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Finreg Summary For Lenders
The Financial Reform Bill passed the Senate, and will no doubt be signed by President Obama. It is 2,300 pages. From my limited view, there are hundreds of thousands of questions for regulators and investors to answer in the next several months (at least), and most large mortgage companies are doing their best to tell clients that “they just don’t know yet” what the answers are to many questions. Certainly nothing will happen overnight. I know very little, but here is a 15 page synopsis by the Mortgage Bankers Association which may be of some help with the lender-specific topics.

Many mortgage lenders are very concerned with the compensation portion of the bill, or at least how regulators interpret the guidance. As one industry veteran wrote to me, “There already is no Origination Fee/Point, Discount Fee/Point, Yield Spread Premium – they were all done away with the GFE RESPA changes last year. There is now only “Origination Charge” in Box 1, on the new 3 page GFE (the total in Box 1 & Box 2 encompasses all of the former Origination Fee, Discount Fee, Yield Spread Premium). The Origination Charge is a flat dollar charge. The new legislation actually just catches up to the new RESPA GFE changes.” more…

Financial Reform Back In Headlines
Our elected officials return from the July 4th recess this week, and those in the mortgage business are waiting to see if the Senate passes the Financial Reform Bill and passes it along to the president for his signature – as expected. Among other things to note, the bill establishes the “Consumer Financial Protection Bureau” (CFPB). The CFPB will be part of the Federal Reserve Board with broad authority to write rules to protect consumers from unfair or deceptive financial products, acts or practices. This agency will be led by a Director appointed by the President. “The CFPB will be responsible for regulation and enforcement of major consumer protection laws including RESPA, TILA, HOEPA, HMDA, etc. primarily for non-depository lenders.

New Appraisal Requirements From Fannie
Fannie Mae spooked the appraisal herd recently by requiring that lenders cannot use inexperienced appraisers, wanting lenders to explain any changes made to the appraised value of a property, requiring interior photos, requiring a 2nd appraisal or field review if the original appraisal was deficient (and not to find a better value), and providing further guidance on how to determine comps. This is starting September 1st. Of course the business is dealing with appraisers not being able to find enough comps, and/or “distressed sales” making up a greater portion of the real estate market therefore becoming the only comps and pushing values down. Typically three comparable sales are required with a maximum price adjustment of 15%. Appraisers are also dealing with the Dodd-Frank Act, which would require lenders and AMCs to pay appraisers “customary and reasonable fees” which in turn begs the question “What does that mean?” Many believe that banks and larger lenders will return to having internal valuation departments rather than outsourcing to an AMC. more…

Tax Credit Deadline Now Sept 30
President Barack Obama signed HR 5623, the “Homebuyers Assistance and Improvement Act of 2010,” a three-month extension on the closing deadline for first-time home buyers to receive the tax credit. Potential homeowners with offers currently under contract now have until September 30 to close the deal, instead of the original June 30 deadline. Buyers had to be in contract by April 30 to be eligible for this extension.

Credit Union Expansion
Credit Unions are making a push to increase their market share of mortgage originations. To some degree, they have stepped in where private investors have exited the business. One example is Kinecta Federal Credit Union, which not only offers conventional and government programs, but also portfolio loans up to $4 million and piggyback HELOC’s up to $500k. The company was originally founded in 1940, and as it turns out is one of the largest credit unions in the nation. The firm is expanding its Wholesale Lending Division, and is looking for Wholesale Account Executives for Northern California, Southern California, Arizona, Oregon, and Washington, and hiring retail Mortgage Loan Officers in California, along with FHA and conventional processors, underwriters and funders. more…

Homebuyers who were in contract by April 30 but can’t close by June 30 may still be eligible for the federal homebuyer tax credit. On Wednesday, the Senate passed (60-37) a proposal set forth by Senate Majority Leader Harry Reid to extend the closing deadline from June 30 to September 30. The closing extension is the only change, contracts must still have been entered into by April 30. The reason for the proposal was, in Reid’s words, to enable “a backlog of 180,000 potential home buyers nationwide” who are experiencing lender or other delays that would prevent closing by June 30 to take advantage of the credit. It should be noted that this extension is an amendment to HR4213, The American Jobs And Closing Tax Loopholes Act of 2010 which still must pass House and Senate votes before becoming law.

Here’s more on specific benefits of the Federal Homebuyer Tax credit, and on the California Homebuyer Tax Credit, which is a $10k tax credit still available to CA homebuyers entering into new contracts now.

