Rents keep rising

As if record low mortgage rates and beaten down home prices weren’t enough to get prospective home buyers off the fence, there’s another factor that has made the case for buying even stronger: rising rents.

Mortgage Rates Begin July At New All Time Lows

Mortgage Rates improved moderately today bringing them just barely into new all-time low territory.  Some lenders released 2nd and even 3rd rate sheets today with improved pricing and the 3.625% Best-Execution level is beginning to looks more and more like it will share the stage with 3.5% if current pricing is maintained.  For now, 3.625% is still dominant, but some of the more aggressive lenders are arguably at 3.5% for Conventional 30yr Fixed Best-Execution.

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

Pricing improvements came today partly due to bond markets holding slight gains versus Friday’s latest levels.  MBS (the mortgage-backed-securities that most directly influence lenders’ rate sheets) are part of bond market and normally trade in the same direction as US Treasuries though often by varying degrees.  Today was no exception with a fairly calm and mildly positive morning (positive = slightly lower in yield or rate).  

The calm was interrupted for markets to react to a much weaker-than-expected report on the Manufacturing sector that showed the first instance of shrinking activity since July 2009.  Bond markets took all off a few short minutes to dash lower in yield, but again resumed their calm, sideways patterns after the adjustment.  The report was the most significant piece of economic data until after markets return from a day off on the 4th.

However abrupt the market movement may have been after the report, it’s important to note that it was consistent with the ongoing theme that we began to reiterate last week, which is this: 

“we’re feeling less and less like rates are cutting this narrow, converging path because they’re ready to break quickly to one direction or another and more like rates are just really low, really sideways, and will take a lot of convincing before doing something else.  In other words, we’re planning on “low and sideways” around current levels until something big happens to change that.  All we can do is watch and wait for such things and keep an eye out for upcoming candidates to motivate the potential movement.  

Unless something carries us out of this low, narrow range before then, we’re only feeling especially defensive about the Employment Situation Report on Friday morning.  If rates are at or near all-time lows on Thursday afternoon, it would be hard to advocated doing something other than locking those in.  

Long Term Guidance: We’d continue to advocate against trying to “get ahead” of current market movements due to the high degree of uncertainty.  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 can change quickly based on events that aren’t “scheduled” or able to be forecast.  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 Perspectives

Ted Rood, Senior Mortgage Consultant, Wintrust Mortgage

Mortgage rates continue to drop, and today is no exception. I’m using the improved rates to cover even more of my clients’ closing costs and escrows. My borrowers and I always have the “lowest rate is not necessarily the best deal for you” conversation early in the loan process. If an 1/8th higher rate saves us thousands in closing costs, it’s often the prudent move, especially with rates as ridiculously low as they are.

Jeff Statz, Network Funding L.P.

There is still much to discover for news and data this week, but if your closing is around the corner, locking is a safe bet today.

Victor Burek at Benchmark Mortgage

If you floated over the weekend, you were rewarded with great rates this morning. If within 15 days of closing, go ahead and lock…everyone else should continue riding the float boat.


  • 30YR FIXED –  3.625%
  • FHA/VA -3.5% – 3.75%
  • 15 YEAR FIXED –  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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Five Questions: Time to Unify Fannie, Freddie Securities?

Freddie Mac is facing a new problem as it nears the fourth anniversary of its government takeover: Investors are spurning its mortgage security in favor of its sibling, Fannie Mae.

Profit Per Loan Up Dramatically – Mortgage Banks Focused on Purchase Biz; LO’s Not Exempt from OT?

On July 4th in 1776, the Declaration of Independence was approved by the
Continental Congress, setting the 13 colonies on the road to freedom as a
sovereign nation. (This year it has turned tomorrow into somewhat of a “get
away” day for many.) As always, parades, fireworks and backyard barbecues await.
It is estimated by the Census that there were 2.5 million people living in
the nation at that point, and now there are 314 million

Check this out, for some non-mortgage news: Reuters reports that Chinese
auto stocks fell steeply after Guangzhou became the country’s 4th
major city to place a cap on annual auto sales. Guangzhou is looking
to ease traffic congestion. Supply and demand suggest that prices will go up,
or a black market will spring up.

