MBA on QM, Delinquencies Fall, Underwriting Tightens, Short Sales, HUD is Watching, Asking Ben, Boomers and Home Equity, Homebuilders, Favored FHA, FNMA Sees QE3 End, Wells Mods, Mortgage Settlement, FBR on Originators, RWT, Back to the 90’s, Private Reps

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MBA recommends (several) changes to qualified mortgage – By Christina Mlynski – The Mortgage Bankers Association issued a letter to the Consumer Finance Protection Bureau advising the agency of ways to improve the ability-to-repay standard among aspects being drafted in the qualified mortgage rule. – Housingwire

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Seriously Delinquent U.S. Mortgages Fall to Four-Year Low – By John Gittelsohn  – Bloomberg
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Mortgage lending standards continue to tighten – OC Housing News

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The Short Sale Process: How To Avoid Delays – (5 items) – by Mike Wheatley – We’re seeing a rising number of short sales this year, a trend that’s set to increase as we run through the summer. – Realty Biz News 
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HUD: Following Mortgage Settlement, We’re Watching Banks Like Hawks – by Elizabeth Ecker – Reverse Mortgage Daily
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(will he?) House Subcommittee on Economic Growth Demands Answers From Bernanke on Fed’s Exit Strategy; Fed Must Reply by March 5 – Mike Shedlock – MISH’S Global Economic Trend Analysis
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(uh-oh house prices better rise) Half Of Boomers Now Say Home Equity is In The Cards for Retirement – by Jason Oliva – Reverse Mortgage Daily 
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(Pulte and others) A Phoenix Housing Boom Forms, in Hint of U.S. Recovery – By Susan Berfield – Businessweek 
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FHA May Get Most-Favored Status – By Brian Collins and Mark Fogarty – WE’RE HEARING that a new housing reform proposal developed by a private bipartisan commission will be very kind to the FHA mortgage insurance program. – more – National Mortgage News 

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Fannie Mae expects QE3 to end this year – By Christina Mlynski – … The good news is the GSE remains relatively confident in the nascent housing recovery, noting that rising home prices could prompt more borrowers to enter the market, allowing the housing recovery to continue through 2013. … – Housingwire 
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Wells Fargo Grants Nearly Five Million Loan Mods to Date – National Mortgage Professional

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California captures 40% of aid from the national mortgage settlement – By Kerri Ann Panchuk – Housingwire 
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Report: Mortgage Banking to Stay Profitable; Refi Boom Not Over Yet – BY: TORY BARRINGER – A new report from FBR Capital Markets asserts low rates and high demand will continue to boost profitability in the mortgage banking sector in 2013. … FBR notes that average rates on outstanding mortgages hover between 4.50 percent and 5.00 percent—well above today’s historically low rates. According to the firm, this means there is a “large portion of loans with an economic incentive to refinance.” … – DS News
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Redwood Trust earnings quadruple in 2012 – 2013 plans: $7B in RMBS, $150M in CMBS, $1B in mezzanine loans – By Eric Gneckow, Business Journal 
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Housing inventory heads back to the 1990s: Housing inventory reaches decade lows and causes unusual trends in the housing market. – Dr. Housing Bubble
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Some Try to Diversify PL RMBS Reps and Warrants – Bonnie Sinnock – … Some of the diversification in these reps and warrants in particular reflects concern about having repurchase liability extend out “for the life of the loan.” By having a “sunset feature,” such as the agencies have been planning, some would-be or existing issuers not rated by Fitch have been trying to “reduce the uncertainty” associated with repurchase risk by having the period of liability end after, for example, less than 36 months. … – National Mortgage News
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Margin Shrinkage, Faith Schwartz, 8.5 Year High, Housing Shortage, Fewer Underwater, Relos Back?, Non-Judicial Delays, RMBS Reps ad Warrants, CFPB on Affordability, Renter Defaults

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Fattened Lending Margins Seen Shrinking 40% at Banks: Mortgages – Heather Perlberg and Jody Shenn -Bloomberg – … Compass Point Research and Trading LLC estimates, as banks absorb most of the costs of tumbling bond prices. … mortgage firms are accepting narrower margins as they seek to sustain demand from a shrinking pool of borrowers. … – SF Chronicle

