Nom de Plumber is a Nom de Plume.

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Regulator-mandated model controls are now so broadly stringent…..perhaps suppressing helpful cost-benefit trade-offs, independent ad-hoc judgment, or market practicality.

Until recent prescriptives, the validation scope would be only those models whose outputs
feed directly into reports for external constituents (regulators, auditors, investors, lenders).  If the front or back office built a model for discretionary and strictly internal analysis, but not mandatory for outside financial representations, it would not warrant validation. 
Model governance had rested on one key criterion: material relevance to accurate, transparent disclosure.

This boundary line of reasonableness has been erased, or at least greatly blurred.  Virtually every model must now validated.  This expanded compliance burden can inadvertently discourage the creative, trial-and-error analytical exploration which fosters innovation, growth, productivity, and even prudent risk management.  

Think of those on-the-fly models which some risk managers had urgently created for:

1. Restricting the ABS CDO warehouse in 2007 at one whale-sized bank, which then largely avoided 2008 ABS CDO losses
2. Alerting top management at one UK bank in 2007 about excessive super-senior credit exposure, before its 2008 collapse
3. Analyzing the risks and optimal workouts of complex Maiden Lane assets.

In this new world of model governance, none of them would have been allowed for critical immediate decision-making until formally validated beforehand, ironically putting institutions at more, not less, risk. 
 
Thank you.  

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How convenient for the politicians. The rate that Fannie and Freddie, now making money, are paying back the government, the $190 billion bailout will be paid back in no time. Fannie’s unexpectedly large payment to the Treasury gives politicians until Labor Day to avoid solving the sequester and budget problems. Check out the following 3 stories. The logjam lives on!  BC

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Lew Says Fannie Mae Delays U.S. Debt Limit Until September (2) – By Jennifer Ryan – U.S. Treasury Secretary Jacob J. Lew said a one-time payment from Fannie Mae confirms that the nation’s debt ceiling won’t be reached until September. “The one-time payment that Fannie Mae has announced makes it very clear that we’re not going to hit the effective deadline until at least Labor Day,” … Fannie Mae, … said yesterday it will pay the Treasury $59.4 billion after reporting a record quarterly profit driven by rising home prices and declining delinquencies. – Businessweek

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Lew says Fannie Mae payment helps delay debt limit until Labor Day – By Jim Puzzanghera – A nearly $60-billion dividend payment to the government by taxpayer-owned Fannie Mae will help push off the effective date on which the U.S. would hit its debt limit until at least Labor Day, Treasury Secretary Jacob J. Lew said Friday. – LA Times

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Fannie, Freddie, Zombie - By JIM MCTAGUE - The two profitable mortgage outfits will be the walking dead if the government takes their profits for another 10 years. An IPO? – Here’s the financial equivalent of the popular Twilight vampire franchise: Politicians are sucking the blood out of resurgent mortgage guarantors Fannie Mae and Freddie Mac rather than returning them in good health to the private sector, where they belong. Washington is using their money in its budget-cap games, leaving the duo in a state of perpetual weakness, like the living dead, imprisoned in the government’s ill-named “conservatorship” program. – Barron’s

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TIMESTAMP: Bill Gross Calls The Moment The Great Bond Bull Market Ended – Matthew Boesler    – PIMCO bond investing legend Bill Gross has called the end of the 30-year secular bull market in bonds in a tweet this morning. Gross: The secular 30-yr bull market in bonds likely ended 4/29/2013. – Business Insider 

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(seller’s market = mortgage contingencies gone) When a High Bid Isn’t Enough - The New York Times – By LISA PREVOST – In a housing market starved for inventory, buyers are stepping over one another to bid on desirable properties. But a high bid may not be enough — sellers are also seeking offers without mortgage contingencies. – NY Times

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What Every Servicer Is Going to Need to Know – National Mortgage News  – When you speak to servicers nowadays, the number one concern many companies are battling right now is complying with new industry regulations. 
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(no surprise) Tight Lending, Foreclosures to Prompt Homeownership Declines - BY: KRISTA FRANKS BROCK – With the homeownership rate already at its lowest point since 1995, Capital Economics predicts further decline before a rebound occurs. – DS News