The MBA puts out some pretty good statistics, and this last set showed
that independent mortgage banks and mortgage subsidiaries of chartered banks
made an average profit of $1,654 on each loan they originated in the first
, up from $1,093 per loan in the fourth quarter. The MBA Quarterly
Mortgage Bankers Performance Report said while per-loan production expenses
increased, secondary marketing gains improved as primary-secondary spreads
widened. Secondary marketing income rose from $4,355 per loan in the fourth
quarter to $5,011 per loan in the first quarter
. “For independent mortgage
bankers, average production volume and the purchase share of that volume
remained relatively constant in the first quarter, compared to the previous
quarter,” said MBA Associate Vice President of Industry Analysis Marina Walsh.
Independent mortgage bankers remained focused on purchase production while
many larger banking institutions were handling significantly more refinancing
” To buy the report.

My crack team of research analysts (Myrtle the cat and Sweetie the dog)
sometimes doesn’t get around to all the news. But this one caught their eye – a
story in the Wall Street Journal: “Bank of America Corp. thought it
had a bargain four years ago when it paid $2.5 billion for tottering mortgage
lender Countrywide Financial Corp. But the ill-fated decision has
already cost BofA more than $40 billion in real-estate losses, legal expenses
and settlements with state and federal agencies, according to people close to
the bank. ‘It is the worst deal in the history of American finance,’
said Tony Plath, a banking and finance professor at the University of North
Carolina at Charlotte. ‘Hands down.'”

Sales of homes that were in some stage of foreclosure, real estate-owned
(REO), or bank-owned accounted for 26% of all U.S. residential sales during the
first quarter
-up from 22% of all sales in the fourth quarter and up from 25%
of all sales in the first quarter of 2011. Foreclosure-related sales picked up
in the first quarter, particularly pre-foreclosure sales where a distressed
homeowner is selling to avoid foreclosure-typically via short sale. Those
pre-foreclosure sales hit a three-year high in the first quarter even as the
average pre-foreclosure sales price dropped to a record low as lenders are
approving more aggressively priced short sales. California
foreclosure-related sales accounted for 47% of the state’s total residential
property sales in the first quarter
, the second-highest percentage among
the states. Foreclosure sales accounted for 46 percent of all residential sales
in Georgia during the first quarter, the third highest percentage of any state.

Not that I want to be the sounding board for various underwriting scenarios or
guideline suggestions, but here’s an interesting note that I received. “I
am located in Texas. We are in the middle of a state that can produce a lot of
borrowers with oil & gas income on their tax returns. In most cases this is
the only source of income and has been for years. Fannie Mae guidelines as well
as most lenders’ guidelines state that in order to use this income for
qualification the borrower must show “proof of continuance for 3 years”. Anyone
that truly understands the oil & gas business sees this statement as
ludicrous at best. The proof most often requested from processors and
underwriters is ‘a copy of the oil & gas lease showing at least 3 years
remaining’. I have one borrower I had to turn down who has over 7,000
fractional interests in minerals and royalties generating over $500K a year and
has been for years but has no lease nor an engineer’s study (way too expensive
to produce) to prove continuance due to reserves. Fannie Mae and all lenders
need to put on their thinking caps and figure this out. This is becoming a
major problem in our neck of the woods.”

K&L Gates reports that a federal district judge in Washington, D.C.
has upheld an “Administrator’s Interpretation” issued in 2010 by the U.S.
Department of Labor (“DOL”) that loan officers in the mortgage banking
industry typically do not qualify as exempt employees
under the
administrative exemption of the federal Fair Labor Standards Act (“FLSA”). The
Mortgage Bankers Association (“MBA”) had challenged the March 24, 2010
Administrator’s Interpretation (“Interpretation”) issued by the Acting
Administrator of DOL’s Wage and Hour Division because the Interpretation had
reversed and rescinded a contrary DOL Opinion Letter issued in 2006 that had
concluded mortgage loan officers were generally exempt under the administrative
exemption. However, a judge ruled that the 2010 Interpretation was not
inconsistent with the FLSA regulations and was not arbitrary, capricious, or
otherwise unlawful. [1] The court thus let stand the DOL’s Interpretation that
employees performing the typical duties of a mortgage loan officer do not
qualify for the administrative exemption and are therefore entitled to receive
minimum wages and overtime compensation under the protections of the FLSA. [2]
The MBA has the right to appeal this decision to the D.C. Circuit.  Link

