Mortgage Rates At New All Time Lows Ahead Of Key Jobs Report

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May 31, 2012 2:48PM

Mortgage Rates At New All Time Lows Ahead Of Key Jobs Report

Mortgage Rates improved again today as domestic economic data joined with ongoing fear of a European currency collapse to send US Treasury yields well into new all time lows. Mortgage rates duplicated that feat, but not nearly as convincingly. After being stuck in the mud for months at 3.875%, the mortgage rate levy broke, giving way to 3.75% recently. With today’s gains, some lenders are at a 3.625% Best-Execution rate for 30yr Fixed Conventional Loans. (Read More: What is A Best-Execution Mortgage…

May 31, 2012 4:42PM

Lines Drawn over California Homeowner Legislation

There is a bit of a dust-up going on over passage of a Homeowner Bills of Rights in California . The Center for Responsible Lending ( CRL ) and the Mortgage Bankers Association ( MBA ) have weighed in on opposite sides of the package consisting of six bills sponsored by Attorney General Kamala Harris. Harris, when she introduced the legislation, said that they had a goal of providing homeowners with a system where the rules are clear, where everyone gets a fair shot and everyone has equal standing…

Micro News

4:33 PM:

LPS’ April Mortgage Monitor Shows Sharp Jump in FHA Foreclosure Starts

4:26 PM:

Fannie Mae Releases April 2012 Monthly Summary

4:16 PM:

FHFA: DeMarco Announces DeLeo to Oversee DeGSE’s Strategic Plans

2:02 PM:

Fannie 3.5’s Regain The 105 Handle as Risk Reverses Course

12:25 PM:

MBS Fall Back To AM Levels; Negative Reprice Risk? Really?

10:03 AM:

Freddie Mac: 15-Year Fixed Rate Mortgage Falls Below 3%

9:50 AM:

ECON: Chicago Purchasing Managers Index Weaker Than Expected

9:31 AM:

Bond Markets Open Flat; Turn Stronger Following Data

Around the Web

Video News

Rep. Paul Ryan on Fixing the Fiscal Cliff

High-End Real Estate In Manhattan

Bair on CFTC Volcker Rule Meeting, JPMorgan

Today’s Comments

Stan Brody

“Forgive me… “POST CRISIS… my ass… the crisis has been ongoing for some five years… Dr. Shiller and Mr. Case still do not “get it”…”

Ted Rood

“Fundamentals haven’t changed and won’t soon, but the Fed’s intervention in the securities markets (Operation Twist) is scheduled to end in…”

scot shumway

“I find this post slightly amusing actually. There is nothing unconstitutional or illegal about requiring fingerprints for a position (verified by 2 constitutional…”

Today’s Q&A

“Can a conventional loan be refinanaced into a VA loan?”

” Can I get a mortgage to purchase a home?”

“Can a loan officer be employed by two or more brokes in arizona?”

<!–

Today’s Forum Discussions

AP

“Hi. I took an FHA loan for $340000 (30 yr fixed FHA) which closed in end of July 2009 @5.125% which I then refinanced in 2009 to a lower rate of 4.75%…”

Ted Rood

“Loan Scenario View All Post A Scenario Loan State: Washington Loan County: — Loan Type: Refinance (Rate and Term) Loan Amount: $280,000 Property Value…”

Dan Burke

“Loan Scenario View All Post A Scenario Loan State: California Loan County: Los Angeles Loan Type: Refinance (Rate and Term) Loan Amount: $460,000 Property…”

–>

[MND NewsWire] – FHFA Veteran Picked to Run Strategic Plan for Fannie and Freddie

FHFA Veteran Picked to Run Strategic Plan for Fannie and Freddie

Posted to: MND NewsWire
Thursday, May 31, 2012 4:42 PM

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The Federal Housing Finance Agency (FHFA) announced a new office to implement its Strategic Plan for Fannie Mae and Freddie Mac Conservatorships and named the person who will head it.  Acting FHFA Director Edward J. DeMarco appointed Wanda I. DeLeo as Deputy Director of FHFA, responsible for the newly created Office of Strategic Initiatives.

The Plan which was sent to Congress is February established objectives and steps for FHFA to take to meet its obligations as conservator of the two government sponsored enterprises (GSEs).  Under the plan, the next phase of the conservatorship will require FHFA to:

  • Build a new infrastructure for the secondary mortgage market;
  • Contract in a gradually manner the GSEs dominant presence in the marketplace while simplifying and shrinking their operations; and
  • Maintain foreclosure prevention activities and credit availability for new and refinanced mortgages.

DeLeo is moving into her new role from one as Deputy Director of the FHFA’s Division of Examination Programs and Support and has held other positions at the agency including as its Chief Accountant.  She will be the central point of contact for all matters related to the Strategic Plan with an immediate task to identify and organize key stakeholders, work streams and deliverables that flow from the plan.

.

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[MND NewsWire] – Lines Drawn over California Homeowner Legislation

Lines Drawn over California Homeowner Legislation

Posted to: MND NewsWire
Thursday, May 31, 2012 4:22 PM

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There is a bit of a dust-up going on over passage of a Homeowner Bills of Rights in California.  The Center for Responsible Lending (CRL) and the Mortgage Bankers Association (MBA) have weighed in on opposite sides of the package consisting of six bills sponsored by Attorney General Kamala Harris.  Harris, when she introduced the legislation, said that they had a goal of providing homeowners with a system where the rules are clear, where everyone gets a fair shot and everyone has equal standing.

In simple terms, the bills which are modeled to a certain extent on the $25 billion settlement agreement would ban robo-signing, give tenants 90 days rather than 60 to leave a property after foreclosure and end “dual tracking” where a servicer is negotiating a modification while still speeding toward foreclosure. The legislation also proposes a $25 fee to be paid by servicers when they record a notice of default.  The fee would go into a real estate fraud trust fund that would support the AG’s investigation and prosecution of real estate fraud crimes. 

The AG’s legislation has apparently undergone considerable revision since originally submitted.  The thrust appears relatively unchanged but changes in bill numbering have made it difficult to backtrack.

According to a press release from CRL on Thursday, “Lobbyists fighting [the Bill of Rights] in Sacramento have now enlisted mortgage bankers from around the country to help them defeat it.” 

Regardless of who may have enlisted whom, the Mortgage Action Alliance (MAA) MBA’s advocacy arm, has definitely entered the fray.  The group sent out a letter to its members that urged its members to take action NOW (emphasis theirs) to support the state MBA in efforts to defeat the legislation.  The MAA contends that the legislation under consideration is highly flawed, and will not accomplish the objectives of meeting homeowner needs and reviving the state’s economy.  “Consumer costs will increase and force California families to pay more for fewer choices.  If enacted, the legislation also has great potential to seriously damage lenders, servicers, and the fragile state economy.”

