many builders had hoped.

The rush to qualify for the credit will end after the April 30 deadline for signed contracts, though the resulting boost to completed home sales will continue to help monthly reports through June.

Those tax credits likely pulled forward sales that otherwise would have occurred later in the year. Partly as a result, “I think we’re going to have a pretty soft second half” of 2010 for housing sales, said John Burns, a real estate consultant in Irvine, Calif.

Bank efforts to work out lower loan payments for some borrowers have delayed millions of foreclosures, but those who don’t qualify are now increasingly losing their homes.

Moody’s Economy.com predicts that 1.9 million homes will be lost to foreclosures or related defaults this year and another 1.1 million in 2011. That compares with two million last year and 600,000 in normal times.

Unemployment remains high and is unlikely to improve much soon, some economists say. Mark Zandi, chief economist at Moody’s Economy.com, expects the unemployment rate to be 10.2% at year’s end, up from 9.7% in March. At the end of 2011, he sees a still hefty 8.6% rate.

Credit conditions, already tight, will get tighter in at least one respect. Around a third of home sales in recent months have been financed by loans insured by the Federal Housing Administration, which allows down payments as low as 3.5%. But now, the FHA is tightening its terms somewhat.

By early summer, the FHA plans to reduce the maximum amount a seller can contribute to the buyer’s closing costs—such as loan-origination, legal and appraisal fees—to 3% of the home price from 6%. That means buyers will have to save more to meet closing costs. Mr. Burns said a survey of builders by his firm found they expected the FHA change to eliminate as many as 15% of potential buyers.

Many economists expect rates on standard 30-year fixed-rate mortgages to rise at least moderately from the recent level of 5% to 5.25%. Mr. Zandi expects a rate of about 5.7% by year’s end.

Despite these worries, Jacelyn Botti, who heads residential sales for seven mid-Atlantic and Northeastern states for Weichert Realtors, said that home-sales contracts signed by the firm’s customers in March were up about 26% from a year earlier in that area, and April was on track for another gain of more than 20%. She said the tax credit and lower prices were driving buyers. Prices on lower-end homes are trending up in some areas, Ms. Botti said.

Newland Communities, a San Diego-based company that plans and develops communities in 14 states, says 761 homes sold in those communities in the first quarter, up 28% from a year earlier. Robert McLeod, chief executive officer of Newland, said Austin, Houston and San Diego were among the stronger markets for the company. He thinks recovering consumer confidence is helping sales. “It’s all about job growth,” Mr. McLeod said.

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19. April 2010 by admin.

Start your week with a smile, thanks to Rob Chrisman .

An elderly lady was having her 100^th birthday party when the emcee stood to speak. He said he had been at the local Hallmark store and looked for the most special birthday card available to celebrate this momentous occasion. As he looked up and down the columns of shelves he noticed the birthday cards for age 70, age 80, and then 90 and then…He finally found what he was looking for.   He proceeded to give the elderly grandma two cards for age 50 each!

Numbers can play tricks. Just ask Goldman Sachs.

The SEC claims that Goldman Sachs had marketed a packages of mortgages put together by a hedge fund that would profit if the mortgages fell in value. The mortgages did indeed fall in value with the bulk defaulting, and the SEC claims that Goldman neglected to fully disclose the role of the hedge fund in putting together the package of mortgages. So on Friday, for example, in spite of companies like Bank of America (and today Citi) having great earnings, financial stocks, and the stock market in general, fell, and rates dropped thanks to the flight to quality. Goldman Sachs misstated and omitted key facts about a financial product tied to subprime mortgages as the U.S. housing market was starting to falter, per the SEC. Was it one of the last deals done by a struggling industry? Let’s hope so.

The issue is Goldman’s lack of disclosure, and once again where the rating agencies were in all of this. Analysts during the dot-com bubble recommended stocks of banking clients they actually believed were highly overvalued, and the same thing happened. Financial companies should not be allowed to mislead investors or take on leverage that can jeopardize everyone else. From 2004 through 2007 Goldman Sachs created 23 financial transactions called “Abacus”, with critics saying that the bank used the deals to off-load the risk of mostly subprime home loans and commercial mortgages to investors. There were $7.8 billion of Abacus notes but the risk passed to investors was multiples higher since the Abacus transactions were synthetic collateralized debt obligations and credit- default swaps. These swaps are used to transfer the risk of losses on debt, and securitization, used to slice the risk in a pool of assets into various new securities, and Goldman’s deals were filled with default swaps that offered payouts to Goldman Sachs if certain mortgage bonds didn’t pay as promised, in return for regular premiums from the bank.