Counterparty risk is certainly increasing in scope. The Financial Stability
Board (FSB) recently released its Principles for Sound Residential Mortgage
Underwriting Practices.  FSB, an international body established after the
2009 G-20 Summit to oversee and recommend on the global financial system
includes representatives of all G-20 economies. The recommendations the board
most recently issued are meant to address problems arising from poorly
underwritten residential mortgages. The board stressed how weak underwriting
practices in only one country can contribute significantly to the global
financial crisis
, and the importance of having sound underwriting practices
at the point at which a mortgage loan is originally made. The principles cover
several areas which proved to be particularly weak during the global financial
crisis. Among them are effective verification of income and other financial information,
reasonable debt service coverage, appropriate loan-to-value ratios, effective
collateral management, and prudent use of mortgage insurance.

Here are some somewhat recent investor/M&A/agency/MERS
, providing a flavor for the environment. They just don’t stop. As
always, it is best to read the actual bulletin.

Fannie Mae Updated its Data Breach Policy, Compensatory Fees, and
Allowable Foreclosure Timeframes. On June 13, Fannie Mae published Announcement
SVC-2012-10, which updates its notice of data breach and incident response
policy to require servicers to provide written notice to Fannie Mae of a data
breach in addition to any reporting to consumers or state authorities required
under applicable state law. A servicer also must request permission to use
Fannie Mae’s name if it intends to refer to Fannie Mae in any notices sent to
affected borrowers or regulatory agencies. On the same day, Fannie Mae also
published Announcement SVC-2012-11, which updates and clarifies for all
mortgages with a foreclosure sale date on or after January 1, 2012, (i) the
maximum allowable foreclosure time frames for twelve jurisdictions, (ii)
compensatory fee assessments and appeals, and (iii) the preferred method of
foreclosure in Montana and Nebraska. Here are the announcements:

Freddie Mac has clarified that, with regards to non-REO expense
reimbursements, taxes incurred and paid to a taxing authority may be reimbursed
up to 12 months before the last paid installment through the payoff date. 
Wire transfers are now allowed for REO-related remittances.  A time frame
for sending completed modification agreements to document custodians has also
been formalized. Homeowners impacted by the automatic stay under bankruptcy law
are to be excluded from quality right party contact performance measurements in
Servicer Success Scorecards due to the fact that the law impedes communication
with these borrowers.

As of July 1, 2012, MERS will require all loans closed in Mississippi
to include a “physical business mailing address” on documents such as MOM
security instruments, satisfactions, assignments, modifications, and

The Maryland Mortgage Bankers Association has penned and distributed a
letter to the CFPB regarding the definition of a qualified mortgage as it
pertains to the pending ability to repay rule.  Stating that the
definition of a QM should be “structure[d]…as a strong legal safe harbor and
not as a rebuttable presumption,” the letter implores the CFPB to consider
protecting borrowers from poorly underwritten mortgages and giving
credit-worthy borrowers to decent mortgages equally.  Those interested in
circulating the letter can find out more by visiting

Grandpoint Capital, Inc. and NCAL Bancorp have agreed to a merger
whereby the former will acquire NCAL Bancorp and the National Bank of
California, whose assets total $340.9 million, will become a wholly owned
subsidiary. All outstanding preferred NCAL Bancorp shares issued to the
Department of the Treasury will be redeemed for $10.5 million as well as
current accrued but unpaid dividends of $605,000 and any dividends accrued
through closing.  Keefe, Bruyette & Woods acted as Grandpoint
Capital’s financial advisor for the transaction.