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Former Hope Now leader takes new position at CoreLogic – By Kerri Ann Panchuk – Faith Schwartz, who for the past few years has been known as executive director of the non-profit home retention program Hope Now, is joining CoreLogic as senior vice president of government solutions. – Housingwire 
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Zillow: Home Values Reach 8 1/2-Year High – BY: TORY BARRINGER – Home values rose for the 15th consecutive month in January, according to Zillow’s most recent Real Estate Market Reports. … The 6.2 percent annual gain is the largest since July 2006, when home values reportedly rose 7.5 percent year-over-year. According to Zillow, the last time national home values were at this level was in June 2004. … – The M Report 
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(2 charts) s the US facing a housing shortage? – Homes available for sale as well as the housing supplies measured in months are now at pre-recession levels, while household formation continues to recover (see post). This development was predicted by William Wheaton back in 2009. – Sober Look Blog

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Fewer Americans are stuck in underwater mortgages – By Alejandro Lazo – Nearly 2 million Americans got out of negative equity positions as home prices rose last quarter, according to new estimates. Negative equity fell to 27.5% of all U.S. homeowners with mortgages in last year’s fourth quarter, compared with 31.1% during the same period a year earlier, according to data from real estate website Zillow.  – LA Times
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Will Rising Home Prices Spur Relocations? – by MortgageOrb.com

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(MBA Panel) Non-judicial foreclosures get delayed for a reason – By Megan Hopkins – … The panel closed with a reminder that another huge player in the non-judicial foreclosure process continues to be the Consumer Federal Protection Bureau. “The CFPB will be the new reality for the next decade,” added Susan DeMars Milazzo, executive director at the California Mortgage Bankers Association, in an indication of potentially longer delays as more regulations come into force. … – Housingwire

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RMBS rep and warrants changing investor landscape – … In Fitch’s view, the rep and warranty as well as enforcement mechanism framework established post-crisis reflects a high standard that provides a higher degree of assurance about loan origination and underwriting quality.  … The September announcement by the FHFA that it will limit repurchase dmeands for breaches of certain reps if a borrower makes consectively timely payments — 36 to be exact — has set the stage for the private label market, Fitch noted.  … – Housingwire 
and
Mortgage Bond Issuers May Expose Investors to Defects, Fitch Says – By Al Yoon –
Mortgage bond issuers that are relieving lenders of some potential liabilities may be exposing investors to additional risks of weak underwriting and defective loans, Fitch Ratings said in a report Wednesday – Wall Street Journal

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Affordability Rules Issued by the Consumer Financial Protection Bureau (CFPB) – Jack Guttentag – … My quick reaction to the hundreds of new mortgage rules recently issued by CFPB, contained in 804 densely packed pages, is that the agency has done a creditable job in an incredibly difficult situation. The rules cover a lot of territory, but those pertaining to borrower affordability probably have attracted the most attention. This article will comment on the new affordability rules, leaving other important issues for future columns. – The Mortgage Professor 
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Risk of Default for Renters Down from Year Ago, Up Quarterly – BY: ESTHER CHO – Renters across the country are less likely to default compared to a year ago, but the risk of not fulfilling lease obligations has increased on a quarterly basis, according to CoreLogic’s SafeRent Renter Applicant Risk (RAR) index report. – DS News

NY Affordable, Detroit Property Taxes, Current Pay Bailout, FNMA on Growth, HUD Talks, Foreign Rental Buyers, Gen X-Y Debt, Agency First Loss, Hot NPL Deals, MERS in KY, Paul Miller on Mortgage Banking,

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New York’s ‘Affordable Housing’ Isn’t Always Affordable – The Atlantic – Cities – .. ANHD charges that, under the Bloomberg plan, one affordable housing unit is as good as another. Take two units developed in Central Harlem in January 2011. Unit A is a studio that rents for $1,492 a month and serves a single resident making upwards of $100,000; Unit B is a three-bedroom apartment that rents for $531 a month that serves a family making about $37,000. Even though the second apartment addresses a “greater need” for affordability, both units count as a success. … – hattip IA

