THE BASIS POINT

Will FHA Down Payments Increase from 3.5% to 5%?, Loan Mods Increasing, BofA’s New Rules For Mortgage Banks

Loan modifications, which seem to have more of an impact on the larger investors than on the smaller brokers, have come a long way since earlier this year. An assortment of modification programs have been almost entirely replaced by HAMP, now the industry standard for first liens, and servicers have streamlined, to a much greater degree, their operations departments. With that, and given the continued political pressure to do them, look for the number of loan modifications to increase significantly in the next few quarters. The most recent data shows that there is a slight moderation in the pace of re-defaults as compared with a few months back. Overall the re-default numbers remain high, but it is very dependent upon the amount of payment reduction, the number of payments missed at time of modification and original credit score.

For those servicers who sell to Freddie and who are modifying their loans, Freddie notified clients that their Workout Prospector is now available “to use when evaluating eligible borrowers for a modification under the Home Affordable Modification program (HAMP). “ In fact, starting on 11/1 “all Freddie Mac Servicers will be required to evaluate and process mortgages for HAMP in Workout Prospector or to transmit data when using your own proprietary or third-party system, and the Borrower Qualification Worksheet will be retired.”

Fannie’s Data Collection Policy for Mortgage Companies
As I mentioned yesterday, Freddie pushed out their data requirement roll-out. Fannie is also changing the roll-out date of their new loan data requirements to July 1 instead of January 1. This is to comply with the Federal Housing Finance Agency (FHFA) requirements, specifically on loan origination identifiers and appraiser data elements. Beginning March 1 Fannie Mae’s systems will be ready to capture this data at the time of delivery should the lender be prepared to send the data prior to July 1, 2010, and the updated Uniform Residential Loan Application (Form 1003 ) is available now, but not required until July. May-as-well start using it now!

Chase’s Appraisal Policy Revisions
And while we’re talking about appraisals, Chase Correspondent clients were told that Chase is making changes to their Collateral Policy which became effective October 2. They are eliminating Chase Approved Appraiser status, establishing minimum appraiser requirements, validating review and ineligible appraiser status, and eliminating First American Appraisal Services (eAppraiseIT) as a Chase-approved Appraisal Management Company (AMC). In fact, the Chase Appraiser Web site has been updated to remove all Chase Approved Appraisers. Correspondents can immediately take advantage of the revised minimum appraiser requirements and validation of Chase Ineligible status. Chase Home Lending will no longer approve, suggest or dictate the use of any specific appraisers. All appraisers with one of the valid state appraisal license/certifications (state license, state certified residential, state certified general) are permitted to complete appraisal services for loan transactions sold to Chase based on loan amount & complexity parameters. (A field review by a State Certified Appraiser is still required when the original appraisal is prepared by an appraiser in a Chase Review status.)

New Rule for Mortgage Banks Selling To BofA
Bank of America Home Loan correspondent clients should note that starting 10/15, the BofA 4506-T IRS Transcript Policy “will require delivered loan files include IRS transcripts dated prior to the closing date. In all instances, the transcript requirements apply to borrower personal returns (1040s).This policy applies to all conventional and government loans except for non-credit qualifying FHA Streamline refinances.”

Big Proposed Changes to FHA Loans
Although it has a long way to go (through the house and senate, and then to the president) a bill has been introduced in Congress which increases the minimum down payment for Federal Housing Administration (FHA)-insured mortgages from 3.5% to 5%. Titled “The FHA Taxpayer Protection Act of 2009” HR 3706 would also prohibit financing appraisals, initial service charges, inspections, or other fees or closing costs with any part of an FHA mortgage.

Loan Apps Up
Lock desks all over the nation seem to be busier. And it turns out that mortgage applications filed last week were up 16.4% compared with the week before. Refinancing apps are over 66% of all the applications, and were up 18% from the prior week. Purchase applications were up 13%, hitting their highest mark since January. The MBAA’s four-week moving average for all mortgages was up a seasonally adjusted 4.2%.

Treasury Auction Update
Are we having fun yet? At least rates are behaving! Yesterday’s 3-year note auction was decent, coming in at a yield of 1.445% with a bid/cover of 2.76, which compares with an average of 2.84 in the four most recent auctions and 2.62 in all of 2009. Indirect bidders took down 49.1% of the auction, which compares with an average of 53.6% for the prior four 3-year note auctions. With no news today except for the $20 billion10-yr auction (currently yielding 3.23%), mortgage security prices are a shade better than yesterday afternoon.

Daily Humor
A crusty old Marine Sergeant Major found himself at a gala event hosted by a local liberal arts college. There was no shortage of extremely young idealistic ladies in attendance, one of whom approached the Sergeant Major for conversation.
“Excuse me, Sergeant Major, but you seem to be a very serious man. Is something bothering you?”
“Negative, ma’am. Just serious by nature.”
The young lady looked at his awards and decorations and said, “It looks like you have seen a lot of action.”
“Yes, ma’am, a lot of action.”
The young lady, tiring of trying to start up a conversation, said, “You know, you should lighten up a little. Relax and enjoy yourself.”
The Sergeant Major just stared at her in his serious manner. Finally the young lady said, “You know, I hope you don’t take this the wrong way, but when is the last time you made love?”
”1955, ma’am.”
“Well, there you are. You really need to chill out and quit taking everything so seriously! I mean, none since 1955?!”
She took his hand and led him to a private room where she proceeded to ‘relax’ him several times.
Afterwards, panting for breath, she leaned against his bare chest and said, “Wow, you sure didn’t forget much since 1955.”
The Sergeant Major, glancing at his watch, said in his serious voice, “I hope not; it’s only 2150 now.”