(10 great questions) Bernanke Must Have Lost My List of Questions: Caroline Baum – Bloomberg BusinessWeek
————

The End of QEII: It’s Time to Make the Donuts – By Tony Crescenzi, Ben Emons, Andrew Bosomworth and Lupin Rahman – PIMCO – Key Points:
1.  We expect the end of quantitative easing by the Federal Reserve to lead to higher yields and lower values for Treasuries.
2.  With quantitative easing the Federal Reserve has in essence picked the pockets of Treasury bond investors throughout the world.
3.  Ultimately, the U.S. must own up to its past sins and let the deleveraging process play itself out.The U.S. must invest in its people, its land, and its infrastructure, as well as promote free trade, to achieve economic growth rates fast enough to justify consumption levels previously supported by debt.
————

Bernanke and the dollar – Scott Grannis – In his first-ever press conference today following the FOMC meeting, Fed Chairman Bernanke mentioned the dollar quite a few times. … In nominal and real terms against a broad basket of currencies, the dollar is now at a new all-time low. … Ben "Trust Me" Bernanke may well pull off the greatest balancing act in history when all is said and done, but I have to believe there is an easier and more direct way to achieve a strong and stable dollar, which is ultimately the only way to enjoy low and stable inflation and a strong economy. … – Calafia Beach Pundit

————

Gold hits record after Fed says low rates to stay – By Barani Krishnan – (Reuters) – Gold rose to an all-time high near $1,530 an ounce on Wednesday and oil also went up after the Federal Reserve vowed to keep U.S. interest rates low for an extended period, which sent the dollar tumbling. 

————

Chris Whalen: Fed Halting Bond Purchases Equals Big Problems – With the Fed signaling that it will keep interest rates low causing gold and silver to take off to the upside, … When asked about Fed policy Whalen stated, “The bottom line is that they seem to be I think lost in a policy sense.  They are going to continue to muddle along and keep rates where they are, so there doesn’t look to be any change in price guidance coming from the Fed.  But I don’t know how they can ignore what’s going on with the financials.  If we don’t let the rates start to rise we are going to have a very serious problem with the banks because the are not making any money.” … – King World News

————

QE2′S FAILURE AND THE HOUSING MARKET – BY CULLEN ROCHE – Pragmatic Capitalism

————

Since the financial crisis lows at the end of 2008, the average US price for a gallon of unleaded has risen $2.18 per gallon. The only time when gasoline prices were higher than today was during a brief three-month period in mid-2007, just prior to the Great Recession. – Chart of the Day

Do boom and bust cycles in real estate only happen in the United States? Of course not: Boom&Bust

Here’s a campaign hitting the public: Zillow Mortgage Marketplace is giving out Lowe’s gift cards to borrowers who contact them for a quote between 4/28 and 5/4 and the loan closes before 7/5. The cards are worth up to $1,000 for SFH, primary residence, $250-417k, FICO greater than 720, LTV less than 80%, in certain states. Here you go: LowesZillow

Is it my imagination, or does the public’s memory last only a few weeks? Or is it just because the financial press is on to the next shiny object? I mention this because I noticed the news yesterday that the Japanese stock market index (Nikkei) hits highest level since the earth quake. Remember the earth quake in Japan, right? Heck, remember hurricane-ravaged New Orleans, or the havoc wreaked by the tsunami in Indonesia?

When you’re hunkered down over that tall cool one this weekend at the bocce ball tourney, ask the person standing next to you, "In the first quarter of 2011, how many housing units are there in the US?" The answer is 131 million. Of those, about 86% are occupied, 57% by owners, 29% by renters, and 14% (nearly 19 million units) are vacant. In this country the home ownership rate is about 66%, down slightly from the previous quarter and year. The Census Bureau reports that the homeownership rates were highest for those householders ages 65 years and over (81%) and lowest for those under 35 years of age (38%) – no surprise there. Lastly, the homeownership rate for non-Hispanic Whites was highest at 74%, while "Black Alone householders" was lowest at 45%.CensusHouseholds

Yesterday I discussed hedging cost, and received this from a grizzled industry vet: "Well you mention a lot of pipeline management items in your hedge cost and unfortunately that falls under the secondary guy. It is up to him or her to track their pull through by broker, LO, and retail office, establish the lock and renegotiation policies and monitor these activities, and operational efficiencies of the loan flow through the pipeline and upon delivery of the final product. This part of the job is not glamorous, but extremely important to remain profitable. Since it is under the secondary marketing’s P&L, they have to make sure all the gears are in sync to ensure profitability. Nice ‘pin cushion’ position!"

LO’s know that borrowers can obtain their IRS Transcripts within minutes, many times before they are available to lender.  They can just call 800-908-9946, press (1) for English (assuming you’re reading this), give their social security number when prompted, and give the street numbers of their address on their tax returns.  The borrower should then listen to the automated message and when it prompts to submit an order by pressing (1) don’t – the borrower should hit zero (0) until it brings them to the operator. At that time the borrower can verbally request a faxed copy of the years’ transcripts needed, but remember that the borrower will be asked personal questions for all people on returns will be asked such as: what form they filed, address, SSN’s, names, number of people on returns, whether it is a business or personal fax, and so on – almost as much as standing in line at the post office.

