Sep. 8, 2012: New g-fees begin to hit market; eminent domain news continues; reader input on mortgage & real estate trends

Sep. 8, 2012: New g-fees begin to hit market; eminent domain news continues; reader input on mortgage & real estate trends Rob Chrisman

The eminent domain saga continues with Mortgage Resolution Partners revising its proposal. And with a potential pay out to the law firm of between $67.5 million and $189 million, at $4,500 for each loan seized and modified, why wouldn’t it keep trying? If the latest proposal is adopted, it could affect up to 15,000 homeowners within the “Joint Powers Authority’s” sphere of influence and up to 42,000 families countywide should other cities opt to join in. MRP said it would use the same methodologies for valuing loans as Fannie Mae and Freddie Mae in order to alleviate opponents’ concerns that MRP will lowball the value of any loans the JPA attempts to acquire.

As a reminder, “MRP has proposed the county take the unprecedented step of using eminent domain to seize underwater mortgages and modify them to current market value so people could afford their monthly mortgage payments and establish equity. The loans would then be sold to hedge funds, pension funds or other investors, with the proceeds being used to pay off outside financiers, secured by MRP, who are funding the eminent domain process. MRP would take a $4,500 fee for each loan seized and modified, and the original bondholder would be left eating the difference between what was owed on the original mortgage and the renegotiated loan at current market value.” What investor, of any security, would want to happen, or to own securities containing that possibility? My guess is that lenders will quickly pull out of those municipalities, as they occasionally do for certain states that pass short-sighted laws that negatively impact lenders, or price those loans accordingly. In either case, it will be the borrower that pays the ultimate price. And will that help the housing markets?

But don’t look for any kind of resolution soon. If this develops, it is expected to quickly become bogged down in the courts. Out in California, the CMBA has written a thorough letter and come out against it, and given the number of logos on the top of the letter, others have as well: http://www.cmba.com/new/docs/FHFAEminentDomainJointLetter.pdf.

For the latest in the press: http://www.sbsun.com/ci_21482566/underwater-mortgage-acquisition-proposal-expands-include-delinquent-or?sourcemost_viewed. Earlier this week this commentary briefly discussed first time buyer issues. (Not only are underwriting and regulations “disfavoring” this segment of the market, but QM and Basel III may also cut investor’s appetite for the segment.) Charles McGowan wrote to say, “I find the comments regarding the plight of the First Time Buyer interesting, timely and in need of further addressing.  To say, ‘…in most cases, their purchase frees up a move-up buyer’ would be accurate and additionally, given today’s market being less than ‘normal,’ we are finding that multiple faults surrounding the offer process presents a further dynamic.  As we all know, lending guidelines have tightened and through these constraints have pressured the First Time Buyer market due to these loans being harder to close then in the past.  These buyers as well are put into a competitive space against cash buyers and albeit prequalified, are less than alluring in a tight or low inventory market where fallout presents pressure on commissions.  What we are finding, especially in the REO space, is that a significant number of offers on properties are not received or being presented to the seller/decision maker due to not only the cash buyer looking more favorable (insecurity over a borrowing based buyer) but traditional process pitfalls, agent inconsistencies, inefficient submission systems and of course, fraud and collusion.  Spikes in fraud are of concern; in Southern California alone we have seen a significant increase just this year.  To say buyers become frustrated or discouraged is underplayed but now we are also finding higher instances of agents who are becoming discouraged as they are never engaged yet are the most interested party in the sale – ‘We submitted an offer on this great house that we loved but never received a response.’  Our company resolves these issues via a secure delivery platform that specifically addresses these holes as well as inventory movement hazards.  Anyone interested in further details can email me @ cmcgowan@offer-pro.com.”

I received this note about trends in the general housing market. “Here is some perspective regarding the housing market rebound. This is NOT your daddy’s traditional market. Here is what I’m seeing through the eyes of my client’s and in the market in general. The multiple offers that are happening right now in the residential resale market are not move up buyers nor is the activity being driven by the first time buyer. INVESTORS and a ton of ALL CASH offers from several sources, the so called “smart money,” is driving this recovery and the second home values recover a little too much from these competitors pushing their own prices higher, some will retreat and we’ll slow down and normalize. Currently I am seeing that the players are people sick and tired of getting 1-3% on their CD’s when they can buy a home all cash and lease-option it and get a 7 to 10% return on an asset that has had most of the negative wind taken out of it so the loss of principle risk in minimized.”

Ron continued, “Here in Southern California, I have a client and friend, one of the top brokers in the area, that Friday of last week put a new listing on the market. While we were golfing Sunday he looks at his smart phone and said, ‘Look at this, over 50 offers since Friday and a bunch of them are ALL CASH and from FOREIGN INVESTORS: Chinese, Brazilian, South Americans, and Eastern Europeans. My branch in Phoenix (rising from the ashes in many areas) is seeing a boom in the builder market because the first time buyers buying FHA with 3 ½% down or USDA buyers with less down payment can’t compete with the all cash offers. So the first time buyer is turning to the seller of properties that have many to sell: builders. I can easily see these demographics and the foreclosure market about to take over and dominate the market for the next few years to come.” Thank you to Ron Quintero, CEO Real Estate Radio Network.

