Friday, April 3rd Market Update
To try and build support for the new budget bill, the Secretary of the Treasury will meet with small businesses. Like General Electric, AIG and General Motors.
How ‘bout this market? Yesterday rates moved higher, and prices lower, after Factory Orders increased 1.8% in February, following a downwardly revised 3.5% drop in January, and six consecutive monthly decreases. So why wouldn’t rates come down? US stock markets continued their rally, and in fact most overseas stock markets improved. (Japan’s was helped by Toyota’s stock rallying after a bank agreed to help finance US car sales.) And it would appear that there is a change in mood about the economy: in spite of the continued bad news, investors appear to feel that the worst is behind us. Just tell that to some Detroit or Sacramento home owner! Maybe investors are just tired of sitting on piles of cash…
This morning the unemployment data came out pretty close to expected: U.S. employers cut 663,000 jobs in March, and the unemployment rate hit 8.5%, the highest since 1983 when Reagan was in office. And although February’s numbers were unrevised, January’s were changed to a loss of 741,000, the biggest decline since October 1949. Since December 2007, the U.S. economy has dropped 5.1 million jobs, with about two thirds of the losses occurring in the last five months. After the news, bond prices are down slightly, with the 10-yr yield currently sitting around 2.69% and mortgage prices a shade worse than yesterday afternoon. (Interestingly, with the high profit margins now built into mortgage pricing, in spite of the MBS market worsening yesterday, many originators decided to absorb the price hit instead of passing it along on their rate sheets in order to potentially help locks.)
Chase Correspondent announced their ability to purchase loans under the new Fannie Mae program DU Refi Plus™. This program is designed to assist borrowers that have demonstrated good pay histories on their mortgages but have been unable to refinance due to a decline in home values.
Franklin American is going along with the pack. “VA Appraisal Requirements for the Market Conditions Addendum - Effective with all appraisals dated on or after April 1, 2009, VA requires appraisers to include Fannie Mae’s Market Conditions Addendum, Form 1004MC, in all VA appraisal reports. Information and instructions on completing the addendum are available online at: https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0830.pdf” And “in conjunction with Circular 26-09-3 dated March 27, 2009 VA has determined that a copy of the sales contract be provided to the fee appraiser immediately upon assignment or within 1 business day after the appraisal request. If the agreement of sale is amended during the process, the requester must provide the updated contract to the appraiser.”
As mentioned several times in recent weeks by me (not that I am any great prognosticator – procrastinator is more the case) Wells Fargo is keeping Wachovia’s warehouse business that will provide funding to independent mortgage bankers. Are they going to open it up to any Tom, Dick, and Harry? That is highly doubtful, and will probably focus on their best clients with proven production, high net worth, and a solid track record in selling loans to Wells. It is rumored that it will not be a captive line – meaning that unlike competitor’s lines, originators are not forced to sell a percentage of their production to Wells.
Yolanda Reason's Commentary
Sunday, April 5, 2009
Market Update
TUESDAY NEW'S March 31st
The former Treasury secretary, Henry Paulson, is writing a book about his role in the Bush administration during the economic crisis. Oddly, the book starts on Chapter 11.
It is the last day of the month. Not only are Ops departments everywhere scrambling to fund loans while they keep an eye on warehouse constraints, but management teams are wondering what April and May will bring. Lock volumes continue to be strong everywhere, and successful companies have made it clear to their agents or brokers that limiting fall out is critical. Whether this involves charging a fee to lock, or only locking after the appraisal comes in, or the loan is approved, etc., pull through seems to be increasing – much to the relief of investors.
As Wells Fargo has made known, they will be continuing, for the most part, Wachovia’s warehouse business. Will BofA continue Countrywide’s? Stay tuned – there are many companies that are hoping so. Of course, if Freddie and Fannie enter the warehouse business, will they be viewed as direct competition for smaller warehouse banks? The regulator of Fannie Mae and Freddie Mac is examining that business channel, both as a way of further stabilizing the market but also as a potential profit center. Existing warehouse banks are strained given the amount of refinancing that is occurring in the market (look for originations in 2009 to be about $3 trillion), and are focused on helping existing clients rather than adding new business. Obviously big banks do not require warehouse funds (remember? They get them from your deposits). Last week the Mortgage Bankers Association asked banking regulators to cut the capital requirement on warehouse lines of credit by as much as 80% to alleviate the funding crisis facing non-depositories that we explained was causing delays and major back-ups in closing loans. That would certainly help.