Hedge fund Paulson & Co. (John Paulson, not Henry Paulson, and is not accused of any wrongdoing) helped pick the underlying securities and also bet the CDO would default. Paulson was proved correct, and his hedge fund eventually turned a $1 billion profit and CDO investors lost a similar amount, according to the SEC. It is the first big case, but probably not the last, that examines investment banker’s role in the subprime mortgage mess, and of course other issuers of mortgage securities, such as Deutsche Bank, Credit Suisse, etc., are caught up in the news and its implications. No matter what happens, don’t expect less financial regulation as a result.

For good news, Congress approved the Continuing Extension ACT of 2010 (H.R. 4851), which includes a temporary extension of the Federal Emergency Management Agency’s (FEMA) statutory authority to issue flood insurance policies under the National Flood Insurance Program (NFIP). The temporary amendment will expire on May 31, 2010. Many investors, such as Union Bank, Provident, and others, sent out announcements re-installing their previous flood insurance policies.

Citgroup announced earnings this morning with earnings per share of 15 cents versus a $0 expected. Revenue was $25 billion versus $21 billion anticipated. Like BofA’s, and Chase’s, these are solid results, but unfortunately overshadowed.

The FDIC closed down several more banks on Friday. Tamalpais Bank (CA) is now under Union Bank (CA). TD Bank (FL) acquired the banking operations, including all the deposits, of three Florida-based institutions: AmericanFirst Bank, First Federal Bank, and Riverside National Bank. Butler Bank (MA) has new signs on its branches saying People’s United Bank (CT). Lakeside Community Bank (MI) is now part of First Michigan Bank. Innovative Bank (CA) was maybe too innovative, and was taken over by the FDIC and a purchase and assumption agreement was signed with Center Bank (CA). City Bank (WA) is now part of Whidbey Island Bank (WA).

The Wall Street Journal reported that federal authorities are picking up the pace in a criminal investigation of Countrywide Financial Corp. and its role in the meltdown in 2007 and 2008 of the U.S. housing and finance industries. The paper didn’t offer details on what charges could emerge, but said a grand jury began hearing testimony about Countrywide last year. No criminal charges have been filed against corporate leaders in the larger federal probe.

Investor changes continue unabated. AmTrust Bank has posted an update to its guidelines which applies to its Conforming Fixed & ARMs (Standard & High Balance) product line(s). Suntrust has posted an update to its guidelines which applies to its Key Loan product line(s). GMAC has posted an update to its guidelines which applies to its Conforming Fixed & ARM product line(s). US Bank has discontinued its Second Lien 30/15 fixed product. Flagstar Correspondent has posted an update to its guidelines which applies to its FNMA Standard ARMs, FHLMC Home Possible, FNMA Fixed Rate, FHLMC Fixed Rate, and FNMA Flex 97 & Flex with Subordinate Financing product line(s).

I am sure that Flagstar has the best interests of its clients at heart. But over the span of two days Flagstar released 15 separate bulletins to clients. Fifteen.  Obviously I can’t go into details on them, but the titles of the bulletins are 60 Day Lock on Agency ARMs and Extended Lock Update, WBCD Update: Lender Name Reflected On HUD-1, 60 Day Lock on Agency ARMs and Extended Lock Update, Short Sale Agreement, RESPA Compliance - Lock Extensions & Escrow Waivers, Fannie Mae DU Refi Plus Removal of Borrowers, Two-Unit Owner-Occupied Loan Limit Updates, New Approved Appraisal Management Company: PCV Murcor, FHA - Electronic Signatures, FHA & VA - Seller Concessions & Broker Fee Policy, FHA Total Scorecard - Upfront Mortgage Insurance Premium Messaging, FHA - Updated Mortgage Calculation Worksheets & Informed Consumer’s Choice Disclosure, FHA & VA - 4506-T Transcripts, FHA - Non-Traditional Credit Overlay, FHA - Recent Mortgagee Letters, and FHA & VA - Property Flipping.

