Lender Updates; March Foreclosure Numbers; Latest on the Principal Forgiveness Plot

A veteran
banker once told me, “I’ve never seen a luggage rack on a hearse.”
Many “experts,” perhaps wishing to make a name for themselves, called
the housing industry dead and lending on life support. And in fact, according
to the Census Bureau, the home ownership
rate hit a 15-year low in the first quarter
, falling to 65.4% from its 2004
peak of 69.2%. Many can argue that it was
too high anyway
. But rental properties had a vacancy rate of 8.8% in Q1,
the lowest level in about 10 years. And the Fed’s April Senior Loan Officer
survey showed Commercial and Industrial
loan demand increased last month, as more businesses requested credit lines
for inventory, accounts receivable financing, M&A and infrastructure
growth. In addition, consumer mortgage demand increased, while other consumer
lines were stable.

(In fact, banks were asked to indicate what factors were currently impeding
their ability to originate residential real estate loans. Most survey
respondents cited periods during which the high volume of residential loan
applications exceeded their application processing capacity, difficulty in
completing timely and accurate underwriting or in completing timely and
accurate appraisals or in hiring sufficient servicing or loan processing staff
as important factors.)

And yes, residential
lending in some sectors continues to grow. iServe
Residential Lending is searching for local branches and MLO’s in strategic
markets throughout the U.S. The company is licensed in 20 states, and has just
announced its GNMA issuer approval. (Quite a feat according to many!) iServe is
a direct lender, with a complete product mix of conventional, government, and
jumbo products, including the unlimited Harp 2.  For more information, go
to www.joiniserve .com or email joiniserve@iservelending .com.

And in Southern California, for something a little off the beaten job path, the Ventura County Community Development
Corporation is seeking a Senior Underwriter to underwrite first mortgage
loans in accordance with Fannie Mae Underwriting Guidelines. It is a non-profit
direct lender that assists first-time homebuyers with first mortgage and
subordinate financing. The Senior Underwriter will work, at least
initially, as an independent contractor, paid for each loan underwritten, after
which the position may grow into a full-time employee position depending on
VCCDC’s growth in production and revenue.  The successful applicant must
have at least five years of experience as a senior underwriter responsible for
underwriting loans to be sold to Fannie Mae.  EOE.  If you know someone
who might be interested, they should send a resume to bgarcia@cabrilloedc .org. And for more
information, visit www.cabrilloedc .org.

Last week’s
applications were flat, per the MBA, or, in the parlance of lock desks, “same
ol’ same ol’.” Purchases were up 2.9% and refi’s were -0.7%, dropping to 72.6%
of overall applications.

“When
you take a bath, you come out clean,” as one old saying goes, and some
would argue it pertains to foreclosures: get them out of the way and let’s get
on with some price appreciation! CoreLogic has released its National
Foreclosure Report for March 2012 (READ: CoreLogic Notes Most Foreclosure Activity Down Year-over-Year) , showing 69,000 completed foreclosures in
March 2012 compared to 85,000 in March 2011 and 66,000 in February 2012.
Through the first quarter of 2012, there were 198,000 completed foreclosures
compared to 232,000 through the first quarter of 2011. Since the start of the
financial crisis in September 2008, there have been approximately 3.5 million completed
foreclosures.

The
industry frets about foreclosures, as it does chatter about principal forgiveness. The FHFA has postponed
a decision on principal forgiveness for Fannie Mae and Freddie Mac-owned
mortgage loans until possibly late May, but that doesn’t stop the pressure in discussions
with the U.S. Treasury. FHFA Acting (when can we drop the “acting”?) Director
Edward DeMarco had said April 10 in a speech at the Brookings Institute that he
would consider principal forgiveness as part of the HAMP program, after the
Treasury upped the ante by tripling the incentive amount it would offer, to up
to 63 cents for every dollar the enterprises would write down on qualified
mortgages. But he has said that such a program would encourage strategic
defaults and cost taxpayers more than a forbearance program. The FHFA has a
state policy that forbearance of principal is preferable to a permanent
forgiveness of principal in modifying loans belonging to or guaranteed by
Fannie Mae and Freddie Mac.  Both the Treasury Department and Democratic
members of Congress have been pressuring FHFA to allow principal reduction, a
process that is used in modifications of non-GSE loans under the Home
Affordable Modification Program (HAMP.) And two Congressmen sent a publicized letter
to DeMarco, citing Fannie Mae documents that show that Fannie Mae officials
concluded as far back as 2009 that reducing principal on its mortgages could
save taxpayer money by avoiding foreclosures. The plot thickens (READ: Principal Reduction Conflict Escalates Between Congress, FHFA)

But other
plans are out there. Here’s one, claiming to be a “Win-Win” Principal Reduction plan. “As a first step in any
modification, an appraisal will establish the property’s present value: the new
“Interest Bearing Principal Balance”. The difference between this assessment
and the loan balance, which includes loan amount plus arrearages at the time of
modification, is divided equally. 50% is written off as principle forgiveness
and the other 50% becomes non-interest bearing “Deferred Principal Balance” due
on sale of the property or in 30 years at loan maturity. As an example, take a
$500,000 loan with $20,000 in arrears and appraised value of $300,000. In this scenario
$110,000 of the loan is forgiven. The bank has $110,000 Deferred Principle Balance
and $300,000 Interest Bearing Principle Balance. It is a win-win situation for
everybody. This strategy is a path forward from a moratorium or massive
foreclosures. It can offer shared benefits to both homeowners and lenders. It
can prevent foreclosures and help underwater home-owners who are in danger of
foreclosure or who might consider walking away from an underwater mortgage as
their best option in a crumbling or stagnant market.” If you care to comment,
write to John Frangoulis (Realtech Financial Services) at John@rfn .net.

