SISA Loans Are Back ;)

Yes, a new SISA had been rolled out: “Substantiated Income – Substantiated Appraisal”. Ha! Don’t hold your breath waiting for the old one to come back.

We have a new plan. There has been little done to help the actual borrower in the present situation since it is near-impossible to find a solution will satisfy both the borrower and the investor. Certainly many steps have been taken, with the Fed buying MBS’s and lower mortgage rates probably being the most help. Principal reductions may help many stay in their homes but it is not going to make the economy turn around since it doesn’t create wealth.

If you were a mortgage servicer like Wells or Chase, and you have been buying 5.5% mortgages at a 2 or 3 point premium above par, thinking that you might have them on your books a while, would you be excited about “Homeowner Affordability and Stability Plan” announced yesterday? The jury is still out since prepayments might increase, but banks, money managers and hedge funds were selling their higher rate mortgage pools and selling 4 and 4.5% MBS’s, which would include 4.25 – 5.125% mortgage rates.

The Homeowner Affordability and Stability Plan may assist as many as 9 million homeowners, but will it help the mid-size mortgage banker? Many hope so. The plan applies to primary residences, and only to loans that don’t exceed Freddie Mac/Fannie Mae conforming loan limits. Homeowners who have conforming loans owned or guaranteed by Freddie Mac and Fannie Mae will be allowed to refinance their homes, even if they do not have 20 percent equity. If homeowners are actually underwater, but not necessarily delinquent, the “Homeowner Stability Initiative” takes over and lenders, servicers, and the government will work together to share in the cost of the modification which reduces the monthly payments to not exceed a 38% DTI. (Servicers would receive an up-front fee of $1,000 for every eligible modification meeting the initiative’s guidelines. Guidelines Mortgage holders will receive an incentive payment of $1,500, and servicers $500, for modifications made on loans that are current but at risk of imminent default.) And lastly, and this should help smaller mortgage companies, the Treasury Dept. plans to increase their Preferred Stock Purchase Agreements with both Fannie Mae and Freddie Mac, and will continue to purchase Fannie Mae and Freddie Mac mortgage-back securities in order to help promote stability and liquidity in the marketplace.

I enjoy making forecasts, except when they’re about the future. Speaking at the National Press Club, Bernanke announced that the FOMC’s forecasts will include a set of projections for a longer-term (5- to 6-year) horizon, the inflation components of which “may be interpreted…as the rate of inflation that FOMC participants see as most consistent with the dual mandate.” He continues to maintain that Fed actions have helped credit markets, and the credit risk to the Fed from the various actions they have taken is low. Importantly, he does not mention purchases of longer-term Treasury securities in what has now become a fairly standard three-part description of the Fed’s tool kit for extraordinary circumstances (the three being provision of liquidity, facilities targeted to specific credit markets, and purchases of longer-term assets). And 5-6 years ago we knew this all was going to happen?

Taylor, Bean & Whitaker followed other lenders with restrictions on TPO business for MI purposes. “Any Third Party Originated Loan Over 80% LTV, Minimum FICO 740, Maximum DTI 38, Maximum LTV 90, 1 Unit Primary Residence only.” This mirrors the restrictions that MI companies have put on business coming through their own doors.

May 1 will be here before we know it, and supposedly on that date mortgage brokers can no longer order appraisals instead using a designated pool of appraisers of unknown quality and efficiency. The New Home Valuation Protection Code, used by Fannie & Freddie, created requirements governing appraisal selection, solicitation, compensation, conflicts of interest and corporate independence. As we all know, mortgage brokers will be prohibited from selecting appraisers, lenders are prohibited from using in-house staff appraisers to conduct initial appraisals, and lenders are prohibited from using appraisal management that they own or control. Appraisers, good and bad, are scrambling to sign up with management companies who have placed them on rotating lists, typically at a cost to the appraiser. Interestingly, the code mandates that mortgage brokers adhere to the rules of using a management company’s pool of appraisers, but mortgage bankers are not.

Wells already does it and Citi’s brokers will soon. They sent an announcement saying, “Please note that Appraisals for conventional loan files registered on or after 3/01/09 must be ordered through the CitiMortgage Wholesale Lending website at https://broker.citimortgage.com. For Appraisals ordered on the CitiMortgage Wholesale Lending website, CitiMortgage will obtain the Appraisal report directly from RealTrans.”

For scheduled news today, we had Jobless Claims remain unchanged from the previous week at 627,000, still near a 26-year high and slightly higher than the 620,000 forecast. U.S. producer prices climbed more than forecast in January, +0.8%, also higher than projected and which followed a 1.9 percent drop in December. The core rate, excluding food and fuel, was +0.4%, also more than anticipated. Later, at 7AM PST, we will see Leading Economic Indicators, expected about unchanged, and the Philly Fed survey. Unfortunately rates have moved higher this morning, both before and after this news. Maybe focused on the supply issue of $97 billion of debt to be sold next week to support the government’s spending? The 10-yr is back to 2.85% and mortgages are worse by .250-.375 in price.

Daily Humor
NINE WORDS WOMEN USE
“Fine”: This is the word women use to end an argument when they are right and you need to shut up.

“Five Minutes”: If she is getting dressed, this means a half an hour. Five minutes is only five minutes if you have just been given five more minutes to watch the game before helping around the house.

“Nothing”: This is the calm before the storm. This means something, and you should be on your toes. Arguments that begin with “nothing” usually end in “fine”.

“Go ahead”: This is a dare, not permission. So don’t do it!

“Loud Sigh”: This is actually a word, but is a non-verbal statement often misunderstood by men. A loud sigh means she thinks you are an idiot and wonders why she is wasting her time standing here and arguing with you about nothing. (Refer back to # 3 for the meaning of “nothing”.)

“That’s Okay”: This is one of the most dangerous statements a women can make to a man. “That’s okay” means she wants to think long and hard before deciding how and when you will pay for your mistake. And you will indeed pay.

“Thanks”: A woman is thanking you, do not question, or faint. Just say, “You’re welcome”. Unless she says “Thanks a lot”, which is pure sarcasm.

“Whatever”: A woman’s way of saying —- you!

“Don’t worry about it, I got it”: Another dangerous statement, meaning this is something that a woman has told a man to do several times, but is now doing it herself. This will later result in a man asking, “What’s wrong?” For the woman’s response refer to “Nothing”.