Mortgage Joint Ventures

Mortgage Minutes

2010-02-02T06:40:00.000-08:00

A review of last week’s economic news finds December housing starts below and new permits exceeding expectations. While consumer confidence rose, initial jobless claims and GDP were worse than expected and durable orders were down. The stock market had three days of sell off however we did not see the flight to quality often seen when stocks slide. Many economists cite constant fear of the actual direction the economy is headed and reference this weeks’ non-farm payroll release a market mover. Those on either side of the economy recovering debate will be closely watching the report for signs of continued weakness or a bounce from the bottom. 2010 has been predicted to see higher interest rates, the question remains when and how fast the rise will occur. Stay tuned!

Below is a snapshot of this week’s economic data releases:

Monday: Dec. Personal Income
Spending
PCE Index
Jan. Institute of Supply Management

Tuesday: No economic release scheduled

Wednesday: Jan. Institute of Supply Management Service Sector Index

Thurs: Initial Jobless claims for the weekend ended 01/30
1st estimate Q4 Productivity & Unit Labor Costs
Dec. Factory Orders

Fri: Jan. Nonfarm Payrolls
Jobless Rate
Average Hourly Earnings

Mortgage Minutes

2010-01-04T15:39:00.001-08:00

The passing of the year and the decade came quietly from the financial news perspective; however, the month of December saw an increase in interest rates of .50%. Moreover, while the start of 2010 has started with an ever so modest improvement, the forecasts for future rates almost certainly indicate movement higher. The Fed will bring their mortgage-backed securities purchasing program to a halt at the end of March and economists are already citing a run up in rates if the program is not extended. Focusing on this week, Friday’s Non Farm Payroll release could spark a quick increase in mortgage rates – while the likelihood of a sharp decrease is unlikely. Employment numbers may be beginning to signal signs of recovery. If this trend continues, the economy will grow and a demand for capital will push interest rates higher. Compounded with the extension and expansion of the tax buyer credit, the time for real estate financing is now.

Mortgage Minutes

2009-12-07T14:03:00.000-08:00

Last week, the National Association of Realtors reported pending sales increased by 3.6% in October. Factory orders defied expectations and reported a rise and last week’s closely watched non-farm payroll reported 11,000 jobs lost in November – far better than the expected 130,000 by the most optimistic economists. The results were so unexpected; it has left investors scratching their heads. In a month were initial jobless claims exceeded 2 million, it seems the dots aren’t connecting. The news sent mortgage rates higher by nearly .25% - but they continue to hover in the upper 4% range! With little economic releases on tap for this week, traders will be focused on the treasury auctions. Following last week’s positive economic news, there is some concerns that the longer termed bonds being auctioned this week will come at higher yields to draw participants. This could cause mortgage rates to rise. As the theme continues, now is not the time to straddle the fence for buying a home or refinancing.

Mortgage Minutes

2009-11-30T11:53:00.000-08:00

Despite positive economic news released last week, mortgage rates improved an .125% (typically, good economic news negatively affects the mortgage market). The improvement can be directly related to the safe haven of mortgage-backed securities. With the request from Dubai for additional time to pay its debts, financial markets reacted globally moving out of stocks into bonds. Many economists anticipate this trend to continue this week as investors monitor the effects of the Dubai announcement. However, this is only one piece to this week’s puzzle. The broad range of economic news scheduled for release this week compounded with the continued scale back of mortgage-backed securities by the Federal Reserve will likely make for a volatile week for mortgage rates. While all of the reports could be potential market movers, investors will be anxiously awaiting Friday’s non-farm payroll report for an updated glimpse on the US economy. The anticipated estimate is 114,000 jobs lost in November and unemployment to remain at 10.2%. Most economist believe actual numbers would need to dramatically exceed the expectations for the mortgage market to reap any benefits – especially considering how incredibly low rates are currently. Stay tuned for updates on the mortgage market.

