PMI, RMIC, USB changes; Does Heather Locklear have a pick-a-pay mortgage?

September 29th, 2008 · No Comments


Forget all the news about the bailout, and about Citi/Wachovia! More importantly, Heather Locklear was arrested! Rumors of thousands of men lined up to post bail are probably exaggerated.  Obviously this mortgage crisis is proving too much for her.

Why stay put when you can “clean your hands” of this whole mess? Here is what’s being thrown at the public at 

Remember all those sketchy loans that you sent to either World Savings or Wachovia? (“They’ll do anything…”) Now they are CitiMortgage’s headache – supposedly 73% of Wachovia’s loan holdings are “pick-a-pay” mortgages. Assisted by the FDIC, Citigroup will buy the banking operations of Wachovia, and depositors will be fully protected and no cost to the Deposit Insurance Fund is expected. “Wachovia did not fail; rather, it is to be acquired by Citigroup Inc on an open bank basis with assistance from the FDIC,” a statement on the FDIC’s website said. Shares of Wachovia are now below $2 per share although Citibank shares are up. Citigroup will buy the bulk of Wachovia, including five depository institutions, and assume its senior and subordinated debt. Wachovia will retain ownership of its retail brokerage unit, AG Edwards, and its assets-management division, Evergreen.

Congressional leaders reached an agreement on the $700 billion rescue plan for the financial industry, although Congress needs to vote on it, and then send it to President Bush for his signature. The plan will give the Treasury access to $250 billion and the ability to purchase a wide range of assets the Treasury deems “troubled,” the ability to buy assets from banks (including non-US banks) affected by the crisis, and eventual access to $700 billion.

Treasury prices are up (better) this morning, although there continues to be a squeeze on short term money between banks. (The 3-month LIBOR rate has soared by nearly 80bps over the past 2 weeks to a 9-month high of 3.77%, last Thursday, and eased 1bp to 3.76% on Friday.) For scheduled economic news, consumer spending was unchanged during August despite incomes from wages and salaries and all other sources being up 0.5 percent in August. Does anyone pay attention to scheduled economic releases anymore? Tomorrow is the Chicago Purchasing Manager’s Survey and Consumer Confidence. Not much on Wednesday, Thursday Factory Orders and the usual Jobless Claims, but then on Friday we’ll see the unemployment data. With all of the news this morning, mortgage prices are better by about .250-.375 and the 10-yr is down to 3.75%

PMI made the following guideline changes effective October 10, 2008: Investment properties are no longer eligible for insurance, regardless of the AUS approval, and Debt-to-Income (DTI) qualifying ratios will be updated (45% DTI for manual underwrite, Loan Prospector®, custom or proprietary AUS; 55% DTI for Desktop Underwriter® Version 7.0.) PMI did, however, state that a higher DTI may be appropriate for loans that are manually underwritten or that receive an LP, custom or proprietary AUS decision. We may allow a DTI ratio higher than 45%, not to exceed 55%, when the loan has certain compensating factors.

US Bank correspondent division made a series of changes, effective October 1, 2008. These impacted their LTV and TLTV (CLTV), FICO’s, etc. In addition, for their “Declining Markets” policy, if the subject property is located in AZ, CA, FL, MI or NV the LTV and or TLTV/HTLTV must be reduced by an additional 5%.

RMIC weighed in with several insurance changes. Effective November 1, loans with LTV/CLTVs of 95.01% to 97% may only be originated through a lender’s retail channels (i.e., broker originated and wholesale loans are ineligible).  In order to be considered a retail loan, the loan must be closed and the MI ordered in the name of the originating lender, by that lender’s personnel.  The minimum representative FICO required for insurance on loans over 95% LTV/CLTV will remain 720 as stated in the August 27, 2008 release notes. In addition, loans on investment properties and cash out refi’s will no longer be eligible for coverage. All loans with A-Minus pricing (including all loans with FICOs below 660 and loans with DU 7.0 Expanded Approval recommendations) will be limited to a maximum allowable debt-to-income (DTI) ratio of 45%. Loans on second homes will require a minimum loan representative FICO score of 720, and be limited to a maximum LTV/CLTV of 90%.

Morris, an 82 year-old man in Miami, went to the doctor at the local Medical Clinic to get a physical. A few days later the doctor saw Morris walking down the street with a gorgeous young woman on his arm.

A couple of days later the doctor spoke to Morris and said, “You’re really doing great, aren’t you?”

Morris replied, “Just doing what you said, Doc: ‘Get a hot mamma’ and ‘be cheerful.’”

To which doctor said, “I didn’t say that, Morris. I said, ‘You’ve got a heart murmur, be careful!’”

Tags: Commentary · Mortgage Market

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