Well, the agency, investor, and lender updates just keep coming. It is hard to keep up, and I squeeze them in, space permitting. As always, it is best to read the actual bulletin, but these will show you the trends.

First, a little guideline tip from Guy Schwartz at CMG: “What is the rescission for a second home refinance?” “Most loan people know that a non-owner occupied has no rescission and the primary owner occupied home has a three day rescission. It’s the second home that gets them all the time. There is no rescission on owner occupied second home – only the owner occupied PRIMARY residence is protected by this rule.”

It doesn’t take long for the new, higher g-fees to hit the market. For example, Plaza Home Mortgage told clients, “The Federal Housing Finance Agency (FHFA) announced that it has directed Fannie Mae and Freddie Mac to raise guarantee fees (g-fees) by an average of 10 basis points.  This translates to roughly an increase of .50 in price being passed on to the borrower. For new locks, we will start increasing the cost of 45 & 60 day locks on all Agency loans by .50 to offset the additional cost associated with Fannie and Freddie’s increased G-Fees.  On September 25th, the 30 day price will be increased by .50 as well. For relocks where the new lock expiration expires on or after November 1st will be subject to an additional charge of .50 to the relock fee. For extensions, locks with the new expiration on or after November 1st will be subject to an additional charge of .50 to the standard extension fee. *Pricing will affect all Agency products including all Agency High Balance, DU Refi Plus, LP Relief Refi, and Home Path* **This change does not apply to Government or Jumbo pricing** SunTrust wholesale reminded broker clients of its “60 Day September Lock Special”. (Normally I don’t put sales pitches in, but this is indicative of the current marketplace.) “SunTrust is offering a NEW 60 DAY LOCK SPECIAL:  Available on ALL 1st mortgage products. When you lock on the 60 day pricing online, SunTrust will then manually adjust your lock to match the 45 day pricing once you have both: 1.  Electronically sent us your submission file within 5 business* days of locking, 2. Ordered your appraisal within 5 business* days of locking. Also, SunTrust updated folks on its eMagic Access – “Please use the following URL to submit your files and conditions to SunTrust: https://ordersystem.order-services.com/direct/Suntrust_Mtg” since Emagic.com will be discontinued.

Recently, and for some reason I am asked about this industry-wide technical issue periodically, Flagstar reminds brokers of record, principal officers, and loan officers that they are not permitted to work with multiple mortgage entities on Flagstar transactions, as this represents a conflict of interest as per the loan officer compensation regulations implemented in 2011.  Should it be discovered that any party is working with multiple entities that are also engaged in business with Flagstar, they will be required to declare a specific employer and will be prohibited from representing any other entity on Flagstar transactions.  Clients should also remember that working for multiple entities is not allowed for FHA transactions and that Flagstar prohibits loan officers from serving as the realtor and loan officer in a single transaction. Speaking of Flagstar some weeks ago it dropped its requirement that Jumbo 10/1 LIBOR ARM and Jumbo 15- and 30-year fixed rate loans must obtain “Approved with Conditions” status before they are eligible to be locked.  As such the 30-day lock option is being replaced with a 45-day lock option.  Jumbo ARM products submitted for underwriting are also subject to a new requirement of 40% DTI; the DTI for Jumbo fixed rate products remains at 45%. During August US Bank has issued a few corrections to the PUD Insurance Coverage reminder it released in late July.  Guidance on PUD insurance states that, in cases where the unit is defined as “attached” by the appraiser, the entire project, which includes common areas and elements, public ways, and commercial areas, must be covered by a commercial general liability policy in the HOA’s name and that individual units must be under a commercial package policy that covers 100% of their replacement cost.  Actual Loss Sustained, Guaranteed Replacement Cost, and 100% Replacement Cost are all considered to fulfill the latter requirement.  These policies must be verified in cases where the subject unit is defined as “attached” by the appraiser as per Freddie Mac requirements.  This verification can be either an agent-issued insurance information form or a USBHM Request for Insurance Information form. In addition to Genworth, MGIC, and United Guaranty, M&T clients may now opt to use Essent Guaranty as a mortgage insurance provider. The following list of phrases and their definitions might help you understand the mysterious languages of science and medicine. These special phrases are also applicable to anyone working on a Ph.D. dissertation or academic paper anywhere. (Part 3 of 3) “A careful analysis of obtainable data” Three pages of notes were obliterated when I knocked over my coffee. “It is clear that much additional work will be required before a complete understanding of this phenomenon occurs” I don’t get it. “After additional study by my colleagues” They don’t get it either. “Thanks are due to Joe Blotz for assistance with the experiment and to Cindy Adams for valuable discussions” Mr. Blotz did the work and Ms. Adams explained to me what it meant. “A highly significant area for exploratory study” A totally useless topic selected by my committee. “It is hoped that this study will stimulate further investigation in this field” I quit. If you’re interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog discusses the new CFPB Rule combining TILA & RESPA disclosures. If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.

Rob

(Check out http://www.mortgagenewsdaily.com/channels/pipelinepress/default.aspx or www.TheBasisPoint.com/category/daily-basis. For archived commentaries, go to www.robchrisman.com. Copyright 2012 Chrisman LLC.  All rights reserved. Occasional paid notices do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)