MAA urged its members both inside and outside of California to utilize the MAA’s automated contact system to send MAA’s message to California assembly members and Senators.

Today Paul Leonard, California Director of CRL said that Californians need AG Harris’ Bill of Rights to fix mortgage lending abuses and speed economic recovery.  His statement referenced the foreclosure crisis in the state and said the settlement would reduce foreclosures in three key ways:

  • Ensure that homeowners get fair consideration for loan modifications and other alternatives before the foreclosure can proceed;
  • Prohibit robo-signing and provide recourse when servicers violate that ban; and
  • Provide homeowners with additional transparency, information, and protections in the foreclosure process.

Leonard said that the Assembly’s Conference Committee has conducted nearly 20 hours of hearings with industry, homeowners, and consumer advocates and he urged the legislators to protect Californians “with common-sense rules that banks have already agreed to.”

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[MBS Commentary] – MBS RECAP: Some Month-End Volatility, But Bond Markets Hold Gains

MBS RECAP: Some Month-End Volatility, But Bond Markets Hold Gains

Posted to: MBS Commentary
Thursday, May 31, 2012 4:08 PM

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MBS Live: MBS Afternoon Market Summary
In an earlier alert at 2:02pm, we postulated that the rest of the trading day may be some sort of sideways or triangular pattern of narrowing ranges ahead of tomorrow morning’s NFP, and that’s effectively all that’s happened this afternoon.  We saw a big jolt of price movement just ahead of the 3pm hour into the Treasury close (end of day and end of month), but it was purely trade-flow driven.  MBS, TSYs, The Euro, and most everything else took two steps forward, two steps back, and have been trading in decreasing amplitudes since then.  Yes, it’s all about Europe, but NFP is still super important tomorrow morning.  It can definitely move markets even if that movement is more muted due to Europe.  Remember that NFP is less about the state of the economy tomorrow and more about how it informs the upcoming FOMC Announcement.
MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.

FNMA 3.5
104-32 : +0-07
FNMA 4.0
106-16 : +0-05
FNMA 4.5
107-09 : +0-02
FNMA 5.0
108-10 : -0-02
GNMA 3.5
106-23 : +0-08
GNMA 4.0
109-08 : +0-03
GNMA 4.5
109-25 : +0-01
GNMA 5.0
110-17 : -0-03
FHLMC 3.5
104-25 : +0-07
FHLMC 4.0
106-04 : +0-04
FHLMC 4.5
106-25 : +0-01
FHLMC 5.0
107-21 : +0-00
Pricing as of 4:07 PM EST
Afternoon Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this afternoon.

2:02PM  :  ALERT ISSUED: Fannie 3.5’s Regain The 105 Handle as Risk Reverses Course

Wow… The extent to which the movement of “risk” is harmoniously evident across diverse markets is impressive these days. Risk aversion ramped up into 11am with stocks, bond yields, and the Euro all falling in unison. Then, through 1pm, everything went back in the other direction (“risk-on” or “risk tolerance”), taking MBS roughly from their highs of the morning to their opening levels.

The “risk-on” bounce hit a snag around 1pm and has been progressively trending back in an MBS-friendly direction. Fannie 3.5’s regained their 105-00 handle moments ago, but currently trade at 104-31+. Fannie 3.0’s are back up to 102-14 after dipping to 102-10. All this to say that the selling trend behind the most recent alert (12:25pm) has abated for now. Too soon to bank on in this market, but we may be seeing some sort of ‘leveling-off’ ahead of tomorrow’s NFP data that progresses relatively sideways from here or perhaps in a more triangular pattern of narrowing ranges.

We’re pretty hesitant to make assumptions about that given the unknowns created by “month-end.” There could be poker-faces at trade desks that move things a bit more quickly in one direction or another into the 3pm hour.

12:25PM  :  ALERT ISSUED: MBS Fall Back To AM Levels; Negative Reprice Risk? Really?

As insulting and paradoxical as it might seem, the concept of a negative reprice might merit some discussion based on the current shape of trading in MBS. Fannie 3.5’s have fallen from 105-02 to to trade closer to their morning range between 104-27 and 104-30. Stocks are on a noticeable upswing and the Euro just shot up abruptly. 10yr yields are up around 4 bps from the lows of the morning.

It’s not out of the question that we could see a negative reprice here from an “early crowd” lender or from a lender whose initial rate sheets were aggressive. That said, a decent measure of the recent ups and downs occurred AFTER most lenders released rates, leaving current levels still within the safe zone.

Best bet is to know your lender and keep an eye on MBS. 102-14 is a good line in the sand to watch in Fannie 3.0’s (yes 3.0’s) and 104-27 would serve the same role for Fannie 3.5’s. If prices are below there and falling, reprice risk is increasing. Otherwise, you might not panic too much unless your past experiences with a particular lender lead you to believe otherwise.

Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard’s Live Chat feature, utilized by hundreds of industry professionals each day.