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Half of Detroit Properties Have Not Paid Taxes; Update on Detroit Bankruptcy – Mike Shedlock – The hollowing out of Detroit is nearly complete. All that’s left is a bankrupt shell of a city with no services and scattered citizens that do not pay taxes. … In bankruptcy, restrictions go out the window. So do union contracts and pensions. Since all of that needs to go out the window, what’s holding the governor back? … MISH’S Global Economic Trend Analysis 
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Federal program could bail out more homeowners – Borrowers released from mortgages don’t have to move for 3 months under Fannie Mae, Freddie Mac guidelines. – By MARILYN KALFUS – … . They’re meant to help those facing hardships such as a job loss, illness or the death of a spouse. Bottom line: Homeowners can turn over the house keys and erase their debt – even if they are still current on their payments. In the past, borrowers typically had to be delinquent before they could qualify for such help as a loan modification. … –  ORANGE COUNTY REGISTER

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Fannie Mae: Housing is ‘on a sustained growth path’ – 2013 purchase loan originations projected to rise nearly 19 percent – BY INMAN NEWS 
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(details) HUD talks property preservation, new Fannie Mae guidelines – By Megan Hopkins – Housingwire

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Foreign Buyers Hop on Rental Trend – By ROBBIE WHELAN – (buying expensive houses with strong Australian dollars) – hattip NDP – Wall Street Journal

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Report: Younger Generations Shouldering Greater Amount of Debt – BY: TORY BARRINGER – … Of the two groups, Gen X appears at first to be worse off, with the average person harboring a debt load of $46,972 compared to the Gen Y average of $28,930. However, SaveUp.com finds that more than 60 percent of Gen Xers’ debt comes from mortgage and student loans—considered “good debt” that helps build assets and job opportunities. … – The M Report 
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(private ownership of first loss and more) Limited Mortgage Finance Role for U.S. Government Gains Support – By Jody Shenn & Clea Benson – A bipartisan panel including former secretaries of the Department of Housing and Urban Development and retired U.S. senators is preparing to release a proposal for scaling back the government role in mortgage finance that would put taxpayer dollars at risk primarily under catastrophic circumstances. The blueprint, which the Washington-based Bipartisan Policy Center is scheduled to release Feb. 25, … – Bloomberg

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(NPL deals are hot) Bad US mortgage loans now big business on Wall Street – By Adam Tempkin – Delinquent and defaulting mortgage loans to struggling US borrowers have become big business on Wall Street, as investors scoop up bonds backed by non-performing loans (NPLs). – Reuters
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Kentucky Court of Appeals rules in favor of MERS – By Christina Mlynski – Housingwire 
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Mortgage-Banking Boom Has Legs, FBR’s Miller Says – (TheStreet) — Mortgage banking, among the few sources of growth for banks amid low interest rates, is likely to remain a tailwind to earnings in 2013, FBR Capital analyst Paul Miller said in a report.

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Angel Alban, Fed Owns 10% Mortgage Debt, Principal Forgiveness Deadline, MBA on Housing, Re-Default Problems, 70 DTI China Housing Slaves, UK Barista, FC Freeze Revenge?, HECM Upfront Draw

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Former Bank of America Executive Joins AmeriCatalyst and EuroCatalyst – Angel Alban is Appointed COO, Managing Partner of Strategic Housing Finance Advisory Firms – Globe Newswire   (congratulations Angel)
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The Federal Reserve owns 10% of all residental mortgage debt, increasing 5% per year – OC Housing News – … What is even more incredible is that through the Quantitative Easing Program (money creation) the Federal Reserve is purchasing $45 billion of mortgage bonds each month. This is about $540 billion of mortgage per year or of 5% of the existing resident mortgage debt. Since this program is expected to last several years (to suppress the mortgage rates) by the end of 2015 the Federal Reserve will 25% of the existing residential mortgages. … 


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Banks Increasing Mortgage Forgiveness as Deadline Looms – By Kathleen M. Howley – Bank of America Corp., JPMorgan Chase & Co. (JPM), and three other banks in last year’s agreement spent $42.3 billion in aid such as principal reductions, refinancings and home-equity loan forgiveness through the end of 2012, compared with $21.9 billion through the third quarter, … Forgiveness of primary mortgages rose to $6 billion from $2.6 billion. Banks are stepping up principal reductions to take advantage of terms that give extra credit for speedy resolutions before the bonus expires on Feb. 28. … – Bloomberg

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MBA economist sees home price recovery, but hurdles remain – By Kerri Ann Panchuk – Housingwire