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Institutional Investor Trends in Atlanta and Their Impact on Housing – BY: ESTHER CHO – In a recent report, Radar Logic closely examined purchase trends and patterns from institutional investors in the Atlanta area. Among its findings, the research firm found investors have been targeting a different cross-section of homes compared to traditional buyers – DS News 
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Loan underwriters make ‘absurd’ demands in effort to verify data - By Lew Sichelman – People trying to get mortgages should be ready for anything. One borrower out of school for several years was asked to produce his high school transcript. – LA Times 
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N.Y. Plans Homeowner Enforcement Against Financial Firms - By David McLaughlin – New York Attorney General Eric Schneiderman said he will announce new enforcement actions against major financial institutions as part of his effort to “protect New York homeowners” after calling the first such lawsuit last year a “template” for future litigation. – Bloomberg 
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Rating Firms Hold Back Mortgage-Bond Revival, Credit Suisse Says – By Jody Shenn – (Bloomberg) – Credit-rating companies damaged the revival in sales of U.S. home-loan bonds without government backing by issuing reports questioning a potential loosening of the debt’s contract terms, according to Peter Sack, a managing director at Credit Suisse Group AG.

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LPS: New Problem Loans at Lowest Rate in 6 Years; Negative Equity Drops – by Bill McBride – Calculated Risk 
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Phil Hall runs his own website called Business-Superstar and just published this profile of Chris Sorensen, executive director of the Homeonwer Education Learning Program. Take a look:

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This Is No Time to Reduce FHA’s Market Share – Brian Chappelle – American Banker BankThink

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What would Watt do as the new head of the GSEs? – OC Housing News – … So what will Representative Mel Watt do if he is put in charge of the GSEs? Will he make it a den of thieves by reducing principal on mortgages for constituents on the political left? Will he overthrow the tables of the moneychangers and shut down the GSEs? The only thing we can tell from his public statements is that he plans to keep everyone in the dark until he gets the job. … 
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Fewer than 1% of new loans troubled – By Kerri Ann Panchuk – … Borrowers who are 50% underwater, or carrying LTVs of 150% or higher, default at a rate that is five times the national average, while those with equity outperform the national average exhibiting a problem loan rate of just 0.6%—on par with pre-crisis levels.  … – Housingwire

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(Dave Stevens has many good points) MBA: ‘We Need These Three Things From Washington’ – by Michael Bates – MortgageOrb 
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(read all of this) Hugely Negative Real Interest Rates Fuel Yet Another Housing Bubble; A Word About “Inflation” and Treasury Yields - Mike Shedlock – MISH’S Global Economic Trend Analysis  –
… The BLS determines OER from a measure of actual rental prices and also by asking homeowners the question “If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?” If you find that preposterous, I am sure you are not the only one. Regardless, rental prices are simply not a valid measure of home prices … 
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NEXT 5: RENTALS or VEGAS RELATED

(has data) What Happens to the Housing Market When the Investors Leave? – By ROBERT DIETZ – US News 
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Las Vegas Housing: 8% Of Single Family Homes Vacant, Yet New Construction Permits Up 50% – Submitted by Tyler Durden – Zero Hedge 
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Lawler: Las Vegas Absentee Buyer Share Up Despite Plunge in “Distressed” Sales – by Bill McBride – … If one’s preferred metric is either non-foreclosure or “non-distressed” sales, however, then the Vegas market looked “sizzling,” … The reason, of course, is that while foreclosure sales plunged and short sales were little changed, absentee buyers dramatically increased their purchases of non-foreclosure (and to a lesser extent non-distressed) properties. … – Calculated Risk  
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Special Report: Cheap money bankrolls Wall Street’s bet on housing - By Matthew Goldstein – (Reuters report) – Michael Marchillo, a plumber, has been trying and failing for months to buy a bigger home for his family here in Sin City. He was pre-qualified by a bank for a $130,000 mortgage, which a year ago … Now, the 36-year-old says, it’s hard to compete with “greedy investors” who come to the table flush with cash for quick deals. …

