Someone told me, "There are three stages in a man's life: Tri-Weekly, Try Weekly and Try Weakly." At this point, banks are not shut down three times a week - yet - but only once a week and on Friday's. Another handful of banks were shut down on Friday, pushing the number over 100 for the 2nd straight year. The assets and liabilities of Home Valley Bank (OR) were assumed by South Valley Bank & Trust (OR), CrescentBank & Trust (OR) went to Renasant Bank (MS), Sterling Bank (FL) is now part of Iberiabank (LA), SouthwestUSA Bank (NV) is now part of Plaza Bank (CA), Williamsburg First National Bank (SC) was incorporated into First Citizens Bank & Trust Co. (SC), Community Security Bank (MN) is now part of Roundbank (MN), and (catching my breath) Thunder Bank (KS) became part of Bennington State Bank (also of KS).

Of course, the FDIC has to do something, or at least help do something, with all the assets of failed banks. Last week the FDIC announced that it will sell $409 million of mortgage bonds originated or acquired by 17 failed financial institutions. FDIC 2010-R1, the name of the bond, will be wrapped by an FDIC guarantee, which is backed by the full faith The Federal Deposit Insurance Corp. plans to issue securities backed by about $500 million of home mortgages acquired from failed banks, leaning again on guarantees to help sell the debt. The FDIC will back about 85 percent of bonds created for the offering and it may not sell the deal's junior-ranked notes, which will lose principal first amid any defaults on the underlying loans. As of May 31, the agency held about $32 billion of assets from failed banks excluding about $7.9 billion of interests in limited liability companies that it has also been creating to help offload its holdings.

 

The 1st quarter is long over with, having ended around Easter with about $330 billion of production. But the investor rankings, which have recently come out, probably haven't changed all that much. Wells clocked in #1 with about a 24% market share, followed by BofA (18%), Chase (10%), Ally/GMAC (4%), Citi (3%), US Bank (3%), PHH (2%), SunTrust (2%), Provident - out of CA (2%), and BB&T (2%). (All this per Stats.)

 

The major investors have been "snorting and prancing" lately. As always, this write up is not meant to detail precise changes (recent announcements totaled close to 100 pages of changes) but rather to indicate trends in the marketplace. And unfortunately for underwriters, processors, and originators, policy and procedure changes continue unabated.

 

Wells Fargo's Homepath product line was modified, and Wells told its brokers that going forward Lender-Paid MI would be a price adjustment rather than a rate adjustment. Multiple sections of Wells Fargo's Wholesale Lending Broker Origination Guide were revised, effective today, and on the correspondent side Wells recently updated its imaging platform on its website. Wells' wholesale channel appears to be experiencing a large inflow of HARP loans. Wells wholesale group is promoting its reduced fee ($450), a price that is only 10 basis points worse, reduced documentation-in some cases stated income, stated assets and no appraisal. For all lenders, Fannie's HARP goes to 105% LTV and a 110% CLTV, no condo approval, and HARP allows credit scores as low as 620.

 

(A word of warning: although the Freddie HARP also goes to 105% LTV with an unlimited CLTV, to be eligible the original loan must have been delivered to Freddie Mac prior to May 31, 2009. Freddie Mac: loans must be refinanced with the lender that is currently servicing the loan and must be refinanced as another Freddie Mac loan, whereas Fannie Mae: loans can be refinanced with any lender but must be refinanced as another Fannie Mae loan. On the correspondent side, the drawback of Freddie's program is that the loan has to be closed in the same name as the servicer. By definition, that excludes all correspondent business, and therefore excludes these loans flowing through correspondent channels.)

Bank of America correspondent clients learned about regulatory changes for Wisconsin. Starting September 1, the Power of Attorney (POA) "is durable unless it expressly provides that it terminates by the incapacity of the principal. A photocopy or electronically transmitted copy of an original POA has the same effect as the original. When the Lender is asked to accept a POA, the Lender may request and rely upon certain information without further investigation. The Lender may, in good faith, refuse to accept the POA within 10 business days of presentment if certain loan scenarios apply." Etc.

 

Citi has posted an update to its guidelines which applies to its Agency Fixed & ARMs & FHA Streamlines (Standard & Jumbo) product line(s). Citi issued a new bulletin to its correspondent clients giving credit policy updates, policy enhancements due to MI changes, modified its policy on rental income for DU loans, echoed Fannie's DU Refi Plus program changes and the delivery deadline for 7.1 loans, addressed loans with a missing FICO score, Freddie's Relief Refinance LP Open Access and FHA Streamline Refinance, and VA policy revisions. Citi also told its clients about many credit policy updates, including real estate obligations, PUD's, interested party contributions, non-occupant co-borrower debt ratios, title defects, rental income, etc., etc. Clients are advised to read the actual bulletin for specific details!

