Fannie Loses How Much? Comments on Home Ownership Priority and HUD’s BofA Discrimination Suit

of the way through the 1st quarter, and we find ourselves in Irish-American
Heritage Month, which, happily for Chicago, contains St. Patrick’s Day. This
day was originally a religious holiday to honor St. Patrick, who introduced
Christianity to Ireland in the fifth century, St. Patrick’s Day has evolved
into a celebration for all things Irish. Congress apparently put aside partisan
squabbling long enough to proclaim March as Irish-American Heritage Month in
1995. And why shouldn’t they? Per the Census Bureau there are about 35 million U.S.
residents who claimed Irish ancestry in 2010 – more than seven times the
population of Ireland itself (4.58 million). Irish was the nation’s second most
frequently reported ancestry, trailing only German. The percent of New York
state residents who were of Irish ancestry in 2010 is 13% compared to about 11%
for the nation as a whole. Lastly, $56k is the median income for households
headed by an Irish-American, higher than the $50k nationwide average.

Catch the
wave – just don’t ask me about any warehouse banks supporting this program. Per
the MBA, HARP is starting to take hold in the applications figures
According to Michael Fratantoni with the MBA, more than 20% of refinance applications last week were for HARP loans
– one would deduce primarily from large depository servicers. Does that narrow
things down?

If you
don’t like RESPA kickbacks, and who does, you might want to sign on to this
. The purpose is to extend the time
line that the regulators can go after people and companies for illegal

I received
some good feedback yesterday on Echo Boomer’s home ownership goals, or lack
thereof. Boris K. wrote: “With regard to the Gen Y homeownership priorities
discussion, is it so terrible for these people to rent?  The absence of
the ‘homeownership as the American dream’ myth propagated for decades by
politicians, the NAR and other special interests may have spared us the housing
bubble and the resulting recession. I
think it’s a shame that the real American dream, i.e. freedom and liberty, has
been supplanted by a decades-long homeownership PR campaign by politicians and
other housing industry special interests to falsely identify a material desire
like homeownership as the ‘American dream’

Ray W. wrote, “I’m not sure I agree with the Baby Boomers being the first
generation to consider home ownership the principal component of the American
Dream. I’m pretty sure the vast majority of the boomers parents (WWII Greatest
Generation) that followed the new interstate systems out to the burbs to make
those little Boomers in their own new homes were an earlier generation who
valued home ownership as a principal component of the dream even if they also
had other priorities (careers & education) and more balanced investments
than most boomers. Arguably, the earlier generation of the 1920’s in which many
of the thrifts and savings & loans was also very much focused on home
ownership as integral part of their American Dream. Home ownership & jobs
(aka, a better life) have been among the primary drivers of most of the
immigration patterns out of Europe with the exception of the earliest
immigrants who strove for religions and political freedom as their overarching

HUD’s charge of discrimination against BofA under the Fair Housing Act (three
borrowers who said they were required to provide personal medical information
and documentation regarding their disability and proof of the continuance of
the Social Security payments in order to qualify for a home mortgage loan), I
received, “So – we are held accountable by the GSA’s to confirm that income
sources will have sufficient continuance, and then HUD wants to litigate for
damages when we do so? Temporary Disability is not considered adequate income
for qualifying, based on my 33 years as a loan originator. So when a loan is
denied on that basis, our reward for protecting the interests of potential
investors is to be sued by parties representing the interests of the applicant.
Didn’t Kurt Vonnegut write a book about this?”

And Cheryl
S. observes, “I found it quite interesting that Bank of America is
involved in a lawsuit of alleged discrimination regarding disabled
borrowers.  I have processed residential mortgage loans for more than 20
years and have been required to provide
this very type of documentation
. The Social Security Administration will
only document that a person is receiving a benefit, same with any pension or
insurance disability payments; neither will they state, in writing, that the
income is expected to last at least 3 years.  In order to meet the
agency’s underwriting guideline that the income is expected to continue for at
least 3 years, it has become common practice to request a physician’s
statement. The physician’s statement is not always a simple request, as many
are leery to state anything in writing as well. I believe any disabled borrower
that has applied for an agency mortgage loan has been asked to provide a
physician’s statement or other documentation regarding their disability in
order for that income to be considered in the loan qualification process.
Fannie Mae and Freddie Mac should be watching this one very closely. It will be
interesting as to how this plays out.”

Fannie has lots of other things to
watch – like losing $2.4 billion in the 4th quarter and asking the
federal government for nearly $4.6 billion in aid to cover its deficit
. Folks keeping track should know that
the -$2.4 billion includes a dividend payment to the government of $2.6 billion
– glad to see someone making some coin – but taxpayers have spent more than
$150 billion to prop up Fannie and Freddie. Fannie has received more than $116
billion so far from the Treasury Department, the most expensive bailout of a
single company. “Fannie’s bailout money totaled roughly $16.4 billion in 2011
after accounting for dividend payments. That’s up from about $7.3 billion in
2010 but down from about $32.5 billion in 2009.” But here is the classic. Fannie
officials say losses have increased in recent quarters for two reasons: some homeowners are paying less interest
after refinancing at historically low mortgage rates
; others are defaulting
on their mortgages.

As we all
know, agency loans must go through the UCDP.
I received this note; “Loans delivered to the Agencies have to have the
appraisals delivered through the Uniform Collateral Data Portal (UCDP). 
The portal site appears to be overwhelmed by volume (how does that
happen?  Didn’t someone try to figure out potential volumes and test
against it?).  The UCDP portal has become very blocked in the last week or
so.  The problems are prevalent around that clock and on several days the
site has been largely inaccessible for the majority of the day.  Right now
the portal is accepting appraisals with minor data errors.  Supposedly
they’re going to tighten up on March 19 and require perfect data after
that.  Appraisals will be turned back and resubmissions are going to be
costly.  Everyone better have a solution to ensure the appraisal data
elements are correct.  Can you imagine what’s going to happen to the
portal when HARP 2.0 volume takes off?” So wrote G Brad Harvey with Triserve Appraisal Management. (If you
want to get in touch with Mr. Harvey, write to him at

Turning to
the markets, Europe has been relatively quiet and so we find our markets back
to being driven by U.S. news. Wednesday prices worsened on somewhat better than
expected economic news but primarily comments from Chairman Bernanke’s
testimony before the House Financial Services Committee. He noted growth in the
economy and positive developments in the labor market. “The decline in the
unemployment rate over the past year has been somewhat more rapid than might
have been expected, given that the economy appears to have been growing during
that time frame at or below its longer-term trend.” The Fed’s Beige Book,
showing reports from the various Fed districts, echoed his comments. There is,
and will be, a lot of jawboning about QE3 – but the economy seems to be bumping
along at a slightly better pace. By the end of the day MBS prices ended lower/worse
by nearly .5 and the 10-yr was up to 1.98%.  View this morning’s MBS Prices.


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