As a sign of the times, Chicago is now the first city in the US to be served by two insolvent newspapers: the Sun-Times Media Group, parent of the Chicago Sun-Times newspaper, filed for bankruptcy protection. They hired Rothschild Inc to try to sell some of its assets, which include 59 newspapers and their websites. "Unfortunately, this deteriorating economic climate, coupled with a significant, pending IRS tax liability dating back to previous management, has led us to today's difficult action," said Sun-Times’ interim Chief Executive. Chicago’s Tribune Co, is in the midst of a bankruptcy restructuring due to declining revenue.
GMAC’s Correspondent group followed the FHA’s suggested, “reducing the LTV for cash-out refinance transactions to 85% loan-to-value (LTV). This reduction is being instituted on a temporary basis while FHA further analyzes the housing and mortgage industry as well as its own portfolio to determine whether permanent measures should be taken.”
Franklin American “under the Economic Stimulus Act of 2008 (ESA) or those previously established for 2009 under the Housing and Economic Recovery Act of 2008 (HERA) and Mortgagee Letter 2009-07 dated February 24, 2009, is pleased to announce we will accept the 2009 revised FHA loan limits effective with Registrations and Locks on and after April 1, 2009. The maximum base loan amount may not exceed the lesser of the Statutory Mortgage Loan Limit as published by HUD for the county in which the property is located OR $417,000 for a 1-unit property. Loan amounts > $417,000 are considered FHA Jumbo product which will now allow a maximum loan amount calculation of the Statutory Mortgage Loan Limit OR $729,750 for a 1-unit property (see the FHA Jumbo Addendum to the FHA Product
Description for 2-unit requirements); previously this limit was set at $625,500.”
On the Wall Street side, it appears that Cantor Fitzgerald is staffing up. On the origination side, AmeriCU Mortgage (who focuses on providing mortgage services to credit unions nationwide, but guilty of capitalizing letters in the middle of their name) has established an operations center in Milwaukee, WI. The story I read said that, “AmeriCU received approval from the Department of Financial Institutions on March 18, and immediately began operations. Within 72 hours, the company hired 45 staff members…”
Making things tough on any broker or agent out there, Lennar Corp, the nation’s largest builder by revenue, is offering a fixed rate of 3.625% "for life," which it says is its lowest ever. The special is "on select homes", closings must occur by April 30, and the loan amount can't exceed $417, 000, according to the terms listed on its Web site. The minimum credit score is 700. Still, just as newspaper headlines raving about 4.5% mortgages influence potential borrower behavior, so might this…
Although our stock market was hit hard yesterday, and stocks overnight were down, this morning they may see a little bounce. Bonds, including mortgage-backed securities, benefited yesterday with the yield on the 10-yr dipping into the 2.60’s although this morning we are back to the low 2.70’s on the 10-yr and mortgage prices are about unchanged. As anticipated, the Fed purchase of $2.5 billion of Treasury securities helped, with the purchases mainly in maturities 20-30 years out. (The Fed will conduct 2 more buybacks in the middle of this week.) For economic news we have the S&P/Case Shiller index, the Chicago Purchasing Manager’s Survey, and Consumer Confidence.
Yolanda Reason's commentary
The former Treasury secretary, Henry Paulson, is writing a book about his role in the Bush administration during the economic crisis. Oddly, the book starts on Chapter 11.
It is the last day of the month. Not only are Ops departments everywhere scrambling to fund loans while they keep an eye on warehouse constraints, but management teams are wondering what April and May will bring. Lock volumes continue to be strong everywhere, and successful companies have made it clear to their agents or brokers that limiting fall out is critical. Whether this involves charging a fee to lock, or only locking after the appraisal comes in, or the loan is approved, etc., pull through seems to be increasing – much to the relief of investors.
As Wells Fargo has made known, they will be continuing, for the most part, Wachovia’s warehouse business. Will BofA continue Countrywide’s? Stay tuned – there are many companies that are hoping so. Of course, if Freddie and Fannie enter the warehouse business, will they be viewed as direct competition for smaller warehouse banks? The regulator of Fannie Mae and Freddie Mac is examining that business channel, both as a way of further stabilizing the market but also as a potential profit center. Existing warehouse banks are strained given the amount of refinancing that is occurring in the market (look for originations in 2009 to be about $3 trillion), and are focused on helping existing clients rather than adding new business. Obviously big banks do not require warehouse funds (remember? They get them from your deposits). Last week the Mortgage Bankers Association asked banking regulators to cut the capital requirement on warehouse lines of credit by as much as 80% to alleviate the funding crisis facing non-depositories that we explained was causing delays and major back-ups in closing loans. That would certainly help.
