THE BASIS POINT

Rates Up Today But Generally Down, Mortgage Applications/Fraud Up

Thanks Mary B. for this example of recent correspondence:

Dear Sirs,
In view of current developments in the banking market, if one of my checks is returned marked “insufficient funds”, does that refer to me? Or to you?
Yours Faithfully,
Signed – Bank Customer

Is The Fed Selling Treasuries to Buy Treasuries?
When I read news like the following, it makes me realize that I will never have the intelligence to figure out financing! “Yields on the so-called long bond plunged yesterday after Federal Reserve Chairman Ben Bernanke said the central bank may purchase Treasuries to help bolster the economy.” In order to buy Treasuries, doesn’t the Fed have to sell Treasuries to find the money? Or take money out of other programs, making things tighter in other areas of the budget?

Rates Up Today, But Down Generally
Loan agents across the nation are once again flipping through their Rolodexes (do those still exist?) with the hopes of refinancing everyone that they refinanced in recent years. If historical spreads are any indication, and some argue, like this morning, that they’re not, mortgage rates should drop in the near future. And why not start refinancing, assuming the property and borrower qualify! Are agents hoping that HOPE would push their business activity higher? Well, it has been disappointing, according to this article from less than a month ago. Are investors finally realizing that conventional and government mortgage-backed securities, now fully backed by the US Government, are a good buy? Everyone in the business hopes so, since good news like that tends to ripple into other products. There is not much for economic news today, with the 10-yr is down to 2.71%. Mortgage rates, unfortunately, are not dropping this morning, and are currently worse by about .375 in price (or .125% to .25% in rate).

Countrywide/BofA Will Require Tax Return Verifications
Countrywide/BofA announced to their correspondents that they will require a completed and signed IRS Form 4506-T for all borrowers on all loan programs closed after December 8, 2008. This policy applies to conventional and government loans regardless of income source or AUS findings. C’wide also changed a few other items.

“For borrowers with prior bankruptcies, the minimum allowable time between the bankruptcy filing date and the credit report date is increased to 48 months (from 24 months). Reductions are made to maximum allowable loan-to-value (LTV) and combined loan-to-values (CLTV) for 3-4 units, cash-out refinances, second homes, and investment properties for all standard conforming loan programs.”

Mortgage Fraud Up
I don’t know who the Mortgage Asset Research Institute is, but they have come out with a headline grabbing report saying that reported incidents of mortgage fraud grew by 45% in the second quarter compared to the year-ago period. Florida accounted for 20% of the incidents, followed by California and Illinois. Can’t this industry get out of the headlines? In the 1st quarter of 2008, mortgage fraud incident reports were up by 42% versus a year ago. The largest increase in mortgage fraud involved borrowers misstating their financial profile, such as using false bank statements made on computers and pay stubs with white correction liquid on them.

Mortgage Applications Up
The MBA weekly application survey, which covers about half of all retail residential applications, was up 112% last week compared with the week before. Every one in the business with a memory longer than 7 days remembers rates plummeting following the Fed’s announcement that it would buy GSE debt and securities backed by mortgages to the tune of a total of $600 billion. According to the MBA survey, rates on 30-year fixed-rate mortgages averaged 5.47%, down 50 basis points from the 5.99% the previous week. Interestingly, one-year ARMs averaged 6.61% last week, down from 6.87%.

Applications to refinance an existing loan rose 203.3% last week, and accounted for almost 70% of all activity.

Daily Humor
Three men died on Christmas Eve and were met by Saint Peter at the pearly gates.

“In honor of this holy season” Saint Peter said, “You must each possess something that symbolizes Christmas to get into heaven.”

The first man fumbled through his pockets and pulled out a lighter. He flicked it on. “It represents a candle”, he said.
“You may pass through the pearly gates” Saint Peter said.
The second man reached into his pocket and pulled out a set of keys. He shook them and said, “They’re bells.”
Saint Peter said “You may pass through the pearly gates”.
The third man started searching desperately through his pockets and finally pulled out a pair of women’s panties.
St. Peter looked at the man with a raised eyebrow and asked, “And just what do those symbolize?”
The man replied, “These are Carols.”

And So The Christmas Season Begins……