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Barclays: Why Repeat Mods Have Been Making a Comeback – BY: ESTHER CHO – The pace of modifications is slowing compared to the 2010 peak, but repeat modifications are on the rise, according to a recent research report from Barclays. Not only are mods returning for seconds, but researchers from Barclays also found remodifications perform more poorly than first-time mods. – DS News 
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China Housing Slaves Helping Property Rebound: Mortgages – … Sheng is part of a generation of middle class that Chinese media has dubbed “fang nu, … Sheng, who paid 1.1 million yuan for the one-bedroom apartment on the city’s western outskirts and will be using about 70 percent of her salary to service her mortgage. … – By Bloomberg News

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It Is Twenty Times Easier To Get Into Princeton Than To Get A UK Part-Time Coffee Barista Job – Submitted by Tyler Durden – Zero Hedge 
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(FC Freeze Revenge?) Foreclosure delays: D.C., Maryland keeping homes but losing value – By Tim Devaney – … On average, it takes more than 1,000 days to foreclose on a home in the District and 531 days in Maryland, according to RealtyTrac. The national average is 414 days. “The bottom line is, D.C. is shut down for foreclosures,” said Mr. Fisher,  … – The Washington Times 
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(upfront draw?) FHA Official: More Reverse Mortgage Change Coming by August – by Jason Oliva – Reverse Mortgage Daily 
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CFPB Conflict, Down Payment Battle, Cordray (2), Property Prices Rise, Children Will Pay, REO Rental Buyers, FC Discounts Shrink, Home Prices Overheating?, Fed Rate Exposure, GAO FHA Worries, Unsinkable DeMarco, Repeating Mistakes?

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CFPB principles for mortgage originations conflict with each other

http://www.housingwire.com/rewired/2013/02/20/congressman-garrett-hud-lending-discrimination-rule-upends-ability-repay   by Kerri Ann Panchuk

NDP says: Ability-to-repay test versus disparate-impact test.   Complying with one can breach the other, but satisfy both anyway. – hattip Nom de Plumber
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(no surprise here) Housing stakeholders warn against strict mortgage down-payment requirements – By Vicki Needham – The Hill
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(another law case) Request filed to add more state AG plaintiffs in DC case challenging Director Cordray’s appointment – By Barbara S. Mishkin – Another case we have been following that includes a challenge to Director Cordray’s appointment is the case filed this past June in federal court in Washington, D.C. by State National Bank of Big Spring against the CFPB, … – Ballard Spahr CFPB Monitor 

and

Senate Democrats Urge Reappointment of CFPB Leader – BY: TORY BARRINGER – Fifty-four Senate Democrats and Independents issued a letter to the president last week defending the Consumer Financial Protection Bureau (CFPB) and pledging to support the re-appointment of current director Richard Cordray. – The M Report
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FNC: Residential Property Values increased 4.9% year-over-year in December – by Bill McBride – In addition to Case-Shiller, CoreLogic, FHFA and LPS, I’m also watching the FNC, Zillow and several other house price indexes. – Calculated Risk 
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Saving the banks and baby boomers at the expense of future buyers – OC Housing News

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Large institutional investors emerge in REO-to-rental market – By Christina Mlynski – … said Chief Financial Officer Timothy Cunneen of Smith Breeden Associates. “It appears these investors have driven home prices higher within some pricing points of their target cities.  Overall, large scale REO-to-Rental investors are helping accelerate the housing recovery,” Cunneen said. … – Housingwire
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Foreclosure discounts no longer as steep – By Kerri Ann Panchuk – During the peak of the mortgage crisis, foreclosed homes sold at a 25% discount on average, but the market is stabilizing and the price differentiation between a home’s foreclosed valued and original market value is beginning to narrow, FNC reported. – Housingwire 
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Are Home Prices Overheating Due To Lack of Inventory? – FEBRUARY 18, 2013 BY MIKE WHEATLEY – Realty Biz News 
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(technical – DV01 and NIM update) The Fed’s D-Rate: 4.5% At Dec 31, 2013… And Dropping Fast – Submitted by Tyler Durden – Zero Hedge
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The Unsinkable Edward DeMarco – by Phil Hall – There is an old joke that claims the only indestructible forces that will be able to survive a nuclear war are Styrofoam, cockroaches and Cher. I might add a fourth potential survivor to that list: Edward DeMarco, … – MortgageOrb 
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GAO Expresses Concern On FHA Risks – … “One such action would be to determine the economic conditions that the FHA’s primary insurance fund would be expected to withstand without drawing on the Treasury,” Dodaro added. “Recent events suggest that the two percent capital requirement may not be adequate to avoid the need for Treasury support under severe stress scenarios.  … – MortgageOrb