Matthew Graham  :  “Treasury Close, Month-End. See the quote below.”
John Paul Mulchay  :  “see below”
Oliver S. Orlicki  :  “what happened at 3?”
Matthew Graham  :  “i’d give it a few minutes and just get really angry if a lender reprices on 2 minutes of month end volatility at all-time highs”
Matthew Graham  :  “month-end, may bounce right back”
Brent Borcherding  :  NostraGrahamus
MortgageMan007  :  “why the nosedive?”
Matthew Graham  :  “”There could be poker-faces at trade desks that move things a bit more quickly in one direction or another into the 3pm hour.” few clunky handfuls of chips hitting the table ahead of 3pm close.”
John Paul Mulchay  :  “who traded?”
Adam Quinones  :  “is that an admission of guilt? If so a new trend is starting!”
Matthew Graham  :  “RTRS – SUNTRUST HAS ADJUSTED POLICIES TO ENSURE BORROWERS ARE NO LONGER HARMED BY DISCRIMINATORY PRACTICES IN CREDIT MARKETS, JUSTICE SAYS “
Andy Pada  :  “Enter David Stevens…”
Matthew Graham  :  “RTRS- JUSTICE SAYS $21-MLN SETTLEMENT COVERS 20,000 BORROWERS WHO WERE ADVERSELY AFFECTED “
Matthew Graham  :  “RTRS – SUNTRUST DISCRIMINATED AGAINST PRIME BORROWERS IN 34 STATES AND WASHINGTON, VIOLATED FAIR LENDING LAWS, JUSTICE SAYS “
Matthew Graham  :  “RTRS- U.S. JUSTICE DEPT SAYS HAS REACHED SETTLEMENT WITH SUNTRUST BANK TO COMPENSATE FOR DISCRIMINATION AGAINST AFRICAN- AMERICAN AND LATINO BORROWERS “
Matt Hodges  :  “translation: “We know notheeen” in Hogan’s Heroes language”
Matthew Graham  :  “RTRS- SPAIN’S GOVERNMENT IS NOT AWARE OF ANY STEPS BEING TAKEN BY THE IMF IN RELATION WITH SPAIN-ECON MINISTRY SOURCE “
Matthew Graham  :  “Euro rose sharply on that, then moderated back down, helped along by this: “
Matthew Graham  :  “RTRS – IMF SPOKESWOMAN, ASKED TO COMMENT ON REPORT OF CONTINGENCY PLANS FOR SPAIN, SAYS IMF ALWAYS DISCUSSING DIFFERENT SCENARIOS IN ALL ITS MEMBER COUNTRIES “
Ray J  :  REPRICE: 1:15 PM – Provident Funding Worse
john murphy  :  “ii’v been on the production mgt side since 05 but LOs loved me as an UW because i originated for so long. Every UW should rotate thru production (and vice versa)”
Brent Borcherding  :  “John, what do you like more underwriting or originating?”
john murphy  :  “when i was UW i always liked to see a statement adding “color” fr employer vs VOE. made it more relevant”
Jason Harris  :  “I am guessing management is going to give me the 80k over 12 months with a letter like you mention John….we will see….”
john murphy  :  “80K annualized appears to be the final answer and is a conservative estimate. perhaps a ststament that bonus likely to continue?”
Ted Rood  :  “In a stunning development, several Italian and Greek workers put in full 8 hour days today. More on reaction from the ECB at their weekly news conference tomorrow.”
Jason Harris  :  “I will update and let you know how it sorts….going to chug some pepto now'”
Michael Gannon  :  “continuance that the bonus will continue but not how much……I agree with you guys dont get me wrong. I could see an underwriter saying it couldnt be used at all”
Ken Crute  :  “did uw possibly mean $80 for both years? not 80k /24 months? “
Jason Harris  :  “I will get it overturned but to me the obvious answer is 12 month average of lowest year”
Matt Hodges  :  “that’s just made up, Jason”
Ken Crute  :  “concur with the gentlemen below, unless 09 was way off from 10/11 “
Jason Harris  :  “UW wants to average 80K over 24 months….freaking crazy”
Matt Hodges  :  “lessor of, unless increasing, then you average”
Jason Harris  :  “QQ guys…borrower has $170K bonus in 2010 and $80K bonus in 2011 – how would you calc bonus?”

Read what our user’s have to say about MBS Live on LinkedIn.
» Start a two week free trial of MBS Live.

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[Mortgage Rate Watch] – Mortgage Rates At New All Time Lows Ahead Of Key Jobs Report

Mortgage Rates At New All Time Lows Ahead Of Key Jobs Report

Posted to: Mortgage Rate Watch
Thursday, May 31, 2012 2:48 PM

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Mortgage Rates improved again today as domestic economic data joined with ongoing fear of a European currency collapse to send US Treasury yields well into new all time lows.  Mortgage rates duplicated that feat, but not nearly as convincingly.  After being stuck in the mud for months at 3.875%, the mortgage rate levy broke, giving way to 3.75% recently.  With today’s gains, some lenders are at a 3.625% Best-Execution rate for 30yr Fixed Conventional Loans.

(Read More: What is A Best-Execution Mortgage Rate? )

(Get Caught Up With: Yesterday’s Post)

Although the market continues to be primarily driven by Europe, today saw the addition of slightly negative domestic economic data contribute to an incrementally gloomier outlook for the global economy.  Investors are scared and the common quip being tossed around to justify the progressively lower bond yields is that they want “return OF capital as opposed to return ON capital.”  

The whole phenomenon produces an environment that benefits Treasuries much more than mortgage rates, something we’ve discussed in greater detail in the past (read more: HERE).  Even so, mortgage rates were able to eke out new all-time lows today.  

Tomorrow brings the most important piece of monthly economic data: The Employment Situation Report.  This is always a potential market mover, regardless of the European consideration.  That said, if the report is strong, which would normally cause rates to rise quickly, those effects could certainly be muted due to ongoing concerns over Europe.  Nevertheless, rates are at all-time lows the day before the big Jobs report.  That’s one of the “lockiest” situations we can think of historically, even if we don’t have any reason to believe rates have bottomed out definitively.

Ongoing Guidance: We’d continue to advocate not trying to “get ahead” of current market movements as a high degree of uncertainty is pervasive.  While it’s a reasonably safe assumption that European concerns will generally help rates stay lower than they otherwise would be, that “otherwise would be” part is very much a moving target.  Best bet is to focus on the fact that rates are at their all time lows, and with very close to their all-time low borrowing costs.  Add in the fact that progress has always been increasingly difficult from current levels and risk vs reward for floating vs locking looks a bit larger than we’d like, but not out of the question for those who understand the risks and have an exit strategy if things don’t go their way.

Loan Originator Perspective With Rates At All Time Lows

Constantine Floropoulos, VP, Quontic Bank

It is irrational not to lock prior to the NFP report. It is one of, if not the biggest market mover for us rate watchers. At all time lows in a rally, you need to book your profit and move along. Just like in the stock market, sell the rips buy the dips….today would be a a day to take your profits. Can rates go lower? Sure, but why risk it at these levels….the old trying to catch a falling knife saying comes to mind here. Don’t be greedy, pigs get fat, hogs get slaughtered…

Victor Burek Mortgage Planner,  Benchmark Mortgage

Big rally today, but lenders held onto most of the gains. At current mbs price, rates should be better but lenders are very reluctant to pass along the gains due to volume of business they currently have. That said, today’s rate sheets are the best i have ever seen.

Bob Van Gilder, Originator, FinanceOne

Fresh lows on 10 yr Treasury and Highs on 3.5 mbs coupon—-rates are good. Period. If you are on the fence, get off. The jobs report (NFP) tomorrow has been known to upset to the upside (rates higher). If you lock-please have your originator lock for minimum 45 days on refinances. As Lender volume increases, the incremental cost of a 45 day lock is worth the peace of mind. (should rates rise during processing—you could run outta time and miss the proverbial “Boat”)

Ted Rood, Senior Mortgage Consultant,  Wintrust Mortgage

90% of a lot is better than 100% of nothing! Reminded of this adage today when a client wanted to keep his 5.25% loan “for now” rather than drop to 3.75% “because he heard rates might drop more.” Guess it’s possible, but when rates are already at unprecedented levels, statistics say it’s more likely they’ll go up than down. Fundamentals are still Europe’s foundering economies, and won’t change anytime soon, but opting to keep a high rate in case rates drop even further means continuing to waste money in the meantime.