Although one conference in New York is fast approaching, there is another one that is on many folks’ radar screens: the Texas Mortgage Bankers Association Convention (their 95th) May 22-25 in Austin. The marketing material notes, "We have been fortunate to line up a level of speakers that rivals any national event: David Stevens (transitioning from FHA to the MBA), Barbara Desoer (President of Bank of America Mortgage), Pat Sheehy (runs Chase’s Correspondent and Rural Housing groups), Vicki Bott (Deputy Assistant Secretary for Single Family Housing at HUD), Mitch Kider (Chairman of Weiner Brodsky Sidman Kider PC), Steve O’Connor (SVP, Government Affairs at the MBA)," and so forth.  Over 500 are expected to attend this event in The Great State of Texas, and they promise not to talk about seceding from the US during the conference: TexasMBA

more news on Wells correspondent, UMDP, UCDP, Mercury Network, MBS buyers, markets, tornadoes, economy, and Joke of the Day – click here

Home Sales: Distressing Gap – Bill McBride – Another update … this graph shows existing home sales (left axis) and new home sales (right axis) through March. This graph starts in 1994, but the relationship has been fairly steady back to the ’60s. Then along came the housing bubble and bust, and the “distressing gap” appeared (due mostly to distressed sales). – Calculated Risk
————

(Vulture bidding wars) Buyers’ Market? Stressed Sellers Say Not So Fast - By NICK TIMIRAOS – Falling home prices should give aspiring homeowners the upper hand this spring, but in a growing number of locations, it doesn’t feel like a buyer’s market – WSJ Homes

————

(touches on many issues) A Waiting Game In REO Asset Management – BY JOHN CLAPP – As of mid-March, companies handling the management and disposition of real estate owned properties (REOs) found themselves asking the same question as they were in the last quarter of 2010: Where’s the inventory? – MortgageOrb

————

Cheapest Homes in 40 Years? Not Even Close… – By Barry Ritholtz – I have been wanting to discuss a horrifically misleading article for a week now: Americans Shun Cheapest Homes in 40 Years as Ownership Fades. It is an object lesson in how an industry spokesgroup, engaging in biased analysis, used poor econometric models to create misleading data. … I would argue the measure of Median income to Median home price a much better gauge. It tracks people’s ability to pay for homes — an important data point if you want to see a measure of affordability that also imagines not being foreclosed upon is a relevant part of affordability. … – The Big Picture

————

(actually worse) $3.3 Billion of FHA Reverse Mortgages Underwater – Elizabeth Ecker – Roughly 93,000 HECM loans, or 17.2% of the Federal Housing Administration’s reverse mortgage loans outstanding, are underwater by $3.3 billion total, according to analysis released today from New York, N.Y.-based New View Advisors … The $3.3 billion figure compares loan balance to property value, New View explains, but does not account for property disposition cost.  More accurately reflecting the situation, New View offers scenarios factoring in 10% and 15% haircut amounts, leading to estimates of 135,000 loans (24.9% outstanding) underwater by $4.9 billion and 166,000 loans (30.6% outstanding) underwater by $6.1 billion, respectively. … – Reverse Mortgage Daily

————

(closing costs hurt) When is a HARP Refinance Worth the Cost? – Bankrate.com – … Borrowers who refinanced through HARP in the first half of 2010 saved on average $125 to $150 a month on their monthly mortgage payments, according to Freddie Mac. That’s not much, considering that some of these borrowers spent thousands on closing costs … – FoxBusiness

————

(inter-agency squabbling?) OCC Makes Patently False Claim That Slap-on-the-Wrist Servicing Penalties Could Hurt Banks – Yves Smith – … As we’ve written in some of our posts on the foreclosuregate settlement negotiations, the OCC has engaged in what even those of us at a remove can tell is bureaucratic warfare against the FDIC and the yet to be operational Consumer Financial Protection Bureau. For the OCC to undermine the CFPB is a twofer. First, it helps to beat back meaningful mortgage reform. Second, the CFPB has the potential to hamper the OCC’s real mission, which is to make sure that the banks come first and everyone else pounds sand … – Naked Capitalism

————

(easier said than done) Getting rid of Freddie, Fannie proving difficult for well-moneyed constituent groups – By ALAN FRAM – … But House and Senate Republicans pushing bills to phase out both federally run companies are learning how fear, politics and old-fashioned lobbying can trump ideology. … – RE on MSNBC

(Conforming Jumbos)  Rules for ‘jumbo’ mortgages to change this year - By Linda Stern – Some homebuyers try to get ahead of Oct. 1 deadline for larger specialty loans – RE on MSNBC

The Truly Remarkable Run of Silver – As gold continues to receive all the headlines, silver continues to look at the yellow metal in the rearview mirror. – Bespoke Investment Group

