THE BASIS POINT

Manufacturing Rising, Bank Stress Tests, Progress On Distressed Refis

Loan Officer Quotes On Appraisal Rules & FHA Loans
Here are some quotes from real-live people in the mortgage business, concerning the HVCC & FHA loans:

“You are correct. Bank of America doesn’t buy without an appraisal on VA IRRR’s.”

“I am sure that Countrywide/BofA will NOT purchase them at all. The problem with GMAC and Citi is that they both keep you on the hook for 24 months for payments rather than the normal 1-4 months.”

“Bank of America Home Loan (they don’t want them referred to as B of A, they get very testy about that) does not buy any VA Streamlines with or without appraisals. Also, loans sold to Citi have a 24 month early payment default on those without appraisals, so why would you want to do that?”

“We at _____ Mortgage are invoking HVCC for FHA loans along with conventional loans. Maybe we are just stupid, but especially with TPO loans – this seems to be what the investors want. We also have been requiring at a minimum an AVM, and in most cases an appraisal, on VA IRRRL’s. We thought this would at least mitigate the VA no bid potential. Again, I’m not sure if we are just stupid or ahead of the game, but the performance level of IRRRL’s is very poor.”

“We’re requiring HVCC over at ____ Mortgage for conventional and FHA. Only VA is excluded over here.”

“EverBank is requiring HVCC on all their files (FHA and Conventional). They appear to be the only one at this time. However, with that said the folks at EverBank seem to be ahead of the market with restrictions that have turned out to be where most end up.”

“Flagstar has been requiring HVCC appraisals for all our loans since January 1, but I think they’ve been flexible. Flagstar now requires them on everything (including FHA), unless it’s a streamline VA or FHA loan. They also waive the appraisal on the new Fannie/Freddie 105 CLTV programs if you elect to use the automated value generated by DU. On Flagstar’s VA IRRRL and FHA-to-FHA Streamlines, they require a credit report IF the existing loan wasn’t done at Flagstar.”

Chase Raises Credit Scores for FHA Loans
Chase is raising the minimum FICO scores for certain categories of FHA loans. For purchase and rate and term refinancing, on FHA loans above $417,000, they require a minimum 640 score. Cash out refi’s above $417k require a 660 score, along with all non-credit qualifying streamline refinances. (Other programs remained at 620.) I believe that Citi, for example, is already at 660 for loans above $417,000.

Video Description of Appraisal Rules
Here’s a good video describing new appraisal rules. One agent wrote to me and said, “Every legislator should be required to refinance their home to stimulate the economy and use an HVCC appraisal – I think they would understand how convoluted the process is. The HVCC will be responsible for taking a minimum of 10% more “value” out of the market with the poor quality.” Let’s hope that maybe 10% could be added to the market for the same reason.

Fifth Third Refis 11,000 Troubled Borrowers
A couple months ago Fifth Third Mortgage Company, a subsidiary of Fifth Third Bank, announced its intention to participate in the government’s Homeowner Affordability and Stability Program (HASP), and at this point it appears to be working: they have worked with more than 11,000 homeowners to refinance more than $1.95 billion in loans. According to the story, the company has already refinanced more than $21 million Freddie Mac-owned or guaranteed mortgages through the Freddie Mac Relief Refinance(SM) Mortgage. Freddie launched that program in early April.

Homeowner Help Organizations
Here’s another example of a relatively new organization that indicates the “sign of the times”: the Rainy Day Foundation. It was established to “create and maintain responsible homeownership and provide tools to educate, counsel, support and financially assist homeowners who experience unforeseen short-term financial problems.” And companies have even begun to help homeowners find help like this. Like Creative Alliances which bring the Rainy Day Foundations HELP program to the marketplace featuring, buyer counseling, monthly newsletters, an emergency relief fund and a 24 month “Job Loss Protection” plan.

Manufacturing Rising, Bank Stress Tests
With all this news, it is easy to forget about the market. But yesterday we had the ISM Index of Non-Manufacturing businesses, which make up almost 90% of the economy, rising more than expected. We also had a $35 billion 3-yr auction, and move on to the 10-yr today. Concern over the results of U.S. government’s stress tests on major banks, which seem to be leaked to the press already, are keeping a cap on the stock market, although the Standard & Poor’s 500-stock index is roughly positive for the year. Supposedly 10 banks need additional capital, including Bank of America and Citi. Overall, there seems to be a feeling that, as Fed Chairman Bernanke put it, “We continue to expect economic activity to bottom out, then to turn up later this year.”

Mortgage Apps Up
On the good news front, mortgage applications filed last week were up 2% from the prior week, according to the Mortgage Bankers Association. (The survey supposedly encompasses about half of all U.S. retail residential mortgage applications as a sample.) Purchases were up 5%, and refinancing was up 1.2%. For those keeping track at home, refinancings accounted for 74.4% of total applications last week, and ARM loans made up 2.1%. Lastly, the 10-yr sits at 3.18% waiting for today’s auction, and mortgage security prices are slightly worse.

Daily Humor
Thank you Greg Erigio:
An Irishman was terribly overweight, so his doctor put him on a diet.
“I want you to eat regularly for 2 days, then skip a day, and repeat this procedure for 2 weeks. The next time I see you, you should have lost at least 5 pounds.”
When the Irishman returned, he shocked the doctor by having lost nearly 60 lbs!
“Why, that’s amazing!” the doctor said. “Did you follow my instructions?”
The Irishman nodded…”I’ll tell you though, by jaesuz, I t’aut I were going to drop dead on dat 3rd day.”
“From the hunger, you mean?” asked the doctor.
“No, from the ‘darned’ skippin’.”