Tax Credit Extension-Signed By President Obama

2009-11-06T11:42:00.001-08:00

To much anticipation and longing for further improvement in the mortgage and housing industry, the First Time Homebuyer Tax Credit will be extended today. The program, scheduled to expire at the end of November, will now require buyers to sign a purchase agreement by April 30, 2010 and close by June 30th. The FTHB Tax Credit Extension would include:
Buyers who have owned their current homes at least 5 years would be eligible for up to $6,500

First Time Homebuyers - or anyone who has not owned a home in the last 3 years would still be eligible for the $8000 Tax Credit
The credit is available for the purchase of principal homes costing $800,000 or less - vacation homes are ineligible
The credit would now be eligible to purchasers up to $125,000 in single income or $225,000 in joint income

The credit would be extended an additional year, until June 30, 2011 for members of the military serving outside the United States for at least 90 days

Extending the credit should allow more people to purchase a home and help stop the continued downward spiral in housing prices caused by the foreclosure crisis. The extension has been a priority to the real estate industry which says that the FTHB Tax Credit has been instrumental in the turn around of the market that was a major cause of the economic downturn.

The tax credit program will cost the government about $10.8 billion and the National Association of Realtors has estimated that out of the 1.4 million homebuyers that have already used the tax credit, about 350,000 would not have purchased their home without the tax credit.

Market Minutes

2009-11-06T08:33:00.000-08:00

Mortgage rates are modestly improving after some important announcements this week. Wednesday’s policy statement issued by the Fed left benchmark rates the same and reiterated inflation continues to be contained. The Fed also confirmed they will continue to use their resources as necessary to boost the economy, but did not increase their total commitment to purchase mortgage-backed securities – a move that would have helped improve mortgage rates. Perhaps the biggest news of the week was released this morning – 190,000 jobs were lost in October and the unemployment rate has jumped to 10.2% (the highest since 1983). On the heels of this news, mortgage markets are modestly improving.

Legislation update:

The bill to extend and expand the First Time Homebuyer Tax Credit has passed the House and Senate and is expected to be signed by President Obama as early as today or tomorrow. The bill provides for the following:

$8,000 tax credit for first time homebuyers
$6500 “move up” credit for homebuyers owning a home 5 of the last 8 years.
Income limits increased to $125,000 for single filers and $225,000 for joint filers.
Eligible sales price to $800,000.
Program extended for buyers signing a purchase contract by April 30, 2010 and closing by June 30, 2010.
For members of the military serving outside of the US on official duty for 90 days during January 1, 2009 and May 1, 2010, the program extends to contracts signed before May 1, 2011 and closed before July 1, 2011.

Market Minutes

2009-11-02T11:12:00.000-08:00

As a result of last week’s economic news, mortgage rates improved slightly. News included a worse than expected consumer confidence reading and a slightly better than expected GDP. The GDP numbers are grossly skewed thanks to the Cash for Clunkers and first time homebuyer tax credit programs. This Wednesday the Federal Open Market Committee will meet and issue a policy statement and the ADP National Employment Report will be published. Thursday’s initial jobless claims and Friday’s non farm payroll may be market movers. There is also speculation that a vote could come as soon as this week to extend and broaden the homebuyer tax credit until April 30, 2010. Details below:

* $8,000 tax credit would remain in effect for first time homebuyers
* New $6500 “move up” credit for homebuyers owning a home 5 of the last 8 years.
* Eligible sales price increased to $800,000.
* Income limits increased to $125,000 for single filers and $225,000 for joint filers.

Check back regularly for updates on this legislation and more.

First Time Buyer Tax Credit

2009-10-09T12:31:00.001-07:00

On Monday, October 5th, the White House came very close to endorsing an extension for the First Time Homebuyer Tax Credit. The White House Press Secretary said it had been a very successful program and is on a “short-list” of measures being considered to help further bolster the economy in its recovery. The likely-hood for an extension of the Tax Credit has been significantly improved (as much as 90% likely to pass). There has been no indication of the Tax Credit being revised that would increase the credit above the already available $8000 limit or offered beyond first-time homebuyers within the qualifying guidelines.

What does this mean?
Unless the Tax Credit provision is made a “stand-alone” bill or attached to an existing bill, a continuation in the program may mean there would be a lapse in availability for First Time Homebuyers, possibly in early December - since tax bills usually move at the end of the year (late December).
It is speculated that a steep drop in home prices may unravel as the current First Time Homebuyer Tax Credit is left to expire December 1st, further denying economic recovery.
If extended, the $8000 Tax Credit program would cost the government approximately $1 billion for each month it is extended as talks are in place that would determine how long it will be extended.