————

(must read – loss of privacy, predicting your behavior) The Really Smart Phone - Researchers are harvesting a wealth of intimate detail from our cellphone data, uncovering the hidden patterns of our social lives, travels, risk of disease – By ROBERT LEE HOTZ – WSJ What They Know

————

CHART OF THE DAY: The Dollar’s Ominous New Record – Joe Weisenthal – You know the dollar is in the toilet, but here’s another perspective indicating just how much the greenback is hated right now.From Morgan Stanley’s latest report on fund flows: “The week saw a continuation in USD selling interest, with the greenback having now been sold for 13 weeks in a row, equaling the record selling period seen in Oct – Nov last year.” – Clusterstock at Business Insider

————

Citi Analyst: It Will Take Two Rounds Of Austerity To Prevent S&P From Downgrading The US – Gregory White – … according to Citi Managing Director Steven Wieting. Wieting says that it’s rising healthcare costs that will prevent one round from being enough. In fact, he believes it is “inevitable” that debt to GDP will rise as a result of the aging U.S. population. – Money Game at Business Insider

————

(now you can make a bet) UPDATE: CBOE Allows Investors To Bet On Wall Street Defaults – -The Chicago Board Options Exchange is expanding its listed credit-derivatives offering to allow investors to hedge or speculate on a default among five Wall Street broker dealers. Known as credit-event binary options, they are an alternative to credit derivatives traded over the counter called credit default swaps, or CDS. The contracts are expected to be popular with investors because they can be traded on exchanges, where prices are more transparent than they are in the opaque swaps market. The firms whose credit are referenced by the new binary options are Bank of America Corp. (BAC), J.P. Morgan Chase & Co. (JPM), Citigroup Inc. (C), Goldman Sachs Group (GS) and Morgan Stanley (MS). – Wall Street Journal

by Rob Chrisman, Pipeline Press, Mortgage News Daily

Fun with numbers: Freddie Mac’s mortgage delinquencies on single-family homes declined in March from both month- and year-earlier levels. March’s delinquencies on single-family residences fell to 3.63% from 3.78% in February, according to Freddie’s report, and were lower than the 4.13% rate reported for the year-earlier month. The rate has now decreased for four consecutive months. Before a two-month period of increases last year, the rate had fallen sequentially for three years. Its mortgage portfolio now stands at $2.14 trillion with single-family refinance-loan purchase volume of $19.4 billion in March, reflecting 72% of total mortgage purchases and issuances. A month earlier, volume was $31.4 billion.
The hiring continues, paragraphs below in production but this time on the risk management side of things. Compass Analytics, a leading provider of pipeline and servicing rights valuation and hedging analytics and solutions, is seeking a seasoned account/hedge manager with at least five years of hedging and secondary marketing experience for Compass’ Washington DC office (in Potomac, MD). If a reader is interested, or knows someone who is interested, they should submit cover letters and resumes to Lucy Poole at lpoole@compass-analytics.com   And you may want to visit with them in New York in a few days.

And there are production jobs out there in the wholesale channel calling on brokers.Nationstar Mortgage is looking for wholesale AE’s in Northern California, Oregon, Washington, and Idaho. You can view their website at Nationstar. The company is owned by Fortress Investment Group and servicing $65 billion, and lends in 48 states. AE’s can contact Tim McAvenia at Tim.McAvenia@nationstarmail.com.

In the retail arena, mortgage banker iServe Residential Lending is continuing to expand its national branching platform which is now in 18 states. The company is a direct lender providing loan servicing, mortgage origination, and real estate under one roof.  iServe is expanding its network of retail branches, and is looking for LO’s AND branches in order to establish a “local branch presence, leveraging established mortgage broker and loan officer relationships.” LO’s and/or branch owners can visit iServeResidential. For more information on the Western US, contact Allen Friedman at afriedman@iservelending.com, and in the Eastern US contact Ken Michael at kmichael@iservelending.com.

In Ohio, Chase announced that it will add between 500 and 1,000 mortgage-servicing jobs to its Central Ohio workforce when it moves into new office space in Gahanna later this year. Chase already is the region’s largest private employer with 17,000 Columbus area workers.

Don’t be the last on your block to buy troubled loans from Flagstar. Flagstar Bancorp reported that it lost less money ($32 million) in the first quarter than it did in 2010′s 1^st quarter ($82 million). In the first quarter of 2010, Flagstar unloaded $80 million in nonperforming mortgages, taking the total down to $547 million at the end of the quarter, certainly better than the $1.3 billion reported the same time last year. (In November alone Flag sold over $400 million of nonperforming loans.) Flagstar decreased the amount loan-loss provisions in the first quarter to $271 million from $538 million one year ago and $274 million in the previous quarter. But income from the mortgage origination department remains down. Gains on loan sales totaled $50.2 million in the first quarter, down from $76.9 million a year ago and $52.6 million in the previous quarter – probably due to the decrease in interest rate lock commitments, lower originations, and lower margins.

