Economic Preview, PennyMac Steps Into PPIP, UBOC Options For Property Investors

Over the weekend my daughter and a friend had a lemonade stand on the street. They weren’t selling much lemonade for 50 cents a cup, so they decided to increase the price to 75 cents a cup. I told them that is not how economics works. My daughter replied, “The price of a postage stamp went up to 44 cents a few weeks ago, and the Postal Service said they had to raise the price because fewer and fewer people are using the mail these days. Dad, that’s government thinking: ‘Hey, nobody’s buying our product. Let’s raise the price.’”

PennyMac Engages in PPIP
When is the best time to add insult to injury? When you’re signing someone’s cast. What some may feel is along the same lines, do you remember how the former Countrywide Financial president formed PennyMac Mortgage last year to buy troubled home loans and related securities? And how people in the business cried foul: “First they originate the stuff, then give the mortgage business a bad name, and now they’re buying their loans back at 10 cents on the dollar?” Well, soon you may be able to buy stock in them. On Friday they filed with the SEC to sell as much as $750 million in stock to the public. PennyMac Mortgage Investment Trust would make some of its investments under a federal plan to offer financing to buyers of toxic mortgage assets from banks, the filing says.

UBOC Gives Options To Property Investors
Union Bank of California, where many brokers have turned for jumbo product, reminded their brokers that their investment property financing, for purchase or no cash out refinance, has no restrictions on the number of properties owned or financed. “Union Bank will finance up to 3 investment properties for the same borrower Loan amounts up to: 1 unit $750,000, 2 units $1,100,000, 3 and 4 units $1,500,000. Available on all programs, Interest Only or amortizing, including the Two Step Mortgage.”

Franklin American and Flagstar Updates
Franklin American came out with their High Balance conforming loan limits originated under Fannie Mae’s Temporary High-Cost Area Loan Limits. An Addendum to the Conforming Fixed Rate provides underwriting criteria and loan parameters as allowed by FAMC. As with other investors, the list can be seen here. Underwriting by FAMC is required on loans for lenders with delegated underwriting authority less than $650,000, and on all loans having loan amounts > $650,000 regardless of lenders delegated authority. Lenders should refer to their most recent FAMC approval letter to confirm their delegated underwriting loan limits.

Flagstar reminded their customers that “FHA has extended the temporary property flipping waiver that allows lenders and the property disposition firms they hire (or with whom they are affiliated) to sell properties on which they’ve foreclosed without regard to FHA’s 90-day seasoning requirement. The waiver is in effect for loans with purchase agreements signed by the borrower and seller on or before May 10, 2010. Individuals or entities that purchase foreclosed homes are not exempt from the 90-day seasoning requirement. When the property seller is not exempt from FHA’s seasoning requirement, the borrowers may not execute the purchase agreement before the 91st day after the seller acquired the property. FHA requires a second appraisal when a property is being sold within 180 days of the seller’s
acquisition date and the sales price is more than 100% greater than the seller’s acquisition cost. This applies to all FHA purchases, including transactions where the seller is permanently or temporarily exempt from FHA’s 90-day seasoning requirement.” For additional information, refer to the FHA Mortgage Letter 2006-14 – Property Flipping Prohibition Amendment.

Flagstar also changed the pricing on all table-funded government loans with properties located in North or South Carolina to reflect a hit of 10 basis points.

Lastly, on June 5th Flagstar will limit eligible manufactured home transactions to rate and term refinances of loans currently serviced by Flagstar Bank. Purchase, cash-out refinance transactions; or rate/term refinances of non-Flagstar serviced loans will be ineligible. This change applies to all products where a manufactured home is an eligible property type. Pipeline loans outside of these guidelines must be locked prior to Friday, June 5th.

Economic Preview For Week
So here we are, on a Tuesday that every year feels like a Monday. We have Treasury auctions today, tomorrow, and Thursday. Today we also have a series of “soft” economic releases: S&P/Case-Shiller housing index, Consumer Confidence, Richmond Fed, and so forth. Tomorrow and Thursday we’ll see Existing Home Sales and New Home Sales. Durable Good comes out Thursday, and on Friday we finish the week with GDP and the Chicago Purchasing Managers Index. Prior to this we find the 10-yr at 3.41% and mortgage security prices better by a shade.

Daily Humor
Let’s ease into the week with some puns:
The butcher backed into the meat grinder and got a little behind in his work….
No matter how much you push the envelope, it’ll still be stationery….
A dog gave birth to puppies near the road and was cited for littering….
A grenade thrown into a kitchen in France would result in Linoleum Blownapart….
Two silk worms had a race. They ended up in a tie.