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(map and text) Across The Country, Renters Are Getting Crushed By Housing Costs – Mandi Woodruff -  – Business Insider -“While rental costs have steadily risen over the last few years, wages for these working families have not fully recovered from the hit they took between 2008 and 2009. Spending most of your paycheck on rent means cutting back on other necessities, including health care and even food.”
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OTHER NEWS:

(history) How 30-Year Mortgages Saved the Housing Market – By Louis Hyman – Bloomberg

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GUNDLACH: Interest Rates Will Stay Low — The Economy Is Too Weak For The Fed To Ease Off The Gas Pedal- Joe Weisenthal – Business Insider
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Republicans want comprehensive housing plan along with new FHFA chief – By Vicki Needham and Peter Schroeder – The Hill
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The current status of foreclosure activity: Pre-foreclosures up 200,000+ from one year ago and examining inflation in regards to housing prices. – Dr. Housing Bubble – … The low supply has definitely pushed prices higher.  What is interesting is the jump in pre-foreclosures.  Part of this has to do with moratoriums that occurred over the last few years in a handful of states.  It looks like banks are now deciding to move on more properties given that the market is now prime for this.  Low supply and higher prices will make it a more lucrative venture to move on some of the pending foreclosures. … 
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(Mauldin’s sandpile instability update) MAULDIN: Bernanke And Friends Are Setting The Stage For An Avalanche -
John Mauldin, Thoughts From The Frontline – Business Insider 
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(on QE unwind) Buffett worries about Fed’s ‘huge experiment’ – By Stephen Gandel – Says he admires Ben Bernanke, but thinks the Fed chief may have overplayed his hand. – FORTUNE — Warren Buffett has a piece of advice for Ben Bernanke: It’s easier to buy than it is to sell.

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(gov’t payback time) Freddie Mac posts second largest income to date – By Kerri Ann Panchuk – Freddie Mac posted first-quarter net income of $4.6 billion Wednesday morning, up slightly from $4.5 billion in the fourth quarter of 2012 and the second largest profit in the enterprise’s history. – Housingwire
and
Freddie Mac on Q1: $4.6 Billion Net Income, No Treasury Draw, REO Declines – by Bill McBride – Calculated Risk
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Federal judge questions constitutionality of Colorado foreclosure law - By David Migoya – The Denver Post – … U.S. District Judge William Martinez issued a preliminary injunction against the sale … until the judge can decide whether parts of state law are unfair to homeowners facing the loss of their house. At issue is a provision in state law that allows lawyers to assert that their client, typically a bank, has the right to foreclose on a property even though they might not have the original mortgage paperwork to prove it.

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(HAMP: has link to report) CBO Releases Report re GSE Principal Reduction Plan - On May 1, the Congressional Budget Office (CBO) released a report entitled, “Modifying Mortgages Involving Fannie Mae and Freddie Mac: Options for Principal Forgiveness, – American Securitization Forum
also this summary of report
CBO Report Finds GSEs Responsible for 13 Percent of Underwater Borrowers – Robert Ottone – National Mortgage Professional 
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HARP Share of Mortgage Market Moves Up to 34 Percent – Southern Daily Press – Mortgage refinance applications filed under the Obama administration’s Home Affordable Refinance Program’s guidelines took up a 34 percent share of the mortgage market last week, up from the previous week’s 32 percent figure. This is the highest percentage of HARP mortgages since this statistic was first tracked more than a year ago. In terms of loan-to-value ratios, borrowers with an LTV of over 105 percent took up 47 percent of all HARP mortgages. 
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This accounting tweak by Fannie Mae and Freddie Mac will mean $60 billion for the U.S. government – by Steven Pearlstein – …  Business is so good, … auditors have decided that those deferred tax assets might not be worthless after all. … next week, Wonkblog has learned that the companies are likely to unwind some of those earlier write-downs of “deferred tax assets,” resulting in a one-time boost to earnings of as much as $60 billion. … – Washington Post

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(Ed Pinto) Next home $ crisis – Feds prop market - by JOHN AIDAN BYRNE – The seeds of the next housing crisis are being sown this spring, according to a former chief credit officer at Fannie Mae – NY Post