Not a day goes by when someone doesn’t walk up to me on the street and either tell me to put my clothes on, or ask, “What is hedge cost?” It is not an easy question to answer in practice, but in theory it is pretty straightforward. Companies that only sell loans on a best-efforts basis (where they will make the best effort to fund that loan, and then it must be delivered to the investor) are not really dealing directly with the hedge cost – the investor is. (But don’t worry – the investor passes their hedge costs on to the lender.) By choosing to sell loans on a mandatory basis (the investor expects that loan, or a similar loan, and the lender is on the hook for it even if it doesn’t close) and therefore holding locks until they fund and are eligible for sale, lenders expose themselves to both interest rate and fallout risks. The interest rate risk (rates go up, and you’ve guaranteed the borrower a lower rate) can be hedged, primarily with mortgage-backed securities. But the very act of buying and selling these MBS’s adds to hedge cost. But wait – there’s more! There are several other factors that can contribute to increased hedge cost, including mismanaged and inaccurate loan and hedge data, inaccurate pullthrough modeling, bad or out of date pipeline assumptions, and various other operational issues that are not the fault of the old geezer running Secondary Marketing.

It helps to know what one’s margins are on your rate sheet. No LO expects their company to not price a profit into the rate sheet prices, but it is important for the calculation of hedge cost to know exactly what this profit margin is. Pricing a loan to an investor’s mandatory price and delivering it via best efforts, or visa versa, creates a pricing mismatch that is not in the “cost of hedge” category since the price spread between best efforts and mandatory is either added in or subtracted. (And this price spread varies by day, by investor, etc.) Companies know hedging costs will increase and/or secondary marketing margins will decline if loan-level data is incorrect, if loans are extended at no cost, if a loan is underwritten to one investor but then it is forced to be sold to another investor due to an underwriting oversight, locks are not entered into the tracking system, estimating pull through incorrectly, and so on.

What have some of the investors and originators been up to lately?

Chase Correspondent updated its non-agency distressed market counties. Bank of America told its correspondents to switch to using its “Disaster Area Policy” for Atoka County Oklahoma, and for 18 counties in North Carolina. (We all wish the residents, and those in Alabama, the best.)

Wells Fargo’s wholesale channel has been busy in recent weeks – and (editor’s opinion) don’t ask me how brokers can keep up with this. Wells has sent out updates on, “Appraisal Disclosure Changes for USDA Rural Development, FHA and Conventional Loans, Appraisal Orders for USDA Rural Development Loans, Requirements to Use Job Loss Insurance, an expansion of its non-conforming Debt-to-Income Ratio to 40%, an enhancement for Owner Concentration Increases for 2-Unit Condominium Projects, LTV Increases to 95% in Florida and Nevada, 3-4 unit Condominium Commercial Space Allowed to 35% in New Jersey, Compensation and Anti-Steering: Reminder – New MBFD Process and Tools & appraisal fees, an updated conventional Borrower Appraisal Disclosure Form, a WFHM/WFHE Market Classification List Update, changes to Property Insurance Loss Payee Clause, a reminder of Hazard and Flood Conditions, a reminder of the FHA MIP changes and that FHA Loans with Case Numbers Assigned on or After April 18 are not allowed with Amortization Terms of 15-years or Fewer and LTV Equal to or Less Than 78%, seven FHA Refinance Credit Policy Changes (effective on the 18^th), a note that Arkansas Amends Usury Limitations, a 3-Day Rate Lock Extension Added, notes on how to use the Pricing Calculator to Determine Compensation, Appraisal Order Functionality Change on RESDirect, on how a Workaround is Required for Accurate Annual MIP Calculations on the Broker’s First Website, HVE Expiration Date for the Freddie Mac Relief Refinance Mortgage Program, New Rules for Same-Lender Refinance Recording Tax Exemption in Fairfax County, VA, a note about Fee Validation in Blocks 3-7 and Block 8 of the GFE on Lender-Paid Transactions and a Change in Compensation Calculation for Government Loans, a reminder that Appraisal and Credit Report Invoices Required for VA Loans, Best Practices to Avoid Loan Delays, and Clarification for Properties with an Unexpired Right of Redemption. Holy smokes!

Real Estate Mortgage Network (REMN), a national mortgage lender, announced the opening of an office near San Diego, CA.

Gateway Funding (PA) rolled out a free Home Warranty & Job Loss Protection plan on select purchases. The home warranty lasts for one year, and the job loss protection plan makes the borrower’s mortgage payment for three months following a 30-day period after a job loss.

CitiMortgage reminded its correspondent clients that it performs post-purchase due diligence on a sample of loans. “Among other check-points, this process identifies defects or instances of non-compliance with investor policies, procedures, and quality expectations, and regulatory requirements.  Our post-purchase audit process includes compliance with RESPA and TILA disclosure requirements.” Citi’s bulletin goes on to provide its clients with a checklist and list of tools to help them comply with RESPA and TILA disclosure requirements.

Stearns Lending told brokers, “You are now eligible to select a flat fee option in addition to a percentage of the loan amount for your Lender Compensation.  You have a choice of zero (no flat fee), $350, $500 or $750 or $950.  The maximum income on each transaction is 4% of the loan amount which must include the flat fee.” Stearns Lending also stated that it has been notified by its investors that “we must limit our Broker Compensation Plans to one compensation rate (percentage) for all programs to our brokers. This change is effective with new locked loans and/or submitted loans starting May 7.”