Julian Hebron, Branch Manager, Loan Agent,  RPM Mortgage

My theme continues: lock these lows if you have low tolerance for volatility. Otherwise if you want to try to squeak .125% lower, eurozone problems now and U.S. fiscal problems becoming a bigger deal this summer could provide that opportunity at very brief trading intervals. If you expect to capture anything lower, you must be pre-approved (meaning all your documentation is submitted to your lender) and your loan agent must have a standing order to lock at your pre-determined target.

Dirk Postupack, Loan Officer, Allentown Mortgage Corp

For the first time in a long time, I am not opposed to floating through this report. Even if we get a better than expected NFP, I believe that there is a lot of room for current pricing to hold its ground, and that a better-than-expected NFP report won’t hurt rates as much as it normally would. Personally, I think tomorrows NFP does not hit expectations.

Brett Boyke, Senior Mortgage Banker, Wintrust Mortgage

I feel like we are at the top of one of those giant drop amusement park rides. I feel like rates will drop at any second, but we are still stuck at the top with a very uneasy feeling of anticipation. For all we know the overly sunburned carnie is taking a nap and forgot about us….

Brent Borcherding, Loan Officer,  Capital M Lending

I commented yesterday that there is the potential lower rates ahead, and I still believe that to be true. However, most of the Pros in our business have seen a similar event to this before (multiple times) and I suggest they will tell you that if you are looking to close in the next 30 days to lock, and I agree. Lenders will be swamped with new locks, meaning new business, and are not likely to pass along any improvements. Additionally, this has been a very nice rally that is likely to back up, slightly higher rates, before we continue lower.

Today’s BEST-EXECUTION Rates 

  • 30YR FIXED –  3.75%
  • FHA/VA -3.75%
  • 15 YEAR FIXED –  3.125 edging down to 3.00%
  • 5 YEAR ARMS –  2.625-3. 25% depending on the lender

Ongoing Lock/Float Considerations 

  • Rates and costs continue to operate near all time best levels
  • Current levels have experienced increasing resistance in improving much from here
  • Rates could easily move higher or lower, but given the nearness to all time lows, there’s generally more risk than reward regarding floating
  • But that will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn’t always mean they’re done improving.
  • (As always, please keep in mind that our talk of Best-Execution always pertains to a completely ideal scenario.  There can be all sorts of reasons that your quoted rate would not be the same as our average rates, and in those cases, assuming you’re following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).

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[MND NewsWire] – HOPE NOW Reports 43K Loan Modifications in April

HOPE NOW Reports 43K Loan Modifications in April

Posted to: MND NewsWire
Thursday, May 31, 2012 1:22 PM

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HOPE NOW is reporting that servicer-members of its alliance completed 43,000 mortgage loan modifications during the month of April, down 8 percent from the 47,000 modifications done in March.  These modifications, done through proprietary programs do not include the April modifications completed by servicers through the Home Affordable Mortgage Program (HAMP) which are reported separately.

HOPE NOW was an early response from the mortgage industry to the growing foreclosure crisis.   It is an alliance of mortgage servicers, investors, counselors, and other mortgage market participants that has developed and is implementing a coordinated plan to help homeowners.  In addition to loan modifications, HOPE NOW operates a homeowners’ hotline, sponsors community events to help homeowners navigate the process of getting a modification, coordinates some of its activities with the HAMP program, and is increasingly focusing on assisting military families who are in trouble with their mortgages.  

Eighty-three percent of the modifications done during April, a total of 36,000, included a reduced principal and interest payment and 33,000 or 76 percent of all proprietary modifications reduced principal and interest payments by 10 percent or more.  Fixed-rate modifications with at least a 5-year initial fixed period accounted for 89 percent of the modifications.

April data shows a decline in foreclosure.  There were approximately 60,000 completed during the month compared with 66,000 in March.   Foreclosure starts were down slightly from 178,000 in March to 177,000 in April.

As part of its military focus, HOPE NOW sponsored two special events in April; one at Fort Gordon and another at Fort Jackson.  The alliance plans to host at least four more on-base events this year.

Faith Schwartz, Executive Director said, “HOPE NOW’s members continue to be proactive in outreach to at-risk borrowers through face to face events, the Homeowner’s HOPETM Hotline, managed by the Homeownership Preservation Foundation, and other outreach efforts.”

The mortgage industry has completed 5.46 million total modifications since 2007.  This number includes modifications achieved through HAMP as well as through proprietary programs.

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[MND NewsWire] – Mortgage Insurers Wrote $7 Billion in PMI Last Month

Mortgage Insurers Wrote $7 Billion in PMI Last Month

Posted to: MND NewsWire
Thursday, May 31, 2012 12:05 PM

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The Mortgage Insurance Companies of America (MICA), the association representing private mortgage insurers, said today that its members companies had $395.7 billion in primary insurance in place in the month of April.  In March the reported coverage was $396.6 billion. The new figure is a substantial reduction in coverage from the $615.7 billion MICA reported one year ago however some year-over-year comparisons are skewed due to the subsequent receiverships of PMI Insurance Company and Republic Mortgage Insurance Company.

Private mortgage insurance is required by many conventional lenders for mortgages written with less than a 20 percent down payment.

Companies wrote $7.2 billion in coverage for newly originated conventional mortgage loans during April compared to $6.7 billion in March and $3.7 billion in April 2011.   Applications were received from 33,013 potential borrowers in April and the insurance was used in the purchase or refinance of 30,575 homes.

Members reported 22,569 defaults in April compared to 21,624 in March and 40,875 one year earlier.  There were 20,678 reported cures in April down from 28,026 in March and 43,362 in April 2011. 

MCIA reports data from three of the country’s largest private mortgage insurers:  Genworth Mortgage Insurance Corporation, Mortgage Guaranty Insurance Corporation, and Radian Guaranty Inc. 

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[MBS Commentary] – MBS MID-DAY: Another Day, Another Melt-Down Snowball Rally

MBS MID-DAY: Another Day, Another Melt-Down Snowball Rally

Posted to: MBS Commentary
Thursday, May 31, 2012 11:08 AM

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MBS Live: MBS Morning Market Summary
Rather than stand out as one of those examples of “a major headline event causing a major, sudden shift” in bond markets, today has been more of a determined snow-ball of risk aversion and duration-grabbing, albeit with growing momentum and speed.  In other words, we haven’t seen 10yr yields shoot “straight down” on the heels of any particular headline, it’s just that they’ve moved “relatively sharply down on the heels of almost every headline!”  10’s made it into the 1.53’s, officially an undisputed all-time low.  MBS Hit all time highs with Fannie 3.5’s into the 105’s and Fannie 3.0’s over 102-16.  The whole of “risk” has made similar movements with 10yr yields sharing a high degree of correlation with stock prices, German Bunds, and the Euro.  For their part, MBS could fall several ticks more and STILL be maintaining a rally trend at all time highs.
MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.

