New Wave of Investor Guidelines, Rates Slightly Up on PPI Spike

Yesterday investors were throwing around guideline changes like candy from a 4th of July float. But first a quiz: what cookie company, founded 31 years ago, just filed for bankruptcy? Mrs. Fields, of course. Mrs. Fields will continue its cookie business, but spin off parts of the company, including its TCBY frozen yogurt business. Due to rising fuel and commodity prices, the company is unable to make an interest payment next month. Warn those Keebler elves to watch out for lay-offs.

LENDER GUIDELINE CHANGES

• Effective with locks on or after Sept. 15, 2008, Wells Fargo Funding (both wholesale and correspondent) will limit the maximum number of properties financed for FHA borrowers “with all lenders to four, including Wells Fargo. The maximum of four financed properties includes the subject property along with any other financed properties, whether conventional or government mortgages.” Wells also expanded their “Ineligible Projects” guidelines to include additional detail regarding characteristics of condominium projects in resort destinations. They will consider resort condos as one in the same as a condotel. Characteristics used to identify ineligible project types include the project name including “hotel”, “motel”, “inn”, “resort” or “lodge”, voluntary or mandatory revenue sharing agreements, mandatory rental pool agreements, occupancy restrictions mandated by the zoning, etc.

• Fannie Mae, over the weekend, sent out changes that apply to conventional loan case files submitted, and all existing DU Version 7.0 case files resubmitted, on or after August 16, 2008. Titled “Support for jumbo-conforming mortgage loans”, they set forth automation of the eligibility guidelines previously announced, which include minimum credit score requirements, maximum total expense ratio, max LTV/CLTV/HCLTV, reserve requirements, mortgage delinquencies, eligible property types, eligible amortization types and terms, and eligible mortgage products.

• CitiMortgage, who sent out a 7 page list of changes, “will now accept loans for the Conventional Economic Stimulus Act of 2008 that have been underwritten and approved via DU. Fannie Mae has updated DU with the necessary Conventional Economic Stimulus criteria. When an Approve/Eligible finding is received from DU all DU recommendations may be followed for Income, Assets, and Ratios. (In the cases of a “Refer” decision, the loan will revert to a manual underwrite and all applicable requirements will apply.)” CitiMortgage will purchase VA loans per VA guidelines, up to a cap of $1 Million, inclusive of the VA funding fee.

• Chase, also in a lengthy statement, announced changes to their Non-Agency Fixed and ARM products (Amortizing and Interest Only). These include reducing the maximum LTV/CLTV to 85%/85% on Non-Agency products and programs, including their Premier Program, reducing the maximum cash back on LTVs 80% from $500,000 to $250,000. For Chase’s Agency Interest Only Fixed and ARM products, they will be requiring a DU approval on 1 unit/Condo/PUD transactions, revising the maximum LTV/CLTV on Co-ops, and adding minimum credit score criteria on Co-ops. Chase also clarified the down payment assistance programs that they ceased accepting.

• Chase also announced that “Due to the Agencies’ adverse market fee increasing for November settlements, any Conventional AOT/DT commitments that must be rolled from Oct to Nov will receive an additional 25 basis point fee on top of the market drop. Conventional Mandatory commitments extended resulting in a price to November securities will also receive this additional 25 basis point fee. Loans delivered within October delivery dates must meet the 3-day cure by date policy and procedure; otherwise these loans will also receive an additional 25 basis point fee. All AOT/DT and Mandatory commitments priced to a November settle at the Chase desk will already include the additional adverse market fee.”

• U.S. Bank Home Mortgage Correspondent group stated that “Due to the imminent termination by HUD of the Seller Funded Down payment Assistance Programs, they have determined that loans utilizing Down payment Assistance Programs will no longer be eligible for purchase by USBHM.”

• Franklin American Mortgage, “Due to current changes in the marketplace is implementing changes to the My Community 97 and Home Possible 97 products and providing additional policy clarification for FHA Down Payment Assistance loans. The product changes are effective for all loans locked on or after August 19, 2008.”

MARKET AND RATE UPDATE
Is your entire 401k in Fannie & Freddie? I hope not. Shares of Fannie Mae and Freddie Mac plunged yesterday to their lowest points in twenty years. Fannie fell 22% and Freddie lost 25% after a Barron’s report, which I mentioned yesterday, suggested that a government takeover of the troubled companies is inevitable. Both of them are down 80% in the last 8 months!

Here’s a piece on how the new housing law impacts reverse mortgages.

Rates slightly higher this morning after the Labor Department’s Producer Price Index was up 1.2% (after a 1.8 percent gain in June). The core PPI, for those that don’t drink and drive, uh, I mean eat and drive, jumped 0.7 percent in July after a 0.2 percent June increase. It was the fastest rise in monthly core producer prices since November 2006 and implied that price gains were spreading outside the food and energy sectors, which will of course catch the attention of the Fed. We also had U.S. Housing Starts fall 11% to the lowest annual rate in more than 17 years, and Building Permits drop 17.7%. Some analysts were calling for a bottom in housing a month or two ago, which has not happened, and in fact many economists are calling for more price declines as REO’s continue to come onto the market.

JOKE OF THE DAY
Seen on a poster:
Teenagers!
Tired of being harassed by your stupid parents?
Act Now!
Move out!
Get a job!
Pay your own bills!

Do it while you still know everything!