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Loan Agents Comment on New Good Faith Estimate
I didn’t plan on yesterday’s Real Words From a Real Agent to incite such a firestorm of e-mails. But first, some “Good Faith Estimate chatter.” The grace period of the new GFE is set forth pretty clearly. But lenders are finding out that what HUD allows and what investors actually do can be two different things.

The new Good Faith Estimate is still a problem for agents out in the field, along with title companies, Ops staffs, and investors. One experienced agent in California wrote: more…

A San Francisco Chronicle mortgage rate story yesterday does a good job simplifying the factors affecting mortgage rates as we move through 2010. It’s a useful consumer-friendly piece on how the Fed’s mortgage bond program works, when it’s ending and what might happen when it does end. It also includes updates on the homebuyer tax credit, FHA loan guidelines, and loan modifications. The Basis Point contributor Julian Hebron was quoted in the story and is excerpted below.

Click the Mortgage Bonds tag below for lots of weekly coverage we do on this topic. Our next report on the Fed’s mortgage bond program and what it means for rates will be this Friday, February 19. more…

I thought about taking today off from the commentary to celebrate, since yesterday I won all 4 quarters of my office’s Super Bowl pool! And then I remembered that I was the only one in the pool, don’t really have an office, and that the net effect of my $50 a square winnings was about the same as the US Government buying back their own securities. Oh well.

Bernanke’s Bailout Exit Strategy
On Wednesday at 10AM EST, Federal Reserve Chairman Bernanke plans to testify before the House Financial Services on that day about the central bank’s plans to withdraw emergency stimulus from the U.S. economy. No one believes that the goal of the Fed is to mess up the markets, or the recover, but the Fed has options in unwinding emergency aid “while not causing inflationary fears, hurting job growth or stunting the fragile economy recovery underway.” We already know that they will keep overnight rates near 0% for quite some time. And in fact late last week a Fed official (the president of the Federal Reserve Bank of New York) said the Fed might reconsider ending the mortgage buying program if rates rose sharply. more…

One never knows when the subject of mortgage banking will pop up – like yesterday. There I was at the Sundance Ski Resort (the one owned by “Bob” Redford) with my son. (He was there to snow board, I was there in the lodge trying to figure out an opening paragraph for today’s commentary.) I had my 2008 Mortgage Bankers Association canvas computer bag, with “Freddie Mac” printed on it, when up walked a fellow who started asking me about it. It turned out that he is the son of David Glenn. Mr. Glenn was ousted from his job as president and COO of Freddie Mac in 2003, over six years ago, pre-bubble. It turns out that he is doing the same thing now that many other mortgage folks are doing: buying and flipping distressed properties – probably here in Utah.

Rates Up On Mediocre Treasury Auction
Rates were up again yesterday (the 10-yr was up to 3.85%), but then improved ever so slightly in spite of a mediocre $44 billion 2-year note auction. The bid/cover ratio was 2.91, below the average for the last four months, and “Indirect bidders” bought 34% of the issue versus 45%, which is the average over the last several sales. $118 billion is a lot to swallow during a holiday weekend. This morning, and this week, we will have the S&P/Case-Shiller index, the Chicago Purchasing Manager’s Survey, Jobless Claims. One thing working in our favor is that the bond market is technically extremely “oversold”, so, like a spring, may be due to head the other way. But there is no bounce-back yet: the yield on the 10-yr is sitting at 3.85% and mortgage prices are worse by another .125. more…

Seven More Banks Fail, 2009 Tally At 140
Wanna buy a bank? Now is a good time to give that someone special a little something special – like a failed bank. Seven U.S. banks were taken over on Friday, and the FDIC could not find buyers for three of them. It brings the total to 140 for the year, the most since ‘92. Heck, even ex-IndyMac (now OneWest Bank) picked up the assets and 39 branches of First Federal Bank after it was closed Friday. OneWest was formed by a group of private equity and hedge fund investors to take over IndyMac’s assets earlier this year. Added to the list of banks this year who have experienced deteriorating loan portfolios and related liquidity and capital issues are Imperial Capital Bank of La Jolla CA, Peoples First Community Bank of Panama City FL, New South Federal Savings Bank of Irondale AL, Independent Bankers’ Bank of Springfield IL, RockBridge Commercial Bank of Atlanta GA, and Citizens State Bank in New Baltimore MI. City National Bank bought assets of Imperial Capital, Beal Bank bought the assets of New South, and Hancock Bank bought the assets of Peoples First Community Bank. The other three: zip.

Loan Modifications Not Going Well
Modifications aren’t going so well. Why not? Well, getting to the essence of things, from someone in the trenches, most people do not qualify income-wise on paper. Self-employed borrowers write off a lot on taxes, and many wonder if the government should help a tax cheater. Others experience the loss of spouse’s income (divorce, death, joining the circus, etc.), loss of job, overtime hours, or second job. Folks dealing with borrowers in this sector report that most borrowers are angry with their servicer because they cannot pay their mortgage, and that this “feud” prevents an open dialogue especially when there is huge amount of paperwork to be filled out. Lastly, sometimes servicers do not have rights to the loans when the MBS holders own the rights – often the servicer is just the administrator of the pools. more…

Attack of the FHA loan files?

