Bank of America Holds Parrot Hostage

Just an amussing tale about how Bank of America accidently siezes a home that is not in default, and takes the owner's bird. Then denies they have the bird, before admitting they have the bird.....

Hit the link for the full story.

Bank Of America Seizes Wrong House, Holds Parrot Hostage

Mortgage Rates May Become Volatile

This holiday shortened week should be interesting for mortgage rates. Investors will be repositioning their portfolios with the end of the first quarter looming. Additional pressure on the market is expected as the Federal Reserve concludes its direct purchase of mortgage backed securities program (1.25 trillion, yep trillion with a T). The big question mark looks like non farm payrolls (due out Friday). Rumor in the market is that barring higher than expected unemployment (9.7% to 9.8% range) there is very little chance of rates moving lower. By contrast any better than expected news could trigger a major rally in the stock market and typically that tends to drag mortgage rates higher.

Citi Bank Back In The Correspondent Lending Game

Citi has announced that they will be reactivating it's correspondent lending channel. They had frozen that channel last year over quality control issues. They apparently have fixed the underlying issues and are going phase lenders back into this channel. Good news for lenders that had lost that sales channel last summer.

Citi correspondent had done almost 115 billion in 2008. It's a glimmer of hope for some of the smaller mortgage banks that have taken some big hits over the last year. It will be interesting to see what effect Citi's move will have on other players like GMAC, Suntrust, Franklin American, Etc.

Tiss The Season To Sue

Bank of America has filed suit against First American Title for 500 million dollars. It would seem the good ole boys at B of A think that the limited title policies issued as a part of their quick close program have resulted in losses. What's fantastic about this lawsuit is that it seems inconceivable that title issues could have contributed to a loss of this magnitude. Maybe the Boys of BofA should look a little harder at the limited documentation (stated income stated asset) requirements THEY developed as well as the negative amortization arms that they marketed rather than fishing for money courthouse.

I would be very interested in seeing what actual losses B of A is claiming directly from title defects. Rarely do you see a title defect as the underlying reason for someone to default on a mortgage. After all the title insurance protects the lender from underlying liens, property line disputes, etc. Title insurance unlike mortgage insurance does not protect from underlying credit risk.

Also it appears that the SEC is being sued for failing to detect and stop Bernie Madoff's ponzie scheme. I have not had a chance to see the actual filing so I have no idea by what theory they plan to prevail. Should make for some interesting reading.

Timothy Geithner - His Role In Lehman's Demise

Speechless. That's all I have after reading the article detailing the collapse of Lehman and the role our new Secretary of the Treasury played in the events leading to the collapse and his subsequent efforts to cover up the rampant fraud.

Read The Article Here

USDA Will Run Out Of Funds For Rural Development Mortgages In April

It looks like USDA will exhaust it's allocated funds for Rural Development mortgages by mid April. Unless Congress acts to supplement USDA's budget, there will be no funding available until late fall of this year or possibly early 2011. This would be yet another blow to the already strained housing recovery.

USDA Rural Development loans provide 100% financing for properties located in targeted areas. While USDA does limit the income of borrowers that can participate it is practically the only option for 100% financing other than VA.

Looks Like FHA is Going To Hold The Line On Down Payment Requirements

Good news out of Washington DC. It looks like the HUD Secretary feels that raising the FHA minimum down payment from 3.5% to 5%. It seems that the Secretary based on his comments feels that the extra "skin" in the game will hurt sales whole doing little to stem the default rate. Instead he favors raising the mortgage insurance premiums. Part of that has already been decided, see the previous post on the increase in the upfront MI premium.

New FHA Flipping Guidelines

• 90 Day Flipping Policy Waiver: Effective February 1, 2010, HUD has issued a waiver of the 90 day rule (flipping rule) that applies to sellers other than HUD and exempt entities. At this time, we can accept properties if the contract of sale for purchase is executed within 90 days of the prior acquisition by the seller under the following circumstances:
 The transaction must be arms-length with no identity of interest between the buyer and the seller or other parties in the sales transaction.
 The seller must hold title to the property at the time of the purchase contract.
 LLCs, corporations or trusts that are serving as sellers must be established and operated in accordance with applicable state & Federal law.
 No pattern of previous flipping activity exists for the subject property, as evidenced by multiple title transfers within a 12 month time frame.
 The property must be marketed openly and fairly via MLS, auction, FSBO offering or developer marketing (any sales contracts that refer to an “assignment of contract of sale” which represents a special arrangement between seller and buyer may be a red flag).
 The sales price of the property must be less than 20% above the seller’s acquisition price. We are not accepting the additional HUD waiver conditions for increases of 20% or more at this time.

FHA Upfront Mortgage Insurance Premium Is Being Increased

Effective for case numbers issued on or after April 5th 2010, the upfront portion of the FHA insurance premium is being raised from 1.75% to 2.25%. The good news is that the actual monthly premium remains unchanged at this time at .55%. This is per letter 2010-02.

Judge Slams One West Bank

The news is a little stale, but I still got a little laugh out of the judges decision to wipe out the family's debt on their home in retaliation for the banks actions. No word on what the state of One West Bank's appeal that I can find. I am betting that the judge gets reversed, but boy I wish this would stand.

Read The Full Story Here!

