Fed Funds vs. Mortgage Rates & Changes At Citi, CW, MGIC, RMIC
Anyone who has been in a car and seen a bike on a city street, watch the video below. That includes all of you that are reading this on your Blackberry in your car right now.
Now down to business. Here’s a graph of the correlation (or lack thereof) between Fed Funds and mortgage rates. It’s also worth noting that the graph label isn’t fully correct in saying that 30yr mortgages follow “other long term rates, such as the yield on the 10-year Constant Maturity Treasury.” Yes 30yr fixed loans follow other rates, but the correlation to the 10-year yield is loose. The tight correlation is to the actual agency mortgage bonds that are created out of 30yr fixed loans.
What is the name of agency products with the new loan amounts? “Jumbo Conforming?” “Conforming Jumbo?” “Agency Jumbo?” “High Balance Conforming?” “It’s-About-Darned-Time Conforming?”. I prefer Super Conforming. The markets, including stocks, bonds, and mortgage securities, are closed today in observance of Good Friday? How do investors set rates when there are no bond market prices upon which to base their rates? This won’t start happening until FNMA starts buying these loans on April 1.
CitiMortgage announced that after today they will no longer offer the Agency AUS SISA program. “Due to the final delivery date set forth by Freddie Mac and Fannie Mae, all affected loans, regardless of Lock Expiration Date, must be purchased no later than May 7, 2008. Note: The Agency Alt-A SIVA and Agency Alt-A SISA are unaffected at this time.”
Countrywide, for their non-conforming and Expanded Criteria programs, made changes to loan-to-values, maximum loan amounts, and minimum credit scores on Non-Conforming Full/Alternative documentation and Expanded Criteria Reduced documentation. No Ratio documentation programs are eliminated. “Due to the final delivery dates imposed by Fannie Mae® and Freddie Mac®, all Conforming CLUES Fast & Easy loans with loan-to-values greater than 90%, or interest-only cash-out transactions must be locked by April 4th. In addition, effective the week of April 21, 2008, “Conforming and Non-Conforming CLUES Fast & Easy will become a documentation waiver program. As of this date, the ability to originate and underwrite CLUES Fast & Easy as a standalone loan program will be eliminated. CLUES Fast and Easy documentation will only be returned as a documentation waiver for loans submitted as Full/Alternative documentation.”
MGIC announced that “For mortgage insurance applications received by MGIC on or after March 31, 2008, the “maximum LTV/CLTV for purchases and rate-and-term refinances of primary residences will be 97% in nonrestricted markets. (The minimum credit score for loans with LTVs of 95.01% – 97% remains at 680.) LTV/CLTV maximums for restricted markets remain as announced in our February 6, 2008, letter. All of our program CLTV maximums will be set to match the maximum LTV. For this purpose, “CLTV” refers to all other acronyms used to describe the ratio of the total loan amount secured by the subject property whether drawn or not, to the lesser of the sales price or the appraised value (e.g., TLTV, HCLTV, etc.).”
After the end of March, RMIC will no longer insure loans with loan-to-value ratios (LTV/CLTV) greater than 97%, regardless of the decision of any automated underwriting system (AUS). This nationwide change will supersede existing guidelines and program approvals, and applies to all loans including housing finance authority and affordable housing loans. The maximum allowable LTV/CLTV for loans on declining market properties will be reduced by five percent from the LTV/CLTV otherwise allowed by RMIC’s underwriting guidelines.