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U.S. Homeowners Are Repeating Their Mistakes – By Brendan Greeley – … Last year, Christian Weller, a professor at the University of Massachusetts, looked at Federal Reserve data for households run by those over 50. The number of families with what Weller calls “very high risk exposure”—a low wealth-to-income ratio, more than three-quarters of their assets in housing or stocks, and debt greater than a quarter of their assets—had almost doubled between 1989 and 2010, to 18 percent. That number didn’t decline during the deleveraging years from 2007 to 2010; its growth just slowed to a crawl. … – Bloomberg Businessweek
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ZIRP: Taking From the Poor, Giving to the Rich – Nom de Plumber’s Thought of the Day

  Nom de Plumber is a Nom de Plume

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This article (courtesy of LinkedIn post by David Stevens) astutely notes that ZIRP (*) is the Great Reverse-Robin-Hood.

http://www.washingtonpost.com/business/economy/fiscal-trouble-ahead-for-most-future-retirees/2013/02/16/ae8c7350-5905-11e2-88d0-c4cf65c3ad15_story.html

How?

Central banks target zero interest rates to re-inflate stocks, bonds, and realty—which the rich naturally own.  Zero rates are also artificial price controls on capital, discouraging long-term credit creation and entrepreneurial risk-taking, retarding economic growth. (Refer to post-1990 Japan and post-2008 world.)Slow global growth especially hurts the poor, who suffer weakened wages.  Worse yet, as Baby Boomers and retirees compete for jobs to offset lost interest income, wages cannot easily grow.
This compounds the other main type of inequitable transfer under ZIRP, from savers to borrowers. Central bankers should be taking note.

Thank you.

Note to new readers: ZIRP is the Fed’s Zero Interest Rate Policy. NDP first mentioned its dangers on this blog in 2008. 

Peter Miller (2), Housing Good Year Ahead, Carol Galante, CRA, Mortgage Rules Show Two Faces, Elizabeth Warren, Gretchen Morgenson on Bailouts, Rental Fascination, Pareto 80/20 Rule, 17 FC Cities, Ballard Spahr on Servicing Transfers

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2 from Peter Miller:

(undo the CFPB?) ARE WE ABOUT TO SEE A MASSIVE SET-BACK IN THE HOUSING SECTOR? – By Peter Miller – It really could happen. It’s possible that thousands of pages of financial rules just issued by the Consumer Financial Protection Bureau (CFPB) could be tossed out, …  The strange twist is that despite lobbying and public statements to the contrary, much of the lending industry might well prefer to see the CFPB survive. Here’s why:  … – RealtyTrac 
and
Peter’s offer of help:
From the OCC…. “While servicers had expended nearly $2 billion on the consultants’ review through November 2012, we were still not ready to compensate the first borrower.” For just $1 billion I could have delivered the same number of compensated borrowers….  http://www.occ.gov/news-issuances/speeches/2013/pub-speech-2013-28.pdf
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Three Signs 2013 will be the Hottest Housing Year Since 2005 – by MIKE SIMONSEN – Altos Research
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Galante: FHA takes action to reduce likelihood of Treasury bailout – By Christina Mlynski – Federal Housing Administration Commissioner Carol Galante testified before the House Financial Services Committee, asserting that the federal agency can avoid an immediate Treasury bailout. – Housingwire 
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Stop Telling Canards About CRA – Ellen Seidman and Mark Willis – hattip Mark Willis – Thought you might find of interest an alternative view of the NBER paper on CRA and why it’s findings do not fit with reality. – American Banker Bankthink  