 

US Bank's Home Mortgage Wholesale Division recently rolled out a NEW 5/1 Libor ARM / Super Conforming product option, the "FHLMC 5/1 Libor ARM Super Conforming Adjustable rate mortgage" with the rate and payment fixed for the first 5 years w/ annual interest and payments adjustments thereafter.

 

SunTrust sent out an update to its appraiser requirements & appraisal guidelines, a VA product description update, and another regarding the subordinations for DU Refi Plus loans.

 

Flagstar Correspondent has posted an update to its guidelines which applies to Flag's Expanded Approval & A-Minus product line(s). At the end of the week the company is making multiple updates to cash-out guidelines for conventional programs (cash-out eliminated on all 3-4 unit property transactions, minimum credit score increased to 680 on all second home and investment property cash-out transactions, minimum credit score increased to 660 on primary residence cash-out transactions with an LTV/CLTV exceeding 75%). Flag also told clients about a higher Georgia "Residential Fee" that must be paid to the state.

 

Going forward AmTrust removed its "Earnest Money Deposit for Investment Properties" policy whereby only 2% of the sales price was allowed as earnest money deposit for investment properties. "All funds over 2% must be brought to the closing table and source of funds verified." For AmTrust Community Seconds are available with conforming fixed, conforming 5/1 and 7/1, and standard ARM products. The company also announced an adjustment to its policy on excess cash in paying off an existing first mortgage in the DU Refi Plus product, along with a reminder "for properties located in the state of Texas, any form of cash back to the borrower is not permitted due to Texas Equity laws."

 

Caliber Funding has made changes to its conventional, FHA and VA underwriting guidelines reflecting changes in the marketplace. These included changes to DU Refi Plus borrower eligibility, condo requirements, pre-foreclosure (short sales), self employment income and asset verification for FHA loans, along with individual tax return policy clarification for income analysis and the consideration of revolving debt time period. On VA products, Caliber added a guideline for the conversion of a principal residence to a second home, and the conversion into an investment property (and consideration of the rental income).

 

Last week Freedom Mortgage set up an AVM Requirement on its VA IRRRL program, therefore establishing a maximum LTV for all VA IRRRL transactions. "The value will be determined by the FMC underwriter after obtaining an AVM. The value will be calculated by using the middle value or estimated value of the AVM value reported. The loan amount will not be able to exceed 120% of that value."

 

Amidst all of the changes in underwriting, at least the prices of agency paper (Fannie, Freddie, FHA, VA) keep "grinding higher and tighter", meaning that prices are improving in general AND in relation to Treasury prices. Apparently, the average of $2 billion per day is not quite enough to satisfy investors out there. That being said, U.S. Treasuries prices have retreated from their recent high levels, and with prices dropping rates move up originators sold about $2.9 billion on Friday, mostly 4% and 4.5% securities (containing 4.25-5.125% 30-yr mortgages).

 

Today's June New Home Sales report, due out at 10AM EST, warrants special attention, because economic forecasters will be watching to see if the "hangover" following the expiration of the homebuyer tax credit is abating. The May reading of 300k was an all-time monthly low going all the way back to 1963 - will the dire news continue? At this point housing accounts for only 2.4% of GDP compared to 6.3% at its peak - not enough to make the economy "double dip". Mortgage applications have not been setting the world on fire, and there is continued talk about how the expiration of the first time home buyer tax credit has impacted the market.

Besides today's New Home Sales for June (expected to be up about 7%) we have the May Case Shiller 20 City index tomorrow (expected to show prices rose +0.3%). Today we also have some Chicago Fed numbers, tomorrow Consumer Confidence, Wednesday Durable Goods and the Beige Book, Thursday Jobless Claims, and Friday the second look at the 2nd quarter GDP number and the Chicago Purchasing Manager's Survey. (Many economists have been lowering their GDP estimates recently.) We have Treasury supply starting tomorrow with $38 billion in 2-year notes, Wednesday with $37 billion in 5-year notes, and Thursday with $29 billion in 7-year notes. On top of all the important economic data we still have earnings reports to sort through. Technical readings are neutral, so rates could go either way although I would guess they won't be much different at the end of the week than they are now. The 10-yr is sitting around 2.99% and mortgage prices are pretty quiet this morning, near unchanged.