THE BASIS POINT

FDIC Ups Fees For Banks, Stated Borrowers Can’t Get Help?, Better Rates On Purchase Loans

President Obama said last week that it’s a good time to buy stocks. So this morning, instead of spending $5 on a Grande latte, I used the money to buy 100 shares of GM…

FDIC Ups Fees For Banks
If the taxpayers should pay for their neighbor’s mortgages, should “good” banks pay for the mistakes of other banks? The FDIC insures 8,300 banks and lenders (including Capital One, who cut their dividend by 87%), and they are all facing increased fees and a one-time “emergency” charge designed to raise $27 billion this year for the agency. Small community banks may take a 10-20% hit on their 2009 earnings. In theory, community banks rely more heavily on deposit funding, so they suffer a “much heavier burden” as a result of deposit insurance proportionate to size than banks like Citi or BofA. U.S. Senate Banking Committee Chairman Dodd may introduce legislation that would temporarily raise the FDIC’s $30 billion borrowing authority with the Treasury to $500 billion, with a permanent increase to $100 billion.

Stated Borrowers Can’t Get Help?
“Rep. Tom Price, R-Ga., plans to introduce legislation that would prohibit the use of government funds to modify mortgages for individuals that “lied about their income on their mortgage application.” Price’s measure would also prohibit government funding to any lender that failed to follow proper underwriting standards.” Determining this sounds near-impossible.

Have A Chase Loan? Call This Number
Chase, given the recent announcement regarding the Homeowner Affordability and Stability Plan and the plan to have servicers possibly modify loans, has established a support unit that is prepared to offer help to those borrowers looking for refinance assistance. If Chase is the servicer of record, the borrower should call (866) 550-5705.

Purchase Loans Get Better Rates
The purchase market, or I should say the interest by investors in purchase loans, is heating up. Some investors are offering price incentives. For example, Union Bank of California, who offers no correspondent channel, is knocking 1/8% off the interest rate on the purchase of a primary residence or vacation home.

FHA Credit Updates
Franklin American is revising their credit parameters for FHA Jumbo and Conventional Conforming Fixed Rate loans. These changes are effective for all loans locked from today onward. FHA Jumbo revisions include all cash out refinance transactions must meet a minimum credit score of 680 and must have a second appraisal regardless of property location, the maximum cash out is limited to $100,000, loans utilizing gift funds are ineligible, and the borrower may not have any other financed properties other than the subject property. For their Conventional Conforming Fixed Rate, all Conventional Loan Appraisals dated on and after April 1, 2009 must be accompanied by a completed Form 1004 Market Conditions Addendum (1004MC) for appraisals of one to four unit properties. (FAMC also reminded their customers that they are not following the Fannie guidelines for maximum properties owned, but instead are restricting the total number of properties to 4 including the borrower’s primary residence.)

Fed MBS Purchases
For the week ending March 4th, the Federal Reserve Bank of New York bought $30 billion in mortgage-backed securities. (They’ve bought a total of $190 billion so far.) What are the coupons? 4.5’s and 4.0’s accounted for 77% of the net purchases. If buying $30 billion in 5 days, when new production is about $2 billion a day, won’t help mortgage prices, I don’t know what will!

Economic Preview For Week
This week is light in terms of economic news. In fact, there is little until March 11th, when we see the usually-ordinary Treasury Budget. (This has taken on a little more significance as of late…) Thursday we have Jobless Claims, Retail Sales, and Business Inventories, and then on Friday the 13th we have the Trade Balance figures for January along the preliminary Michigan Consumer Sentiment Survey (is there much to be optimistic about in Michigan right now, aside from Spring being on the way?). Of no little importance is an auction this week, starting tomorrow with $34 billion of 3-yr notes, $17 billion of 10-yr notes on Wednesday, and $11 billion of 30-yr bonds on Thursday. Nonetheless, the markets are roiled this morning since HSBC’s stock taking a 24% plunge is once again pushing our own equity markets down, and we find the 10-yr at 2.86% and mortgage security prices roughly unchanged from Friday afternoon.

Daily Humor
A cowboy, who is visiting Idaho from Texas, walks into a bar and orders three mugs of Bud. He sits in the back of the room, drinking a sip out of each one in turn. When he finishes them, he comes back to the bar and orders three more.

The bartender approaches and tells the cowboy, “You know, a mug goes flat after I draw it. It would taste better if you bought one at a time.”

The cowboy replies, “Well, you see, I have two brothers. One is in Arizona the other is in Colorado . When we all left our home in Texas we promised that we’d drink this way to remember the days when we drank together. So I’m drinking one beer for each of my brothers and one for myself.” The bartender admits that this is a nice custom, and leaves it there.

The cowboy becomes a regular in the bar, and always drinks the same way. He orders three mugs and drinks them in turn.

One day, he comes in and only orders two mugs. All the regulars take notice and fall silent. When he comes back to the bar for the second round, the bartender says, “I don’t want to intrude on your grief, but I wanted to offer my condolences on your loss.”

The cowboy looks quite puzzled for a moment, then a light dawns in his eyes and he laughs.

“Oh, no, everybody’s just fine,” he explains, “It’s just that my wife and I joined the Mormon Church and I had to quit drinking.”

“Hasn’t affected my brothers though.”