THE BASIS POINT

Bank Layoffs & Earnings, Mortgage Guideline Updates

With the continued slowdown in the economy, the family made the decision to let my son go. After 16 years we had a certain amount of loyalty, but the harsh realities had set in. He wondered why it was him and not his younger sister, and I explained that she had edged him out on the latest report card, and besides, since he just received his driver’s license, he could better fend for himself. Fortunately he had accrued some vacation time. In all seriousness, mortgage companies find themselves in the same situation as we were in last year, examining payrolls and overhead. Some companies are more fortunate than others. At Wells Fargo, for example, lay-offs have been rare, with the manpower being moved to auditing files and packages instead. Recent lay-off news stories from Indy and Wachovia remind us, however, that employment can be fleeting.

Oil prices are down, which, generally speaking, does not help development of alternative efficient energy sources. But at least it helps our inflation outlook – you wouldn’t want it to get carried away, as in Zimbabwe, which introduced a 100-billion dollar note!

MORE BANK EARNINGS
Washington Mutual reported a $3.3 billion quarterly loss, worse than Wall Street was anticipating – a net loss of $6.58 a share, which included a charge related to a $7 billion capital raise the company announced in April. Excluding the charge, WaMu reported a loss of $3.34 a share, compared to a year ago when the company reported a profit of $830 million. Although that about does it for economic news, and there is nothing scheduled to be released, rates are worse again early this morning, with the 10-yr up to 4.15% and mortgage prices worse by another .250.

MORTGAGE INDUSTRY UPDATES

  • During the weekend of August 16, Fannie Mae will update Desktop Underwriter Version 7.0 to implement policy changes including Adverse Market Delivery Charges, New Flow Business Pricing Requirements, Temporary Increase to Our Conventional Loan Limits, Mortgage Eligibility and Pricing Updates for Desktop Underwriter® and Manually Underwritten Loans, Jumbo-Conforming Mortgage Loans – ARM Plans, MBS Pooling, and Other Information, Jumbo-Conforming Mortgage Loans – Expanded Eligibility and Products, National Down Payment Policy Replaces Maximum Financing in Declining Markets Policy, and 2008 Area Median Income Limits.
  • Citi announced the introduction of new product offerings, and policy enhancements for Agency Jumbo Loans. Key changes to the program include the addition of 4 product options – the 7/1 and 10/1 ARM Full Amortization and Interest Only (10-year I/O period) which must be manually underwritten, AUS not eligible. Citi announced that all manually underwritten loans may now go up to 80% LTV (previously 75%) with a minimum 660 credit score, that credit score requirements are now based solely on the underwriting method, not the product, and that fully amortizing products are qualified at note rate. Interest Only products are qualified at the higher of note rate or fully indexed rate based on fully amortizing PITI and no longer the note rate + 2%.
  • PMI is introducing new underwriting guideline changes, including “Eligibility and Underwriting Guideline Changes for Investment Properties — Effective August 15, 2008: All loans, including those submitted through DU® v7.0, must meet these two additional criteria: Purchase transactions only Minimum 720 credit score required. Primary Residence Conversion to Second Home or Investment Property -Effective September 1, 2008 This is a new policy for borrowers who are purchasing a new primary residence and will be converting their current residence to a second home or investment property. Please view the complete Owner Conversion Policy. PMI also provided a “Distressed Markets Policy Updates — Effective September 1, 2008”.
  • Chase is revising their Non-Agency Amortizing and Interest Only Fixed and ARM products with LTVs > 80%, and making updates to their declining markets policy for Non-Agency transactions. In addition, effective July 22, 2008, Chase is increasing the price adjustments on FHA Fixed Rate transactions with expanded loan amounts in half and whole rate increments.

FHA DOWN PAYMENT ASSISTANCE ALMOST GONE
Any agent hoping and praying that down payment assistance programs for FHA will remain in place… well, good luck According to a Sacramento Bee story, a key program is likely to be shut down this week per Nehemiah Corp. of America officials. “The nonprofit giant believes Congress and President Bush will ban its decade-old down-payment assistance “gift” program within days as part of a larger housing bill, Nehemiah President and Chief Executive Officer Scott Syphax said Monday. Syphax said he met Monday with the Nehemiah board and about 30 down-payment assistance employees in Sacramento to say it’s likely the “doors are closing” on the program.” The firm has steadily remade itself into an urban developer.

JOKE OF THE DAY
President Bush calls in the head of the CIA and asks, “How come the Jews know everything before we do?”
The CIA chief says, “Because the Jews have this expression ‘Vus titzuch?’ as a way of finding out.”
The President says, “What does that mean?”
“Well, Mr. President,” replies the CIA chief, “it’s a Yiddish expression which roughly translates to `what’s happening?’. They just ask each other so they get to know everything.”
The President then decides to personally go undercover to determine if this is true. He gets dressed up as an Orthodox Jew – beard, hat and traditional attire – and is secretly flown to New York, picked up in an unmarked car and dropped off in Brooklyn’s Hasidic neighborhood late at night.
Soon a little old man comes shuffling along. The President stops him and whispers, “Vus titzuch?”
The old guy whispers back, “Bush is in Brooklyn.”