CFPB Turns to Reverse Mortgages; Banks Making too Much on HARP? Builders Coming Back; FHA Streamline Investor News

Do we really need Congress writing or approving the industry’s disclosure
forms? Can’t it pick on the rental car agreement forms that no one reads, or
maybe rafting or sky diving forms? Or maybe worry about our impending “fiscal
cliff” at the end of the year? Okay, that is a bit of an exaggeration, but the
House, with two interesting sets of panels, is hearing about disclosures – Go
Bill!

Pssst! Want a cool Census site on wealth trends in the U.S. with which to
impress your co-workers or Realtors?.
Your tax dollars at work, going to pay actuaries. Seriously, U.S. median
household net worth
declined 35% between 2005 and 2010, from $102,844 to
$66,740 (in 2010 constant dollars), according to a set of detailed tables
released by the U.S. Census Bureau. However, excluding home equity, median
household net worth increased by 8% between 2009 and 2010, from $13,859 to
$15,000.
The Net Worth and Asset Ownership tables show household net worth
─ the value of assets minus debts ─ by a variety of demographic characteristics
in 2005, 2009 and 2010.

Want to comment on the pros and cons of reverse mortgages? “I don’t
want the Gray Panthers picketing in front of my office” versus “This
program is God’s gift to anyone who remembers Lawrence Welk’s accordion
solos!” The CFPB wants to hear from you! The agency said it will
look into the financial abuse of the elderly, particularly reverse mortgages
and will collect comments from the public until Aug. 13th. And once again the
CFPB has scored public relations kudos – but does the name of the site
(“protecting older Americans from financial abuse”) assume guilty
before proven innocent?.

When in doubt, order a probe. Fifth grade humor aside, the ResCap bankruptcy
could take a very long time to sort out.

I love unintended consequences – but should the press be upset about
making a profit in mortgage banking? Honestly, I haven’t figured out if Wells
Fargo is a “big” bank or a “regional” bank, but when it
comes to mortgages, it is a big bank. The Wall Street Journal noted that “big
banks” are netting unanticipated financial gains from the Home Affordable
Refinance Program
, with Nomura Holdings estimating that mortgage servicers
could pocket up to $12 billion in revenue this year and borrowers could save
$2.5 billion to $5 billion. However, critics worry that changes making HARP
easier for borrowers to refinance with existing lenders could create what HUD
Secretary Shaun Donovan calls “a monopoly on refinancing.” “The
contrast is the latest illustration of the competing demands policy makers must
juggle when they devise responses to the housing bust, now in its sixth year.
Federal officials last year revised the HARP program in a bid to encourage
banks to refinance borrowers who were current on their payments but owed more
than their properties were worth. The revisions have driven a sharp increase in
refinancings, following years in which the program fell short of government
projections. But some critics, including members of the Obama administration,
say the changes risk making HARP a giveaway to big banks
. That is because
the new HARP rules make it easier for borrowers to refinance their loans with
existing lenders. That, the critics say, allows large lenders to charge a
captive customer base above-market interest rates on the refinanced loans.
Borrowers refinancing through their existing lender make up about 75% of HARP
refinancings, according to government figures.”

Builders…remember
them? The National Association of Home Builder’s (NAHB)/Wells Fargo Housing
Market Index (HMI), a measure of confidence, ticked up one point this month to
reach its highest point since May 2007. The June increase in the HMI came from
increased optimism over current sales while builders remain cautious about
future prospects. But, the WSJ reports, “The recent rise in home building
could be thwarted by an unlikely factor, a shortage of land in desirable
locations.” It seems that a sizable portion of developed lots (paved roads, sidewalks,
ditches for sewage pipes, etc.) are often are in distant suburbs of cities and
still owned by banks, builders or developers. The problem is that they are in
places where few home buyers want to live. “In fact, builders are running
low on land in suburbs that have well-regarded school districts and reasonable
commutes to city and job centers
…’Of all the lots out there, probably 95%
of them are unbuildable,’ said Patrick Malloy, an Atlanta-area builder. Mr.
Malloy said home prices are recovering-but only in the city and nearby suburbs…That
means the recovery in both home construction and new-home sales could be held
back until developers replenish their supply of land, especially in areas where
buyers want to live.”

Soon, the borrowers who make up about $2.5 billion of performing
servicing will receive a letter saying, “The company servicing your loan has
changed – please send your payment to…” Yes, for various reasons, the transfer
of servicing continues
. “Mortgage Industry Advisory Corporation
(MIAC), as exclusive representative for the Seller, is currently marketing a
$2.47 Billion FNMA A/A mortgage servicing portfolio. The portfolio is being
offered by a West Coast Mortgage firm, with loan originations primarily
concentrated in the Pacific Central, Pacific Northwest, and South Central
regions. The Seller will be providing full representations and warranties for
the loans included in this offering.” Key portfolio characteristics
include: $327,894 Average Loan Size, 99.89% Fixed Rate loans, Weighted average
interest rate of 4.325%, Weighted average delinquency rate of 0.05%, Weighted
average loan Age of 9 months, 100% Retail, 100% Full Doc, Weighted average FICO
778, Geographic concentration in California and Colorado.” (Anyone who wants to
bid by June 25th should contact Dan Thomas at dan.thomas@miacanalytics .com.)