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Fixing manufactured housing - Sober Look Blog – One of the casualties of the sub-prime crisis in the US has been the manufactured housing sector. … Part of the reason the manufactured housing sector failed to make even a modest comeback has been the Dodd Frank regulation. Mortgages on these homes have been viewed as “predatory” because of their high rate and small size. … U.S. Representative Stephen Fincher introduced the Preserving Access to Manufactured Housing Act … 
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(top 25) RealtyTrac: Where to Find the Biggest Flipping Profits – BY: ESTHER CHO – DS News – … The online foreclosure marketplace found flippers in Orlando, Florida averaged the highest gross profit at 63 percent. The average purchase price in the area was $103,701 in 2012, while the average flipped price was $168,677. Las Vegas came in second, where flippers saw a gross profit of 53 percent last year. Phoenix, a metro known for its rapid price gains over the last year, pulled in a gross profit of 44 percent, putting it at third.  … 
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Did the Community Reinvestment Act Lead to Risky Lending? - …  (NBER Working Paper No. 18609 , Sumit Agarwal, Efraim Benmelech, Nittai Bergman, and Amit Seru trace the effect of the CRA on both the quality and the quantity of mortgages originated … They compare the lending behavior of banks undergoing CRA exams within a given census tract in a given month (the treatment group) to the behavior of banks operating in the same census tract-month that did not face these exams (the control group). This comparison clearly indicates that adherence to the CRA led to riskier lending by banks …   – hattip Ira Artman
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Nevada lawmakers push for local Homeowner Bill of Rights – By Kerri Ann Panchuk – Housingwire 
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HUD to sell 40,000 distressed loans in 2013 – By Megan Hopkins – Housingwire 
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(about Silver Bay) Chicken to Buy Foreclosed Homes? REIT Does It – BY CARLA FRIED – Ycharts.com

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The BLS Jobs Report Covering April 2013: Lowest Labor Force Participation since 1978/9, weekly hours and wages down – By Hugh, who is a long-time commenter at Naked Capitalism. – 3 big reasons 

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HUGE DEAL FOR GSEs!

Fannie Mae Regulator Restricts Purchases to Qualified Mortgages – By Gregory Mott – Fannie Mae (FNMA) and Freddie Mac are being asked by their regulator to limit purchases to loans meeting qualified-mortgage requirements and those exempt from Dodd-Frank Act ability-to-repay rules.
The change announced today by the Federal Housing Finance Agency means that beginning Jan. 10 next year, the U.S.-owned companies won’t purchase interest-only mortgages, loans with 40- year terms or those with points and fees exceeding thresholds set by the Consumer Financial Protection Bureau (3 points). – Bloomberg 
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Underwater Mortgages Drop to 9 Million as Home Prices Rise: Report - BY Shanthi Bharatwaj| – (TheStreet) — Rising home prices are helping pull more distressed borrowers from out of the water, according to the March Mortgage Monitor Report from Lender Processing Services(LPS). The number of underwater borrowers — those who owed more than their homes were worth — fell 41% from a year earlier. In total, 9 million borrowers or 18% of active mortgages were underwater at the end of March. 
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(disappointed with HAMP) It’s Business As Usual When It Comes to Foreclosure – Richard Zombeck – Huffington Post
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Fannie Mae, Freddie Mac: Mortgage Serious Delinquency rates declined in March - by Bill McBride – Calculated Risk 
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(here we go again) Miami’s Condo Market Rebounds, Stoking a Building Boom - By TERRY PRISTIN – Of the 22,000 condos created in downtown Miami during the boom years, only about 600 remain unsold — thanks mainly to an influx of Latin American investors seeking a safe haven for their money. – NY Times 
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As Jobs Lag, Fed Is Viewed as Unlikely to Do More – By BINYAMIN APPELBAUM – NY Times 
vs.
Fed May Shift Talks Toward More Stimulus, El-Erian Says – By Susanne Walker – Bloomberg