FNMA 3.5
105-01 : +0-08
FNMA 4.0
106-21 : +0-09
FNMA 4.5
107-11 : +0-04
FNMA 5.0
108-14 : +0-02
GNMA 3.5
106-24 : +0-08
GNMA 4.0
109-09 : +0-04
GNMA 4.5
109-24 : -0-01
GNMA 5.0
110-18 : -0-02
FHLMC 3.5
104-25 : +0-07
FHLMC 4.0
106-05 : +0-05
FHLMC 4.5
106-25 : +0-01
FHLMC 5.0
107-22 : +0-01
Pricing as of 11:08 AM EST
Morning Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this morning.

10:03AM  :  Freddie Mac: 15-Year Fixed Rate Mortgage Falls Below 3%

30-year fixed-rate mortgage (FRM) averaged 3.75 percent with an average 0.8 point for the week ending May 31, 2012, down from last week when it averaged 3.78 percent. Last year at this time, the 30-year FRM averaged 4.55 percent.

15-year FRM this week averaged 2.97 percent with an average 0.7 point, down changed from last week when it averaged 3.04 percent. A year ago at this time, the 15-year FRM averaged 3.74 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.84 percent this week, with an average 0.6 point, up from last week when it averaged 2.83. A year ago, the 5-year ARM averaged 3.41 percent.

1-year Treasury-indexed ARM averaged 2.75 percent this week with an average 0.4 point, unchanged from last week. At this time last year, the 1-year ARM averaged 3.13 percent.

9:50AM  :  ECON: Chicago Purchasing Managers Index Weaker Than Expected

* PMI 52.7 vs consensus 56.5

May 2012: The Chicago Purchasing Managers reported the May Chicago Business Barometer decreased for a third consecutive month to its lowest level since September 2009. The short term trend of the Chicago Business Barometer, and all seven Business Activity indexes, declined in May.

Among the Business Activity measures, only the Supplier Delivery index expanded faster while Order Backlogs and Inventories contracted.

The Production index fell to neutral while, inexplicably, measures of Business Policy advanced.

BUSINESS ACTIVITY:
• PRODUCTION and NEW ORDERS lowest since September 2009;
• PRICES PAID lowest since September 2010;
• EMPLOYMENT rate of growth slowed

9:31AM  :  ALERT ISSUED: Bond Markets Open Flat; Turn Stronger Following Data

Despite yesterday being a tough act to follow, both MBS and Treasuries are carving out incrementally stronger record levels after a raft of weaker-than-expected economic data. All across the board this morning, things were in line with expectations or worse:

– Challenger Job Cuts were an 61k vs 40k previously
– ADP Employment was 133k vs a 148k forecast
– Jobless Claims were 383k vs a 370k forecast
– GDP was an as-expected +1.9%, but corporate profits were down 4.1% vs a +1.1% consensus, the largest drop since Q4 2008

All told, it was enough to nudge 10yr yields briefly down to another record low of 1.593 while Fannie 3.5 MBS hit another record high of 104-29+. Fannie 3.0’s also hit a record of 102-14.

Records aside, we haven’t seen any follow through at these levels and markets are moving sideways in slightly less aggressive territory. But with 1.5983 10yr yields and MBS holding at the highs, we’re not exactly looking at a panicked bounce weaker either.

Next piece of domestic data on the calendar is Chicago PMI at 9:45am.

8:40AM  :  ECON: GDP In Line With Expectations

* Headline GDP +1.9 vs +1.9 consensus, previously +2.2
*Consumer Spending +2.7 pct vs +2.9 pct previously

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 1.9 percent in the first quarter of 2012 (that is, from the fourth quarter to the first quarter), according to the “second” estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2011, real GDP increased 3.0 percent.

The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month. In the advance estimate, the increase in real GDP was 2.2 percent (see “Revisions” on page 3).

The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, residential fixed investment, private inventory investment, and nonresidential fixed investment that were partly offset by negative contributions from federal government spending and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP in the first quarter primarily reflected a deceleration in private inventory investment, an acceleration in imports, and a deceleration in nonresidential fixed investment that were partly offset by accelerations in exports and in PCE.

8:36AM  :  ECON: Jobless Claims Higher Than Expected

* Claims +383k vs 370k consensus
* 4wk moving ave rises to 374.5k from 370.75k
* Benefit exhaustion leads to fall in continuing claims, lowest since July 2008,

In the week ending May 26, the advance figure for seasonally adjusted initial claims was 383,000, an increase of 10,000 from the previous week’s revised figure of 373,000. The 4-week moving average was 374,500, an increase of 3,750 from the previous week’s revised average of 370,750.

The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending May 19, unchanged from the prior week’s unrevised rate.

The advance number for seasonally adjusted insured unemployment during the week ending May 19 was 3,242,000, a decrease of 36,000 from the preceding week’s revised level of 3,278,000. The 4-week moving average was 3,263,750, a decrease of 12,000 from the preceding week’s revised average of 3,275,750.

8:18AM  :  ECON: ADP Employment Lower Than Expected

* Private Payrolls +133k vs 148k consensus
* Last month revised down to 113k from 119k

Private-sector employment increased by 133,000 from April to May on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The ADP National Employment Report, created by Automatic Data Processing, Inc. (ADP®), in partnership with Macroeconomic Advisers, LLC, is derived from actual payroll data and measures the change in total nonfarm private employment each month. The estimated gain from March to April was revised down modestly, from the initial estimate of 119,000 to a revised estimate of 113,000.

Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard’s Live Chat feature, utilized by hundreds of industry professionals each day.

