FHA Streamline Investor Changes; Other Lender Tweaks to Slow/Control Volume

Mortgage rates are low.

But volume is a problem.
Raise our margins now!

(See Miss Hickox? Your 7th grade haiku section really paid off!)

Fannie
Mae bumped up its volume forecast for 2012
. According to a new forecast, Fannie’s
economists now believe that for all of 2012, originations will come in at $1.34
trillion, compared to a month ago forecast of $1.31 trillion. In 2011 mortgage
bankers originated $1.45 trillion in home mortgages – wouldn’t that be
something if 2012 was unchanged from 2011! So instability in Europe, and a
“slow recovery” here in the United States, is helping to keep our rates low.

That is certainly helping the mortgage industry, and firms are looking to
capitalize on the potential volume that is out there and are hiring. (In fact,
many investors are absolutely swamped with business – see the lender/investor
changes below.) For example…

Independent
retail mortgage banker Vitek Mortgage Group is seeking a VP of Mortgage
Operations for its Sacramento headquarters. The 25 year old
purchase-focused company (teamvitek.com),
which has its GNMA seller/servicer approval, continues to grow through builder
& realtor partners. This VP position will be responsible for partnering
with VP of Production, implementing processes and procedures for consistently
meeting contract contingency periods and scheduled close of escrow dates with
effective standards for compliance, processing, underwriting, funding and
post-closing. Expert pipeline management, strategic leadership, maximizing
productivity with on time closings, development and coaching for all of the
operations team are requirements of the role. The ideal candidate should have
10+ years of senior operational experience. Candidates should send their
resumes to Karen Drew at kdrew@teamvitek .com.

I have been retained by a technology-focused, nationally licensed mortgage
lender based in Charlotte, NC, that is seeking a VP of Credit Risk Management
to add to its rapidly growing organization. The company will increase
volume more than 100% to over $1.5 billion of on-line mortgages in 2012. 
Key responsibilities include QA/QC reporting on UW’s, tracking current investor
guidelines and managing company product offerings, cross-functional project
management and managing the restructuring of difficult loans for eligibility to
be sold on the secondary market.  This position will also provide process
improvement expertise on work flow for sales and operations and own all
on-going communication over underwriting, products, and programs. 
Requirements include prior experience in project and operations management,
experience and understanding of selling direct to FNMA, DE certification (VA
SARS a plus), past management of investor/third party relationships and
familiarity with IT, system enhancements, and automated underwriting systems
with six sigma certification preferred. If interested, please send a
confidential resume to me at rchrisman@robchrisman .com.

GMAC Mortgage is expanding its loan origination business at its Costa Mesa,
CA location and will be holding an interview event on June 28. “We are
hiring processors, funders, closers, operations managers, and pre-funding
auditors.” Interested candidates should send their resume to OperationsResumes@gmacm .com, and
qualified applicants will be contacted by GMAC Mortgage.

Jobs and housing, housing and jobs. Yesterday morning the MBA reported
that mortgage applications declined by 0.8% last week following the biggest
gain in over a year.  Purchase applications reportedly fell -8.5% last
week, after soaring up 13% the prior week. (Refi’s now account for 81% of new
applications.) Mike Fratantoni from the MBA observed that, “Refinance volume
increased again last week, but the composition of activity changed
markedly. Despite rates remaining near all-time lows, conventional
refinance application volume declined, and the HARP share of refinance activity
dropped to 20 percent. On the other hand, FHA refinance volume exploded to an
all-time high, more than doubling over the week.  New, lower FHA premiums
on streamlined refinance loans came fully into effect, and borrowers seized the
opportunity to lower their mortgage rates without increasing their FHA
premiums.”

And today we’ll have Jobless Claims. That, and the
first-Friday-of-the-month unemployment numbers are usually enough to give us a
picture of the jobs market. But for further fine tuning, one can watch job
opening numbers…and they aren’t good.