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Baby Boomers Plagued by Mortgage Debt as They Enter Retirement – BY: KRISTA FRANKS BROCK – DS News 
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(3 charts) Housing Prices Continue To Firm – Calafia Beach Pundit – Seeking Alpha
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Mortgage Originators Say Regulation will be Biggest Challenge of 2013—By Far – by Jason Oliva – Reverse Mortgage Daily 
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(4 ways the government steals from you) PIMCO INVESTMENT OUTLOOK – There Will Be Haircuts – William H. Gross 
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(not light reading but important) Desperately Seeking $11.2 Trillion In Collateral, Or How “Modern Money” Really Works – Submitted by Tyler Durden – Zero Hedge 
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CoreLogic: Year-Over-Year Foreclosure Inventory Numbers Down Substantially – … there were 55,000 completed foreclosures in the U.S. in March 2013, down from 66,000 in March 2012: a year-over-year decrease of 16%. … “In March, completed foreclosures were down 52 percent from the peak in 2010, and almost all of the top 100 major metropolitan areas have declining foreclosure rates,” says Dr. Mark Fleming, … – MortgageOrb 
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S&P Predicts 20% Drop in Spain’s Housing Prices Over Next 4 Years; Bad Bank to Dump Distressed Properties on Market – Mike Shedlock – MISH’S Global Economic Trend Analysis 
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Report: More than 1 in 4 Working Renters Face Severe Housing Costs – BY: ESTHER CHO – According to the annual Housing Landscape report from the Center for Housing Policy (CHP), 26.4 percent of working renters spent more than half of their household income on housing costs in 2011. The share is an increase from 2008 when 22.8 percent of working renters had a severe housing cost burden. – DS News

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Phil Hall has been sighted: Mel Watt: The Wrong Man For The FHFA Job - BY PHIL HALL – Progress in Lending

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Fun – nothing to do with mortgages: NO NEED FOR A CORKSCREW – How do you open a bottle of wine without a corkscrew? Well, it’s actually simple. You just need your shoe and a hard surface. No, really. This works. – hattip Kim Komando 
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(details) Snowball effect: Shared appreciation bill fuels FHFA nomination – By Christina Mlynski – Housingwire 
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Pew: Impact of Mortgage Interest Tax Deduction Varies Geographically – BY: KRISTA FRANKS BROCK – DS News 
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How luxury homeowners dodge foreclosure – Owners of high-end properties who fall into financial trouble have more options than others. – By AnnaMaria Andriotis of MarketWatch – MSN.com 

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Large down payments provide stability to the housing market – OC Housing News 
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(rentals mentioned) U.S. Homeownership Rate Falls to Lowest Since 1995 – By Prashant Gopal & John Gittelsohn – … was 65 percent in the first quarter, down from 65.4 percent a year earlier and the lowest level since the third quarter of 1995, the Census Bureau reported … – Bloomberg 
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Bubble Symmetry and Housing – Charles Hugh Smith – If bubbles eventually revert to their starting level, Phase 3–capitulation and a return to pre-bubble prices–still lies head for the housing market. – Of Two Minds 
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Is Bernanke Preparing to Jump Ship? - Submitted by Phoenix Capital Research – … Ben Bernanke has announced he won’t be attending this year’s Jackson Hole meeting. A Jackson Hole meeting without the Fed Chairman is like having a performance of Hamlet without Hamlet himself in it. … – Zero Hedge 
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Home prices in gold ounces chart – Chart of the Day 
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The drawn out impact of quantitative easing on real estate: Japanese real estate continues to struggle while Bank of Japan expands monetary base. Federal Reserve and Americans style quantitative easing. – Dr. Housing Bubble – … Housing prices have moved up because of three major reasons; investor demand, low supply, and historically low interest rates.  Each one of these reasons can be traced to the Fed either directly or indirectly.  Can an aggressive central bank with a low rate environment re-inflate asset prices? …
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Here We Go Again – Builders Hold Lotteries for Right to Buy a House – Mike Shedlock –
MISH’S Global Economic Trend Analysis 
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Home Prices Growing At Pre-Bubble Rates On Bernanke Boost, But Big Shadow Inventory Lurks – Agustino Fontevecchia, Forbes 
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(DeMarco replacement) Obama Said to Choose Watt to Lead Fannie Mae Regulator – By Cheyenne Hopkins & Clea Benson – Housing industry officials expect President Barack Obama to nominate Representative Mel Watt, a Democrat from North Carolina, as director of the federal Housing Finance Agency as early as today, according to three people briefed on the matter. – Bloomberg

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