According to news sources in Denver, where the City Council voted to regulate medical marijuana dispensaries, more applications have been received for licenses for selling pot than there are Starbucks coffee shops in the entire state, 390 versus 208. Fun with numbers...

"God Loves Mortgage Bankers"

Maybe that could be an MBAA bumper sticker at the next convention. Especially smaller mortgage companies, whose owners tend to be optimistic. But it seems that there is a disconnect going on in the industry between many smaller companies' projections for their own volumes and profit margins for 2010, and the industry-wide projections.

Every large investor has production projections that range from $1 trillion to about $1.5 trillion for 2010. The MBAA came out yesterday with a projection that residential mortgage originations will drop 40% this year to the lowest level in a decade: $1.28 trillion in 2010 down from $2.11 trillion in 2009. They expect purchases to rise slightly to $776 billion from $742 billion in 2009 but expect refinances dropping to $502 billion this year from $1.372 trillion last year. Yet many smaller companies are expecting to increase their production: "My company funded 15 loans per month on average, but since then we've hired 5 more agents, so we expect to do 25 loans per month..."

Maybe they'll have some help: last week mortgage applications in the U.S. rose 14%, with refinancing up 22% and purchases up .8%. Slightly lower rates last week helped, of course, and apps for refinancing were back up to 71.5% of all applications. READ MORE

Uh-oh. Let's hope that you don't find your company on this list, put out by HUD and consisting of companies that are under investigation for excessive claims. HERE is the story and the list you do not want to be on.

At least the Federal Reserve is making some coin on the asset purchases. The Fed had a $46 billion profit last year - heck, I wish that I got my taxes done as quickly as they calculated that! READ MORE

SunTrust told clients that in spite of HUD eliminating the 1.00% origination fee limit, the change has "not been immediately embraced by SunTrust" at this time, due to required system enhancements. Clients can look for an update in the near future, but for now "lenders must continue to limit the origination fee on all FHA transactions sold to SunTrust to one percent (1.00%)." HUD, and therefore, has also delayed the implementation of Appraiser Independence Guidelines until on or after Monday, February 15, 2010. Lastly, in order to improve data integrity and therefore loan investment quality, "SunTrust will be validating that the most recent AUS findings in the loan file, match the last AUS submission on record with the agencies, and that the most recent AUS findings match the terms upon which the loan closed." AUS findings should be included in the loan file, and match how the loan closes, and for closed conventional loans correspondents need to include the Fannie Mae Transmittal Summary (1008) after this Friday.

Guild Mortgage is currently accepting loan applications with the old GFE form as long as the application was signed and dated prior to January 1, 2010. This will probably last until the end of the month. Guild is also offering clients a temporary service to review the new forms prior to brokers delivering them to their consumers, as long as the forms are sent to Guild within 24 hours of completing it and before you give it to the consumer. Interesting.

Due to FHA adjusting their condominium guidelines, US Bank's Wholesale Division tweaked its guidelines. "A new provision is that FHA now requires HO-6 Coverage which is a 'walls-in' coverage policy. The monthly cost of the insurance must be included in the applicants monthly PITI.  Only exception is if it can be proved that the Home Owners Association's Hazard insurance covers the content (wall in) of each unit." Also Project Approval is not required for FHA-to-FHA streamline refinance (with or without an appraisal), or FHA/HUD Real Estate owned (REO) Division sales. The bulletin goes on to give site condominium project specifics, the required forms, and basically restating for their clients the FHA requirements. Lenders can go the FHA site to find whether or not a project (must be phase specific) is FHA approved: https://entp.hud.gov/idapp/html/condlook.cfm and look under HRAP/DELRAP Approval Method listing.

Brokers who sell to Wells Fargo's Wholesale Division are busy wading through a 32-page update to procedures, policies, and underwriting guidelines. Obviously it was too large to go into the details in this commentary, but the topics included "WFHM/WFHE Market Classification List Update, Mortgage Insurance Changes: Maximum Late Payments On Housing, Installment And Revolving Credit, Policies for Documenting and Qualifying Income, Enhancement: FHA Streamlined Refinances Now Allowed With High Balance Loans, Changes to Freddie Mac-owned Streamlined Refinance Transactions, Policy For Renegotiated Sales Contracts, Update: Maximum 43% Debt-To-Income (DTI) With Non-occupant Co-borrower, Direct Express Impacts for Interest-Only/Cash-out Refinance Transactions, Clarification: Wells Fargo Home Mortgage Does Not Accept FHA Construction Permanent Mortgage Program Transactions, New Streamlined IRS 4506-T Process, Desktop Underwriter® Manual Overlay Job Aid, Home Equity Updates, and the Indiana Undue Appraiser Influence Disclosure Also Required for Wells Fargo Home Equity Transactions." Phew!

In the news this morning, besides the tragedy in Haiti, was the Obama Administration's plan to penalize the banks that received TARP money. The final details of the levy are still being worked out, but the idea has been discussed since last summer as a way of recouping taxpayer bailout money and reducing the deficit. What a nightmare. The levy would hit banks even though the aid is being repaid, and the Treasury making a "healthy profit" on the money paid out from the $700 billion Troubled Asset Relief Program fund.

China's central bank raised bank reserve requirements for the first time since 2008, increasing them by 50 basis points on January 18th. So what? Well, it raises concern that if those banks have to increase their reserves, there will be less lending. Therefore one of the key engines for the global economic recovery would be slowed. And if growth slows, perhaps rates will improve, which is what happened.

We had a nice rate improvement yesterday, starting Monday night with some banking news out of China, a widening Trade Deficit due to oil prices, a down stock market due to potential corporate weakness, and following through to a decent 3-yr Treasury auction. It was "well bid" at 1.49% and a 2.98 bid/cover, exactly the same as last month, but with mediocre indirect level of 38%. The Treasury's 10-yr, which last Thursday was above 3.90%, was down at 3.72%, resulting in a "bull flattening" on the yield curve. (Once again, if short term rates are near zero, longer term rates going up or down will obviously steepen or flatten the yield curve.)

It is a new day, however, and we're looking at $21 billion in 10's today and $13 billion 30's tomorrow. Dealers expect that once the 10-yr is sold, the yield curve may flatten further. The auction, and the Fed's Beige Book this afternoon, is the only real economic news expected to push the markets around a little today. Currently the 10-yr risk free Treasury note is yielding 3.75% and mortgage prices are roughly unchanged from Tuesday afternoon.

Wall Street firms report a continued slowdown in supply of mortgages for sale, in spite of apps being up last week. Once again, the laws of supply and demand come into play: with applications, locks, and mortgages for sale slowing, and the Fed, hedge funds, and money managers buying...

Lots of folks were traveling over the holidays. So, overheard on some airline flights:

"On an Air NZ Flight with a very 'senior' flight attendant crew, the Pilot said, 'Ladies and gentlemen, we've reached cruising altitude and will be turning down the cabin lights. This is for your comfort and to enhance the appearance of your flight attendants.'"

"On landing the hostess said, 'Please be sure to take all your belongings. If you're going to leave anything, please make sure it's something we'd like to have.'"

"'In the event of a sudden loss of cabin pressure, masks will descend from the ceiling. Stop screaming, grab the mask, and pull it over your face. If you have a small child traveling with you, secure your mask before assisting with theirs. If you are traveling with more than one small child, pick your favorite.'"