Last weekend I took my daughter, who is taking some fancy economics class in high school, with me to the used record store. I had eighty three 45 RPM records that I've been hauling around me with for the last 25-30 years, gathering dust after I played them once to record them onto my cassette tapes, and I figured I'd sell them to help finance her college tuition. "You'll see economics in action!" I told her as we walked in. And as we walked out, with my box of eighty three records still under my arm after the pierced fellow told me, "Debbie Gibson? The Psychedelic Furs? These aren't rare - you should take them to the Salvation Army," we had indeed seen economics in action: no demand leads to lower prices. The same thing is happening with bonds made up of subprime residential mortgage-backed loans.

At least Freddie Mac gave unemployed homeowners a break when it eased its temporary forbearance restrictions. Effective February 1, Freddie Mac servicers will no longer need prior approval from the government sponsored enterprise (GSE) before extending forbearance of up to six month's duration to its borrowers who have lost their jobs.  Servicers can also seek preapproval for a second six month period of forbearance for those borrowers if needed. Read about it here.

Up the road at Fannie, it launched Loan Quality Initiative (LQI) a while back but has now introduced a new optional service called EarlyCheck. Besides being yet another two words joined with a capital in the middle, EarlyCheck will "enable lenders to identify and correct potential eligibility and/or data issues as early in the loan origination process as possible." The program is available across all underwriting methods - for DU loans, manually underwritten loans, and non-DU AUS loans.   Lenders will be able to access the EarlyCheck service at any point in their processes prior to delivery such as underwriting, prior to closing, etc. EarlyCheck includes checks for SSN, occupancy, address, unit number, DTI, loan limits, DU Compare, required delivery fields, and so on. It does not include product eligibility checks (loan terms, mortgage insurance coverage, etc.), customer contract and commitment pricing checks, pooling rules, tie your shoes, or make your lunch - you're on your own for those. Read more about it at https://www.efanniemae.com/sf/technology/ou/earlycheck/. EarlyCheck is an optional service so lenders are not required to use it but it is highly recommended, and is currently available to approved Fannie Mae sellers only and there are no service fees. 

In legal news relating to the mortgage biz, last month the Indiana Department of Financial Institutions adopted an "Emergency Rule" on mortgage lender and originator licensing. It updated Title 750, Article 9 of the Indiana Administrative Code (IAC), which regulates mortgage lenders and originators. First, the amendments expanded the stated purpose of Title 750, Article 9 to conform the regulation of mortgage lending practices not only to state and federal laws, rules and regulations but also to policies and guidance from state and federal authorities. Second, non-profit organization employees who exclusively originate mortgages are exempt from state educational, testing, background or licensing standards and requirements unless otherwise required by the CFPB. Third, the rule amended the IAC to specify that an expunged criminal conviction is not considered, for licensing purposes, a conviction resulting in an automatic denial or revocation of a mortgage lender or originator's license; however, the DFI director may still consider the underlying crime or facts of that expungement for licensing eligibility. Fourth, the rule revised Article 9's revocation and suspension provisions so that they are uniform with all state consumer credit laws. Finally, the rule made changes to Article 9's pre-licensing testing, licensing qualification and renewal and regulatory reporting provisions. For a copy of the rule, please see http://www.in.gov/legislative/iac/20111221-IR-750110778ERA.xml.pdf.

David Akre (who has probably had to spell his last name as many times as I have) wrote, "Rob - your commentary Monday mentioned some of the statements recently concerning the underwriting environment. The survey I did discusses the tight lending environment in jumbo, 'Whole Loan Capital First Annual Jumbo Lending Survey.'" Find it here: at http://www.wholeloans.com/blog.html

The Congress-mandated g-fee shoes are beginning to drop. Wells Fargo, where one out of every three or four loans wind up, got the word out to its correspondents on "Pricing Adjustments Resulting from FHFA-Directed G-Fee Increases" and "New MERS Requirements" among other things such as a new approved securities dealer list and documentation for coop loans. "For best-efforts sales, Wells Fargo Funding will implement the change into our pricing structure for all Conforming conventional (including High Balance) Loans, based on lock period (greater or equal to 60 days starting on 1/11, 45 days on the 18th, and other shorter periods on the 23rd). Watch out for extending loans that were previously locked - based on dates the loan could receive a .5 hit. For the mandatory trades, however, there is some leeway: no change in g-fee for February settlements, for March only Standard or earlier settlements will be accepted, and notes and files must be delivered to Wells Fargo by the delivery date (sellers will be given the standard 5 business days to clear Loans for purchase), and for April you'll have a 50 basis point negative price adjuster."