As a sign of the times, Chicago is now the first city in the US to be served by two insolvent newspapers: the Sun-Times Media Group, parent of the Chicago Sun-Times newspaper, filed for bankruptcy protection. They hired Rothschild Inc to try to sell some of its assets, which include 59 newspapers and their websites. "Unfortunately, this deteriorating economic climate, coupled with a significant, pending IRS tax liability dating back to previous management, has led us to today's difficult action," said Sun-Times’ interim Chief Executive. Chicago’s Tribune Co, is in the midst of a bankruptcy restructuring due to declining revenue.
GMAC’s Correspondent group followed the FHA’s suggested, “reducing the LTV for cash-out refinance transactions to 85% loan-to-value (LTV). This reduction is being instituted on a temporary basis while FHA further analyzes the housing and mortgage industry as well as its own portfolio to determine whether permanent measures should be taken.”
Franklin American “under the Economic Stimulus Act of 2008 (ESA) or those previously established for 2009 under the Housing and Economic Recovery Act of 2008 (HERA) and Mortgagee Letter 2009-07 dated February 24, 2009, is pleased to announce we will accept the 2009 revised FHA loan limits effective with Registrations and Locks on and after April 1, 2009. The maximum base loan amount may not exceed the lesser of the Statutory Mortgage Loan Limit as published by HUD for the county in which the property is located OR $417,000 for a 1-unit property. Loan amounts > $417,000 are considered FHA Jumbo product which will now allow a maximum loan amount calculation of the Statutory Mortgage Loan Limit OR $729,750 for a 1-unit property (see the FHA Jumbo Addendum to the FHA Product
Description for 2-unit requirements); previously this limit was set at $625,500.”
On the Wall Street side, it appears that Cantor Fitzgerald is staffing up. On the origination side, AmeriCU Mortgage (who focuses on providing mortgage services to credit unions nationwide, but guilty of capitalizing letters in the middle of their name) has established an operations center in Milwaukee, WI. The story I read said that, “AmeriCU received approval from the Department of Financial Institutions on March 18, and immediately began operations. Within 72 hours, the company hired 45 staff members…”
Making things tough on any broker or agent out there, Lennar Corp, the nation’s largest builder by revenue, is offering a fixed rate of 3.625% "for life," which it says is its lowest ever. The special is "on select homes", closings must occur by April 30, and the loan amount can't exceed $417, 000, according to the terms listed on its Web site. The minimum credit score is 700. Still, just as newspaper headlines raving about 4.5% mortgages influence potential borrower behavior, so might this…
Although our stock market was hit hard yesterday, and stocks overnight were down, this morning they may see a little bounce. Bonds, including mortgage-backed securities, benefited yesterday with the yield on the 10-yr dipping into the 2.60’s although this morning we are back to the low 2.70’s on the 10-yr and mortgage prices are about unchanged. As anticipated, the Fed purchase of $2.5 billion of Treasury securities helped, with the purchases mainly in maturities 20-30 years out. (The Fed will conduct 2 more buybacks in the middle of this week.) For economic news we have the S&P/Case Shiller index, the Chicago Purchasing Manager’s Survey, and Consumer Confidence.
Yolanda Reason's commentary
Economy Update
To try and build support for the new budget bill, the Secretary of the Treasury will meet with small businesses. Like General Electric, AIG and General Motors.
How ‘bout this market? Yesterday rates moved higher, and prices lower, after Factory Orders increased 1.8% in February, following a downwardly revised 3.5% drop in January, and six consecutive monthly decreases. So why wouldn’t rates come down? US stock markets continued their rally, and in fact most overseas stock markets improved. (Japan’s was helped by Toyota’s stock rallying after a bank agreed to help finance US car sales.) And it would appear that there is a change in mood about the economy: in spite of the continued bad news, investors appear to feel that the worst is behind us. Just tell that to some Detroit or Sacramento home owner! Maybe investors are just tired of sitting on piles of cash…
This morning the unemployment data came out pretty close to expected: U.S. employers cut 663,000 jobs in March, and the unemployment rate hit 8.5%, the highest since 1983 when Reagan was in office. And although February’s numbers were unrevised, January’s were changed to a loss of 741,000, the biggest decline since October 1949. Since December 2007, the U.S. economy has dropped 5.1 million jobs, with about two thirds of the losses occurring in the last five months. After the news, bond prices are down slightly, with the 10-yr yield currently sitting around 2.69% and mortgage prices a shade worse than yesterday afternoon. (Interestingly, with the high profit margins now built into mortgage pricing, in spite of the MBS market worsening yesterday, many originators decided to absorb the price hit instead of passing it along on their rate sheets in order to potentially help locks.)