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(QM, jumbos, self-employed) Friend or Foe? Mortgage Rules Show Two Faces – by Polyana da Costa – Fox Business News 
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(gives 2 answers) Too Big to Regulate? The Warren Debut – posted by Adam Levitin – Elizabeth Warren’s questioning of financial regulators at her first Senate Banking Committee hearing got a lot of attention for her pointed question about when was the last time any of their agencies had taken a large bank to trial.  It was a telling exchange, but I think the attention it received overshadowed her even more interesting second question (here at 04:29):  why is the market capitalization of the major banks lower than their book value? … 2 answers given – Credit Slips Blog 

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(uh-oh was Fed being a favorite to BofA?) Don’t Blink, or You’ll Miss Another Bailout – By GRETCHEN MORGENSON – NY Times

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The Wall Street fascination with rentals: Is the big rush with investor buying locking up the supply of real estate? How retail buyers are priced out of the equation. – Dr. Housing
Bubble

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(mentions housing and economy) The Pareto Economy – Charles Hugh Smith – The Pareto distribution suggests that costs could be cut by 80% across the entire economy. Economist Vilfredo Pareto’s (1848 – 1923) data-driven discovery that 80% of the land in Italy was owned by 20% of the population led to the Pareto principle, known as the 80/20 rule. – Of Two Minds

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The 17 Cities With The Highest Foreclosure Rates In America – Mamta Badkar – Business Insider

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(5 points made) Attention Servicers: Ballard Spahr tackles CFPB servicing transfer rules – Housingwire 
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Ally Sells TPO Unit, Nationstar Collapses Deals, 5 DC Questions, Mexican Labor Shortage, 1894 Again, REO Insurance, QE Forever, REO Bulk Sales, DOJ Lawsuit Against S&P, OCC FC Review, CA Momentum, Billionaire B. Wayne Hughes, Controller Justifies Herself

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(Third Party TPOs) Ally banking subsidiary sells mortgage unit to Walter – Reuters –  Ally Financial Inc’s banking subsidiary said on Monday it agreed to sell a mortgage unit to Walter Investment Management Corp … Ally Bank said in October that it was selling its business lending operation, which buys mortgages from other lenders and makes loans through brokers. The transaction, which includes 300 employees, is expected to close on February 28. – Fox Business

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(from Nationstar – collapsing deals to get value) New Residential implements strategy to drive nonagency RMBS growth – By Christina Mlynski – … As a result, the real estate investment trust plans to buy attractive Nationstar-serviced securities by improving portfolio performance and collapsing deals, according to its investor presentation … – Housingwire 
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(Asks 5 questions?) Memo to Washington: Time to Tackle Housing Finance Reform – Lee R. Gibson – As a community banker in Tyler, Texas, I have an unobstructed view of how the mortgage market is working, and not working, for average Americans. – American Banker Bankthink

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(lack of Mexican labor) This Empty Picnic Table Represents One Of The Few Problems In The US Housing Market Today – Sam Ro – Business Insider

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(click on the chart) Home Prices Are Back… To 1894’s Levels – Submitted by Tyler Durden – Zero Hedge 
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(storms, squatters, deterioration) REO Insurance Remains Consistent Amid Extreme Industry Changes – by Phil Hall – MortgageOrb

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(QE forever?) BANK OF AMERICA: ‘This Is Not A Fluke’ — The Fed May Have To Ramp Up QE Again – Matthew Boesler    – Business Insider 
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Bulk Sales Don’t Loom So Large – Ted Cornwell – … Since Fannie Mae and Freddie Mac unveiled pilot projects to sell REO to investors in bulk last year, there has been little talk about new bulk sales … “It seems the trend has kind of fizzled,” he said. “There is much less concern about the shadow inventory ‘bogeyman’ than there was in the past,” he said. That probably reflects an improving market for banks and institutions that still need to unload a large inventory of REO. … – Mortgage Servicing News
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(RMBS and CDOs – both sides well armed) DOJ Lawsuit Against S&P and McGraw Hill – BY RUSSELL KOONIN AND PHILIP R. STEIN – Mortgage Crisis Watch

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OCC Compounds Botched Foreclosure Review Process with Barmy Plan for Distributing Peanuts – Yves Smith – The OCC is bravely trying to spin the horrorshow of its botched foreclosure reviews as some sort of positive outcome. It is apparently now trying to present its dereliction of duty in figuring out how to compensate borrowers as no big deal. But the most amazing finesse, which a New York Times article tacitly accepts, is the OCC’s pretense that it got a good deal for homeowners in the settlement. … – Naked Capitalism

