Citi, BofA, Wells Hammered; Rates For Super-Conforming

The Detroit Auto Show opened recently, and America’s automakers are showing off their latest cars. Unfortunately, they didn’t get as much of the bailout as they thought, so a ticket to the auto show costs $1.3 billion.

Citi, BofA, Wells Hammered
Anyone who owns stocks in financial companies got whacked yesterday. Citigroup, Bank of America, Wells Fargo – no one was immune from losing a large percentage of their value in one day. Is Wells Fargo really worth 25% less than it was last Friday? The overall stock market was down about 4%, and the S&P 500 is already down 11% in the last two weeks! Is this helping interest rates? At some level, yes, although both Treasury and mortgage rates are not doing as well as one would expect given the general economic picture. In fact, this morning the 10-yr is up to 2.46% and mortgage prices are worse by about .250. Generally speaking, investors are questioning whether or not banks’ assets, which contribute toward net worth and stock price, are really worth what banks say they are.

Rates For High-Balance Conforming
Unfortunately at this point “experts” see no jumbo, or jumbo conforming, coming back into the non-bank retail market. The big bank branches are out there protecting their branches, and their retail portfolios, and focusing on their retail customers. Mortgages continue to be viewed as risky, and even if the base rate is acceptable, loan-level fees are on the rise. For example, effective April 1 Fannie Mae is raising its loan fees. The change was announced December 19, 2008, and impacts risk-based fees known as “loan-level pricing adjustments”. LLPAs aren’t just limited to credit score and LTV, and the new Fannie Mae guidelines impact three other loan characteristics: Condo and co-op mortgages over 75% LTV – add 0.750 percent to fee; Interest only mortgages – add 0.250 percent to fee for ARMs, 0.750 for fixed rate; Mortgages under 75% LTV with subordinate financing – add up to 0.500 percent to fee. The loan fees don’t have to be paid in the form of cash due at closing, but instead can be financed in the mortgage rate at roughly .25% for every 1 point in fee.

US Bank’s Correspondent Division, for example, will implement these fees beginning tomorrow in spite of Fannie not requiring them until April. Their pricing changes impact FICO/LTV fees, Cashout Refinance fees, IO ARM fees and now specific Condominium fees, and one should expect to pay more for transactions with an LTV > 60% and FICO score < 700. US Bank will charge, for Interest only ARMs with LTV > 90%, and additional .250 point in fee, and condominiums with LTV > 75% will be charged an additional .750 pt. fee.

More Compliance for Loan Originators
James B. Lockhart, director of the Federal Housing Finance Agency (FHFA), announced that with mortgage applications taken on or after Jan. 1, 2010, Freddie Mac and Fannie Mae are required to obtain loan-level identifiers for the loan originator, loan origination company, field appraiser and supervisory appraiser. This is the result of Title V of the Housing and Economic Recovery Act of 2008, the S.A.F.E. Mortgage Licensing Act through which Congress required the creation of a nationwide mortgage Licensing system and registry. With enactment of the S.A.F.E. Mortgage Licensing Act, identifiers will now be available for each individual loan originator.

Countrywide Price Changes
Countrywide’s wholesale group joined in the pricing manipulations. Effective today, Countrywide “is pleased to offer improved pricing on the 45-day rate lock commitment on select Conforming products.125% improvement to pricing on the 45-day rate lock commitment on purchase transactions.250% improvement to pricing on the 45-day rate lock commitment on refinance transactions. The following Pipeline Protection rules apply: The pricing will be effective on all 45-day rate lock commitments beginning Tuesday, January 20, 2009. The new adjustments will apply to all new loan submissions as well as all loans currently in the pipeline that are not locked. Any lock extension or re-lock will be subject to current lock extension/re-lock policies.”

Daily Humor
Tom had been in mortgage banking for 25 years. Finally sick of the stress, he quits his job and buys 50 acres of land in Alaska as far from humanity as possible. He sees the postman once a week and gets groceries once a month. Otherwise it’s total peace and quiet.
After six months or so of almost total isolation, someone knocks on his door. He opens it and a huge, bearded man is standing there.
“Name’s Cliff, your neighbor from forty miles up the road. Having a party. Friday night. Thought you might like to come at about 5:00.”
“Great”, says Tom, “after six months out here I’m ready to meet some local folks. Thank you.”
As Cliff is leaving, he stops. “Gotta warn you. Be some drinking.”
“Not a problem,” says Tom. “After 25 years in the business, I can drink with the best of ’em.”
Again, the big man starts to leave and stops. “More ‘n’ likely gonna be some fighting’ too.”
“Well, I get along with people, I’ll be all right! I’ll be there. Thanks again.”
“More’n likely be some wild sex, too.”
“Now that’s really not a problem,” says Tom, warming to the idea. “I’ve been all alone for six months! I’ll definitely be there. By the way, what should I wear?”
“Don’t much matter. Just gonna be the two of us.”