Recent
lender, investor, and MI changes continue, and the ones from yesterday, below
this Freddie clarification, are especially indicative of what is going on out
there.

First, a clarification on PMI cancellation requirements from Freddie Mac.
It should have read, “For an automatic cancellation of MI one 1- unit primary
residences: the date on which the LTV ratio of the Mortgage, irrespective of
the unpaid principal balance of the Mortgage on that date, is first scheduled
to reach 78% based on the original value of the Mortgaged Premises as defined
in Section 23.1, or the date on which the midpoint of the amortization period
of the Mortgage is reached. (The midpoint occurs halfway through a Mortgage’s
amortization period. As an example, in the case of a 360-month or 30-year
Mortgage with a payment Due Date on the 1st of each month, we deem the midpoint
to be the 1st day of the 180th month. Assuming that the 180th month is April
2021, and that the Due Date for the April 2021 payment is April 1, and that the
payment record conditions below are met, you must have mortgage insurance
canceled effective for the 181st month’s payment, i.e., the payment whose Due
Date is May 1, 2021.) For an adjustable-rate Mortgage or a Balloon/Reset
Mortgage (either HPA or Pre-HPA), the LTV ratio set forth above and the
midpoint of the amortization period are both based upon the current
amortization schedule following the most recent rate change. Paying down the
mortgage principal will not eliminate the need for MI unless the current
balance is 80% or less of the current value.”

Investors, and lenders, are swamped with business. Anecdotal evidence show
minimum review times of 45 days for institutions such as BofA (retail
processing) and Chase. Are all the
contract underwriters being used by Freddie and Fannie and others to
re-underwrite the loans the industry did five years ago?
One vet wrote,
“See how long does it take to train a new underwriter. If you are out of
the industry for 120 days you’re probably gone. I have a processor who came
back after 3 years, and she lasted 1 week.”

Number 11 in total originations in the 1st quarter of 2012, BB&T
sent a note to clients, “To align with recent market events, BB&T
Correspondent Lending will cease purchasing FHA Streamline Refinance mortgages
that are not currently serviced by BB&T
effective with new
registrations and locks on and after June 21, 2012. Locks prior to June 21 will
be honored. Please note that BB&T Correspondent Lending will continue to
purchase credit qualifying and non-credit qualifying FHA Streamline Refinance
mortgages currently serviced by BB&T. The product parameters have not
changed for these mortgages as stated in the FHA Product
Description located on our website.”

But then we have “Carrington Mortgage Services remains committed to FHA
Streamline Refinance transactions
and we continue to accept submissions for
this product.  As a Ginnie Mae seller-servicer we are uniquely positioned
to offer FHA Streamline Refinances regardless of servicer. Our non-credit
qualifying FHA Streamline has a minimum FICO of 620, no appraisal, no income
documentation and a tri-merged credit report with FICO and mortgage rating
only.   Visit our website, CarringtonWholesale.com, for
more information and our guide to submitting a CMS FHA Streamline Refinance or
contact our knowledgeable AE’s.”

Chase Correspondent was rumored to have followed Wells and the others in
“giving the Heisman” (think trophy, with the outstretched arm) to
non-same-serviced FHA Streamlines. I have not seen it. What Chase did, however,
was increase their jumbo. “The maximum loan amount on Non-Agency products
is increasing to $3,000,000 in specific geographic locations.”
Chase also did something else on trust income documentation requirements, but
the focus is on the $3 million – but don’t forget those limitations! Check the
bulletin.

REMN sent a note out to its clients, “Despite the introduction of a
temporary .75% price add-on for conventional refinances announced last week
(Announcement 12-09), the number of conventional refinance submissions has
continued to increase.  Therefore, as part of our ongoing effort to ensure
that REMN continues to offer industry-leading service on purchase transactions,
the submission of all conventional refinances is temporarily suspended.
The suspension does not apply to any loan that has already been submitted (as a
full or a lite file) or locked prior to this announcement. To reiterate, this
has become necessary in order to preserve our level of service on purchase
transactions
.  As you would expect, the dramatic increase in the
volume of refinances has begun to cause our condition review turn times to
deteriorate.  We are aggressively increasing our staff in order to
accommodate more volume without compromising the service you have come to
depend upon (including opening an additional underwriting center in Wall,
NJ).  Once we have successfully increased our staff, we will again accept
conventional refinance submissions.”