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California housing recovery may gain momentum, experts say – A sharp drop in new foreclosures in January and the resulting decline in bank-owned properties listed for sale are among factors that may boost the industry. – By Alejandro Lazo, Los Angeles Times

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Billionaire Hughes Chasing Blackstone as U.S. Rental King – By Heather Perlberg & John Gittelsohn – B. Wayne Hughes, a sharecropper’s son who became a billionaire pioneering warehouses for Americans needing storage space, is buying thousands of houses to rent as more people find homeownership out of reach. Hughes, 79, has purchased about 10,000 properties through his American Homes 4 Rent, making the Malibu, California-based firm the second-biggest owner of single-family rentals after Stephen Schwarzman’s Blackstone Group LP. Hughes is using $600 million from the Alaska Permanent Fund Corp. and other fundraising to buy real estate, mostly at foreclosure auctions, … – Bloomberg 
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Comptroller defends decision to end independent foreclosure reviews – By Kerri Ann Panchuk – … Curry said by November 2012, servicers spent $2 billion on consultants to review foreclosures, but no borrowers had been compensated. … Curry said, agencies “came to the realization that maintaining our course would significantly delay compensation without appreciable benefit to the affected borrowers. I decided we needed to change direction, and the Federal Reserve came to the same conclusion.” … – Housingwire  
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Feds Look to States, Caroline Baum, Donovan on Sequestration, DQs Fall, QM Filter, Settlement in Jeopardy?, Jumbo Deal Delayed, IL Fast Track, Shorter Loan Terms, Obama SOTU, Ben Stay or Go?

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Feds Look to States for Refi Ideas – By Brian Collins and Mark Fogarty – WE’RE HEARING that an Oregon pilot program might be the model the Treasury Department has been looking for to refinance borrowers who are trapped in underwater private-label loans … Treasury recently approved an Oregon pilot program that will use HAMP funds and funds from the National Mortgage Settlement to buy and refinance underwater loans. The idea is based on a proposal by Sen. Jeff Merkley, D-Ore., … – National Mortgage News

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(housing mentioned) The Real Risk-Takers Are at the Federal Reserve – By Caroline Baum – Bloomberg 
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Donovan: Sequestration could devastate Fed housing programs – By Kerri Ann Panchuk –  Automatic government spending cuts could result in 75,000 fewer households receiving foreclosure-prevention aid along with rental and counseling services through the Department of Housing and Urban Development. – Housingwire

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Delinquency Rate Falls 14% from 2011, but Remains Elevated – BY: ESTHER CHO – … while more than 80 percent of metropolitan areas saw their rates decline, according to a TransUnion report. … – DS News
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CoreLogic: QM, QRM Rules Remove 60% of Loans and 90% of the Risk – BY: KRISTA FRANKS BROCK – … QM rules would eliminate about 48 percent of today’s mortgage originations, and when the QRM (with a 10 percent down payment requirement) is added to the equation, about 60 percent of today’s loans would be eliminated. … “The combined impact of QM and QRM is that only 25 percent of purchase originations would meet the eligibility requirements of the QM rule’s safe harbor,” according to CoreLogic. … – DS News

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(Barron’s Other Voices) The Great Mania – By MARTIN CONRAD – Reinflating the collapsed housing bubble, as many desire, would likely yield the same disastrous result. What’s needed are lower, fairer prices, and more investment in more productive sectors of the economy
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(letter sent to presiding judge) ($8.5b) Bank of America Settlement in Jeopardy? – BY ENZA G. BODERONE AND ROBERT SIEGEL – Mortgage Crisis Watch

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JPMorgan delays issue of jumbo RMBS – By Jacob Gaffney – … JPM worked on the deal for months, but had structural issues that are slowing the process. A spokesperson for JPM declined comment. However, a source close to the deal went so far as to declare the deal had “been shelved.” Others say the deal may be privately placed instead. … – Housingwire

