Feb. 4, 2012: Libertarian letters from the trenches; investor updates

Feb. 4, 2012: Libertarian letters from the trenches; investor updates Rob Chrisman

For this Saturday edition, don’t forget about the payroll tax cut – recall the big battle back in December that only produced a bill that lasts through the end of this month? And the g-fee tax that will be with us and the agencies for the next 10 years? And how politicians who want to do away with Fannie and Freddie seem to conveniently forget that? Negotiations have been taking place over the last few days to extend the cut through year-end. There are 25 days left technically but really only 18 working ones, including President’s Day. So we’ll all be fortunate enough to see this Congressional fight coming up in the press again.

Let’s take some calls from listeners. How about Denver? “Rob, when will the madness stop? Didn’t companies like Lehman Brothers, WAMU, TBW, Countrywide, etc. send out reassuring messages to their clients soon before their failure? It almost seems that any time a company feels the need to send out a ‘We firmly stand behind’ note, it is the ‘kiss of death’.” (Editor’s note: yes, it does almost seem like a company is ‘damned if they do, damned if they don’t’ when it comes to notices like that – they can’t ignore the rumors, but sending out a note means that management feels there’s cause to do so.)

Another wrote, “The hairs on the back of my neck stood up last week when the purchase of a cleared loan was delayed by PHH for ‘computer issues’. This week the story changed to ‘second level review’. After having to go back to the borrowers for a few items before, including a full 30 days of paycheck stubs, that were requested for seemingly no good reason, we got hit with 7 more stips yesterday that even made less sense. These last 7 came in 3 different faxes! We have never experienced anything like this before unless the investor was about to dramatically scale back.”

With all the government-related news this week, I received this note. “Throughout the entire meltdown of the mortgage and real estate market I have been screaming that the media and politicians have it all wrong. While certainly there have been improprieties by some dishonest industry players, I feel the US consumer is as much or more to blame. Case in point, I received a three page certified letter in the mail this week from a borrower requesting that my bank reassign the servicer on their loan, lower their interest rate and grant them access to their current equity. Keep in mind that we sell 100% of our loans as a correspondent lender and that this loan was originated and sold to a large servicer back in 2008. According to the letter, this client was ‘courted’ by the larger servicer to refinance using the HARP program in late 2010 and after serious thought the borrower decided to proceed with the refinance. They were immediately told they would not qualify for HARP because they were current on their payments. To their own admission they argued and then pursued the program further. After more consideration, the borrower decided to strategically default on their loan in order to gain access to the wonderful HARP program. Well, you can guess what happened next. After a few months of red tape and delays (which probably did happen) the borrower started to receive foreclosure notices.  Numerous phone calls later they decided to get current and stop the foreclosure. They have since tried to buy a car and do a regular refinance but have been derailed by damaged credit scores. Now, they are back here asking for help while mentioning the word lawsuit. I am sure the larger servicers are trying their best, not telling anyone to stop making payments and probably are drowning in red political tape of their own. Hopefully, this borrower has something in writing from the servicer telling them to not make payments which just might help their case. My concern is while the administration continues to demonize our industry and credit-worthy borrowers continue to hurt themselves, it demonstrates we still have a long road to travel before we see the light.  Don’t even get me started on the misleading ‘trigger’ lead industry and our broken disclosure regulations. ‘Intent to Proceed’ forms? Really?” And another note: “I guess the political speak of ‘A Chicken in every Pot’ has evolved. This is so much wrong in the real world with most of Obama’s ‘Plan’ that I don’t know where to even start with consequences. [Sarcasm!] Why doesn’t he make it real simple and just outlaw all mortgage debt, wipe it clean, every home owner gets their home debt free today. And in ‘fairness’ let all renters just ‘own’ their unit they live in today collectively like a condo with the other tenants? That way in the name of ‘fairness’, everyone today owns a home free & clear. Of course then, how do we make it fair that some have 7,000 sq. ft. estates in the suburban hills, and some just have an apartment shared with 400 other ‘owners’ of their units in crime ridden areas. The ‘fairness’ argument never ends until there is nothing left and no one has anything. 90% of this has no chance (I hope) and is just another play in the class warfare game of his electioneering. I’m embarrassed our country has come to this. Wealth seizures are alive and well in their minds.” “Rob – I am taking a continuing education class on line and this is one of the pages from a mortgage fraud class. It looks like we just need to get rid of these mortgage brokers and everything will clear itself up. [Sarcasm.] The text says, ‘Between the mid-1980’s and 2007, the depository institution’s role in mortgage lending diminished greatly, and mortgage brokers stepped in to fill this vacuum. Mortgage brokers originate mortgage loans for a fee, and then submit the loans to wholesale lenders or funding companies. In many cases, the lender will then sell the loan on the secondary market. According to referenceforbusiness.com, mortgage brokers’ share of the market rose steadily from 20% in 1987 to 55% in 2001. The National Association of Mortgage Brokers reported that in 2004, mortgage brokers originated 68 percent of all mortgage loans in the United States. However, as a result of the housing and credit crisis, the number of loans originated by brokers fell precipitously, to between 10 and 20% of the market by late 2009. New state and federal mortgage broker licensing requirements, prohibitions on “yield-spread premiums”, and HUD’s prohibition on mortgage brokers ordering their own appraisals have also played havoc with the profession. Mortgage brokers maintain there is no connection between brokers and fraud, and that a mortgage broker is no more likely to engage in fraud or poor lending practice than other parties involved in a mortgage transaction. However, a Columbia University study in 2009 found that loans originated by mortgage brokers between 2004 and 2008 were 50% more likely to end in foreclosure than loans that were originated directly by banks.‘”