Most of the United States begins Daylight Saving Time at 2:00 a.m. on the second Sunday in March and reverts to standard time on the first Sunday in November. So by my calculations, that means that this Sunday here in the U.S. most of us “fall back” and it will dark by dinner time. more…

The Wall Street Journal reports that, due to the federal tax credit to buy high-mileage cars, the Federal government is now paying Americans to buy golf carts. As it turns out, the IRS has ruled that golf carts qualify for the electric-car credit as long as they are also road worthy. The federal credit “provides from $4,200 to $5,500 for the purchase of an electric vehicle, and when it is combined with similar incentive plans in many states the tax credits can pay for nearly the entire cost of a golf cart”. At a list price of $8-10,000, and a top speed of 15 to 25 miles per hour. “The Golf Cart Man” is offering a deal where “you can buy the cart for $8,000, get a $5,300 tax credit off your 2009 income tax, lease it back for $100 a month for 27 months, at which point Golf Cart Man will buy back the cart for $2,000. ‘This means you own a free golf cart or made $2,000 cash doing absolutely nothing.’”

Wells Record Earnings, Also US Bank, Morgan Stanley
Wells Fargo can afford to buy a few golf carts – but let’s hope that they don’t until they pay that loan back to the Federal government. Wells reported a 3rd straight quarter of record earnings – net income of $3.2 billion, almost double 2008, $9.5 billion year to date, up 75 percent from last year. This includes net interest margin of 4.36% – so it helps paying nothing on checking accounts and earning 5.5% on mortgages! As a sign of the times, Wells pumped up their credit reserves by $1.0 billion, hitting $24.5 billion and about 3% of total loans and 118 percent of nonaccrual loans on their books. more…

“A woman in Great Britain has died after being hit in the back of the head by a golf ball, on the first hole. Her husband was so distraught he only played the front nine.”

Stories like that are terrible, and it is hard for men to catch a break. It is also hard for reverse mortgages to catch a break. In talking to people who are involved in that field of lending, they say that sometimes they feel that the press is almost hoping that something goes wrong with that business. Really, any time you become involved with a senior citizen, or their money, alarm bells begin to ring and often times with cause. Here are two of the latest articles (1, 2) with the second one having some top wholesale buyers of the product.

Tax Credit Extension?
There was a story in Reuters yesterday saying that “lawmakers have said they are considering extending or expanding the tax credit. Senate Majority Leader Harry Reid backs a bipartisan bill to extend the credit for six months. A Senate Republican plan would expand it to $15,000.” As one can imagine, NAR, NAHB, and the MBAA are all lobbying strongly for some type of extension. As we have seen, the Federal government would rather continue to stabilize the economy rather than upset it, and taking away the credit would be a move toward “upsetting the apple cart”. more…

Greetings from San Diego, where, coincidentally, there is a national mortgage banking conference. Although I didn’t see any chains of mortgage banker types forming conga lines in any hotel lobbies, the mood here has improved since the last few conferences, and most are cautiously optimistic. There is still the “Hey, congratulations, we’re still in the business” mood, but no one seems to believe that it will be smooth sailing from here on out. If I had to sum things up, I would say that a) there are a number of “displaced” mortgage bankers starting up some new ventures with good potential, b) “new” loan programs are practically nonexistent, c) vendors are introducing a few new products and new twists on dealing with the current “agency-only” environment, and d) regulatory and compliance changes have become constant.

Regardless, the mood is definitely better than one would probably find in the Chicago Cub’s front office, given that they have declared bankruptcy. At those ticket prices! more…

Loan modifications, which seem to have more of an impact on the larger investors than on the smaller brokers, have come a long way since earlier this year. An assortment of modification programs have been almost entirely replaced by HAMP, now the industry standard for first liens, and servicers have streamlined, to a much greater degree, their operations departments. With that, and given the continued political pressure to do them, look for the number of loan modifications to increase significantly in the next few quarters. The most recent data shows that there is a slight moderation in the pace of re-defaults as compared with a few months back. Overall the re-default numbers remain high, but it is very dependent upon the amount of payment reduction, the number of payments missed at time of modification and original credit score.

For those servicers who sell to Freddie and who are modifying their loans, Freddie notified clients that their Workout Prospector is now available “to use when evaluating eligible borrowers for a modification under the Home Affordable Modification program (HAMP). “ In fact, starting on 11/1 “all Freddie Mac Servicers will be required to evaluate and process mortgages for HAMP in Workout Prospector or to transmit data when using your own proprietary or third-party system, and the Borrower Qualification Worksheet will be retired.” more…