Happy Pi Day (3.14) and speaking of pie (I know, a weak transition), if you think the U.S. government is knee-deep in the mortgage business check this out: the US Department of Agriculture is considering buying 400,000 tons of sugar to help provide support to sugar processors.  The action is aimed at supporting falling sugar prices - whatever happened to free markets? 400K tons would allow the government to make 142 billion Hershey Kisses.

Thanks to Kevin K. for passing this appraisal, legal, and logistic nightmare along. Once again, we are reminded that there is a fool born every minute.

At the other end of the intelligence scale, there are many smart folks in mortgage banking, and many smart companies expanding. For example, with over 25 years in the industry, VITEK Mortgage Group, a leading Northern CA mortgage banking firm, is expanding. To facilitate their growth in 2013, VITEK is searching for a seasoned Mortgage Operations Manager to help lead their Sacramento-based operations team. The position is responsible for oversight and ongoing development of the set-up, processing, Scenario Desk, underwriting, and closing teams. A thorough knowledge of full-scope mortgage operations is required, with 7+ year's mortgage industry experience, 3+ mortgage operations management experience, and 2+ underwriting experience. Qualified candidates are invited to submit their confidential resume directly to VITEK's HR Department, Libby Feyh, VP of Human Resources, at HRD@teamvitek .com.

And many smart companies consider training their employees a priority. The MBA is rolling out a comprehensive set of compliance manuals for everything from vendor management to loan officer compensation to servicing standards and the whole alphabet of regulations, TILA, FCRA, AML, QM and ECOA. The Compliance Essentials Program is being put together with some of the top compliance law firms in the country and is meant to be a ready reference guide for independent and bank-affiliated mortgage bankers, both large and small, on how to build a compliance program from the ground up and how to and establish policies and procedures for the federal rules and audits.  In addition, the manuals will be complemented by a series a series of deep-dive webinars on the rules. The manuals and webinars are available as a package or individually, and, as usual, MBA members get a very large discount off the sticker price. For everyone else it is probably worth the price of joining MBA just for this discount. The program kicks off March 18^th.  Click here for more information.

And Pete Mills with the MBA alerted the industry: "With the final Qualified Mortgage (QM)/Ability to Repay rulemaking nearing completion (the final rule is out, though we continue to work with the CFPB on a few outstanding items, interpretations and implementation issues), MBA has returned focus to the Qualified Residential Mortgage (QRM) rulemaking under the Dodd-Frank Act's risk retention provisions. As part of our advocacy efforts, MBA, working with the Coalition for Sensible Housing Policy, held a briefing on Capitol Hill yesterday where we (gave a presentation) calling for the synchronization of the QRM definition with the now-final QM definition. The briefing, which featured MBA's Vice President of Research Mike Fratantoni, drew approximately 100 Congressional staff and other stakeholders and allowed us to once again demonstrate the negative impact on credit access that would likely occur if regulators include a down payment requirement in the final QRM rule. The MBA will continue to lead advocacy efforts on this issue, and I look forward to any feedback you may want to share." Here you go.

Turning to the production side of the equation, don't shoot the messenger - you can write to the authors of this comprehensive study that shows, "....commission based loan officers are 19% more likely to accept loan applications, and approve loan amounts larger by 23%. Although the observable credit quality of loans booked by commission-based loan officers increased, they were 28% more likely to default. We show that the increase in default occurs primarily at the population of loans that would not have been accepted in the absence of commission-based compensation."

What is the latest on conference information? Fred Kreger, the president of the California Association of Mortgage Professionals, writes, "I just came back from DC and meetings on the hill with congressional members and the discussions that I had showed the conundrum between QM and Disparate Impact. So follow the logic. If lenders will not originate a NON-QM loan for fear of ATR defense lawsuits and defense to foreclosures, then in some communities they will be subject to disparate impact claims levied by the DOJ for not offering loans in areas of protected classes. And Community Re-investment Act is now subject to the same scrutiny. So now the actuaries get involved right? What is less expensive to defend? Therein lays that conundrum of our regulatory system." Well put - thank you Fred.

The banking, investor, and agency news continues to come out. As always, it is best to read the full announcement, but these will give you a flavor for what is going on out there.

Mergers and acquisitions continue: in Washington Heritage Financial ($1.2B) will acquire Valley Community Bancshares ($242mm) for $44.2mm in cash and stock, and in Illinois Midland States Bancorp ($1.6B) will acquire the BHC of The First National Bank of Grant Park ($105mm) for an undisclosed sum.

Private equity firm Blackstone Group borrowed $2 billion from banks to invest in single-family homes it intends to rent out. Someone thinks the housing rally will continue! The Wall Street Journal reports that "Blackstone's agreement with Deutsche Bank, Bank of America, Credit Suisse, and other lenders more than tripled the size of its previous loan, to $2.08 billion from $600 million, a person familiar with the deal said. Deutsche, which had arranged Blackstone's initial accord, will remain the lead bank on the bigger loan. Private-equity firms such as Colony Capital LLC and real-estate investment firm Waypoint Real Estate Group LLC have snapped up thousands of previously foreclosed homes in recent months to rent out as part of a strategy to take advantage of the recovery of the housing market." It appears that leverage is alive and well. "Blackstone has said it is buying single-family homes at the rate of $100 million a week, a faster pace than any other buyer. The firm now owns around 20,000 homes, say people familiar with the matter. The firm expects to spend more than $4 billion on homes, and could seek additional loans related to fund these purchases, these people said."

The FHA has issued a reminder that locks on the front and rear entry doors must be rekeyed with random identical key codes in the interest of prohibiting unauthorized access.

