THE BASIS POINT

Are Appraisers Lapdogs or Just Lazy?, Bonds Rally on Middle East Violence, Home Prices & Consumer Confidence Down

In the news, besides Ms. Palin becoming a grandmother up in Alaska (the baby’s name is Tripp), you know how bad the economy is? This week, Exxon Mobil had to lay off 25 congressmen.

One Event Larger Than TARP
Only one event in American history was allocated more money than the Treasury’s TARP program. Do you know what it was? (Thank you Chris S.)

Is New Appraisal Process Making Things Worse?
How are the new appraisal procedures working out? One owner of a brokerage wrote to me and said,

“I decided to be proactive and use an appraisal management company on 5 deals this month. 4 out of 5 of my appraisals were useless. I had the appraisals reviewed by a current appraiser. He stated that they were very sloppy and if he did them they would have been appraisals that I could have worked with and values that he could stand behind and were not inflated. This should shave off about 30% of the deals going forward not because values aren’t there, but because appraisers are going to now have the work ethics of government employees.”

Wells Wholesale implements the new policy as of January 5th.

Fannie Mae Updates
Since Fannie Mae is increasing the Property Inspection Waiver fee from $50 to $75 with loans delivered to them on or after February 1st, watch for large investors to do the same shortly. For example, Chase sent out an announcement stating that, “all PIW eligible loans using the $50 PIW fee must be delivered to Chase in fundable condition on or before January 5, 2009, regardless of lock expiration.”

Speaking of Fannie, yesterday they announced that, “Effective for whole loans purchased on or after April 1, 2009, and for mortgage loans delivered into MBS with issue dates on or after April 1, 2009, we will implement new and updated loan-level price adjustments (LLPAs) for loans with certain risk characteristics. Updated LLPAs will apply to: A number of LTV/credit score combinations, certain cash-out refinance transactions, loans secured by two-unit properties, and loans with subordinate financing. New LLPAs will apply to: Interest-only loans and loans secured by condominium and cooperative properties.

US Bank Stops ‘My Community’ Program for Mortgage Banks
U.S. Bank Home Mortgage Correspondent Lending Division is discontinuing their remaining My Community Program. Effective close of business tomorrow, USBHM will no longer accept any locks on My Community Mortgage Program #3514. Floating pipeline loans should be locked by tomorrow.

Chase Cuts More Options For Brokers
Chase Wholesale will no longer accept the following FHA and VA loan transactions with a representative credit score less than 620: All FHA transactions, including FHA Streamline refinance transactions, and all VA transactions, including VA IRRRL transactions.

Middle East Violence Causes Bond Rally, Home Prices Decline, Consumer Confidence Down
Yesterday’s problems in the Middle East not only caused oil prices to rise, but a flight to quality in US Treasuries. Unfortunately mortgage rates didn’t tag along for the ride, and buyers backed off their prices during the day. On today’s economic agenda, October’s composite home price index is expected to decline -17.9%, a new record low, due to the inventory of homes and weak economic conditions. The Chicago PMI is expected to decline -0.8 points to 33.0, far below the neutral level of 50. We also have Consumer Confidence, expected at 45.7. Ahead of all of that, the 10-yr yield is around 2.16% and mortgage prices are worse by .125-.250 versus yesterday afternoon.

Daily Humor
The owner of a mortgage bank in North Carolina was confused about paying an invoice, so he decided to ask his secretary for some mathematical help.
He called her into his office and said, “You graduated from Appalachian State University in North Carolina and I need some help. If I were to give you $20,000, minus 14%, how much would you take off?”
The secretary thought for a moment, then replied, “Everything but my earrings.”
You gotta love those North Carolina mortgage bankers.