In recent weeks Flagstar reminded its clients that
“underwriters are once again available to respond to inquiries which
involve existing files only. Underwriters will respond to emails and voicemails
(to increase efficiency, please use one method of contact only) that are
specific to a loan that has been submitted and reviewed by Underwriting, along
with curative questions regarding declined loans. Please provide the loan
number and borrower name with your inquiry and allow four (4) business hours
for response.”

Fifth Third’s broker clients received the note: “The items below
pertain to Fifth Third’s Wholesale Lending: Price Adjustment on VA and FHA Base
Loan Amount Greater than $417,000. Effective with all loans locked or relocked
after 8:30 am EST on Thursday, June 21, 2012, the adjustment for FHA and VA
loans with base loan amount greater than $417,000 will be updated. The rate
sheet currently states that for FHA 15 and VA 15 products, with base loan
amount greater than $417,000, there is a .75 hit to the pricing.
Tomorrow’s rate sheet will reflect that this adjustment applies to the FHA 30
and VA 30 products also.” (On the correspondent side, 5 3 is going away
with full underwrites and is moving to all post close submissions only, rumored
due to a lack of capacity.)

The Fed announcement came and went, but by the time the dust settled our 10-yr
T-note’s yield really hadn’t changed that much and it closed at 1.64%. The Fed
said that there will be no additional MBS purchases but “Operation Twist” is
extended in Treasuries. So it will continue to reinvest principal payments from
its holdings of agency debt and agency mortgage-backed securities, buying $267
billion more in longer-dated securities by the end of 2012. Traders seem to
view this decision as the Fed maintaining “status quo”. The Federal Reserve, by
extending its monetary stimulus, pretty much said that a U.S. economic recovery
is at risk of stalling. “This continuation of the maturity extension
program should put downward pressure on longer-term interest rates and help to
make broader financial conditions more accommodative.”

The focus on Treasury securities, and not residential mortgage-backed
securities, brought an immediate adverse knee-jerk selling response in MBS’s. So
although Treasury yields didn’t do much Wednesday, we saw several intra-day
lender price changes
as spreads on 30-year 3.5% and 3.0% coupons went from
slightly “tighter” throughout the morning to “wider” by .125 to .250 versus the
10-yr.

For thrills and chills today we’ll have weekly Jobless Claims (expected
to drop slightly), Existing Home Sales for May (also expected down slightly),
Leading Economic Indicators (expected up), and the Philly Fed. Lots of numbers –
individually they might not nudge rates much, but collectively they could. Too
early to tell…

(These are from a book called Disorder in the American Courts, and are things
people actually said in court, word for word, taken down and now published by
court reporters who had the torment of staying calm while these exchanges were
actually taking place – part 1 of 3.)

ATTORNEY: What was the first thing your husband said to you that morning?
WITNESS: He said, ‘Where am I, Cathy?’
ATTORNEY: And why did that upset you?
WITNESS: My name is Susan!
__________________________________________
ATTORNEY: This myasthenia gravis, does it affect your memory at all?
WITNESS: Yes.
ATTORNEY: And in what ways does it affect your memory?
WITNESS: I forget.
ATTORNEY: You forget? Can you give us an example of something you forgot?
___________________________________________
ATTORNEY: Now doctor, isn’t it true that when a person dies in his sleep, he
doesn’t know about it until the next morning?
WITNESS: Did you actually pass the bar exam?
____________________________________
ATTORNEY: The youngest son, the 20-year-old, how old is he?
WITNESS: He’s 20, much like your IQ.

…(read more)

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