GMAC released a set of additional guidance guidelines to its correspondents to determine second home eligibility, including items such as “Often located in a vacation/resort area, the property must be suitable for year-round occupancy, the subject property should not be located in the same market area as the borrower’s primary residence” and so on. GMAC also adjusted their policies on deferred student loan and timeshare debt payment underwriting.

Direct Mortgage is now allowing cash-out to 80% LTV on Super-Conforming Fixed with an LP approval. A 720 FICO, with compensating factors, is required.
Affiliated sent out a series of revisions to checklists, programs, underwriting checklists, appraiser and settlement agent lists.

Pinnacle Capital Mortgage has updated its underwriting guidelines including such areas as 2055 & 2075 appraisals are now eligible per DU findings for conforming loans, for enhanced DU Refi Plus loans allowing 2^nd homes and NOO to 125%, no limit on the number of financed properties the borrower may own, regardless of occupancy, etc., Standard DU Refi Plus, HomePath, and jumbo changes (Second Homes are now available, one full appraisal required on loan amounts <=$1mil).

It was another low-volatility day in the markets Wednesday, although 10-yr Treasury notes dropped by about .375 to a yield of 3.37%. Agency MBS prices were worse by about .125. As most expected, the Federal Open Market Committee’s statement was uneventful, as was the press conference afterward. “Information received since the Federal Open Market Committee met in March indicates that the economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually.” This is not “stop the presses!” news. The Fed will complete its $600 billion in Treasury purchases as scheduled at the end of June. Most economists are not expecting the Fed to increase overnight rates until the end of 2011 at the earliest. Finally, the statement did make its obligatory comment on housing saying “the housing sector continues to be depressed.”

Today is a new day, however, with Jobless Claims and the 2^nd reading on the 1^st quarter’s GDP number – a downgrade is expected. Later in the morning we’ll see yet another housing number, this time Pending Home Sales, and a $29 billion 7-yr note auction.

Off to New York for the MBA secondary conference!

Gallagher opened the morning newspaper and was dumbfounded to read in the obituary column that he had died.
He quickly phoned his best friend, Finney.
“Did you see the paper?” asked Gallagher. “They say I died!!”
Finney relied “Yes I saw it. Where are ye callin’ from?” 

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 2011 Rob Chrisman.  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.

MBA Calls Proposed Risk Retention Down Payment “Nearly Insurmountable” – by Elizabeth Ecker – … For mortgages overall, Cunningham said,”FHFA reports that less than one third of the loans purchased by Fannie and Freddie in 2009 would have met these requirements. This is all the more notable because 2009 was the most cautiously underwritten market in generations. … The hardest hit would be first-time homebuyers, minorities, and middle class families, for whom the down payment requirement would be nearly insurmountable.” … – Reverse Mortgage Daily

(details) Drop in Home Values Puts Pressure on Reverse Mortgage Servicers – Elizabeth Ecker – Reverse Mortgage Daily

————

Jumbo Mortgage Loan Squeeze: Will it Affect Home Prices? – Michael Shedlock – Starting October 1, the maximum loan amount from Fannie Mae and Freddie Mac will drop from $729,750 to $625,500. The correct amount is zero because government should not be in the mortgage business at all. However, this is a small step in the right direction and it will increase costs of mortgages that exceed the maximum. – MISH’S Global Economic Trend Analysis

————

(good read – 6 charts and logic) We Could Be Near a Housing Bottom – John Lounsbury – Seeking Alpha

8 Mortgage REITs That Currently Yield Above 10% – Zvi Bar – Seeking Alpha

————

Bank of America Dismissed From Countrywide Securities Lawsuit - By Edvard Pettersson – Bloomberg

————

Model of short (disclosure) mortgage form in the works – By Carter Dougherty – Bloomberg News -  Elizabeth Warren, the Obama administration adviser charged with setting up the U.S. Consumer Financial Protection Bureau, said the agency will soon release model mortgage forms that may become the basis of new regulations on home finance. … Warren has made simplification of mortgage-disclosure forms a centerpiece of her work at the new agency, which is scheduled to officially begin work in July. Warren has said that many of the forms now in use are duplicative. … – Seattle Times RE

————

FICO Can Read Underwater Homeowners’ Minds – DANIEL INDIVIGLIO – The Atlantic – Thinking about walking away from your underwater mortgage? Beware: FICO is on to you. The credit analytics firm has developed a new methodology to catch potential strategic defaulters — … What does a likely strategic defaulter look like? …
Better FICO Score (good previous credit history)
Lower utilization, less overlimit on credit card (better credit management)
Less retail balance (spend money carefully)
Shorter length of residence in property (less attachment)
More open credit in the past six months
————

‘Strategic defaulters’ pay bills on time and plan ahead, study finds – By Dina ElBoghdady – … They know their credit scores will take a hit after they fall behind on their mortgages, so they tend to open new credit cards in advance of defaulting, according to Thursday’s study, conducted by FICO … – Washington Post w/ Bloomberg

