Before we delve into the agency, lender, and investor news, here is some holiday cheer....maybe. On December 9th, the Federal Reserve released its Z.1 data revealing that homeowners in the United States had the value of their home equity increase $417B in the third quarter and $2.2T over the past year. This is nothing too earth shattering as analysts have been screaming this from the proverbial rooftops for weeks now. Homeowners' equity now stands at $9.2T, from a trough of $6.0T during FY11. Some analysts believe that this increase could support the issuance of home equity loans by banks, improve the credit profile of the U.S. consumer, increase the pool of borrowers available to refinance, and increase the mobility of the U.S. homeowner.

With higher rates comes talk of ARM business. The MBA's weekly poll of retail applications shows that 8% of new apps are ARM loans. But the MBA puts out additional stats, and when one looks at state-level numbers it is easy to see the differences. For example, in September, when overall ARM applications were running at 6% of the total, California's ARM percentage was 14.5% versus Oklahoma's 2.3%. For all of 2012, California's ARM share was 9.7%; Mississippi's was .8%. As you can guess, there is a direct correlation between ARM percentage and average loan amount - typically CA and Hawai'i have the highest state loan amounts.

Speaking of California, plenty of high income individuals have relocated to other states, such as Nevada or Texas, due to the increasingly onerous tax burden in The Golden State. Nationwide, while 43% of the population pays no federal income taxes, down from 47% in 2010, two-thirds of that 43% pay payroll taxes, leaving just 14.4% of the population that pay no federal income or payroll taxes. Of those, two-thirds are elderly with incomes below $20,000/year and one-quarter are nonelderly with equally low incomes. The remaining 1.3% of the population includes big givers of charity, those with large medical bills etc...

As noted in Saturday's commentary, after some lengthy discussions with the MBA and other groups, incoming FHFA director Mel Watt agreed to delay the implementation of fee increases planned for March & April of 2014. (At this point loan level price adjustment changes are on hold; gfee changes are yet to be determined.) As the WSJ noted, "Rep. Mel Watt (D., N.C.), the incoming director of the regulatory agency that oversees Fannie Mae and Freddie Mac, said Friday night he would delay an increase in mortgage fees charged by the housing-finance giants, which was announced earlier this month by that agency. Upon being sworn in, 'I intend to announce that the FHFA will delay implementation' of the loan-fee increases 'until such time as I have had the opportunity to evaluate fully the rationale for the plan," he said in a statement."

The WSJ article noted, "Executives at Fannie and Freddie said last month that the fees they have been charging are enough to cover expected losses. But the FHFA, under the leadership of Acting Director Edward DeMarco, has said that those fees should rise in order to allow private investors, which target a higher rate of return, to compete. An FHFA official Tuesday said that even with the latest changes, Fannie's and Freddie's fees would be considered low relative to private firms'."

But that was not the only potentially good news for lenders. On December 6, 2013, the Federal Housing Administration (FHA) issued Mortgagee Letter 2013-43 which announced FHA's loan limits for case numbers assigned on or after January 1, 2014 and through December 31, 2014. The FHA is extending the date for interested parties to request a change to high cost area loan limits announced in ML 2013-43 from January 6, 2014 to January 31, 2014. The MBA did an analysis of the information for the industry, looking at the impact of the 2014 FHA loan limit change on the 3,000 counties in the US. "These are broken out by counties that are in metro areas and divisions, vs. counties that are in non-metro areas and micro areas. Here are the HUD loan limits files for 2013 and 2014 as the source."

Breaking things down, the MBA tells us it turns out that 52 percent of counties in a metro area or division saw no change in loan limits, while 92 percent of counties in a non-metro or micro area had no change in loan limits. But 43 percent of the counties in a metro area or division had some reduction in loan limits, compared to 6 percent in the non-metro or micro areas. And 25 percent of the counties in a metro area or division had greater than 10 percent reduction in loan limit (sum of the 3 blue bars on the left side of the chart), compared to 4 percent of the counties in non-metro or micro areas. The MBA calculates that, "For the counties with the largest reduction in loan limits, the median sales price used to determine the limit was unchanged in most cases, with some increases, but hardly any decreases. It appears that the biggest impacts to the loan limit reductions were from using 115% in the calculation, dropping the high cost limit from 729k to 625k, and moving some counties to the floor of 271k."

Returning to the extension for public comment, one can't merely write to HUD and whine about loan amounts. "Requests for a change to loan limits for a specific local area will only be considered for counties for which HUD does not already have home sale transaction data for the calculation of loan limits. A request to change loan limits must contain sufficient housing sale price data, with the request listing one-family properties sold in a specified high-cost area, and where the sale took place within the look-back period of January through August 2013.  Housing sale price data included in requests should also: differentiate between single-family residential properties and condominiums or cooperative housing units, and distinguish between distressed and non-distressed sales, to the extent possible. All requests for local area loan limit changes should be submitted by January 31, 2014, and only to FHA's Santa Ana Homeownership Center."  Mortgagee Letter 2013-43.

Let's keep playing catch up with recent company-specific news - some of it is actually good.

But first, a correction. Last week I noted, "As of January 10^th, Chase will apply a minimum FICO requirement of 60 and a maximum DTI of 45% to all Chase-serviced DU Refi Plus HPML transactions." No, this doesn't mean subprime is back. Some folks caught that typo, and I gave a few of them an all-expense paid trip to Cancun. (That is the last time that will happen, sorry.)  It's 620.