Pinnacle Capital, on its conforming product, offered lowered credit score requirements to 720 and added Rate/Term option for Radian MI on 95% loans, clarified that PUDs that are part of a subdivision are allowed on Construction to Perm, etc., and tweaked its conforming high balance guidelines so that paying off consumer debt will be considered cash-out Pinnacle also adjusted its FHA guidelines stating that “rental income can be used when a borrower is converting their Primary Residence”, unlimited CLTVs on FHA cash-out refinances when existing subordinate financing exists,  and said that investment properties are allowed on FHA Streamline Refinance transactions without an appraisal.

Bank of America’s wholesale group announced its “Wholesale Lending Standards for Quality” for brokers. “Our standards for quality are based on doing the right thing for our customers, our clients, our associates and our shareholders…the three types of standards that enable us to meet these objectives: Quality and Efficiency Standards (upholding quality loan manufacturing practices), Professional and Industry Standards (ensuring the highest levels of ethical conduct), and Responsible Lending Standards (building and maintaining our customers’ trust).” The announcement goes on to tell clients, “If you have questions about our Wholesale Lending standards for quality, please contact your Bank of America account executive.”

The Goldman news was enough to shake up the markets, and fixed-rate securities improved in price and dropped in rate. The 10-yr Treasury yield dropped to 3.78% and mortgage spreads widened out slightly, so did rates not improve quite as much. The futures market is pricing in an 83% chance that the Fed keeps rates at .25% through August - so don’t look for a change. 

The press is certainly consumed with the Goldman Sachs news, but that doesn’t mean that scheduled news comes to a halt. Things are pretty slow this week for the first few days, although we do have Leading Economic Indicators later this morning (expected to be up 1.3% for March, which would be the largest increase in nine months). On Thursday we have the Producer Price Index (PPI), Existing Home Sales, and Initial Jobless Claims. Friday we have Durable Goods, an important indicator of economic activity, and New Home Sales. Currently the yield on the 10-yr is at 3.78% and the 5-yr & mortgage prices are unchanged, maybe worse a tad. READ MORE. SEE CHARTS

Dear Tide:
I am writing to say what an excellent product you have.

I’ve used it all of my married life, as my Mom always told me it was the best.

Now that I am in my fifties I find it even better!

In fact, about a month ago, I spilled some red wine on my new white blouse. My inconsiderate and uncaring husband started to belittle me about how clumsy I was, and generally started becoming a pain in the neck. One thing led to another and somehow I ended up with his blood on my new white blouse!

I grabbed my bottle of Tide with bleach alternative, to my surprise and satisfaction, all of the stains came out!

In fact, the stains came out so well the detectives who came by yesterday told me that the DNA tests on my blouse were negative and then my attorney called and said that I was no longer considered a suspect in the disappearance of my husband.

What a relief! Going through menopause is bad enough without being a murder suspect!

I thank you, once again, for having a great product.

Well, gotta go, have to write to the Hefty bag people.

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12. April 2010 by admin.

by Rob Chrisman

Recently I saw an interesting new story headline. “Kids Make Nutritious Snacks.” (Do they taste like chicken?)

The FDIC shut down Beach First National Bank, and the branches have re-opened this morning as Bank of North Carolina. Per the press release, Beach First was heavily invested in coastal real estate development. But banks are not the only savings institutions that are shut down. Connecticut’s South End Mutual Benefit Association, which has been around since 1945, has passed a resolution to cease operation and terminate its business, and has petitioned the National Credit Union Administration (NCUA) as receiver. With a credit union, accounts are insured up to at least $250,000 by the National Credit Union Share Insurance Fund (NCUSIF) - a federal fund managed by NCUA and backed by the full faith and credit of the U.S. government.

HUD came out with a new Mortgagee Letter, stating that the FHA will accept electronic signatures on third party documents “included in the case binder for mortgage insurance endorsement in accordance with Electronic Signatures in Global and National Commerce Act (ESIGN) and the Uniform Electronic Transactions Act (UETA), as applicable.” It is good for regular mortgages as well as HECM’s, and applies to documents that are originated and signed outside of the mortgagee’s control, such as a sales contract. Remember that the origination case binder must be maintained in either hard copy or electronic format for two years from the date of endorsement [HUD Handbook 4000.2 REV-3].

