Dec. 22, 2008: mortgage musings – no scheduled economic news, but lots of investor updates

Dec. 22, 2008: mortgage musings – no scheduled economic news, but lots of investor updates Rob Chrisman

The rates are great – jump on in! Remember that next-to-0% short term Treasury rates are helping many ARM loans reset to lower rates. How are we looking in terms of ARM re-sets for 2009? Well, not too bad! Check out the websites below. Some brokers are finding out that with the lower rates (ARM rates actually resetting lower), loan modifications, and people losing their homes, the universe of refinancing is somewhat dimmed.

ImportMedia/images/MortgageRateResets.jpg ImportMedia/images/armadjust.gif

Large investors have begun to re-evaluate and in some cases change their renegotiation (“re-lock”) policies. Are they making it less expensive to extend a lock? Of course not – why should they, when there is so much demand for extensions. Chase, for example, bumped their extension fees up by roughly .125.

Speaking of Chase, they beefed up the documentation required for TPO originations, in addition to a rumored “backing off” their pricing to brokers late last week. Chase defines a Third Party Origination as “when a party, not the Correspondent Seller, performs a significant portion of the origination process for a fee. A Third Party Originator is any person or entity, not employed by the Correspondent, who is duly authorized to perform all or part of the origination processing, including but not limited to processing a loan application, ordering appraisals and/or credit reports, verifying income and/or employment.”

Fannie Mae has issued Announcement 08-35: Credit Score Requirements for Government Loans, Debt-to-Income Ratio Changes, Community Seconds Rider, and Seller/Builder Affiliation Policy. In it they clarified “Minimum Credit Score of 580 Extended to Government Loans”,  “Implementation of Maximum Debt-to-Income (DTI) Ratio for Manually Underwritten Loans” of 45%, “Elimination of Community Seconds Rider”, and “Clarification of Seller/Builder Affiliation Policy”. Beginning March 1st, all whole mortgage loans purchased by Fannie Mae or delivered into MBS must comply with the 580 minimum credit score for government loans and the maximum DTI ratio for manually underwritten loans.

Fannie Mae also noted that they will no longer provide document certification and custody services effective May 11th, and instead The Bank of New York Mellon Trust Company, will be the designated document custodian for portfolio mortgage loans.

CitiMortgage announced that since both Fannie Mae and Freddie Mac have announced their exit from the Stated Income market, Citi is making some changes. “The Accept Plus documentation level in Loan Prospector will be eliminated with the LP update scheduled for this weekend (12/6-7/08). All loans containing an Accept Plus finding issued before this change must be registered and locked with CitiMortgage no later than December 12, 2008 and purchased by January 9, 2009, regardless of actual documentation used. Loans resubmitted to LP after the scheduled update of LP will not receive an Accept Plus documentation level and the new documentation criteria must be followed.” As a result of the scheduled upgrade to DU Version 7.1 by Fannie Mae, loans processed under DU version 7.0 and containing any of the updated ineligible criteria must be registered and locked with Citi by January 9th and purchased no later than February 6, 2009.

Citi is also requiring, “For FHA loans, the applicable Mortgage Insurance Premium (MIP) is to be disclosed to the borrower on the TIL per RESPA guidelines. If, at the time the FHA case is transferred to CitiMortgage for servicing, it is determined that there was either no disclosure of monthly MIP premiums, or monthly MIP was under disclosed either in term or monthly premium amount per RESPA guidelines, then CitiMortgage will bill the Correspondent for the total amount of the under-disclosed MIP.”

There is no scheduled economic news out today. And given folks’ attitudes, and light staffs, maybe that is a good thing. There is some news tomorrow, and we also have $66 billion of 2-year and 5-year Treasury securities to be auctioned today and tomorrow, plus another $54 billion in T-bills. The current 2-year yield is .77%, the 5-yr stands at 1.36%, and the 10-yr is at 2.12% this morning. Mortgages? Worse than Friday afternoon, but only by about .125 in price.

According to the Alaska Department of Fish and Game, while both male and female reindeer grow antlers in the summer each year, male reindeer drop their antlers at the beginning of winter, usually late November to mid-December. Female reindeer retain their antlers till after they give birth in the spring. Therefore, according to EVERY historical rendition depicting Santa’s reindeer, EVERY single one of them, from Rudolph to Blitzen, had to be a girl. We should’ve known… ONLY women would be able to drag a fat-___ man in a red velvet suit all around the world in one night and not get lost.