Stonegate Mortgage Corporation announced that it completed the acquisition of Crossline Capital, a California-based mortgage lender that originates and services consumer direct mortgages. "The acquisition of Crossline expands the Company's retail channel and accelerates its geographic expansion, which is consistent with the Company's acquisition and growth strategy. Crossline is being operated as a wholly-owned subsidiary of Stonegate Mortgage. Crossline is licensed to originate mortgages in 20 states (AZ, CA, CO, CT, FL, GA, ID, MD, MA, NH, NM, NC, OH, OR, PA, RI, TX, UT, VA, and WA) and is an approved Fannie Mae Seller Servicer. In addition, it operates two national mortgage origination call centers in Lake Forest, CA and Scottsdale, AZ and also operates retail mortgage origination branches in seven other locations in Southern California. Crossline originated $572 million in mortgage loans during the year ended December 31, 2012 and $374 million in mortgage loans during the nine months ended September 30, 2013.

Western Bancorp announced a new program designed for relief for self-employed borrowers. The company recently announced a 5/1 ARM for self-employed borrowers using Alternative Income Verification (AIV). The program also offers an interest-only option, non-owner occupied and options for first time borrowers, with loan amounts from $200,000 to $2,500,000.  Income is verified using bank statements to support the borrower's income, with no tax returns, no P&L, and no 4506T requirement. Western Bancorp lends in California, Washington, Idaho and Montana.

Wells Fargo Funding (correspondent) will be aligning its tax returns policy with that of FNMA to require a fully complete and signed 4506-T for each business tax return used to underwrite the loan in addition to the 4506-Ts required for personal tax returns.  In cases where an extension for business tax returns has been filed for the most recent tax year, the loan file must include Form 7004 and 4506-T transcripts confirming "No Transcripts Available" for the applicable year are required.  For self-employed borrowers who do not use their self-employed income to qualify, the first page of the most recent personal federal tax return must be provided so that underwriting can determine whether or not there was a business loss.  This affects all Conventional Conforming loans with applications dated December 16^th and after.

Wells has extended the deadline by which DU loans with LTV/CLTV/TLTVs over 95% must be locked to December 23^rd. The delivery and purchase deadlines have been updated as well; all loans must be delivered on or before March 3^rd and purchased on or before May 1^st.

As part of its standard guidelines, Wells is now accepting High Balance VA loans from $700,001 to $1.5m with DTIs of 41% or less, while all such loans with DTIs over 41% will be considered for purchase per the existing exception process.

Homeward has rolled out its new FHA and VA IRRRL ARM products, both of which are now eligible for purchase from approved correspondents.  Both product matrices have been published to the Homeward website, and as a note, VA IRRRL ARMs will be offered under the 3/1, 5/1, and 7/1 products.

Homeward has revised its suspended closed loan policy to state that failure to supply the information or documentation required to purchase the loan within five calendar days from the later of the delivery expiration or the last initial review date will result in late fees.  Sellers may be provided with additional time for an extension or suspense fee or re-pricing of the loan in question; however, the delivery may also be rejected and/or incur a pair-off fee.

Congrats to John Hummel, ex-Citibank, who is now CMG Financial's SVP of Consumer Services. He will be helping with corporate business development initiatives, and will now expand his focus to managing all production efforts for CMG Financial's consumer-facing sales channels, including its traditional Consumer Services Branch (Retail), Affinity Partnerships and National Builder Division. "With the continued growth the company expects, it is important that we have strong, capable leaders that make up our senior management team. John Hummel fills a vital seat perfectly with respect to our B-to-C business operations. He brings a level of experience and expertise that will help take the organization as a whole, to another level, while fulfilling our expansion objectives in key areas." said Christopher M. George, President and CEO of CMG Financial.

Well, there won't be a lot of locks coming in during the next few weeks, and many folks are taking some time off. The economic calendar is somewhat light this week, but still has some numbers that can move rates around, especially with lower volumes, fewer traders, and less liquidity. Today is the Personal Income and Spending/Consumption duo, a spate of PCE numbers to help us measure non-existent inflation, and we'll also have a University of Michigan Consumer Confidence number. Tomorrow is the MBA apps numbers, along with Durable Goods and New Home Sales; along with folks scooting out early. Wednesday is Christmas, and then we resume things Thursday with Initial Jobless Claims and Pending Home Sales. In the early going, the 10-yr, which closed Friday around 2.89%, is around 2.90% and there is little change to agency MBS prices.

Joe M., a VP with a major aggregator, writes:

'Twas the night before Christmas and all through the shop, the LOs are pushing another loan to the top.
The processors all running on sugar laced highs, trying to satisfy all borrowers why's.
The lock desk keeps searching for more YSP, but now they realize that service is key.
Management still looking to close one more loan, in order for borrowers to get a new home.
Compliance team ready's for changes to come, just hoping these updates really are done.
Closing and shipping are running on caffeine, trying to help the American dream.
So put down your smart phone, your BlackBerry and tablet, give thanks to your co-workers, and make it a habit.

As we close out the year and look to the next, and look at the clutter that now fills our desks, we give thanks for our jobs our family our friends, for that we are grateful so I thank you again!