Government Related:

(cool – has links) Dodd-Frank for Dorks - … , I’ve uploaded my fancy electronic copy of Dodd-Frank here (and embedded below). By “fancy,” I mean a PDF of Dodd-Frank that has bookmarks to every title, subtitle, and section (and even some subsections) in the law; is fully tagged, so you can copy-and-paste from it without any screwy line breaks; and perhaps most importantly, scales-up the Government Printing Office’s text size (since the tiny text size and unreasonably large page margins make the GPO’s official version practically unreadable).  … – posted by Economics of Contempt

————

Jim Grant: Bernanke Has Unilaterally Added A THIRD Fed Mandate That Guarantees QE3 – Joe Weisenthal – In the latest version of his newsletter, James Grant points out that the Fed has a third, unofficial mandate, and that it explains why QE3 is much more likely than people presume right now. – Money Game at Business Insider

Economic Related:

Baby Boomer moms keep supporting grown kids? – By Barbara Liston – (Reuters) – More than half of Baby Boom-generation mothers support adult children financially and 60 percent are the go-to person when their grown kids encounter problems, according to a survey issued on Thursday

————

The New “Household” Misery Index: February 2011 – Sold at the Top – Paper Economy Blog  – … Back in the 1970s and 80s the “Misery Index” was popularized as a measure that accurately captured the misery and malaise of the time. The original Misery Index was a bit too simplistic … The Household Misery Index captures the following trends and weights them equally:
1. The U-3 unemployment rate
2. YOY percent change of the 10-Year moving average of total nonfarm payrolls
3. YOY percent change of the 10-Year moving average of “real” personal income
4. YOY percent change of the 10-year moving average of “real” S&P 500
————

Is the nation headed for a McRecovery? – By Annie Lowrey – McDonald’s named Tuesday “national hiring day.” As with everything McDonald’s, it’s all about scale. In one day, the chain hoped to add as many as 50,000 people to its payrolls; worldwide, it employs 1.7 million, runs 32,000 restaurants and serves tens of millions of burgers every day. On one hand, this is great news: 50,000 jobs! On the other hand, 50,000 McJobs? Indeed, the McHiringSpree raises the question: What kind of jobs has the recovery ginned up? – Washington Post w Bloomberg

Rob Chrisman’s Pipeline Press

Huh? Maybe Freddie and Fannie are not going to evaporate, which many in the industry were not looking forward to anyway: 

MSNBCAgencies

One servicing manager from a large institution wrote to me and said, “If you look at the delinquencies at the agencies versus the market, Freddie & Fannie are a much smaller percentage. If FNMA and Freddie ‘own’ half the mortgages, but their delinquencies are much lower than other institutions during that time period who were buying loans, what does that say?”

A security, backed by mortgages, is not a bad thing, and, if properly constructed, is a very good thing. Many will argue that the market was working well until 2002, when the residential mortgage backed security market (RMBS) began to experiment with non-traditional structures, AND non-traditional mortgages. CDO’s (collateralized debt obligations) and synthetic CDO’s were rolled out, taking pieces of higher-risk RMBS tranches and securitizing them… but we digress. The plans that the Treasury presented, focusing on the phasing out of Fannie and Freddie, may not fully consider the implications to our housing market. Lew Ranieri recently spoke out on the issue. “…why we created the mortgage security in the first place, ’cause it can’t fund housing on a balance sheet because it requires too much equity-you can do some, but you can’t do most…The government has to make a decision that all be it we want to transition to a more public market, a non-government market…In the meantime if you have the only source of current credit being the government, tight, like this, you just keep the overhang going, prices go down, more people become under water-it becomes a vicious circle…the core problems are still there, despite all the good new regulations and rules…Until the people in the chain have responsibility and will be held to those responsibilities, just like we are when we sell stocks, you won’t fix this.”

“MLOs employed by federally regulated institutions have until July 29 to become actively registered on NMLS. Even though the individual MLO is responsible to register, the employing institution must also complete a number of steps in order for the MLO to become actively registered. These steps include creating the institution’s account, submitting the Form MU1R, and confirming each MLOs’ employment within NMLS.” But is your company required to go through NMLS training? Here’s a site to find out:  NMLS

All I can do is shake my head and stare out the window. A new bill written up by a California Assembly member calls for a $20,000 fee to be charged to banks for every foreclosure they carry out in the state, with the aim being reducing foreclosures. (One would think that the goal is to make lending less attractive for lenders in California, but I’ll hold my comments.) Assembly Bill (AB) 935 would fine mortgage lenders or loan servicers $20,000 per foreclosure in the form of a “foreclosure mitigation charge,” creating incentives to offer loan modifications or refinance alternatives. The bill would supposedly generate up to $16 billion over the next two years, as nearly 800,000 foreclosures are expected in the Golden State. Someone had better tell Assemblyman Blumenfield about how changes in servicing released premiums factor into pricing for mortgages for potential new homeowners.

