THE BASIS POINT

Treasury Auctions Biggest News Next Week, ACORN Cut Off By Gov’t, Bye To Portable Appraisals

When I got home last night, my wife demanded that I take her someplace expensive…So I took her to a gas station…That’s when the fight started.

Gasoline prices are on the rise, just in time for “Talk Like a Pirate Day”, which is tomorrow. In our wonderful non-metric system here in the US, a “barrel” of crude oil contains 42 US gallons. From this barrel, refiners can produce almost 20 gallons of gasoline. So if the price of a barrel of oil goes up $1, you can expect roughly a 2-3 cent increase in the price of gas at the pump. (Remember, however, that from crude oil comes kerosene, jet fuel, diesel, etc., so it is not quite that simple – the price of those products also goes up.)

Errors & Omissions Insurance
A fidelity bond protects policyholders for losses that they incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees. After Halloween, Flagstar Bank will require all warehouse line customers to have in place fidelity bond insurance and mortgagee E&O insurance. “Both types of insurance are a mandatory requirement in order to maintain a line of credit with Flagstar Bank.” Clients had better provide “Flag” with either a copy of your current policies if they meet the current guidelines or a binder or insurance certificate of for updated policies to meet the guidelines. Flagstar’s memo, too long to recite here, details the E&O Insurance requirements, coverage limits, approved insurance carriers, etc. Flagstar also recommends that their clients have Professional Liability Errors & Omissions policy.

Wells Fargo Loan Guideline Updates
Not to be outdone, Wells Fargo’s correspondent group’s risk and underwriting departments have been busy. After Monday, they will allow subordinate financing for 1031Tax Deferred exchanges, provided the seller does not finance the subordinate, and enhanced the following conventional, high balance loan types to allow Resale Deed Restrictions, provided they meet the Wells Fargo Deed Restriction policy (prior approval high balance conforming loan program, delegated high balance loans with an acceptable DU recommendation – acceptable LP loans must follow Freddie’s eligibility requirements of Resale Deed Restrictions). Wells’ correspondent clients should note that they updated their “owner occupancy requirements for Prior Approval transactions eligible for the Wells Fargo HOA Certification Review secured by a condominium as follows: A minimum 70% of the units sold must be sold to individuals for use as a primary residence or second/vacation home. (2-4 unit condominium projects utilizing Wells Fargo HOA Certification Review are not eligible for this change, and sellers should continue to follow Agency Project Approval guidelines for Delegated loan transactions.)

After October 1, for certain types of approval, Wells Fargo Funding’s conventional verbal verification of employment (VVOE) policy will be updated for expanded timeline for self-employed borrowers (10 to 30 days of closing), and flexibility for borrowers in the military.

Lastly, Fannie’s stance on Taylor Bean loans continues with Wells. Where TBW played a role in the origination process, conventional and government loans to be eligible for purchase by Wells Fargo Funding, sellers are required to follow applicable Agency guidelines, and Wells Fargo Funding requires the original Note, with applicable addenda and riders, for all loans prior to purchase (lost note affidavits or lost instrument bonds will not be accepted.) Loans closed by TBW are not eligible for purchase by Wells Fargo. For conventional loans the seller must obtain all new documentation, including a new loan application for the borrower, and underwrite the TBW-originated loan to Wells Fargo guidelines. Any previous DU files must have a new DU loan casefile created and submitted. “As part of re-underwriting, the Seller must obtain a new appraisal for the loan to be compliant with the HVCC. Wells’ bulletin goes on to address FHA and VA loans – it is best to check with the actual lengthy bulletin.

Another Lender Rejects Portable Appraisals
As part of their merger/buy-out/folding in/purchase by Caliber Funding, StoneWater Mortgage will no longer accept transferred or ported appraisals on conventional conforming loans. “StoneWater Mortgage acknowledges that a transferred appraisal ordered by an approved AMC is in compliance with HVCC regulation, but rapidly changing market conditions require that we take this action immediately.” Today is the last day to lock any loan, and fund by 10/2. In fact, starting today, “StoneWater Mortgage will no longer be ordering conventional or government appraisals in preparation for the transition to Caliber Funding – all loans submitted to StoneWater Mortgage without an appraisal as of Friday, September 18th will be stopped.”