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Illinois Allows Lenders to Fast-Track Foreclosures for Abandoned Homes – BY: KRISTA FRANKS BROCK – …  Illinois took a momentous step to shorten its foreclosure process last week. A new Illinois state law that allows servicers to fast-track the foreclosure process on certain properties has the potential to shorten a two-year process to between 90 and 180 days. The bill, which took almost as long to pass as Illinois former foreclosure process, received Illinois Governor Pat Quinn’s signature Friday. … – DS News 
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About 27% of refinancing borrowers choose shorter loan terms – By Christina Mlynski – About 27% of borrowers that refinanced an existing mortgage in the final quarter of 2012 chose to shorten their loan term, while 69% of borrowers kept the same term as the loan that they paid off, according to a report from Freddie Mac. Additionally, refinancing borrowers preferred fixed-rate loans, accounting for 95% of refi applicants. Fixed-rate loans were preferred regardless of what the original loan product was, the report said. – Housingwire 
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Obama discusses state of housing, urges refi bill passage – During his State of the Union Address, President Obama touted a home loan refinancing bill that’s currently sitting in Congress. – Housingwire 
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Bernanke’s Fed prospects? Many economists bet he’ll go – Paul Davidson, USA TODAY –  Two out of three in a USA TODAY survey predict the USA’s most famous economist will step down when his second four-year term ends next January. 
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QM-QRM, FHA, Fay Servicing

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Lykken Mortgage Industry Update

Mon, February 18, 2013 12:00 pm CST

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Fay Servicing

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(transcript from http://www.blogtalkradio.com/lykken-on-lending/2013/02/18/lykken-on-lending–weekly-mortgage-market-update )

I’d like to touch on three areas today:  QM-QRM, FHA, and an update on my employer, Fay Servicing.

On QM and QRM, the American Banker has an article about how regulators are choking off good loans. In their zeal to prevent another 2008, underwriting guidelines have become a simple yes and no checklist. This can exclude worthy borrowers.

There can be problems relying too much on DTI and LTV. A number of worthy loans are excluded.

You can have someone with a huge down payment and very high FICO who also has considerable assets. One can argue that a borrower with the assets to pay off the house several times over but a DTI ratio of over 43 is a more secure loan than a lower income sub 43% DTI borrower.

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How much of current mortgage production qualifies for QM? Interesting numbers arise from two articles found at Reverse Mortgage Daily and Housingwire.

Reverse Mortgage Daily looks at a survey that says that less than half of originators believe that 80% of current production qualifies for QM.

The Housingwire article looks at a Corelogic press release. Corelogic says that only 40% of current production qualifies as QM. Think about that – Corelogic says 60% of current production is not QM qualifying.
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Next up are a couple of items about FHA.

Reverse Mortgage Daily points out an editorial by Dave Stevens, former FHA Commissioner. The FHA was crucial during the housing meltdown, but now it’s capital ratio is negative. He says that it is mandatory for the agency to return to its congressionally mandated 2% capital ratio.

OC Housing News has what I consider to be a must-read article. The article says that by offering riskier terms than private competitors, the FHA today controls 56%, well more than half of all the mortgage insurance market in terms of numbers of loans.

The article says that the FHA will ensure high cost, extremely low down payment mortgage loans, that put it in direct competition with the private sector.

The FHA insures riskier mortgage loans at prices lower than PMIs are willing to charge. That is why FHA has 56% of the MI market.

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Finally I’d like to share two news items about my employer Fay Servicing.

We put out a press release that appeared in several of the mortgage related websites about how our revenue growth grew over 250% last year. I would like to point out that a good deal of this revenue increase is based upon performance incentives. In other words our needs are aligned with our customers. The more money that we can make or save our customers, the better we do.

The second thing I would like to tell you is that an article appeared on the National Mortgage News website last week about how Fay works with realtors in the short sale process.

We actively reach out to realtors in the early stages of a short sale something that a surprising number of special servicers do not do. We have found that a good realtor can be worth their weight in gold during the short sale process.

If you have loans that have a clouded title – something like a second mortgage, foreclosure judgment, a HELOC, or HOA issues, the realtor with their local market knowledge and contacts greatly increases the success of a short sale.

If you would like a copy of the article from the National Mortgage News about how we work with realtors, send me an email and I will share the article with you.

Also to get a copy of today’s comments and all of the links and referred to, you can go to the Lykken on  Lending website,  click the radio show,  and you’ll see at the right side of the page a link that will take you to further information.

Today we discussed QM-QRM, FHA, snd Servicer-Realtor relationships.

That’s it for this week Dave. I look forward to returning to the show again live.