Aug. 8, 2007: More guideline changes, more companies in the news

Aug. 8, 2007: More guideline changes, more companies in the news Rob Chrisman

It has become apparent that the majority of changes in the marketplace for loans deal with some (or all) of the following characteristics: Non-agency product i.e. anything non FNMA, FHLMC, GNMA, FHA, LTV’s greater than 80%, FICO’s less than 700, and anything other than Full Documentation.

With that in mind…

Mylor closed its doors.

Impac Mortgage said it will stop originating alt-A mortgages and is cutting staff but added it has been able to meet all margin calls to date. Impac will originate prime mortgages through wholesale and retail channels but will shut down its alt-A business due to concern about rising mortgage delinquencies and defaults.

HomeBanc, a mortgage lender and servicer in the Southeast, said it is exiting the mortgage origination business since it has been unable to tap its lines of credit in order to fund new originations and had no liquidity. (HomeBanc has reached an agreement with Countrywide to transfer certain assets related to the retail mortgage origination operations, including up to five branches.)

In a Wall Street Journal article today, highlighted as at higher risk of a liquidity crisis were Crystal River Capital Inc., Deerfield Triarc Capital Corp. and Thornburg Mortgage.

NovaStar Mortgage wholesale division has resumed approval and funding activity subject to all loans meeting new guidelines (loans not already in docs out status will be re-underwritten to the new guidelines), and all loans not already locked will be repriced.

Wells Fargo, effective 8/14, will no longer offer the SISA doc type in their Home Equity business. In conjunction with a Direct Express “MINDOC” finding of “No Income / No Asset”, however, SISA type documentation relief will be available for HELOCs and Closed End seconds.  Prior Approval is required.

Chase is updating price adjustments on the Alt-A Fixed and ARM products. They improved pricing on certain fixed rate loan products less than $1 million with mid-range LTV’s, but worsened their adjustments on higher LTV, reduced documentation, and lower credit score product.

Effective August 11, CitiMortgage is proposing that it will begin using the CitiMortgage County List of Seriously Depreciating Markets, rather than the data from the appraisal. If the subject property is located in a county on the list, the maximum financing will be reduced by 5% (i.e. 95% TV/CLTV/HCLTV maximum financing would be reduced to 90%). The list will be located on the CitiMortgage Web site.

AmTrust (formerly Ohio Savings, and yet another company guilty of capitalizing mid-word letters), is putting in “increases in Price Adjustment Factors on all products and all grids”.

Fannie Mae has asked its regulator (OFHEO) for permission to increase its on-balance-sheet holdings in order to provide liquidity to the secondary mortgage market. The cap is currently set at $720 billion, but with Wall Street conduits shutting down or tightening loan standards, conforming lenders that play in the nonprime market cannot sell their loans in the secondary market and there has been widespread speculation that OFHEO may allow the GSEs to buy more than mandated by their portfolio limits, in response to the stresses. There has been no comment from OFHEO on this issue so far. Some expect that Fannie & Freddie will purchase high-rated non-agency Alt-A/subprime mortgages and fund with shorter maturity paper.

The economy and the market? Oh yeah! The 10-yr is at 4.80%, A-paper mortgage prices worse by .125, Fed Fund futures are suggesting only a 14% chance of a decrease by October. Yesterday, as expected, the FOMC kept rates unchanged, and the accompanying statement indicated that inflation remains the Fed’s predominant policy concern. While the  statement acknowledged the recent financial market volatility and associated credit tightening, it gave no encouragement that it is poised to cut rates, as is currently priced in; we read the statement as consistent with a Fed on hold for an extended period. We have a $13 billion 10-year T-note auction, along with news this morning from China hinting it will sell holdings of US Treasuries should the US government impose trade sanctions. Great.