Fannie Mae Relief For Homeowners Near Oil Spill
CitiMortgage will suspend all foreclosure sales and filings for 90 days on its 1st mortgages within 25 miles of the Gulf coast. Fannie Mae said that servicers of Fannie-backed loans may immediately suspend or lower payments on mortgages for borrowers whose income or property were affected by the spill. Under the Fannie Mae program, servicers can offer to postpone or lower payments for up to 90 days, during which the servicer is expected to verify the borrower’s income loss or the damage the oil spill may have done to their property. Freddie Mac will grant up to six months forbearance to victims of the oil spill.

Re-Defaults of Modified Loans
Fitch Ratings forecasts that most borrowers who get lower mortgage payments under a federal government program will default within 12 months. This is not much of a surprise to anyone involved in modifying mortgages, but in a story by WSJ’s James Hagerty: more…

Despite a volatile week, rates were net down .125%, bringing conventional conforming rates (on loans up to $417,000) within .1% of all-time record lows. Below is a recap of last week and rationale for a rate lock bias going into next week. And don’t forget that Friday is the last day homebuyers can be in contract to be eligible for the Federal homebuyer tax credit—those in California have a new state credit with different deadlines. More on both tax credits here.

Rate Factors Week of 4/19/10
The largest factor pushing rates down early and late last week was the ongoing debt crisis in Greece. As bond market investors have grown more skeptical about Greece’s ability to fund their debt obligations, they have sold out of Greece and other European bonds to buy mortgage and Treasury bonds. When mortgage bond prices rise on this buying, rates drop. more…

The California Association of Realtors (CAR) predicts that the money allocated for the CA first-time homebuyer credit may run out in 10-20 days once the program starts on May 1. This is what CAR said:

“The $100 million allocated for California’s first-time homebuyer tax credits may be depleted in about 10 to 20 days or sooner, according to C.A.R.’s Economics team. California’s Franchise Tax Board (FTB) plans to begin accepting applications on May 1, 2010 for tax credits up to $10,000 for first-time homebuyers and for homes that have never been previously occupied. However, the total tax credit allocation for all taxpayers is $100 million for first-time homebuyers and $100 million for new homes, both on a first-come, first-served basis. more…

California Tax Credit
The newly announced California tax credit is available to homebuyers closing from May 1, 2010 to July 31, 2011, but they must be in contract by December 1, 2010. The credit is for 5% of the home price up to $10,000 cap. It’s for owner-occupied single family homes only, and it’s for first time buyers or buyers of homes that have never been occupied. This credit is on a first-come, first-served basis until the state’s allocated $100m to first time buyer and $100m to never-occupied programs are used up. There are no income limits on borrowers. The tax credit has to be claimed one-third per year over three years. UPDATE APRIL 17: California Association says CA credit could run out in a few weeks.

Federal Homebuyer Tax Credit
The deadline for the Federal homebuyer tax credit fast appraching. Federal homebuyer tax credits are available to buyers in contract before April 30, 2010 and closing by June 30. The credit is allowed for single buyers earning up to $125,000 and married couples earning up to $225,000. Who qualifies: first time buyers who haven’t owned a home in three years get an $8000 credit, and buyers who have owned a primary residence for at least five of the last eight years get a $6,500 credit. The tax credit is equal to 10 percent of a purchase price—credits are capped at $6500 for repeat buyers or $8000 for first time buyers, and purchase price is capped at $800,000. more…

Here’s a handy, printer-friendly Homebuyer Tax Credit Fact Sheet outlining key parameters for the newly announced California tax credit available to homebuyers buying from May 1, 2010 to July 31, 2011. There’s also a refresher on the Federal tax credit. And here are some additional links on each program:
more…

Mortgage Help For Unemployed Borrowers
The official announcement by the Federal Government is today, but the details came out yesterday, about funding & requiring lenders to temporarily slash or eliminate monthly mortgage payments for many borrowers who are unemployed. Banks and other lenders would have to reduce the payments to no more than 31% of a borrower’s income, which would typically be the amount of unemployment insurance, for three to six months. In some cases, administration officials said, a lender could allow a borrower to skip payments altogether. And for borrowers who owe more than their home is worth, the US government, with its big budget surplus (right?) will be offering financial incentives for the first time to lenders to cut the loan balances of such distressed homeowners.

Are the people who are responsible about making their payments subsidizing those that don’t? (Like the Greek debt issue in Europe, perhaps?) That is a huge argument of course, but those who are still current on their mortgages could get the chance to refinance on better terms into loans backed by the Federal Housing Administration. Officials said the new initiatives will take effect over the next six months and be funded out of $50 billion previously allocated for foreclosure relief in the emergency bailout program for the financial system. No new taxpayer funds will be needed, the officials said. more…