I couldn’t make this stuff up. “Octomom” is facing foreclosure, and a leading adult entertainment kingpin is offering to pay her mortgage. Only in America!
Dear Abbey, “If a mid-sized lender that is not doing any FHA loans (or is about to go through their test cases) absorbs or buys a branch or smaller lender who is fully “up and going” with its FHA lending, does that allow the mid-sized lender to start doing FHA loans?” Signed, “Searching for Shortcuts in Saginaw.” Dear SSS, “The surviving entity has to have the approval. The acquiring non-approved company must go through the process of converting the approval to the official (surviving) entity, which is easy presuming the acquisition (absorption) results in a qualifying entity. In other words, the funding lender must apply and be approved. The HUD authority does not transfer.”
Chase announced that it will be joining the second-lien program of the federal government’s Home Affordable Modification Program (affectionately known as “2MP”), which is designed to work in tandem with HAMP to lower homeowners’ payments on both their first and second mortgages. Add this to its 600,000 loan modification offers in 2009, and the dozens of Chase Homeownership Centers around the states, and one has a growth industry! 2MP can push the rate on a homeowners’ 2nd down to 1% for five years.
Chase also told clients that, due to various factors, the USDA Rural Development has announced that funding for the USDA GRH Program will likely be exhausted by the end of April. As long as a loan is approved by USDA RD and a Conditional Commitment for Single Family Housing Loan Guarantee, it is ok if it closes prior to expiration with the locked terms. But if there is no approval, or one tries to change the terms, “the Lender may not be able to obtain the final USDA Loan Note Guarantee (RD Form 1980-17) unless the loan is closed under the terms of USDA Rural Development’s approval (RD Form 1980-18). And effective March 25th, “Chase Rural Housing will require a copy of the Lender’s executed Guaranteed Loan Closing Report (RD Form 1980-19), and a copy of the guarantee fee check made payable to USDA Rural Development, as conditions of our purchase.”
Franklin American notified their correspondent constituents that they must include a copy of an appraisal delivery form in each conventional closed loan file, thereby complying with requirements that borrowers receive a copy of the appraisal for review at least three days prior to the loan closing date. The appraisal delivery form must document the date and method used to deliver the copy of the appraisal to the borrower(s). FAMC also updated its insurance requirements, in that standard escrow procedures should now be followed for loans with HO-6 insurance.
US Bank National Wholesale Sales Division, following Freddie Mac, has announced that it will be eliminating its IO LIBOR ARM products. The last application date for these will be May 31, and closed & delivered by July 16, and if the loan doesn’t make it plan on switching it to an amortizing product or a USBHM Interest Only ARM product.
Yesterday I mentioned a rumor about Radian rolling out a 1.25% upfront MI program – up to 95% LTV’s for borrowers with a FICO score above 720. It turns out that it is already in place, labeled Radian’s “Split Edge Premium Program”. The rates exist today: .75 pt upfront, 47 bps annual renewal, 1 pt upfront, 40 bps annual renewal, 1.25 pts upfront, and 33 bps annual renewal.
Is it as quiet out there as mortgage traders think it is? Some reported that yesterday was their slowest day in weeks and believe that originators were selling loans last week ahead of this week. And more of the usual: Fed, money manager, Asian, and servicer buyers. One trader wrote, “The basis (spread between mortgages and Treasuries) appears to be in fine shape and should be bought on weakness going into the $118 billion in Treasury supply this week. We continue to like scaling into an outright short mortgage position over the next week and a half in what will be the final days of the FED’s buy program.” Our fixed-income market was helped by the resurgence of issues in “Greeceland”, so there was a bit of a flight to quality.
The markets continue to believe that inflation is not a problem, which is good since it is the enemy of fixed income securities. In fact, last week’s PPI and CPI numbers showed that price increases appear well in hand. But some analysts are predicting low inflation but rising commodity prices, resulting in an “off the radar screen” broad-base high inflation rate (including labor) but with no big increase in the headline CPI. In our view, true inflation must be broad-based. The argument against that, of course, is that we have a high unemployment rate, and it takes a wage-price spiral to drive broad-based inflation. But if enough bond investors see the risk of broad-based inflation rising, real interest rates may rise owing to a higher demanded inflation risk premium, which in turn will impact the stock markets.
We probably won’t see much from the housing market for a while. In December, the Fed was very optimistic about the turnaround in the housing sector, and in January, less optimistic. Now, at the FOMC meeting last week, they said that the housing sector is showing little improvement. That is not a good trend. And if folks are nervous about their home values, spending suffers, and in fact consumer credit has been declining for a year now, implying (contrary to the recent increase in retail sales) that the majority of Americans are hunkering down.
But what is safer, debt issued by the US Treasury, by Greece, or by Berkshire Hathaway? Last month 2-yr notes sold by Berkshire Hathaway yielded 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg. And recently debt from Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. also traded at lower yields. What the heck? The problem, of course, is that there is a glut of Treasury debt on the market, along with rumors that the rating agencies will cut our government’s AAA rating. Last year our government borrowed $2.1 trillion, compared to $1.08 trillion of debt issued by investment-grade companies.
Moody’s predicts that the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K: 7% of taxes for debt payments in 2010 and almost 11 percent in 2013. Some believe that all the G7 countries, except Canada and Germany, will have debt-to-GDP ratios close to or exceeding 100 percent by 2014. On the flip side, of course, is the theory that unprecedented spending in the US and the Federal Reserve’s emergency measures to fix the financial system are boosting the economy and cutting the risk of corporate failures. Berkshire Hathaway (rated Aa2 by Moody’s) has about $157 billion of cash and equivalents and about $52 billion of debt. In fact, corporate borrowers are reducing debt at a record pace while the US government is expanding debt at a record pace. Companies in the S&P 500 cut their liabilities by $282 billion to $7.1 trillion in the fourth quarter, 28% of assets, the least in at least a decade, and their cash position is rising with a record $2.3 trillion as of the fourth quarter, according to Bloomberg.
Foreign central banks hold about $3.00 trillion at the Federal Reserve. Of this, roughly 75% of it is held in the form of Treasury securities and the remaining 25% is Fannie Mae and Freddie Mac securities – let’s hope they keep buying. Later this morning we’ll see Existing Home Sales and some Richmond Fed numbers. But here in the early going, stocks are quiet, the yield on the 10-yr is down to 3.66%, and mortgage prices are better by about .125.
A man was sitting on the edge of the bed, watching his wife, who was looking at herself in the mirror. Since her birthday was not far off he asked what she’d like to have for her birthday.
“I’d like to be six again” she replied, still looking in the mirror.
On the morning of her birthday, he arose early, made her a nice big bowl of Lucky Charms, and then took her to Six Flags theme park. What a day! He put her on every ride in the park; the Death Slide, the Wall of Fear, the Screaming Roller Coaster, everything there was.
Five hours later they staggered out of the theme park. Her head was feeling and her stomach felt upside down. He then took her to a McDonald’s where he ordered her a Happy Meal with extra fries and a chocolate shake.
Then it was off to a movie, popcorn, a soda pop, and her favorite candy, M&M’s. What a fabulous adventure!
Finally she wobbled home with her husband and collapsed into bed exhausted.
He leaned over his wife with a big smile and lovingly asked, “Well dear, what was it like being six again?”
Her eyes slowly opened and her expression suddenly changed.
“I meant my dress size, you IDIOT!!!!”
The moral of the story: Even when a man is listening, he is gonna get it wrong.
Rob
(Check out http://www.mortgagenewsdaily.com/channels/pipelinepress/default.aspx. For archived commentaries, check www.robchrisman.com, )
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