Huh? The FHA has temporarily rescinded its policies on “Disputed Accounts
and Collection Accounts
” in order to clarify them. They were to become
effective July 1. Go here
and click on 12-10.

The FHA
Streamline changes continue
, begun last week by Wells Fargo. The numbers are
staggering. In Wells Fargo’s case, it currently services more than 500,000
customers with FHA home loans that could qualify to save money by refinancing
under changes at the agency.
Wells’ demand for this product is such that they can focus on it, and forget
the other servicers – it helps keep turn times down. FHA, in a recent monthly
report, has undertaken more than 126,000 refinance applications under the
streamlined program, along with projections that it could see close to 224,000
by year end. Other investors such as PHH, it seems, doesn’t want/need the
influx of business either.

But
some investors are staying the course
. “With the recent industry news regarding FHA
Streamline Refinances, Franklin American Mortgage Company (FAMC) is
pleased to announce that it will continue to provide liquidity to the
marketplace, free of servicer restrictions. In
an effort to manage market exposure, a loan level price adjustment of 50 basis
points will be applied to all FHA Streamline Refinance transactions effective
with loans locked on a best-efforts basis starting Tuesday June 19
, and
effective with all mandatory trades executed on June 19, and forward. This
streamline price adjustment applies to all FHA conforming fixed, FHA jumbo
fixed, and FHA adjustable rate products. Please review FAMC’s online lending
manual for detailed product descriptions and other requirements.”

“In response to the recent investor pull back of FHA Streamline Refinance
transactions, Mountain West Financial wants to reiterate their
commitment to the FHA Streamline Refinance product.  We will continue to
offer FHA Streamline transactions, regardless of servicer, for all of its
business channels. It’s business as usual here at Mountain West. We do not
require an AVM and will not cap your LTV at 110%. We still need a 640 score and
a full credit report with a 12 month mortgage rating. And don’t forget, we
waive the normal $975 underwriting fee for our FHA Streamlines.”

Pacific Union sent out a note to brokers, “With all the banks changing
their Streamline programs, they should know Pacific Union Financial is here to
help. They can find us at Corr.PacUnionDirect .com.”

Last week I mentioned First Mortgage, also “standing pat” on
this program: http://www.firstmortgage .com/

And M&T is sticking around. “As announced last week, effective today
we will accept FHA Streamline Refinances on loans where M&T Bank is not the
current servicer.  As many lenders in the market are scaling back, M&T
is remaining true to the goal of making home ownership more affordable.” There
is some fine-tuning on maximum loan amounts, a manual LTV calculation for
pricing purposes, and some other criteria lenders should be aware of – there is
a conference call at 1PM CST tomorrow to answer specific FAQ’s related to this
product.  The dial-in number is 1-800-851-0194, code # 6821340.

With all the investor chatter, one would think that FHA Streamline
product is the entire mortgage market – but it isn’t. Freddie and Fannie
issuance is still strong, as is “regular” FHA & VA. From a hedging
perspective, traders report that the 3.5% coupon (the “bucket” containing
3.75-4.125% loans) still represented the majority of hedge activity from last
week at 65% of all 30-yr flows.  However, liquidity in the 3.0% coupon
remains steady with prior week levels at 29% of activity.

Last week, of course, the MBA application numbers showed a sharp increase
in week-over-week mortgage application volume. Total refinance applications
increased 19%, with the conventional refinancing applications increasing 18%
and government refinancing applications surging 28% resulting in the highest
level on these indices since May 2009. After ruminating on it a bit, analysts
suggest that there are three factors that could have led to the surge in the
index. The impact of the shorter week, since the index reported in the prior
week was adjusted for the Memorial Day holiday. Mortgage rates rallied to new historic
lows in the prior week (week of May 28th to June 1st), and although rates were
unchanged to slightly higher for the most recent MBA reporting period, it is
possible that borrowers were waiting to see if rates would rally further but
decided to apply for a refinancing seeing rates were holding steady or trending
upwards. Lastly FHA premiums: the higher FHA premiums for jumbo loans and the
lower FHA premiums for loans with endorsement date prior to May 2009 went into
effect on June 11th. There is a possibility that there was some front running
of the increase in premiums by FHA jumbo borrowers. However, this would only
impact the government refinancing index and the fact that average loan size on
those applications went down suggests that it may not have impacted application
volume. That said, the lower premiums for pre-May 2009 borrowers could have led
to the larger increase in the government refinancing index.

Continuing on with the temporal markets, we didn’t see too much volatility
yesterday, given the Greek election news. In fact, it is a pretty light
calendar this week although today we have Housing Starts – expected +.4% but generally
not an interest-rate moving number, and Building Permits. (Tomorrow we have the
results of the FOMC meeting, Thursday Jobless Claims, Existing Home Sales, and
the Philly Fed.) The focus is on the verbiage of the Fed meeting and then
Bernanke’s press conference afterward, with some believing that the odds of QE3
at better than 50/50. It would appear that rate locks are stable, or so one
could believe given that MBS supply from originators is about average at between
$1.5-2.0 billion. With little news, we find the 10-yr nearly unchanged from
Monday’s close at 1.58%. MBS prices also appear nearly unchanged.

 
Men are like… (Parental discretion advised; Part 2 of 2)…

 

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