Hiding From The Test

Interesting point being brought up today by a good friend of mine. The NMLS test is only seeing a 30% pass rate at this point. As a result he (recruiting for a one of the nations largest banks) has seen a dramatic increase in loan officers running for the shelter of the FDIC's little shelter! You see, FDIC bank employees are only subject to the fingerprinting and fraud check. They get a complete pass on the educational requirements. No national test! No state test! At a bank, the only educational requirements for a mortgage loan officer is whatever the bank thinks you need.

It seems, the banks are turning into the employer of last resort for the mortgage "professionals" that can't pass the NMLS test or are too afraid to take it! Thankfully, rumor has it, that certain politicians are starting to question why the banks are not forced to meet the same educational levels as the mortgage brokers. Hopefully, Congress will strip the FDIC insured banks of their protection from NMLS educational requirements. I think it is the only real way that they can assure the public as to the basic educational qualifications of the person writing their loan.

Interesting Concept

Since the inception of the Home Valuation Code of Conduct (HVCC) in May 2009, there has been much discussion, and misinformation, about the benefits and harm caused by the controversial agreement with the New York Attorney Generals office and the Federal Housing Finance Agency. This agreement, originally made with the Office of Federal Housing Enterprise Oversight, requires Fannie Mae and Freddie Mac to only accept appraisals ordered from parties independent to the loan production process. Essentially, this means, anyone that may get paid by a successful closing of the loan cannot order the appraisal.

In the past 6 months while the Realtors© and Mortgage Brokers associations point fingers at appraisal management companies for their use of incompetent appraisers who don’t understand the local markets, appraisers are complaining that banks are abdicating their regulatory requirements to obtain credible appraisals by forcing them to go through appraisal management companies at half of their normal fee.

Read The Full Story Here

Underwriting a Mortgage In The New Era

Been interesting talking to underwriters these days. Back when I first started, underwriters were very skilled and valued assets of a mortgage lender. They were given a set of guidelines to follow but were largely allowed to evaluate each file on its individual risk. The underwriter was largely "trusted" to make a decision.

Then came the world of automated underwriting. Fannie Mae rolled out Desktop Underwriter and Freddie Mac had Loan Prospector. At that point there was a noticeable shift in underwriting. Underwriters were largely responsible for verifying information that the computer program thought "necessary". Underwriters were still largely able to manually underwrite a file even if the file did not fit neatly into the computer generated box.

Scroll forward to today. Try to find an underwriter that is allowed to manually underwrite a file. The risk of a purchase refusal are simply too great. Most lenders will not even entertain that notion that their underwriter is "capable" of assessing risk on a file. It's an unfortunate devaluing of the underwriter's value. So we as a nation have largely surrendered our underwriting decisions to computer programs.
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The HVCC Virus Has Spread

Yep, new rules regarding the ordering of FHA appraisals mirroring those of HVCC have come into effect. That's right, your FHA appraisal is now ordered by an AMC (appraisal management company), who tend to select, how should I put this........THE LOWEST BIDDER!

To think that pressuring an appraiser into coughing up half their fee to the AMC in order to get the job is not going to effect the quality of the end product is obtuse! The AMCs have no interest in the quality of their work.

So as a broker, you have the client pay the AMC $500 for an FHA appraisal, and the AMC collects $150-$250 for "their effort" and the appraisal is not satisfactory to the underwriter, does the client get their money back? No! They might have to spend another $500 to have a second appraisal done and the AMC collects another fee. Can you see where an AMC really does not have much of an incentive to make sure that the appraisers they hire are actually any good. It's not like it's costing them any money out of pocket. The check in this process is the actual lender possibly pulling the contract. Then again, there are a lot of lenders that actually own AMCs (PROFIT CENTER).

HUD does not want the broker to order the appraisal? Fine I understand the rational. I do not agree with it, but I understand it. Back when I first started as a broker we were assigned an appraiser by the Portland HUD office. They had a list of approved rostered appraisers and they picked who you got. Pretty simple stuff! Too simple by half for the boys back East! No, that would not help their friends in the banking and AMC lobby would it?

HUD $100 Home Mortgage

Had a call yesterday from a Realtor that read the breakdown of the HUD $100 down mortgage plan. She said "well I would hate to see the interest rate on that kind of loan!" She was pleasantly shocked to learn that the interest rate offered was the same as a regular FHA loan (currently less than 5% for a 30 year fixed). The rate is the same as a regular FHA loan, the upfront mortgage insurance premium is the same as a regular FHA loan, and the monthly mortgage insurance is the same as a regular FHA loan.

Her next question was "where is the catch?" I had to explain that the "catch" was that this was only for HUD owned properties. That's the only real "catch". Just the restrictions listed yesterday's program breakdown.

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HUD Foreclosured Homes With $100 Down Payment

Really! HUD offers a very specific product that allows borrowers to purchase HUD owned properties with $100 down. This is a very specific product with a very specific target market.

This is a traditional FHA loan complete with both upfront and monthly mortgage insurance, but without the 3.5% down payment. So lets hit the highlights:

1. Owner occupied only
2. HUD owned properties only
3. May add up to $5000 to the loan amount to finance required repairs
4. 1-4 units
5. Can use the existing HUD appraisal if sales contract was signed within 6 months completion
6. $100 down payment

Restrictions:

1. No Manufactured homes
2. No Spot approval condos
3. No Cooperatives
4. No working farms,
5. No foreclosure within the last 3 years
6. No bankruptcy within the last 2 years
7. No non occupant coborrowers
8. Max ratios 31%-43%

While this product is not a great fit for a lot of people, it is a home run for the people who fit!