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Guns & Mortgages
This story speaks for itself, here’s the link and the epic lead paragraph below: Prosecutors: Mortgage Worker Got Drunk, Shot Computer Server

A Salt Lake City mortgage company employee allegedly got drunk, opened fired on his firm’s computer server with a .45-caliber automatic, and then told police someone had stolen his gun and caused the damage. more…

What Do Manufacturing & Inflation Stats Mean?
Economic stats often point to different economic trends, depending on one’s viewpoint. What difference do numbers like Industrial Production, Capacity Utilization, Producer Price Index, etc., mean for anyone in the mortgage business? Aside from moving rates around, last week we saw strength in manufacturing production (pushing commodity prices higher), weakness in final demand, and negligible inflation. The Consumer and Producer Price Indices have fallen for two months in a row. CPI is now up just 2% over the past year, but the PPI is up 5.3% over the past year. This leads us to believe that companies cannot pass along their higher costs to their end consumers, which in turns suggests that profit margins in coming quarters will be impacted. The same applies to mortgage banks – many would prefer to increase their profit margins, but don’t want to risk any market share so are forced to keep things slim.

Another Failed Bank & Summer Solstice
Nevada Security Bank wasn’t so secure, and on Friday Umpqua Bank, through the FDIC, assumed all its deposits. The bank didn’t make it to see the summer solstice, which occurred this morning at 7:28AM EST. (From here on, the days will become shorter here in the Northern Hemisphere.) more…

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…

Mortgage News vs. Industry Advocacy
The other day a reader wrote to me and said, “I keep wondering why you continually defend mortgage brokers and bankers. Hopefully the changes that are coming from Congress should go a long way to reducing the fraud, abuse and overcharging that brokers and some bankers have been doing for years. What we’ll be left with will be a smaller but more honest mortgage banking industry.” This is a valid question, valid points, and I appreciate the input. I try to not let my opinions enter into the commentary too much, and keep it “newsy.”

That being said, however, I think that brokers and bankers entered this business because they wanted to help others, and to make good money. The order of those two varies, but wherever one places the blame many decent brokers and bankers have either left the business or are barely hanging on. Just like the credit pendulum 3 years ago had swung too far to one side, many feel that it has swung too far the other, and will eventually come back to the middle. And honest people in the business are in favor of measures that eliminate fraud and overcharging, and any measures mortgage lenders can take to protect themselves from both of those should be encouraged. more…

Reporter Passes Out
It is not often that one is able to watch a financial newscaster pass out while on the job. And don’t ask me what relevancy a keyboard-playing cat has with any of it.

Fed Continues Reign Over Small Banks
Well, let’s not beat around the bush. According to the popular press, the Federal Reserve scored a victory and mortgage bankers suffered a defeat yesterday when the Senate approved an amendment by a 90-9 vote to preserve Fed supervision of hundreds of smaller banks, instead of transferring them to other regulators. more…

Rates Benefit on Stock Weakness
The drop in the equity markets yesterday, and possibly again today, certainly helped the flow of funds into “safer” investments – such as Treasuries and MBS’s. But we also had some economic news of note, the first being Pending Home Sales. The index was up 5.3% in March, with sales in the South up 13%, up 2% in the West, up 1% in the Midwest, but fell 3.3% in the Northeast. Second, Factory Orders here in the US were up 1.3% in March. And the Federal Reserve released its “Senior Loan Officer Survey” which showed that banks kept their lending standards tight during the first quarter – no surprise there, huh? There may have been a little movement in commercial and industrial loans to large and medium-size firms.

Greece Bailout Is Like US Needing 10x TARP Funds
Returning to the Greek issue for a moment, some believe that this will be the end of the Euro currency, at least in Greece. Let them print their own currency! The odds of sharp recession have increased, obviously, and naysayers are skeptical about any bailout plan based on the recession-stricken Portuguese and Spanish contributing billions of Euros to the cause. We have the ECB adopting a pure bailout strategy by accepting all Greek collateral and have seen almost $150 billion in potential economic aid offered to the Greeks. This figure is almost 50% of Greek GDP, and is the equivalent of the United States needing 10x the TARP funds! Greece’s GDP is only about 2% of US GDP and slightly less than that of Eurozone GDP, and one analyst likened it to Ohio going bankrupt and taking the entire US economic system with it. more…

Lawmakers Solicit Consumer Comments On 7 Financial & Housing Reform Topics
Do you want some input in financial reform? There are many ways to do this, and here is another. The public will have the opportunity to submit written responses to seven questions that will be published in the federal register online at www.regulations.gov. The administration also plans a series of public forums across the country on housing finance reform. The questions are:

1. How should federal housing finance objectives be prioritized in the context of the broader objectives of housing policy? more…

Are You Smarter Than A Congressman?
If you are ever feeling down about yourself, or that you’re just not performing at the top of your game and need a boost, you can watch this for 90 seconds and compare yourself to this $174,000 a year employee. And then there’s some development in yet another well-known mortgage fraud case in Sacramento involving properties in six states.

Seller Financing
Any broker will typically recommend seller financing when other lending avenues are exhausted. In fact, in the last 5-10 years, investors have offered programs that usually didn’t require the buyer to obtain a loan from the seller, and one has to go back to the 80’s, when rates were very high, to see just how popular the practice was. But now the industry is seeing a reemergence of seller financing. The terms are usually different than a conventional loan, but the loans are usually straightforward. An owner typically agrees to transfer title to the home in exchange for a note and a security interest in the property. The note is paid off like a conventional mortgage, though to the seller instead of a bank. Closing costs may be slightly lower: there’s no need for an appraisal, for instance, because the seller already knows a property’s value. Also, prospective buyers typically cannot qualify for traditional financing unless 70 percent of the building is sold, if it’s a new development, according to Fannie & Freddie Mac. 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…

Does A Loan Originator Have To Buy Back A Bad Loan Even After It’s Modified?
Yesterday I mentioned the question about whether or not modified loans could still be forced back to the seller for buybacks. Freddie Mac does indeed say that the seller would still need to buy it back after a modification. At the current time, however, there is the belief that sellers continue to be successful in challenging these because most contracts don’t specifically allow the servicers to modify the loans. And in fact several national law firms are making a run at challenging the large servicers, who find themselves caught between not being able to modify a loan and being forced to modify it by the GSE’s and HAMP. Servicers claim that the reps and warrants stay with the seller, and especially if the loan is modified due to fraud or material misrepresentation then the seller may have to indemnify the loan with some deposit of money to the investor.

BofA To Select Certain Loans To Modify
Bank of America will soon begin offering, by invitation only, loan modifications based on a reduction of the mortgage principal to some of its borrowers. Borrowers with principal balances of 120% or more of the home’s market value or who are confronted with endlessly increasing balances on negative amortization loans will be the target (they must meet the basic qualifications of HAMP), and stories reported that BofA will forgive up to 30% of the mortgage loan balance in two stages: the bank will offer an interest-free forbearance of up to 30% of the principal balance for five years, and if the homeowner stays current on mortgage payments for the period of time, then the amount will be forgiven. Urged by the US Government to do more, we may see that other banks are willing to take some losses now to avoid much greater losses later if the housing markets begin to drop again. Industry observers say that it is a variation on the implementation of HAMP, rather than a new alt-HAMP or HAMP-light program. Say what you want, HAMP volumes have been disappointing, especially for Pay-Option ARMs. Bank of America estimates that 45,000 loans will be affected for about $3 billion in principal reductions ($67,000 per loan). more…