Brent Borcherding  :  “Nobody is rooting against the economy and there is absolutely nothing wrong with coming to a place like this, staying informed better than your peers, and planning accordingly so that you an provide. Actually it is your obligation.”
Victor Burek  :  “i agree..seems we root against economy, but if it walks like a duck, quacks like a duck..its a duck”
Matthew Graham  :  “i was thinking about saying something to the effect of feeling sort of guilty or “bad” sometimes being an economic bear… I mean, it’s not like we WANT the global economy to be in this desuetude. It just is what it is.”
Matthew Graham  :  “yeah, that… well-said. I was just trying to think of a way to phrase that, but yours is shorter and better”
Brent Borcherding  :  “Hope can blind one from reality, VB.”
Victor Burek  :  “i dont see how anyone didnt see this coming with europe imploding”
Matthew Graham  :  “BB is on that list too”
Matthew Graham  :  “a hearty congratulations to Vic, B-C, JW, and anyone else that called “105” and/or “best-rates ahead this spring” around mid-March. “
Matthew Graham  :  “RTRS – U.S. 30-YR FIXED RATE MORTGAGES RECORD LOW 3.75 PCT MAY 31 WK VS 3.78 PCT PRIOR WK-FREDDIE MAC “
Matthew Graham  :  “two different phenomena anyway… In the case of QE, low rates are a “cause.” In the case of the E-Z crisis, they’re an “effect.””
Christopher Stevens  :  “Let me rephrase that…I think the yld is low enough that the Fed does not have to use QE3″
Matthew Graham  :  uhh… pretty sure they could get it as low as they want. whether or not that’s a good idea is another story.”
Christopher Stevens  :  “the Fed could not have gotten the 10YR this low with QE3”
Christopher Stevens  :  “No need for QE3 with Spain, Italy and Greece doing the work for the Fed”
Adam Quinones  :  “warm the tar and start plucking feathers…”
Matthew Graham  :  “RTRS- JPMORGAN CEO DIMON AGREES TO TESTIFY BEFORE SENATE BANKING COMMITTEE ON JUNE 13 – COMMITTEE “
Victor Burek  :  “150kish
Andy Pada  :  “What is tomorrow’s payroll # forecast?”
Tom Schwab  :  hmmm… the market appears to be endorsing the Mayan calendar and the end of the world.”
Jason Harris  :  “Chris is spot on….I will be interested to see if we get much improvement with capacity already pressed to the edge”
Oliver S. Orlicki  :  “1.59 wow!”
Andy Pada  :  “I guess the parade of horribles has come to town”
Adam Dahill  :  turntimes are horrendous and not getting any better”
Christopher Stevens  :  “banks are in no hurry to lower rates with refi’s at the current levels”
Victor Burek  :  “i still have the 3.5”
Gus Floropoulos  :  “who else has switched their current chart to the fnma 3.0?”
Matthew Graham  :  “RTRS – US Q1 CORPORATE PROFITS DROP LARGEST SINCE Q4 2008 (-26.5 PCT) “
Matthew Graham  :  “RTRS – US Q1 CORPORATE PROFITS AFTER TAX -4.1 PCT (CONS +1.1 PCT), VS Q4 +1.1 PCT (PREV +1.1 PCT) “
Matthew Graham  :  “RTRS- US Q1 CONSUMER SPENDING +2.7 PCT (PREV +2.9 PCT), DURABLES +14.3 PCT (PREV +15.3 PCT) “
Matthew Graham  :  “RTRS – US PRELIM Q1 GDP +1.9 PCT (CONSENSUS +1.9 PCT), PREV +2.2 PCT; FINAL SALES +1.7 PCT (CONS +1.5 PCT), PREV +1.6 PCT “
Matthew Graham  :  “RTRS – US CONTINUED CLAIMS LOWEST SINCE JULY 2008”
Matthew Graham  :  “RTRS- US CONTINUED CLAIMS FALL TO 3.242 MLN (CON. 3.250 MLN) MAY 19 WEEK FROM 3.278 MLN PRIOR WEEK (PREV 3.260 MLN) “
Matthew Graham  :  “RTRS – US JOBLESS CLAIMS 4-WK AVG RISES TO 374,500 MAY 26 WEEK FROM 370,750 PRIOR WEEK (PREVIOUS 370,000) “
Matthew Graham  :  “RTRS – US JOBLESS CLAIMS RISE TO 383,000 MAY 26 WEEK (CONSENSUS 370,000) FROM 373,000 PRIOR WEEK (PREVIOUS 370,000)”
Matthew Graham  :  “RTRS – REUTERS CONSENSUS FORECAST FOR ADP PAYROLL CHANGE FOR MAY WAS FOR INCREASE OF 148,000 JOBS “
Matthew Graham  :  “RTRS – ADP NATIONAL EMPLOYMENT REPORT SHOWS U.S. EMPLOYMENT INCREASED BY 133,000 PRIVATE SECTOR JOBS IN MAY “
Jason Harris  :  “Not sure what was rigt or wrong….but the appraiser in question was in the process of being taken off of our AMC list for shoddy work and bad turn times totally unrelated to value”
Matt Hodges  :  “so, gray area, jason?”
Jason Harris  :  “I have had the same thing….more a request that we use someone else….we sent another appraiser out”
Victor Burek  :  “if thats the case, then cant be done”
Matt Hodges  :  “but remember who instituted HVCC originally”
Matt Hodges  :  “that would be “logical””
Victor Burek  :  “client is paying for it, they should be able to refuse”
Matt Hodges  :  “the FAQs don’t address refusal of assignment by a Realtor or borrower”
Matt Hodges  :  “they ended up doing that, but put up a big stink”
Victor Burek  :  “so the AMC assigned to new appraiser”
Victor Burek  :  “i just had a realtor for a seller refuse an appraiser assignment…she knew the appraiser”
Matt Hodges  :  “can a borrower refuse appraiser assignment, for example because of distance from their office to property location?”
Jason Harris  :  “These times are ridiculous….everyday that I see rates like this I think about how freaking lucky we are. Make as much of this opportunity every day as you can!”

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[MND NewsWire] – Mortgage Fraud Rates Show Some Purchase/Refi Correlation

Mortgage Fraud Rates Show Some Purchase/Refi Correlation

Posted to: MND NewsWire
Wednesday, May 30, 2012 4:56 PM

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Interthinx, a provider of comprehensive risk mitigation solutions, has released its 12th quarterly report and its Mortgage Fraud Index which measures four types of fraud common to the mortgage industry.  The composite index for the first quarter of 2012 which is derived from the four underlying indices, dropped to 139, its lowest point since the second quarter of 2009.  This represented a change of -4.3 percent from the fourth quarter of 2012 and -3.1 percent from one year ago.

Nevada returned to the role of “riskiest state” after being displaced by Arizona in the fourth quarter.  Arizona fell to second place followed by Florida, New Jersey, and California.

Much of the report centers on those metropolitan statistical areas (MSAs) with the highest fraud risk.  Two MSAs in Florida, Cape Coral and Miami occupy the first and second spots with composite risk scores of 248 and 241 respectively.  They are followed by Modesto and Chico, California and Las Vegas. 

The report notes significant movement among MSAs as to the levels of fraud, the types of fraud, and their relative positions in the rankings since the previous quarter.  For example, Stockton, California had been the riskiest city for three consecutive quarters but saw a 24 percent decrease from the fourth quarter of 2011 to drop to 7th place. 