More reader input. “As an appraiser, I read with great interest your notes from Friday, saying, ‘One of the more troubling Realtor strategies is to threaten the business relationship with a LO if a loan does not go through, or is not on time, regardless of whether or not the loan makes sense for the buyer. (If I couldn’t do the loan) they would find another lender who would do it and they would make sure that no other Realtors used my company in the future.’ I would like to point out that up until recently, appraisers heard the same thing from LO’s everywhere: ‘If you can’t bring this in near value, we’ll find someone who can.’ Have LO’s forgotten that phrase?”

“Those thinking QRM underwriting rules are similar to GSE underwriting guidelines, need to reconsider. ‘Guidelines ‘are flexible to some extent & penalties for mistakes (buybacks) can be expensive, but rarely are. ‘Rules’ are enforced rigidly by regulators with expensive penalties, license actions, felonies, and private action. People in the industry should realize that a whole new world of mortgage credit tightening is coming.”

As most Lock Desk folks know, there was little to cheer about last week. The MBA reported that its application index dropped 5.6%, with refi’s dipping slightly, and “The seasonally adjusted Purchase Index decreased 13.6 percent to its lowest level since February 25, 2011, driven by a 26.6 percent decrease in government purchase applications.”

ING reminded brokers that, “For all Purchase Transactions, your Good Faith Estimate MUST include an estimated cost for Owner’s Title Insurance in Block 5. An amount must be provided regardless of who is selecting or paying for it.  If your GFE Block 5 is not complete, your application will not be accepted regardless of your ability to cure this charge at closing.  You may re-submit the application with a corrected GFE after 60 days.”

To the surprise of no one, the S&P Case-Shiller HPI (Home Price Index) declined 3.3% in February from a year ago on the 20-city composite, and the 10-city composite was down 2.6% YOY. From a year ago, only Washington DC reported appreciation at 2.7%, while Phoenix and Minneapolis experienced the largest declines at over 8%. 10 of the 20 cities recorded new lows. Economists believe that with already weak home values declining further, refinancing activity will remain limited and keep prepayment speeds relatively slow – a positive with much of the market trading at a premium. At the same time, while affordability holds near record highs, homebuyers may be hesitant to purchase just yet with prices still sliding lower.

Looking at the markets, things aren’t too bad, and Tuesday both stocks and bonds did well. This surprised some, given that we’re still grappling with rising oil, gold, and commodity prices, a raging deficit, and problems overseas. The 10-yr Treasury closed at 3.32%. On the mortgage side, agency MBS prices improved by about .125 – .250 and one trader commented, “High price and low yield levels have relegated REITs and banks mostly to the sidelines, while other investors were mixed. In general, hedge funds and structured desks were buying…”

This morning we learned that March Durable Goods were up 2.5% versus +.7% in February. The markets seem to believe that the highlight of Wednesday’s session will be the first ever post-FOMC press conference beginning at 2:15 EST with Chairman Bernanke discussing the Committee’s “current economic projections and to provide additional context for the FOMC’s policy decisions,” as stated in the press release. We also have a $35 billion 5-yr auction. Across the Atlantic, things don’t look so good in Greece as their 2-yr note yield climbed to 25%. Investing in that is not for the timid.And after 3 consecutive up days Treasuries are down this morning due to some profit taking: the 10-yr is at 3.35% and MBS prices are worse a smidge.

(Discretion advised; no offense intended – I thought it was clever.)

Several years ago a US Navy cruiser anchored in Mississippi for a week’s shore leave.
The first evening, the ship’s Captain received the following note from the wife of a wealthy plantation owner:
“Dear Captain, Thursday will be my daughter Melinda’s Debutante Ball. I would like you to send four well-mannered, handsome, unmarried officers in their formal dress uniforms to attend the dance. They should arrive promptly at 8:00 PM prepared for an evening of polite Southern conversation.  They should be excellent dancers, as they will be the escorts of lovely refined young ladies. One last point:  No Jews Please.”
At precisely 8:00 PM on Thursday, Melinda’s mother heard a polite rap at the door which she opened to find, in full dress uniform, four handsome, smiling Black officers.  Her mouth fell open, but pulling herself together, she stammered, “There must be some mistake.”
“No, Madam,” said the first officer.  “Captain Goldberg never makes mistakes.”

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 2011 Rob Chrisman.  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.

Banks Kept Waiting for Terms of U.S. Foreclosure Accord as States Divided – By David McLaughlin – Attorneys general negotiating the settlement of a nationwide foreclosure investigation have yet to approach banks with a proposed dollar amount that would fund principal reductions for borrowers, a state official said. – Bloomberg

Existing Home Sales in U.S. Rise on Growing Demand for Distressed Property – By Timothy R. Homan – Sales of U.S. previously owned homes rose in March as a mounting supply of properties in or near foreclosure lured investors. Purchases increased 3.7 percent to a 5.1 million annual rate, exceeding the 5 million median forecast of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed today in Washington. All-cash deals accounted for 35 percent of transactions, the most on record, the group said. – Bloomberg
————