MGIC addressed short sales in response to the Home Affordable Foreclosure Alternatives (HAFA) program. In a MGIC press release, the company says that its program lowers the MI approval time for short sales down to 120 days from 6 months. The borrower must be at least 60 days delinquent on the owner-occupied property, the loss on the sale must be less than $75,000 (based on a broker price opinion (BPO) or appraisal performed within 90 days of the sale), the property must not only be sold in “as-is” condition, but the sales price must be within 90% of the home’s value after repairs, and net proceeds at closing must be at least 82% of the “as-is” value. There are other stipulations - check with MGIC for list.

Starting today, Genworth has removed FL, CA, AZ, NV & MI from its declining market list, aside from saying that cash-out refi’s are not allowed in Florida, and still not allowing condos or attached housing in that state. In a related statement, Genworth also introduced “new definitions” for retail and non-retail originations which in effect removes its existing Third Party Origination definition. “For a loan to qualify as a Retail Origination, the entity that orders the mortgage insurance coverage (the Insured) must have performed all of the following loan tasks: taking the loan application, processing the loan application, underwriting the loan application for MI eligibility, and funding & closing of the loan. Check with Genworth for other requirements, such as “loans must be funded from a warehouse line in the lender’s name or from the lender’s own funds - table-funded loans are considered Non-Retail.”

In the Great State of Texas some lenders offer Veteran Land Board loans. (http://wwwdb.glo.state.tx.us/vlb/general/interest.cfm) Military veterans can obtain below-market rates, with CitiMortgage as the master seller/servicer. One originator wrote to me about some confusion at the originator level on these loans. “Citi will not accept an appraisal from someone on their declined list - even though we have no appraiser choice on VA loans. There may be loans where we will have to get a 2nd appraisal. So can lenders obtain a copy of Citi’s declined list to share with VA and some AMC’s to avoid the obvious expense and delays of a 2nd appraisal? I was told ‘no’. I also just found out that all conventional loans being sold to BofA are now going to require a LARA, BofA’s AVM.”

Wells Fargo’s broker customers learned that when converting an appraisal from a conventional loan into an FHA loan, they had better verify that the original appraiser is HUD approved. If the appraiser was not HUD approved, a new appraisal is required. “The original conventional appraisal must have been in Wells Fargo’s name, completed by Rels Valuation and the broker is responsible for obtaining an FHA Case Number for FHA appraisals.”

Of great interest to investors in mortgages are the buyouts by Freddie and Fannie. There is one important difference between Fannie & Freddie in terms of how the 120-day delinquency status is defined for buyout eligibility. For Fannie a loan is eligible to be bought out if it stays uncured for 4 consecutive months. For example, if a borrower misses one payment, but then makes all the subsequent payments, then the loan is eligible to be bought out under Fannie Mae rules. In the case of Freddie, however, a loan can be bought out only if a loan is 120 days delinquent based on the MBA method. Traders know that, due to this difference, Fannie pools will have higher delinquency “roll rates”, and the delinquency status would increase month over month when a borrower makes trial payments that are less than the full payment. Freddie Mac investors might end up receiving a few extra months of cash flows, which is positive for Freddie Mac premium pools.

Monopolies are not dead. Once a week our garbage is picked up, usually early in the morning. (Sometimes, if I go outside, the garbage man will ask me what I am doing up at 4:30AM. Rather than embarrass myself by telling him that I write a commentary about the mortgage industry, I tell him I’m still liquored up.) In San Francisco, the cost for this service is $37 per can per week. That seemed pretty steep to one contractor, who canceled his service, had his neighbor do the same, and then took their garbage to the dump and paid $40. Word spread, and soon many neighbors were paying the guy $10 per household for him to take their garbage, saving everyone over a thousand a year. Unfortunately for free enterprise, the local garbage company and the union found out what was happening, and convinced the city to pass a law banning this type of activity. READ THE FULL STORY

Overall, few economists disagree that here in the US we’ve come off the bottom. It is odd, however, that the recovery is not being led by a rebound in housing and consumer durable spending, or by much job growth. And don’t we need job growth to create more borrowers to either refinance or to buy houses? If the economy really takes off and jobs don’t, the mortgage industry could be hit by the famous “double whammy” of higher interest rates and fewer qualified borrowers. Uh oh.