Further details on the possible extension of the First Time Homebuyer Tax Credit will be published when they become available.

FHA Updates

2009-10-08T09:54:00.000-07:00

The FHA Commissioner, Dave Stevens, opened up the conference in Atlanta. He outlined his three goals. They are:

1) Support the Obama Administration’s foreclosure avoidance programs
2) Maintaining FHA’s financial soundness
3) Technology improvements

In response to a question on risk-based pricing, Dave Stevens said FHA has no plans to implement risk-based pricing.

The highlights of the conference are:

1. Condominiums
The implementation of the new condominium rules have been delayed until November 2nd.

• Recertification of Project Approvals

FHA will not be implementing recertification requirement until October 2010. If the project was FHA approved prior to 10/1/08, the lender can continue to certify that the project is FHA approved by using Attachment C of ML 09-16 until 9/30/2010. If the project is not reprocessed under the procedures in ML 09-16 by 9/30/2010, then the project will be removed from the FHA approved list starting 10/1/2010.

2. Miscellaneous Items

• HUD is reconsidering second appraisal requirement for properties with loan amounts above $417,000.
• HUD will soon issue a Mortgagee Letter eliminating the option to obtain a 10 year warranty in order to get a high ratio loan.
• Credit Watch for wholesalers will likely be implemented by January 1, 2010.
• FAQs will be published soon on the three new appraisal MLs- 2009-28, 2009-29 and 2009-30.
• FHA also said is not permissible to have staff use FHA Connection from outside of the United States.

I. Assessment of FHA’s Financial Condition and Future Direction

• FHA’s Financial Condition
o FHA Commissioner has said FHA has sufficient reserves and will not require taxpayer assistance
• FHA’s Changing Philosophy
o For the first-time ever, FHA has leadership with industry experience
o FHA is expected to revamp its risk management and business processes
o FHA will move toward industry underwriting standards
• FHA’s New Credit Policies
o FHA has published new appraisal independence requirements and tightened rules on streamline refinances transactions
o Supervised mortgagees (financial institutions) will be required to submit audited financial statements starting in January 2010
o Proposed mortgagee eligibility changes could have significant impact (See below)
• RESPA FAQs

We believe the FHA proposal to stop approving loan correspondents in the FHA program is arguably the most significant announced change. In the press release ,FHA said “Correspondents (mortgage brokers) will continue to be able to originate FHA‐insured loans through their relationships with approved mortgagees; however they will no longer receive independent FHA approval for origination eligibility.” In other words, FHA Direct Endorsement lenders will be able to underwrite and close loans that were obtained from non-approved mortgage brokers, community banks, etc. Of course, the Direct Endorsement lender will be responsible for the origination process on these loans. In effect, these loans are likely to be treated like retail loans from a liability perspective.

In light of Dave Stevens’ background (a former Freddie Mac executive), it appears likely that FHA will be adopting some Freddie Mac business principles. One of the GSE guidelines, of course, is to hold the seller-servicer responsible for the actions of the originator. The FHA proposal, in effect, would be substituting the Direct Endorsement lender for the GSE seller-servicer. We would expect the DE lender would have to underwrite and close the loan in its name.

FHA’s primary reasons for taking this action are: 1) FHA does not have the resources to conduct a thorough review of all applicants and their current process for mortgage brokers is cursory at best and 2) the minimal net worth ($63,000) provided little protection for the Government’s risk in the event of an indemnification request.

The implications of this change are far-reaching in the FHA program. Once you permit FHA approved lenders to take applications from any source that meets State and other Federal guidelines (e.g. RESPA), it could render FHA’s other lender approval requirements outdated and unnecessary (i.e. branch lending areas, direct lending, principal-agent restrictions, etc.). We expect FHA will be reengineering its lender approval and monitoring process.

Timeline for Implementation

To implement this change, FHA must go through the rulemaking process. We expect the proposed rule to be published in the next several weeks and there will likely be a 30 day period comment period. While changes are possible as a result of comments, the apparent goal is to have a final rule published by the end of the year so current loan correspondents will not have to be recertified in 2010.

Starting Out

2009-10-08T09:44:00.000-07:00

This blog will be a source of information for real estate companies, home builders, banks and credit unions. The Lending Partners has been creating partnerships in the mortgage industry for over 13 years.