The Property Valuation Fraud Index was 213, down 11.8 percent from the previous quarter and 4.7 percent from one year earlier.  Property Valuation Fraud is perpetrated by manipulating property values to create false equity which can be used for various purposes.  Florida led the nation in this type of fraud with five metropolitan areas (MSAs) in that state making in the top ten.  Cape Coral Florida had an index of 482, more than twice the national value, a major reason why it was also the riskiest MSA overall.  Las Vegas was second with an index of 440, but every MSA in the top ten had an index score of at least 401.  

The Identity Fraud Index was 140, down 2.2 percent from the fourth quarter of 2011 and 24.4 percent from the first quarter of 2011.  Identify fraud is frequently used in schemes to hide the identity of the offender and to obtain a credit profile that will meet lender guidelines.  The hot spot for this fraud was San Jose, California with an index of 293; Detroit was second and Ann Arbor, Michigan was in third place.

The Occupancy Fraud Index finished the quarter at 61, 23.2 percent lower than one year ago and down 2.1 percent from the previous quarter.  Offenders commit occupancy fraud by falsely claiming they intend to occupy the property they are purchasing in order to obtain a mortgage with a lower down payment or a lower interest rate.  Miami was the riskiest for this fraud, moving from second to first place even though its score of 104 was a decrease of 23.6 percent from the previous quarter.  Other MSAs appearing high on this list were Jacksonville, North Carolina; and Flint, Michigan.

The fourth type of fraud is measured by the Employment/Income Fraud Index.  This occurs when a mortgage applicant misrepresents income in order to meet underwriting guidelines.  Nationally this fraud risk has increased 18.1 percent over the last year and 4.5 percent from the fourth quarter of 2011.  Burlington, Vermont leads in this category of fraud risk with an index of 271, 80 points higher than San Diego which was in second place.  Eight out of the remaining nine MSAs in the top ten for this type of fraud are in California.

As interest rates declined the composition of loan applications in the Interthinx database have changed from a nearly 60:40 split between purchases and refinances in Q2 2011 to a 40:60 split in the first quarter of 2012.  The geographic changes that may have been caused by the composition shift were extremely granular in nature; however the type-specific risk indices did show some significant trends, especially in Identity and Occupancy Fraud Risk which saw decreases of 22 and 23 percent respectively and the Employment/Income category which increased 18 percent.  Both indices that decreased have lower values for refinances relative to purchases while the reverse is true for the Employment index.  Interthinx speculates that at least part of the major type-specific trends over the last year may be related to a change in loan composition. 

Interthinx maintains that its indices have proven to be reliable leading indicates of default and foreclosure activity therefore it advises that areas that bear watching going forward are Nevada and Arizona, the two riskiest MSAs in Florida, Cape Coral and Miami, and the New York Tri-State area where risk is rising in all three states, New York, New Jersey, and Connecticut.

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[Pipeline Press] – HARP 3.0 Musings; What these High MBS Prices Mean; Flood Insurance in the News Again?

HARP 3.0 Musings; What these High MBS Prices Mean; Flood Insurance in the News Again?

Posted to: Pipeline Press
Thursday, May 31, 2012 10:04 AM

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Sometimes I wish that I could use swear words in this commentary, but they wouldn’t pass e-mail filters. But if I could, I’d use them here. Why is Congress still “jerking around” with flood insurance? If Congress is concerned enough with protecting borrowers to ram Dodd Frank through and put the CFPB in place, why can’t they even come to an agreement on flood insurance? Instead the can is kicked down the proverbial road: Congress has given itself two more months to come up with long-term solutions for the program. The last full-scale reauthorization of the NFIP, a wing of the Federal Emergency Management Agency, occurred in 2004. Since 2008 the insurance provider has stayed alive through a series of 16 short-term extensions while lawmakers debate how to restore its fiscal soundness.

This time around, a voice vote in the House extended the life of the National Flood Insurance Program for 60 days. Last year the House passed a five-year extension that allowed for increased premiums and ended some subsidies, but the Senate has been unable to get a companion bill to the floor for a vote. The Senate last week passed the 60-day extension after adding a provision by Sen. Tom Coburn, R-Okla., that would gradually eliminate premium rate subsidies for people buying second homes and vacation homes in flood-prone areas. Coburn said that could save the program $2.7 billion over 10 years. I am done ranting, and there is a back story, of course, and that is that the NFIP was largely self-financing until it was overwhelmed by claims from hurricanes Katrina and Rita in 2005. It now owes nearly $18 billion to the Treasury. But still, should ordinary borrowers suffer again due to Congress’ inability to come to a conclusion?

MBA president Dave Stevens, ex-World Savings, ex-Freddie Mac, ex-Wells Fargo, ex-Long and Foster, ex-HUD/FHA, announced that he will soon be ex-MBA.  Dave will be leaving the organization effective June 30, to join SunTrust Bank as president of SunTrust Mortgage. Anyone interested in the vacated spot can send their resume to Michael Young at the MBA…

But here is a different type of opportunity. An experienced, well-financed mortgage banking group is actively pursuing opportunities to purchase controlling or full interest in an established mortgage bank with current annual production in the $50 million to $300 million range. In 2013, the minimum liquid capital requirement will be $2.5 for many types of business. “Our group will provide a minimum of $5 million injection of equity while building a national platform. The mortgage banker MUST have minimum of a New York state license – multi-state license preferred – and must be Direct Endorsed FHA lender and preferably have seller/servicer approval from Fannie and/or Freddie. We would like Chase and/or Wells (preferably both) to be current approved investors, of course other investors are a positive. Our offer will be based on number of state licenses as well criteria mentioned above. All inquiries will be strictly confidential.” Please contact Mr. Kalin at mk@buildaforce .com to discuss further.

Remember HARP 3? I received this note yesterday from New Jersey: “If it is truly the objective of government to protect the masses and offer a fair and balanced unwinding of the mortgage situation, HARP 3 is necessary. At some point, whether it’s a HARP 3, 4 or 5, the basic economics are going to dictate that the ability to refinance into a lower interest rate should be afforded to all Americans. I don’t know if it needs to be a 28th Amendment, but since Congress can’t remember how to build a budget I’d rather not consider the war over a new Amendment. The Real Estate sector accounts almost 19% of the US Economy. Considering how beaten down our economy has been in recent years perhaps something radical is required. HARP 3 needs to be a unified refinance program. Perhaps the FHA or Fannie/Freddie is not the solution, as has been rumored, but the US Government owns another source of funding: the USDA.  Since USDA is exempt from many state laws it’s foreclose process is simpler, thus making it more attractive in the MBS markets – and no MIP, simple and complete.”

Speaking of HARP III, here’s Part II of a little write up, near the top right corner: http://www.stratmorgroup.com.

