Did the Texas owner of the company "America's Best Mortgage and Creative Solutions" in St. Martinville, LA get a little too "creative"? She is accused of submitting false loan applications on behalf of clients to mortgage lenders and falsifying documents to make it appear borrowers were purchasing homes for significantly higher amounts than the actual purchase price: BayouFraud. Originators in the business continue to deal with the public's perception of headline-grabbing stories like this.

I received a somewhat related note. "It irks me when we blame Obama and Congress for these regulations, when we have no one to blame but ourselves and our inability to manage our own industry.  I've been in this business almost 40 years.  I've seen lending policies that pre-dated ECOA and redlining policies that pre-dated CRA: I assure you that we'd now be appalled at those policies.  TIL and RESPA are because we weren't treating consumers honestly and fairly, not honoring our commitments. Why is it that we have such a short memory, that we now forget that we paid commissions that encouraged originators to choose the product that paid them the most money rather than what was best for the consumer? Let's stop blaming the politicians and commit to always treating our consumers with honesty and integrity. That's how we keep the regulations at bay." THE MAN IN THE MIRROR

As if the mortgage biz doesn't have enough other things to worry about, how about a US government shut down? There are dozens of HUD programs that may be impacted, but focusing on FHA loans, there are two important steps in the origination process where FHA lenders have a dependency on FHA:  obtaining a case number for a new FHA loan and after it closes being endorsed by FHA so that a mortgage insurance certificate can be issued. The case number for an FHA loan is obtained via FHA Connection. It is possible that FHA Connection may continue to operate even if there is a government shutdown. If that is the case, obtaining case numbers would not be a problem. (During the November 1995 shutdown, case numbers could not be obtained.) The last I checked most believe that it is very likely that loans will not be endorsed and "mortgage insurance certificates will not be issued in the event of a shutdown. Lenders could continue to originate FHA eligible loans but they will need to wait to obtain an endorsement and an MI certificate. It should be noted that lenders with DE authority can potentially obtain MI certificates if FHA Connection continues to operate." The shutdown in 1995 mainly caused a delay rather than drop in FHA loan origination, but if lenders decide to stop accepting FHA applications, it could be a problem. I have heard nothing about Fannie or Freddie's operations. MND WROTE A FULL STORY ON THE POTENTIAL IMPACTS

With the comp issue settled, but in no way forgotten, our business turns its attention to the release recently of the set of Proposed Risk Retention Rules, with a comment period ending on June 10, 2011. These rules encompass more than residential mortgages - they also impact ABS & CMBS (asset-backed, like credit card debt, and commercial mortgage) instruments. Industry followers believe that the portions that seem to be generating the most discussions will include the exemption of Fannie Mae and Freddie Mac from risk retention; the narrow definitions of qualified residential mortgage (QRM), commercial real estate (CRE) loan, commercial loan, and auto loan; the creation of a premium capture cash reserve account; and the limited exemption for re-securitizations. If you'd like to comment on the risk retention proposals, go to RiskRetentionComments.
 
In spite of this being very much an agency-centric residential lending environment, there are some "off the beaten path" loan products that continue to evolve. CMG Mortgage, in California, continues to offer its HOA program with success. A few other recent entries include:

Avant Capital Partners launched its "Bank Lending Program for Small Business & Owner Occupied Real Estate" program. "Loans range from $500,000 to $10,000,000 with leverage up to 90% LTV. The program offers conventional and SBA guaranteed financing solutions for owner-occupied real estate.  Acceptable property types include: office, retail and industrial (including condominium), mixed use, and many more like funeral homes, grocery stores, convenience stores and markets.  Interest rates range from 4.15% to 6.45%." For more information, contact Adam Luysterborghs at adam@avant-capital.com.  Avant is hosting a webinar April 12th: AvantWebinar

And Mortgage Harmony Corp. initiated "rate resetting" mortgage, which upon the first consumer initiated change compensates originators with monthly recurring commission. The marketing material suggests that the program, HarmonyLoan, is catching on with credit unions for both conforming and jumbo loans, "mitigates investor churn, increases MSR values, offers consumer protection (improves credit risk), and provides originator income stability." Programs include conforming and jumbo 5/1, 7/1, 10/1 ARMS and 15 year fixed, and if you want a demo go to MHarmony or read the recent press release: MortgageHarmonyNews.