ACORN In Jeopardy
ACORN, with 700 employees and whose mission is to be an advocate for low- and moderate-income people on fair wage, education and housing issues, is in jeopardy of having its Federal funding cut off by Congress. The group is accused of voter fraud and assailed over a video that surfaced this month. “We’re disappointed that the House took the rare and politically convenient step of attempting to eliminate federal funding for a single organization, one that has been the target of a multiyear political assault stemming variously from the [George W.] Bush White House, Fox News and other conservative quarters,” Bertha Lewis, ACORN’s chief executive, said in a statement.

RMIC Mortgage Insurance Guidelines
RMIC revised the manner in which they base their market classifications, which in turn influence their Declining Markets Policy. RMIC no longer uses a strict formulaic approach based on the FHFA index because of the “observed quarterly volatility in the index and the impact artificial influences have on the index’s ability to adequately reflect market trends, and instead are now based on several home price indices, local market economic factors such as employment trends, housing price to income ratios, and the likely impact of government intervention such as foreclosure moratoria in combination with other relevant market level factors.” RMIC’s bulletin goes on to give market details, timelines, etc. RMIC also revised their “property flip” criteria, stating that after October 12th, “Loans on properties that are being resold within 90 days of purchase are ineligible for mortgage insurance, and loans on properties that are being resold within 91 to 180 days of purchase must be full files submitted to an RMIC underwriter. If the new sales price is higher than the price the seller paid to acquire the property, the increase must be fully documented and explained.

Treasury Auction Preview For Next Week
We are about to find out what it is like with no scheduled economic news for roughly the next five business days. We’ve certainly had our fill this week, ending with yesterday. The Philly Fed survey (how come the surveys from the San Francisco, Minneapolis, Dallas, Atlanta, etc. Fed never make the headlines?) increased to 14.1 from 4.2 in August and -7.5 in July. The report suggested that manufacturers are being squeezed by higher raw materials costs, and the need to slash prices to make sales. Regardless, the bond market got a nice boost from the news, even after announcing that they would be auctioning off a record $112 billion in 2-, 5- and 7-year debt next week. So, in spite of some prepayment information on higher-rate loans, mortgage securities did pretty well, and numerous investors had price changes. Of course it helps that the Fed bought $25.5 billion during the week ending Wednesday. The trend of buying mostly 30-yr 5-5.5% securities continued, with 75% of weekly purchases in this sector (5.75-6.125% mortgage rates). This morning we find the 10-yr yield back down to 3.42% and mortgage prices a “smidge” worse.

Daily Humor
A boy enters the confessional at the local Catholic church.
“Bless me Father, for I have sinned. I have been with a loose girl.”
The priest asks, “Is that you, little Joey Pagano?”
“Yes, Father, it is.”
“And who was the girl you were with?”
“I can’t tell you, Father. I don’t want to ruin her reputation.”
“Well, Joey, I’m sure to find out her name sooner or later so you may as well tell me now. Was it Fran Rubino?”
“I cannot say.”
“Was it Erin Calabrese?”
“I’ll never tell.”
“Was it Nina Faneli?”
“I’m sorry, but I cannot name her.”
“Was it Tonia Russo?”
“My lips are sealed.”
“Was it Suzanna Pomilia, then?”
“Please, Father, I cannot tell you.”
The priest sighs in frustration. “You’re very tight lipped, and I admire that. But you’ve sinned and have to atone. You cannot be an altar boy now for 4 months. Now you go and behave yourself.”
Joey walks back to his pew, and his friend Franco slides over and whispers, “‘What’d you get?”
Joey replies, “Four months vacation and five good leads.”