Over the weekend I was in the express lane at the store quietly fuming. Completely ignoring the sign, the woman ahead of me had slipped into the express check-out line pushing a cart piled high with groceries. Imagine my delight when the cashier beckoned the woman to come forward looked into the cart and asked sweetly, “So which ten items would you like to buy?”

Speaking of buying things, it is not difficult to lose track of who is buying what these days. And I had forgotten which investors are accepting delivery of DU Refi Plus loans on the Temporary High Cost/balance limits (loans from $625,500 – $729,750). It turns out that many investors will buy them. In no particular order, this should give you a feel for what is out there. (Please note that I am not an underwriter, I tried to include major investors, any errors or omissions are purely accidental, and I welcome corrections or additions.)

Chase will buy them: high balance loans are eligible under the DU Refi Plus program (with the caveat that all DU Refi Plus loans must be Chase or WaMu serviced).

Wells Fargo Correspondent buys them with certain overlays.

GMAC will buy them. (GMAC will buy them from correspondents with an “accept” – High and Temp, and as of today allows DU Refi Plus with new MI. GMAC rolled out the DU REFI Plus with no MI in late April to correspondents and then added the DU REFI Plus with no MI with HERA/ARRA in mid-May.)

Bank of America Home Loan buys them, but sellers won’t receive an “approved/eligible” in underwriting – with the new temporary high balances they will receive “approved/ineligible” until DU is updated. Therefore they will take Approved Ineligible high balance if DU Refi Plus provided the only reason for ineligibility is the loan amount. On the new temporary high balance DURPs loans, DU is not returning a useful MI condition, so as a result MI waivers normally given on DURPs may not be available today.

Flagstar buys them.

SunTrust buys them.

AmTrust will buy them using standard Fannie guidelines.

CitiMortgage – yes and no. The picture is not quite clear, so check with your rep.

Franklin American buys high balance Freddie loans, but not DU Refi Plus. Their April announcement on DU Refi Plus stated that they had not yet determined whether FAMC will participate in any of the “Making Home Affordable” programs announced by the Department of the Treasury.

Will higher rates help the housing market? Of course not and of course this puts the Fed in a difficult position since they can’t stimulate their way out of this problem with trillions of dollars in borrowing and keep rates low by buying those same securities. The yield on the 10-yr has gone from 2.14% in the last 3-4 months to today’s 3.85%+ level, and rates on 30-yr conforming loans have gone from about 4.75% up to around 5.375% during the same time period. And newspapers are being quick to point out the costs to homeowners: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/06/06/REHB1807P8.DTL

Fraud in mortgage banking! Shocking. In San Antonio , Texas , a man who conned mortgage lenders out of $1 million has been sentenced to more than six years in prison. 60-year-old Fred DeGuzman pled guilty and was sentenced to 75 months in prison and ordered him to repay $1.67 million in restitution for crimes committed in 2007. He and his wife admitted convincing property owners to inflate the sale prices of their homes, and then used fake identity, employment and asset documents to obtain mortgages at inflated amounts. On closing, they pocketed all or most of the difference. After making one or two mortgage payments, they allowed the mortgages to go into default. But this is only one story out of dozens. If you want more, check out http://www.mortgagefraud.org/

Aren’t you happy that there is little in the way of economic news due out today and tomorrow? On Wednesday we have the Trade Balance figures (not typically market-moving), and the Beige Book (which can move rates since it provides information about what the Fed is seeing in the various economic regions). On Thursday we have Retail Sales for May (expected -.4%), along with Jobless Claims and Business Inventories. And on Friday we have Import & Export Prices and the Michigan Consumer Sentiment Survey. And of course we have the issue of the Treasury auctioning off several billion in debt this week: $35 billion in 3-yr’s, $19 billion in 10-yr’s, and $11 billion in 30-yr’s. The 10-yr Treasury checks in this morning at 3.82%, and mortgages are waffling around unchanged.

A couple in their nineties are both having problems remembering things. During a checkup, the doctor tells them that they’re physically okay, but they might want to start writing things down to help them remember.

Later that night, while watching TV, the old man gets up from his chair. “Want anything while I’m in the kitchen?” he asks.

“Will you get me a bowl of ice cream?”

“Sure.”

“Don’t you think you should write it down so you can remember it?” she asks.

“No, I can remember it.”

“Well, I’d like some strawberries on top, too. Maybe you should write it down, so’s not to forget it?”

He says, “I can remember that. You want a bowl of ice cream with strawberries.”

“I’d also like whipped cream. I’m certain you’ll forget that, write it down?” she asks.

Irritated, he says, “I don’t need to write it down, I can remember it! Ice cream with strawberries and whipped cream – I got it, for goodness sake!”

Then he toddles into the kitchen. After about 20 minutes, the old man returns from the kitchen and hands his wife a plate of bacon and eggs.

She stares at the plate for a moment. “Where’s my toast?”

Rob

(For archived commentaries, check www.robchrisman.com,

or to subscribe write to rchrisman@robchrisman.com)

 Posted by: Jonathan Foxx

From CAMELS to CORE™

     For thirty years, a supervisory risk rating has been used by federal regulators to evaluate the overall condition of the country’s banks. The Uniform Financial Institutions Rating System (UFIRS), adopted by the Federal Financial Institutions Examination Council (FFIEC) on November 13, 1979, set forth the rating system that provided a unique and methodical way to determine bank stability.

     Under the UFIRS a bank is assigned ratings based on performance in the following five areas: Capital Adequacy, Asset Quality, Management Capability, Earnings, and Liquidity. Given the acronym CAMEL, this system has been used ever since by federal supervisory agencies to evaluate the safety and soundness of a banking institution. In January 1997, the FRB revised the UFIRS by adding a sixth component for Sensitivity to Market Risk. This CAMELS rating system provides a composite of a bank’s condition and overall performance, and it has been adopted by many countries, including, of course, Hong Kong.

The Core™ is the Cure

     However, no similar rating system has ever been devised or federally mandated for entities that originate residential mortgage loans. If such a system were in place, standardizing all findings, the regulatory and state licensing agencies as well as the public would be assured of the kind of oversight that will serve to strengthen the mortgage industry and consumer confidence.

       In 2007 we developed a risk rating system to evaluate the safety and soundness of loan originating entities. Called the CORE Compliance Matrix™, our procedures assess four critical components and five composite ratings that must be considered when evaluating the safety and soundness of an entity originating residential mortgage loans. We evaluate a company’s Compliance Program, Organizational Structure, Regulatory Risks, and Enforcement Strategies.

     Our methodology uses the acronym CORE™.

     The CORE™ review findings are derived through the risk rating protocols of our CORE Compliance Matrix™.

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About the Author: Jonathan Foxx is the President and Managing Director of Lenders Compliance Group, a risk management firm specializing in all areas of mortgage and lending regulatory compliance.