Last week we had a very limited amount of economic news, so bonds were pushed around by the auction results. When the yield on the 10-yr hit 4%, it seems to have attracted investors, so we “bounced”. Overall the auctions were received well; although there is continued nervousness about whether or not the US will see others support our deficit. Regardless, mortgage rates actually ended the week on a decent note - certainly no disaster has occurred since the Fed stopped buying MBS’s - and are following Treasury rates. Money managers, insurance companies, and pension funds are buyers of mortgages, and although there are weekly volume fluctuations, most indicators still point to a slower year in 2010 than 2009. And if production (supply) is down, and demand steady…

This week we have a little  more substantive economic news, including Wednesday’s Consumer Price Index (CPI), Retail Sales report, and Beige Book. Tomorrow we’ll see some trade balance figures. Industrial Production & Capacity Utilization and the Philly Fed survey are announced on Thursday (after Initial Jobless Claims come out). Housing Starts (”New Residential Construction”) are on for Friday. Inflation certainly appears under control and the March CPI is expected to be +.3% with the core rate only up .1% (which the Fed likes). And March’s Retail Sales figure is expected to be +1.8%, probably due to strong auto sales. Ahead of all that, the 10-yr is at 3.88% and mortgage prices are better by about .125.

A distinguished young woman on a flight from Ireland asked the priest sitting beside her, “Father, may I ask a favor?”

“Of course, child. What may I do for you?”

“Well, I bought an expensive electronic hair dryer for my mother’s birthday. It is well over the Customs limits and I’m afraid they’ll confiscate it. Is there any way you could carry it through Customs for me…under your robe, perhaps?”

“I would love to help you, dear, but I must warn you … I will not lie.”

“With your honest face, Father, no one will question you.”

Then they got to Customs, the woman let the priest go ahead of her.

The official asked, “Father, do you have anything to declare?”

“From the top of my head down to my waist, I have nothing to declare.”

The official thought this answer strange, so asked, “And what do you have to declare from your waist to the floor?”

“I have a marvelous instrument designed to be used on a woman, but which is, to date, unused.”

Roaring with laughter, the official said, “Go ahead, Father. Next!

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8. April 2010 by admin.

by Brian Montgomery

The latest iteration of housing assistance announced by the Obama Administration has turned up the volume on the “worthiness” argument. 

Critics see struggling borrowers being bailed out for what they believe was reckless behavior by both lenders and home buyers.   Many skeptics feel this group of borrowers did not play by the “rules,” and now everyone who did is being forced to bail them out.  Why do they get a lower interest rate for their irresponsible decisions?  Why isn’t my loan principal being reduced? 

Others ask why the government is taking on more risk by refinancing high loan balance borrowers. These are distressed homeowners who live in one of the 75 HUD specified high-cost loan limit counties.  This pool of borrowers is able to rate/term refinance up to a $729,000 loan amount. These limits were set to expire at the end of 2008 but instead were extended two years by Congress.  Most housing experts expect the loan limits to drop significantly in 2011 even though the percentage of mortgage activity at these levels is a small percentage of FHA’s entire book of business. 

And then there are those who bought their home at the worst possible time (when the market reached its apex) and are now attempting to survive in a very difficult economic landscape.  They weren’t reckless speculators or searching for a “get-rich quick” scheme (most of those were foreclosed on months ago).   More than likely they were a rental family looking for their version of the American dream.  For too many that dream is now their worst nightmare. 

These are well-reasoned concerns, but what is the alternative – mass foreclosure?  Can the nation endure a few million more foreclosures?  Of course not as that would only imperil what has been a measured and unpredictable housing recovery.

The FHA is rightfully trying to help the borrowers who can still be saved.   Assisting at-risk borrowers especially during trying economic times is one of the primary reasons FHA exists as a government entity.  It is not chasing profits or trying to push a stock price to a 52 week high—it is simply trying to do what it does best for housing.  And even though these homeowners may be deemed “risky,”  I remind you that these borrowers must still pass FHA’s underwriting process which include:

• Be current on existing mortgage
• Proof of wages
• Stable employment history
• New appraisal must be obtained. New loan to value can be no higher than 97.75%.
• Must occupy the home as their primary residence
• New Front Ratio limit is 31%. Maximum back ratio is 50%

As a kid, I can remember riding through a stretch of desolate Texas highways where one large sign ominously warned: Last Gasoline Station for 200 Miles Exit Now.  If you’re an at-risk borrower and your options are few, now is the time for you to exit – this latest effort by the FHA could be your last chance.

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