Housing: On pace for Record Low Completions in 2011 – Bill McBride – … In 2010, 1 to 4 unit completions were at a record low 505 thousand. This was just below the 535 thousand units completed in 2009 and was far below the previous record low of 712 thousand units in 1982. 1 to 4 units completions are currently on pace for another record low in 2011 … – Calculated Risk

————

REO sells for 88% discount in California – by JON PRIOR – … Distressed home sales accounted for 51% of the California market in March, down from 56% in February but unchanged from one year ago, according to the California Association of Realtors. In March, traditional home sales sold for a median $386,500, which was 41% higher than short sales and 88% higher than the REO median price of $205,000. REO made up 31% of all sales statewide, flat from the month before and one year ago. Short sales stayed at 20% as well. … – Housingwire

————

(12 pages excellent) Foreclosure Price Discounts – April 2011 Quarterly Report - …  In the market-value based foreclosure discount calculation, a distressed property’s foreclosure-sale price is compared to its underlying market value—the price the seller would receive if it were sold under normal, non-distressed conditions.  The extent to which foreclosure sales are priced below underlying intrinsic value underscores the impact of foreclosures on property and neighborhood conditions as well as market illiquidity of the distressed housing sector.Prior to this, precise industry data on price discounts pertaining to foreclosure sales has been non-existent. … hattip Ira Artman – FNC Residential Price Index

————

(major Taylor Bean article) Once Is Never – William Black – I can no longer say that not a single senior executive of one of the major nonprime lenders whose frauds hyper-inflated the housing bubble and caused the Great Recession has been convicted of his frauds. A single senior executive of one of the hundreds of fraudulent nonprime lenders was convicted yesterday, April 19, 2011. A jury found Lee Farkas, Chairman of the Board of Taylor, Bean & Whitaker (TBW), guilty of fraud. – Huffpost Business

————

After Years of Red Flags, a Conviction – By FLOYD NORRIS - In 2002, when Lee B. Farkas was running a relatively small mortgage company, it got caught selling eight fraudulent mortgages to Fannie Mae. To make things even worse, the mortgages — all of which defaulted without a single payment being made — listed Mr. Farkas as the borrower. But Mr. Farkas scrambled, and Taylor Bean survived to commit more frauds. This week, Mr. Farkas, 58, was convicted of 14 counts of fraud and conspiracy in what had become a $2.9 billion scandal. – NY Times

Geithner Downgrades His Own Credibility to Junk: Jonathan Weil – Fox Business reporter Peter Barnes began his televised interview with Treasury Secretary Tim Geithner two days ago with this question: “Is there a risk that the United States could lose its AAA credit rating? Yes or no?” Geithner’s response: “No risk of that.” – Bloomberg Businessweek

————

(De-fang?) Wall Street, Banks Press to Shape Dodd-Frank Rules – By VICTORIA MCGRANE – Wall Street and the financial industry spent more to lobby Washington in the first quarter of this year than a year ago when Congress was writing sweeping financial-overhaul legislation, according to a Wall Street Journal review of lobbying reports released Thursday. The law, known as Dodd-Frank, was adopted nine months ago but banks, credit unions, investment firms and their trade groups now are trying to shape how it is put into practice. – WSJ Business

————

Party Like It’s 1937 – by Randall Forsyth – Dueling deficit-cutting plans, plus end of QE2, raise risk of premature withdrawal of stimulus. St. Augustine, let us pray. Just as the U.S. economy is emerging from a severe contraction caused by a credit crisis, there are pressures to tighten both fiscal and monetary policies in order to rein in an excessive budget deficit and stave off nascent inflation. Sound familiar? It should, because that is precisely what happened in 1937 – Barrons – Yahoo Finance

————

Bernanke Briefings May Offset Fed Hawks With Words as New Tool – By Joshua Zumbrun – When Federal Reserve Chairman Ben S. Bernanke convenes his first press conference next week, he may emphasize a point the markets seem to have forgotten: He’s serious about keeping interest rates low for an "extended period." – Bloomberg

House Republicans Move to Push Derivatives Rules to 2012 – By Phil Mattingly and Silla Brush – …The legislation introduced today would line up the timing with the Group of 20 finance ministers’ agreement that reform must be implemented by December 2012. … – Bloomberg

————

The Fed’s Newest Tool Is Bernanke’s Voice – DANIEL INDIVIGLIO – Next week, the Federal Reserve will do something unprecedented: it will explain what its monthly monetary policy statement actually means. Fed Chair Ben Bernanke will hold a press conference after the meeting concludes. Some think this will result in greater transparency. But the new feature will more likely simply clarify the Fed’s stance, not add much additional information. - The Atlantic

————

Bank Of America Analyst Advocates The "Unthinkable" — An Intentional Default On US Debt - Joe Weisenthal -  We continue to be astounded by the emergence of the pro-default meme within financial circles. Previously it was Chris Whalen and Dean Baker taking the stance that the US could default with minimal negative ramifications. Now it’s someone at a major bank: BofA’s credit strategist Jeffrey Rosenberg, whose note from Friday is titled The Case For Default (via @dutch_book). – Money Game at Business Insider