Franklin American reminded clients that, starting on the 18th, "Appraisals may no longer be used to increase the insurable mortgage balance above the sum of the outstanding principal balance and the new UFMIP. In other words, closing costs, discount points or prepaid items may not be included in the new loan balance. The insurable balance may only increase above the sum of the outstanding principal balance and the new UFMIP by using a credit qualifying (streamline or rate/term) refinance with an appraisal. FHA requirements for three and four unit purchase transactions regarding self-sufficiency test, net rental income calculations, reserves and monthly payment calculations also apply to all refinance transactions of three and four unit properties." In addition, "Maximum financing is allowed for a refinance of a former investment property at the same level as an owner-occupant if the borrower re-occupied the property 12 months or more prior to the loan application. For those who re-occupied less than 12 months prior to application, the maximum LTV is limited to 85%."

Provident Funding told brokers of its "Section 7 of the new Loan Origination Agreement that broker compensation must be the subject of a written agreement between the mortgage broker and the borrower.  A copy of the agreement must accompany each completed loan package delivered to Provident Funding by the mortgage broker.  The written agreement must indicate that (1) broker compensation may or may not be negotiable, and (2) in setting the amount of compensation the mortgage broker has not discriminated on the basis of race, color, religion, national origin, sex, marital status, handicap, familial status, or any other legally prohibited basis." The agreement must be executed and returned to the Broker Approval department by next Wednesday.

Parkside Lending, a West Coast wholesaler, provided its brokers with a "RESPA and TILA Disclosure" form which the agents fills to guarantee that the borrower received a valid and timely GFE, and has not been steered in any matter in their loan choice given the anti-steering provisions.

Wednesday was another not-so-good day for rates, with MBS sales volumes picking up a little bit but current-coupon prices losing about .125. Ten year Treasury notes were worse by about .5, closing with a yield of 3.54% given the inflation fears picking up again (oil is nearing $110 per barrel) along with some weakness in the US dollar ahead of an expected interest rate hike from the ECB (which did indeed happen). "REITs, banks and money managers" were better buyers at these rates.

Weekly Jobless Claims dropped from a revised 392k down to 382k, another little bit of good news for our job market (as opposed to going the other way), but more importantly the ECB (European Central Bank) raised their rates. The Jobless Claims number was about as expected, but the ECB move tends to put a little pressure on our own Fed. Regardless, the 10-yr is up to 3.57% and MBS prices are worse by .125-.250.

An Irish farmer named Seamus had a car accident. In court, the lorry company's hot-shot solicitor was questioning Seamus.

"Didn't you say to the police at the scene of the accident, 'I'm fine?'" asked the solicitor.
Seamus responded, "Well, I'll tell you what happened. I had just loaded my favorite cow, Bessie, into the..."

"I didn't ask for any details," the solicitor interrupted. "Just answer the question. Did you not say, at the scene of the accident, 'I'm fine!'?"
Seamus said, "Well, I had just got Bessie into the trailer and I was driving down the road..."

The solicitor interrupted again and said, "Your Honor, I am trying to establish the fact that, at the scene of the accident, this man told the police on the scene that he was fine. Now several weeks after the accident, he is trying to sue my client. I believe he is a fraud. Please tell him to simply answer the question."

By this time, the judge was fairly interested in Seamus's answer and said to the solicitor, "I'd like to hear what he has to say about his cow Bessie."

Seamus thanked the judge and proceeded. "Well as I was saying, I had just loaded Bessie, my favorite cow, into the trailer and was driving her down the road when this huge lorry and trailer came through a stop sign and hit my trailer right in the side. I was thrown into one ditch and Bessie was thrown into the other. I was hurt, very bad like, and didn't want to move. However, I could hear old Bessie moaning and groaning. I knew she was in terrible pain just by her groans.

"Shortly after the accident, a policeman on a motorbike turned up. He could hear Bessie moaning and groaning so he went over to her. After he looked at her, and saw her condition, he took out his gun and shot her between the eyes.

"Then the policeman came across the road, gun still in hand, looked at me, and said, 'How are you feeling?'

"Now what the heck would you have said?"