On to some investor notes. Citi issues some recommendations in decreasing loans held up for review due to processing issues. A copy of the “Goodbye Letter” that the Correspondent sent to the borrower must be sent as a trailing document. The Escrow Account Information box on the Good Faith Estimate (GFE) must match the HUD-1 Settlement Statement.  If the Escrow Account Information box reflects “Yes” for an escrow account deposit, the HUD-1 Settlement Statement should show retained escrow funds. If an escrow account deposit is waived or not collected at closing, the final GFE should reflect that an escrow account was not required. Per the Instructions for Completing HUD – 1 Settlement Statements, the full and complete Settlement Agent address and place of settlement must be shown in Section H on the HUD-1—the name only is not sufficient. A detailed itemization of all the fees associated with the loan must be included in the loan file, and the total of the itemized fees should match the lump sum fees disclosed on the final GFE and charged on the HUD-1.  For VA loans, Lenders must either itemize the Origination charge in the empty 800 lines of the HUD-1 to the left of the column or provide a separate “Origination Statement” indicating the purpose of the charge and the amount.  If the “Origination Statement” option is used, the statement must be signed and dated by the borrower.

Wells Fargo’s correspondent division told clients that customers refinancing under Fannie’s DU Refi Plus program will be able to take advantage of HARP’s recent enhancements, effective with registrations and/or locks on and after February 6, 2012, as the bank has now aligned its policy with Fannie’s.  The “enhancements” – benefit to borrower – will allow for a reduced monthly P&I payments, a diminished loan amortization term, and a lower interest rate. (The LTV/CLTV offered by Fannie continues to be unavailable.) On January 30th, Wells began using Rural Developments Guarantee Fee & Annual Fee Calculator in assessing applications for Guaranteed Rural Housing Loan funding packages.  As such, a copy of the lender’s RD-1980-19 Loan Closing Report is no longer required. Its Seller Guide (Section 300.02, 51, Real Estate Appraisals) has been amended slightly, with the changes addressing an appraiser’s potential conflict of interest and Wells Fargo’s relationship to appraisal provider Rels Valuation. A reminder has been issued that FHA loans for properties in PUDs require 100% of the insurable replacement cost of the units exterior and interior improvements, be they already installed or later upgraded – detached PUDs are, however, exempt. And because of changes to the MERS, sellers must initiate the Transfer of Beneficial and Servicing rights transactions within five days of the transfer date, and Original Mortgagee loans must be registered within a week of the Note date (non-escrowed states) or the funding date (escrowed states) – February 27th.

Wells Fargo also released their investment property pricing adjuster and cash-out refinance pricing adjuster changes, which come into effect 3/1 for Best Effort Locks and Mandatory Commitments, Assignments of Trade, and Specified Bulk Commitments. The Wholesale Lending Division has also released the deadlines on Conforming loans as dictated by recent Congressional action.  Conditions must be received by 2/13, loans must be clear to close by the 17th (the 20th for non-escrow states), and closing documents for Refinance loans in escrow states must be signed by the 22nd.  They’re also cracking down on self-employed borrowers, whose income must meet the income standards as written in the Home Equity Broker Guide—no exceptions! US Bank told clients that as of 1/30 FHA refinance applications were subject to the FHA regulation that premium pricing cannot serve as payment of any upfront mortgage insurance premium (UFMIP), which is not technically a “closing” cost. Apparently the documentation of gift funds on FHA loan files is still an issue, particularly when the gift is in the form of a cashiers’ check and the appropriate withdrawal documents are not received.  Underwriters are now required to make an amended Closing condition, which will then be verified by the Closing/Funding Department.  The US Bank Home Mortgage Wholesale Division has even issued a handy chart outlining exactly what to do in nine different gift fund scenarios. VA loan files delivered to purchase in the past six weeks have been required to follow new requirements for property interior photographs as well as value adjustments to the Department of Veterans Affairs Notice of Value by Lender’s Staff Appraisal Reviewers. Fifth Third Mortgage, due to the changed g-fees, told clients that conventional loans with pre-January 3rd initial lock date are subject to an additional 50bps adjustment pricing for any extension past March 3rd. This is a one-time charge additional to the listed standard extension fees, including the free 3-day extension.  Loans that utilized a float down after January 3rd have an initial lock date past the cutoff, Non-Agency Jumbo and Government Products are all exempt from the charge.

In honor of tomorrow’s football game, Steve Wozniak, of Apple Computer fame and from whom I receive a fair number of my jokes, wrote, “This is a true story…I thought it was a great artistic achievement with sci-fi and rebel and individualism overtones and that the board considered the Super Bowl time too expensive…I remarked to Jobs that we should show it because ‘This is who we are.'” And thus the story of how the most famous Super Bowl commercial was almost cancelled: http://gizmodo.com/5882178/how-the-best-super-bowl-commercial-was-almost-cancelled-by-apple.

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