How about
some somewhat recent
lender/investor/agency/MI 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…

First, a clarification for Flagstar.
Yesterday noted some information regarding the payoff statement for refinances,
that it “cannot reduce the loan payoff by the amount of the escrow balance” and
so on. To clarify, this policy applies to all FHA refinances, including
refinances of conventional, VA and USDA loans, so any refi from a conventional, USDA or VA into
an FHA loan…this policy would apply. (Flagstar still allows escrow funds to
reduce the payoff for conventional loans.)

Lenders
looking to obtain FHA approval can
look forward to an online application process, which HUD plans to implement in the near future.  As the transition
period approaches, lenders who are currently in the process of completing the
application or who plan to do so should submit their applications to the Lender
Approval & Recertification Division at OLA@hud.gov
to avoid delays.  The subject line should read “New Applicant,” and a
contact name and phone number should be listed in the body of the email. 
Lenders should not pay through pay.gov until they’ve spoken to a Lender
Approval representative.  For lenders who are already FHA-approved and
seeking to add Title I or II approval, a paper application is still protocol.

The FHA allows HUD-approved nonprofit agencies to act as mortgagors for 203B
and 203K mortgagees using FHA insurance.  Provided that the properties are
resold to low- and moderate-income families, such agencies may finance these
mortgages with the same terms and conditions as an owner-occupant, which
include a 3.5% down payment requirement.
HUD has entered a loan servicing contract with Deval, LLC, which will handle
Assigned Home Equity Conversion, Secretary-Held Title II, Partial Claim
Subordinate, Home Equity Conversion Subordinate, Section 235 Subordinate,
Nehemiah Subordinate, Emergency Homeowners Loan Program Subordinate, Asset
Control Area, Hope for Homeowners Subordinate, and Good Neighbor Next Door
Subordinate mortgages.

If you’re interested in working for HUD, there are vacancies for a PUD Single
Family Appraiser in Philadelphia and a Program Support Assistant in
Denver.  More information is available at www.usajobs.gov.

Due to home price declines and lingering unemployment, the Rural Housing Service is launching its Rural Refinance Pilot to
assist Section 502 borrowers in Hardest Hit states, which include Alabama,
Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan,
Mississippi, Nevada, New Jersey, New Mexico, the Carolinas, Ohio, Oregon, Rhode
Island, South Carolina, and Tennessee.  The pilot program is being offered
for a two-year period and will let borrowers refinance at lower interest rates
and monthly payments without new credit reports, appraisals, or property
inspections.

The RHS has clarified the refinancing guidelines of the Single Family Housing
Guaranteed Loan Program (also known as the ever-catchy SFHGLP).  Current
Section 402 Direct and Guaranteed borrowers are no longer subject to the
requirement that their properties continue to meet the guidelines in HUD
Handbooks 4150.2 and 4905.1.

Chapter 6G of GMAC‘s Client Guide
(“Assets”) has been amended to include clarification on Trade Equity (G604) and
Employment and Income Analysis and Documentation (6I).  The latter
includes clarification on Stability and Continuance and Income (I601), Income
Types (I604), and Other Sources of Income (I607).  Chapter 7 (“VA
Eligibility”) has been divided into three sections, which include Eligibility,
Transactions, and Financing.  The guide now defines Permanent Disability
and Temporary Leave as two different types of disability income, and additional
guidance is available in cases where the borrower will not be returning to work
before the first mortgage payment is due.

GMAC has modified its policy on accepting electronic signatures for FHA
programs such that they are only permitted on third party documents, which the
FHA defines as originated and signed outside of the mortgagee’s control. 
Wet signatures from the borrowers and other parties involved in the transaction
are required for all other documents in the mortgage application and Endorsement
Binder.

Effective April 20th, GMAC has revised its Jumbo price adjustments.  The
charge for cash out on Fixed rates has increased for loans with LTV for 70 or
less but over 65, as have certain Fixed rate incentives.  The purchase
loan incentive for Jumbo loans with LTV of 75 or less has increased for both
Fixed and ARM products.

Speaking
of price changes, we saw a few late yesterday from lenders due to a slight
market move. Traders reported that the sales of mortgage-backed securities
picked up a little, although generally the MBS price movement was about the
same as for Treasuries. (On the trading desk, we would say, “prices got tired
of going up, so they went down a little.”) Later this morning we’ll have the
always-of-questionable-predictability-for-Friday’s-number ADP number, measuring
private payrolls, and then at 7AM PST we’ll have March Factory Orders. In the early going the 10-year is back down
to 1.94% and MBS a shade improved.

 
What is the purpose of a house? Let’s ask George Carlin.

…(read more)

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