As part of its initiative to expand into being a full-service lender, Real
Estate Mortgage Network
is launching its new correspondent division and
enlisting the services of Bela Donine as Managing Director of Correspondent
Lending and Melissa Sherman as Managing Director of West Coast Operations.
Wells Fargo has saved itself $1.5 million by installing 7,000 LED signs
across the country, which has cut down electricity bills. (Go Green!) It’s
also requiring Flood Disclosures for all applications received on and after
April 9, 2012, including properties that have maximum coverage and are not
presently in a flood zone. This is due to the fact that the consumer would
be able to decrease their coverage to an unacceptably low level at a later date
and the fact that flood zones can change, respectively. The Notice of
Special Flood Hazards is required one day before signing at the minimum.  All
sellers must comply with Wells’ flood protocol regardless of any federal
requirements as dictated by their licensing or regulator.

On Friday our 10-yr t-note closed at 1.66%, roughly where it resided much of
last week. After a downward/worsening move occurred early after the news hit of
some stability in Europe, the markets tended to improve during the day. But
that was then – what about today? We’re nearly unchanged, but that doesn’t mean
we don’t have a lot of potential volatility this week, including the mid-week
holiday which could make Thursday and Friday a little iffy. One trader noted, “This
week promises to be somewhat illiquid and as a result will likely create decent
trading opportunities for those that wait for the right levels to initiate
trades. 1.59% remains resistance on 10s, while 1.70% represents support.”

For scheduled, non-European news we have the ISM Index and Construction
Spending today. Tomorrow is Factory Orders. Thursday is Challenger Job Cuts,
the ADP employment numbers, Initial Jobless Claims, and ISM Services. Friday is
the whole spate of unemployment data. With all that we find the 10-yr at
1.56% and agency MBS prices up considerably.

Very punny, part 1 of 2:

Ratio of an igloo’s circumference to its diameter = Eskimo Pi
2000 pounds of Chinese soup = Won ton
1 millionth of a mouthwash = 1 microscope
Time between slipping on a peel and smacking the pavement =1 bananosecond
Weight an evangelist carries with God = 1 billigram
Time it takes to sail 220 yards at 1 nautical mile per hour = Knotfurlong
16.5 feet in the Twilight Zone = 1 Rod Serling
Half of a large intestine = 1 semicolon
1,000,000 aches = 1 megahurtz
Basic unit of laryngitis = 1 hoarsepower
Shortest distance between two jokes = A straight line
453.6 graham crackers = 1 pound cake
1 million-million microphones = 1 megaphone
2 million bicycles = 2 megacycles
365.25 days = 1 unicycle
2000 mockingbirds = 2 kilomockingbirds


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David H. Stevens Staying at MBA

Slightly more than a month after it confirmed
he was leaving his post as President and CEO, the Mortgage Bankers Association
(MBA) announced that David H. Stevens would remain at the head of the trade
association.  Steven’s resignation and
appointment as president of Sun Trust Mortgage was announced by both MBA and
the parent company of his new employer, Sun Trust Bank, on May 30.  The announcement came almost simultaneous
with Steven’s first year anniversary with MBA.

In a statement released this morning MBA
said they were pleased to announce that Stevens “has agreed to stay on as
President and CEO.”  MBA Chairman Michael
W. Young said that, “Over the past several
weeks, MBA’s leadership, members and staff impressed upon Dave the important
role he was playing for the industry and his unique qualifications to lead the
association.  The importance and
significance of MBA’s voice during this critical time coupled with Dave’s
experience and talents encouraged us to do all we could to retain him.”

“The past few weeks have been extremely
difficult for me personally and professionally,” Stevens said.  “After serious thought and consideration, I
simply cannot leave the MBA at such a critical time for the industry and the
association.  Frankly, at the end of the
day, stepping away now when so much progress is being made and so much still
left to be done, did not feel right.

through this experience left me encouraged by the tremendous opportunity that
lies within our industry and reinforced the essential component mortgage
finance will continue to play in helping our nation’s economy recover.” he

Stevens joined MBA in May 2011 after serving as Assistant
Secretary of Housing and Urban Development and Commissioner of the Federal
Housing Administration (FHA). 

Mr. Stevens was to have joined the Company on July 16, reporting to SunTrust Mortgage President and CEO Jerome Lienhard.

“We have a strong leadership team in place, and continue to execute our business plan and serve the needs of the clients of SunTrust Mortgage,” said Mr. Lienhard.

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