Super Conforming Better Still, 50% of 2006 Home Buyers Under Water

Yesterday the news of Vallejo, California’s bankruptcy, and Wachovia’s head of Commercial Lending leaving, was overshadowed by Fannie Mae. Fannie Mae threw some chum into the water for loan agents in high balance areas, saying that it will buy jumbo mortgages for the same prices as smaller loans. Some random notes:

• Fannie is expecting the benefits of the price improvement to be passed along to the consumer. The intention and spirit of the price change is to improve the rate for the borrower, not to present an arbitrage opportunity. Fannie’s policy is that for loans already in pipeline lenders can float the borrower’s rate lower or sell already closed loans at the originated market level – they will not buy closed loans at flat to conforming. Other investors have yet to announce firm guidelines regarding those loans already locked in.
• Credit pricing is unaffected, and all adjustments still apply, including the 25bp for fixed rate, 75bp for ARMs, and the 25bp adverse market delivery charge.
• Fannie Mae approved seller/servicers should see approximately a 37bp yield improvement for the jumbo-conforming fixed rate and a 20bp yield improvement for the jumbo-conforming 5/1 adjustable rate whole loan postings.
• Fannie Mae Trading Desk will buy jumbo-conforming adjustable rate securities at levels flat to where they are bidding conforming ARM securities.
• Fannie also announced that they will handle refinancings of non-delinquent mortgages for as much as 120 percent of property values when it owns the existing loans.
• Some investors made the change effective immediately and reduced the spread from 150 basis points down to 50 bps, of which 25 bps is a direct fee to Fannie Mae. Manual u/w is still required, DU can be run but it must meet the product overlays.

Well, that does it for the good news. And now for something completely different:

• According to Zillow, over 50% of homeowners who bought a house in 2006 now owe more on their mortgages than their homes are worth.
• Wachovia said it is nearly doubling previously reported losses for the first quarter after reviewing its portfolio of bank-owned life insurance. The fourth-largest US bank said it lost $708 million during the January-March period. Also within Wachovia, Robert Verrone (with his nickname “Large Loan” because of his personality and doing $50 million mortgages at attractive terms) is expected to leave Wachovia within the next week, sources said.
• Wells Fargo’s wholesale Home Equity group announced that effective May 23 they will have a new distressed list. San Francisco, San Mateo, and Marin counties will be reflected on this list as “Severely Distressed”. Therefore the maximum CLTV when doing a SIMO will be reduced to 75% from 85%.
• This morning’s weekly unemployment figures from the Labor Department expected to show 375,000 new claims for benefits were filed last week, but the number of U.S. workers filing claims for initial jobless benefits fell to a lower-than-expected 365,000 in the week ended May 3 from an upwardly revised 383,000 for the prior week, the Labor Department said. The four-week moving average of new claims, considered by economists a more reliable gauge of labor trends because it reduces the weekly volatility, rose to 367,000 from 364,500 in the previous week. What difference does any of that make? Very little: mortgage prices are roughly unchanged from yesterday afternoon, and the 10-yr is floundering around in the mid 3.80’s.

A West Virginia couple, both bona fide rednecks, had 9 children.

They went to the doctor to see about getting the husband “fixed.” The doctor gladly started the paperwork for the required procedure and asked them what finally made them make the decision. Why after 9 children, would they choose to do this?
The husband replied that they had read in a recent article that 1 out of every 10 children being born in the United States would end up in the mortgage business.

They just didn’t want to take a chance.