How do Ops and compliance folks keep up with things? Here are some somewhat recent investor/agency updates. As always, it is best to read the actual bulletin, but this will give one a flavor for what is happening out there. In no particular order…

The FHA has issued a few reminders about the source reference and data elements for 203(k) transactions in FHA Connection for insuring.  The values in “Est. Value of Property” (line C3 on the conditional commitment section of the 203kWS); FHAC, Appraised Value; and FHAC, Escrow Amount should be used to obtain the correct LTV at the time of insuring for Purchases or Refinances.  For more 203(k) loan program resources, there’s an online reference guide at http://portal.hud.gov/hudportal/HUD?src/program_offices/housing/sfh/203k/203kmenu.

Freddie Mac announced that, beginning November 26, the GSEs’ respective electronic delivery systems will deliver a fatal or critical edit when the data for ULDD Sort IDs 525 (appraisers’ state license), 627 (loan origination company), and 634 (loan originator) is not delivered.  Freddie has also issued a reminder that, under Dodd-Frank, the GSEs are all required to publicly disclose information on ABS loan repurchase requests, including the identity of whoever is funding the applicable mortgage.  As such, lenders will need to supply ULDD data points Sort IDs 641.1 (“NotePayTo”) and 641.2 (the name of the entity funding the mortgage as listed on the note).

The ULDD transition period, of which we’re currently in the middle, will come to an end on July 23, when the requirements of Phase I will go into effect for loan deliveries whose applications are dated December 1, 2011 or after.  Freddie encourages making the transition as soon as possible by entering the date on which the application was received along with all data required for Phase I.  All data entered for relevant loans should match the appraisal data entered into the UCDP.  Fannie’s website features a number of resources to help with the transition, including ULDD tutorials (http://freddiemac.sparklist.com/t/410575/4682831/4967/35/), selling and delivery training tools (http://freddiemac.sparklist.com/t/410575/4682831/1627/36/), a list of key program milestones (http://freddiemac.sparklist.com/t/410575/4682831/4747/37/), and an interactive webinar on the new selling system functionality (http://freddiemac.sparklist.com/t/410575/4682831/4876/34/).

Wells Fargo Correspondent has updated its cooperative LTV ratios, reducing the LTV/TLTV/CLTV maximum by 5% for conforming loans on primary residences as of June 18th.  Fannie HomePath Program loans submitted to Wells will not be affected by the changes.

Correspondent clients are reminded that all loans submitted for purchase on or after June 11th must list the originating company’s main company NMLS ID on the Universal Residential Loan Application (a.k.a. Freddie Mac Form 65 and Fannie Mae Form 1003).  Submissions that only list the originating company’s Branch NMLS ID will no longer be accepted.  For companies in Delaware, Maine, and Missouri that don’t have a Company NMLS ID, the appropriate Agency Assigned Code should be used.

As per Uniform Delivery Dataset requirements, Wells is required to report the year that a property purchased with an agency loan was built, regardless of whether an appraisal was conducted for the transaction.  Conventional loans for which the appraisal or loan application doesn’t supply the year built will be suspended.  This applies to conventional Conforming and Non-Conforming loans whose applications are dated December 1, 2011 or after.

Loans received by Wells Fargo Wholesale are required to have The Record of Account (Box 6C) ticked on the 4506-T Transcript of Tax Return.  This is necessary for the loan to move to the Underwriting Department.  Clients are also reminded that the Return Transcript (Box 6A), Record of Account (Box 6C), Form W-2, the Form 1099 series, and Box 8 of the Form 1098 series must all be checked and completed as necessary.

New pricing is in effect for FHA and VA loans that locked or re-locked with Wells Wholesale on or after May 21st; loans locked prior to this should be renegotiated accordingly.  While pricing was previously based on GNMA I or II identifiers, the identifiers are no longer selectable, and there is only one government price on display.  Interest rates are now available in 0.125% increments.  Temporary Buydowns on 15-year fixed-rate FHA and VA loans, previously not allowed, are now being accepted, and the High Balance FHA Loan Program is being allowed with 15-year fixed rate, 30-year fixed rate, 5/1 and 3/1 ARM transactions.  The High Balance VA Loan Program is allowed with 15-year fixed rate and 30-year fixed rate transactions with amortization terms between 20 and 30 years, as well as 5/1 ARMs with margins of 1.75.  The relevant borrowers are required to qualify at the Note Rate apart from exceptional circumstances.

Wells Wholesale has improved the pricing adjusters for Freddie Mac Relief Refinance Mortgage 20-year fixed rate loans with LTVs over 125%.  The adjuster for primary residences has been updated from 1.625 to 1.375; for second home/investment loans, the adjuster has been changed from 3.125 to 2.875.

And rates continue to avoid being a source of complaint from anyone. Yesterday the U.S 10-yr T-note hit 1.63%. Prices on 30-year Fannie 3.0%, 3.5% and 4.0% coupons hit new price highs respectively of 102.25, 104.75, and 106.375 per Tradeweb – and when you add on a little servicing value those are some hefty premiums! And originators should remember that just because agency MBS prices rally doesn’t mean those price moves are passed on to rate sheets – most lenders are being somewhat conservative for reasons discussed a few weeks ago in this commentary. But mortgage rate sheets are almost back to where they were on May 18th – it seems that no points loans at 3.75% for 30-yr and 3% for 15-yr are where the market is. As we all know, Wednesday’s prices were driven by the ongoing crisis in Europe which will be with us for years.

At these lofty price levels, if you were a servicer, would you want to own mortgages with rates above 4.25%? If you were a borrower, would you be waiting to refinance? If you were a lender, would you be worried about the margin calls on your hedged pipeline while also being concerned about fallout/renegotiation? The answers, of course, are “no”, “no”, and “yes”. In the meantime, LO’s and well run mortgage companies can’t believe their good fortune despite all the hassles of actually moving a loan from application to funding.

Continuing with the markets, this morning we had the ADP Employment report of May, always of questionable predictive ability for tomorrow’s government unemployment data, which came in at +133k (lower than expected). And April was revised downward. We also had the weekly Initial Claims (5/26), up 10k to 383k. Other economic news consists of the preliminary reading on Q1 GDP (+1.9%, lower than expected) and at 10AM EST is the Chicago PMI index for May. In the early going the 10-yr is down to 1.60% and MBS prices are better .125-.250.

Puns (Part 3 of 4)
I got a job at a bakery because I kneaded dough.
Haunted French pancakes give me the crepes.

My Dad was a bankrupt doctor right after med school – he had no patience.
Velcro – what a rip off!
Cartoonist found dead in home. Details are sketchy.
Venison for dinner? Oh deer!
Earthquake in Washington — obviously the government’s fault.
Be kind to your dentist. He has fillings, too.
I used to think I was indecisive, but now I’m not so sure.

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