Oct. 10, 2007: Two interesting forms attached

Oct. 10, 2007: Two interesting forms attached Rob Chrisman

Last week the math teacher saw that my son wasn’t paying attention in class. She called on him and said, “Robbie! What are 2 and 4 and 28 and 44?”

Robbie quickly replied, “CBS, NBC, HBO and the Cartoon Network.” I need to keep a better eye on him…

Want to broker a loan to WAMU? Washington Mutual said it’s increasing the amount of disclosure that mortgage brokers are required to provide borrowers – attached is the form.  Brokers who do business with WAMU must show that they explained terms of the loan they are recommending including the amount, whether the interest rate or the payments could change, and if the loan has a fee for prepayments, the company said Monday last week. I have also attached the California Department of Real Estate (DRE)’s required “Form 885 Mortgage Loan Disclosure Statement / Good Faith Estimate – Nontraditional Mortgage Product”, which is to be completed and a copy retained in the file for all loan transactions in which a non-traditional loan product is used. Its use is mandatory for all DRE-regulated transactions. (A “nontraditional mortgage” product is defined as a loan that allows borrowers to defer payment of principal or interest on such products as including but not limited to, interest only loans, negative amortization loans or loans that have payment options that could result in negative amortization.) Check out the DRE website if you have questions.

Is this late-breaking news? According to a story on Bloomberg, UBS analysts say that 17% of subprime mortgage balances are too large for borrowers to refinance into loans from Fannie Mae or Freddie Mac, making them more likely to default. That also makes the loans ineligible to be insured by the FHA. Their analyst said that, “Subprime borrowers with jumbo mortgages will probably have a more difficult time in the coming months than borrowers who can take advantage of” refinancing opportunities through government- linked entities.” Astonishing.

Indymac has found loan performance issues for Stated Income HELOC’s with credit scores less than 700 (also astonishing?), is matching other lenders, and for their stated income HELOC’s will now require a minimum credit score of 700.  This change includes all Stated Income HELOC’s regardless of property type, occupancy type, or lien position.

The Minutes of the 18 September FOMC meeting provided little new information about the reasoning behind for the Fed’s decision to cut 50 basis points. Interestingly, there is no discussion of alternatives to the 50 basis point rate cut, which suggests either that Chairman Bernanke is choosing not to disseminate that information or that no debate occurred and the Committee possessed a unanimous desire to cut by 50 basis points. They revised growth forecasts for the economy downward, downplayed the August employment report, and did little to change their outlook on inflation. Fixed-income securities headed modestly lower (and therefore rates went up slightly) after these FOMC meeting minutes since the statement did not commit to an easing bias but indicated that future rate cuts would depend on emerging economic data. In spite of housing doing very poorly, we have seen positive job growth for about 4 years, so does that mean any talk of a recession is unwarranted? These Fed minutes remind us that it was the intention of the Fed’s rate cut was to help the credit markets, not to bailout the ailing homeowner or Wall Street. And this is indeed happening!