The USDA has revised Form 1980-21 (Request for Single Family Housing Loan Guarantee), the revised version of which must be included in the file when submitting loans for review.

GNMA has announced plans to update the HECM MBS Loan Level Disclosure Layout, the initial changes to which should be implemented by Q3 of 2013.  With the implementation of Phase 2, which encompasses monthly loan level disclosure and new issuance disclosure, the full revision is scheduled to go into effect by Q1 of 2014, and a test file will be available by June 2013.

Fannie Mae has revised guidance to allow principal curtailment in cases where it is a refund to the lender for overpaid fees or charges by the borrower or to reduce the amount of cash back such that the loan complies with maximum cash-back requirements.  Principal curtailment is limited to $2500 or 2% of the original loan amount, whichever is less.  Guidance on living trusts has been updated as well, as Fannie has established a new Special Feature Code and clarified the requirements for various signature blocks.  Full details of the latter can be found in the Seller Guide and will go into effect as of May 1^st.

Effective immediately, servicers of Fannie loans for which the foreclosure sale was held on or after October 1, 2012 are required to cancel hazard insurance coverage for both borrower- and lender-placed policies within 14 calendar days of the property appearing on the Vacancy Report in HomeTracker.

Wells Fargo has issued a correction regarding its previous announcement about authorized eSignature and eDelivery vendors.  This list now includes National Credit-reporting System, Inc. (NCS) and Mortgage Builder as eligible versions of authorized vendors for both eSignature and eDelivery.  As a reminder, the audit trail is required when using electronic signatures to sign documents.

As of May 1^st, Wells correspondent will require all original Notes to be delivered to a new location (see the Wells Correspondent site for the full address).  Sending Notes to the original address after this date will result in delays.

Wells is now allowing DU Refi Plus ARM loans in mandatory take downs, effective April 15^th.  As a reminder, DU Refi Plus loans can only be purchased if they are serviced by Wells.

Pursuant to the October announcement from Freddie Mac, US Bank is limiting the current FHLMC 5/1 ARMs with 5/2/5 caps and offering new FHLMC Conforming and Super Conforming 5/1 ARMs with 2/2/5 caps.  Loans under the former product code must be closed, funded, disbursed, and delivered to US Bank for purchase by May 17^th, while current pipeline 5/2/5 cap loans that fail to meet this deadline will have to be changed to the new 2/2/5 cap structure.

MGIC has rolled out its Go! underwriting, a streamlined process that allows up to 97% LTV and 45% DTI on primary residence loans for borrowers with FICO scores of 680 and over.  In certain cases, borrowers can put down as little as 3% from gift funds.  All loans are eligible for Go! underwriting, and as a reminder, all MI loans with purchase-eligible DU Approve or LP Accept responses that comply with the minimum overlays are automatically eligible for MGIC insurance.

MGIC has updated a number of underwriting guidelines and now permits loans with Approve/Ineligible or Accept/Ineligible from DU and LP, respectively, to use the DU or LP documentation requirements for employment, income, and assets.  All other responses require that standard documentation be submitted for manual underwriting.  For cash-out refinances that are either not processed through DU or LP or receive a response other than Approve/Eligible or Accept/Eligible, the loan amount is subject to an aggregate limit of $100,000 over the unpaid principal balance of the refinanced loan and may include closing costs and prepaids, payments to other payees, and cash back to the borrowers.  (As mentioned above, read the MGIC bulletin for all the details.)

Kinecta has reduced the cap structure for its Agency 5/1 ARMs from 5/2/5 to 2/2/5, effective for all loans locked on or after March 11^th.  The changes do not apply to Jumbo or Agency ARMs with other fixed terms.

There sure is a lot going on without worrying about rates - and sure enough, in the grand scope of things rates aren't doing much. Despite yields rising into early afternoon on stronger than expected economic news with the 10-year note reaching 2.05%, mortgage-backed securities barely budged. Sure, compared to nominal GDP and the potential threat of inflation, rates could be higher - but no one really expects that for many, many months, if not well into 2014. And for now, investors are buying agency, and non-agency, MBS, and most pipelines are down and the supply is limited (Tradeweb's volume on Wednesday remained below normal at 83% of the 30-day moving average.)

So which is correct: the stock market, which continues to rally (which is often a sign of economic growth hopes) or the bond market (which usually sells off on signs of economic growth but has barely budged)? Retail Sales and Business Inventories for February were reported much better than projected today which supported the risk trade, the Dow set another new high and the S&P 500 closed very close to a new record. One never fights the Fed, who is pushing for lower rates...

Today we've had a few pieces of information. Initial Claims, expected at +350k from +340k, went from a revised +342k to +332k, so pretty much as expected, and the February Producer Price Index, expected at +0.7%, core at +0.2%, came in at exactly that! But rates have crept slightly higher, and the 10-yr is at 2.06% and MBS prices are roughly .125 worse.

A customer asked, "In what aisle could I find the Irish sausage?"  

The assistant asks, "Are you Irish?"

The guy, clearly offended, says, "Yes I am.  But let me ask you something. If I had asked for Italian sausage, would you ask me if I was Italian? Or if I had asked for German Bratwurst, would you ask me if I was German? Or if I asked for a kosher hot dog would you ask me if I was Jewish? Or if I had asked for a Taco, would you ask if I was Mexican? Or if I asked for Polish sausage, would you ask if I was Polish?"

The assistant says, "No, I probably wouldn't."

The guy says, "Well then, just because I asked for Irish sausage, why did you ask me if I'm Irish?"

The assistant replied, "Because you're in Halfords Motorparts."