Chase Correspondent announced their ability to purchase loans under the new Fannie Mae program DU Refi Plus™. This program is designed to assist borrowers that have demonstrated good pay histories on their mortgages but have been unable to refinance due to a decline in home values.
Franklin American is going along with the pack. “VA Appraisal Requirements for the Market Conditions Addendum - Effective with all appraisals dated on or after April 1, 2009, VA requires appraisers to include Fannie Mae’s Market Conditions Addendum, Form 1004MC, in all VA appraisal reports. Information and instructions on completing the addendum are available online at: https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0830.pdf” And “in conjunction with Circular 26-09-3 dated March 27, 2009 VA has determined that a copy of the sales contract be provided to the fee appraiser immediately upon assignment or within 1 business day after the appraisal request. If the agreement of sale is amended during the process, the requester must provide the updated contract to the appraiser.”
As mentioned several times in recent weeks by me (not that I am any great prognosticator – procrastinator is more the case) Wells Fargo is keeping Wachovia’s warehouse business that will provide funding to independent mortgage bankers. Are they going to open it up to any Tom, Dick, and Harry? That is highly doubtful, and will probably focus on their best clients with proven production, high net worth, and a solid track record in selling loans to Wells. It is rumored that it will not be a captive line – meaning that unlike competitor’s lines, originators are not forced to sell a percentage of their production to Wells.
How ‘bout this market? Yesterday rates moved higher, and prices lower, after Factory Orders increased 1.8% in February, following a downwardly revised 3.5% drop in January, and six consecutive monthly decreases. So why wouldn’t rates come down? US stock markets continued their rally, and in fact most overseas stock markets improved. (Japan’s was helped by Toyota’s stock rallying after a bank agreed to help finance US car sales.) And it would appear that there is a change in mood about the economy: in spite of the continued bad news, investors appear to feel that the worst is behind us. Just tell that to some Detroit or Sacramento home owner! Maybe investors are just tired of sitting on piles of cash…
This morning the unemployment data came out pretty close to expected: U.S. employers cut 663,000 jobs in March, and the unemployment rate hit 8.5%, the highest since 1983 when Reagan was in office. And although February’s numbers were unrevised, January’s were changed to a loss of 741,000, the biggest decline since October 1949. Since December 2007, the U.S. economy has dropped 5.1 million jobs, with about two thirds of the losses occurring in the last five months. After the news, bond prices are down slightly, with the 10-yr yield currently sitting around 2.69% and mortgage prices a shade worse than yesterday afternoon. (Interestingly, with the high profit margins now built into mortgage pricing, in spite of the MBS market worsening yesterday, many originators decided to absorb the price hit instead of passing it along on their rate sheets in order to potentially help locks.)
Chase Correspondent announced their ability to purchase loans under the new Fannie Mae program DU Refi Plus™. This program is designed to assist borrowers that have demonstrated good pay histories on their mortgages but have been unable to refinance due to a decline in home values.
Franklin American is going along with the pack. “VA Appraisal Requirements for the Market Conditions Addendum - Effective with all appraisals dated on or after April 1, 2009, VA requires appraisers to include Fannie Mae’s Market Conditions Addendum, Form 1004MC, in all VA appraisal reports. Information and instructions on completing the addendum are available online at: https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0830.pdf” And “in conjunction with Circular 26-09-3 dated March 27, 2009 VA has determined that a copy of the sales contract be provided to the fee appraiser immediately upon assignment or within 1 business day after the appraisal request. If the agreement of sale is amended during the process, the requester must provide the updated contract to the appraiser.”
As mentioned several times in recent weeks by me (not that I am any great prognosticator – procrastinator is more the case) Wells Fargo is keeping Wachovia’s warehouse business that will provide funding to independent mortgage bankers. Are they going to open it up to any Tom, Dick, and Harry? That is highly doubtful, and will probably focus on their best clients with proven production, high net worth, and a solid track record in selling loans to Wells. It is rumored that it will not be a captive line – meaning that unlike competitor’s lines, originators are not forced to sell a percentage of their production to Wells.
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