Over in the Wells wholesale channel, "In order for a loan to meet the April settlements, it must close by Feb. 29. The G-fee increase will worsen prices by up to 80 bps depending on note rate." (An 8:1 ratio? Come on...) Continuing, "Wells Fargo Wholesale Lending is staggering the impacts of that increase by Rate Lock Period in an effort to offer lower rates to consumers in the market for as long as possible. On January 11 the G-fee increase will impact 45- and 60-day pricing. You must begin calling Priceline for Rate Lock Extensions rather than extending online for Conventional Conforming loans (extensions will not be available online for Conventional Conforming loans), on 1/31 the G-Fee increase will impact 30-day pricing, and on 2/13 the G-fee increase will impact 15-day pricing. Conventional loans locked prior to the dates above must fund by Feb. 29 - no standard extensions. If the loan extends, you will be charged 55 bps to cover the G-fee plus normal extension fees. Non-Conforming pricing is impacted since pricing is set as a spread to conforming base price."

(Returning to Wells' correspondent, MERS has announced system updates ("Release 21.0) effective 2/27. If a loan funds after that date, the following items will be required: seller must initiate the Transfer of Beneficiary (TOB)/Transfer of Servicing rights (TOS) transactions within five calendar days of transfer date. MERS as Original Mortgagee (MOM) loans must be registered within seven calendar days of the note date or the funding date, and so forth. Go to the MERS site for specifics - there are several.)

The ripple affect doesn't take long. Florida Capital Bank Mortgage, for example, spread the word to its brokers that, "Mandatory increases in guaranteed fees have been implemented by FHFA as a result of the government's Temporary Payroll Continuation Act.  These actions require Florida Capital Bank Mortgage (FLCBM) to begin phasing in the increased costs as it relates to our overall daily pricing and extension costs. The cost will be implemented by lock period on conventional products.  The 45 and 60 day pricing has already been implemented. 30 day pricing will reflect the new guarantee fees on Thursday, January 12, 2102. In addition, loans closing after February 6, 2012 that requires an extension will be charged an additional 65 bps to account for the increased guarantee fee, if it has not already been assessed."

In the consulting realm, The Collingwood Group announced its acquisition of GWN Consulting, LLC, a firm specializing in Federal Housing Administration (FHA) and Ginnie Mae risk management and quality control.  "The firm's expertise includes FHA compliance, risk and claims management, Quality Control Plan review, implementation and analysis, and FHA lender and Ginnie Mae issuer approvals. GWN also has extensive experience supporting lenders' responses to FHA and HUD Office of Inspector General audits, as well as Credit Watch and Direct Endorsement Authority terminations.  GWN's business will operate as part of Collingwood's Risk Management & Compliance Division."

Flipping over to the markets, yesterday the 10-yr T-note closed at 1.96%, about the same level as the previous Friday after a little volatility. For mortgages it was "same ol' same ol': active buying reported from the Fed, banks, money managers, and hedge funds while mortgage banker selling held near the $1 billion area, and MBS prices improved slightly.

If you're looking for more excitement today, you may not find it. The only data is the not-market-moving Wholesale Trade figures. We do, however, have the Treasury's auction of $32 billion in 3-year notes at 10AM PST. In the meantime, the 10-yr yield has crept up to 1.99% and in the early going MBS prices range from unchanged to worse by .125.

Friendship Between Women:

A woman didn't come home one night.

The next day she told her husband that she had slept over at a friend's house.

The man called his wife's 10 best friends.

None of them knew about it.           

Friendship Between Men:

A man didn't come home one night.

The next day he told his wife that he had slept over at a friend's house.

The woman called her husband's 10 best friends.

Eight of them confirmed that he had slept over and two claimed that he was still there.

If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog discusses the time frames for borrowers returning to A-paper status after a short sale or foreclosure. If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what's going on out there from the other readers.