Lock desks (maybe I should say "lock systems", as things become more automated) are busy! The MBA reported that apps last week were up 13% from the prior week - over 81% of them being refi's. Refi's were up 17% hitting May 2009 levels, but purchases were down over 3%.

I received a number of questions and comments about compensation. First let me say that the 60-day comment period ended and the final rules have been issued.  So, some of the comments, along with suggestions:

"This takes effect 8 months from now. 8 months! Any company that makes a knee jerk reaction without hearing what the large mortgage companies do first as a result of this may be making a mistake, and mortgage bankers and brokers are pretty smart folks. An investor will always pay more for a higher yield, everything else being equal, and they should keep that in mind."

"We believe that apparently a broker can still receive YSP, they just can't charge up front points and receive YSP as well. ("Likewise, the Board finds that § 226.36(d)(2) of the final rule is consistent with TILA Section 129B(c)(2), which allows mortgage loan originators to receive payment from a person other than the consumer (such as a yield spread premium paid by the creditor) only if the originator does not receive any compensation directly from the consumer.")  You have to disclose the total fees on the GFE anyway.  If YSP had been totally done away with the broker channel would be closed.  That would have eliminated no cost refi's, and the broker would have no chance to compete with the retail banks. If there are products that offer higher yield to investors, the originators (any channel) will usually find a way to sell those products.  One hopes that a broker will not steer a customer into a higher cost loan when the borrower qualifies for a lower cost loan, but the borrower needs to do their due diligence & homework. And sometimes the best mortgage is no mortgage. Renting is not a crime!"

"Rob, as best I can tell, the final rule, among other things, prohibits payments to the loan originator that are based on the loan's interest rate or other terms. Their compensation that is based on a fixed percentage of the loan amount is permitted. It prohibits a mortgage broker or loan officer from receiving payments directly from a consumer while also receiving compensation from the creditor or another person. And it prohibits a mortgage broker or loan officer from "steering" a consumer to a lender offering less favorable terms in order to increase the broker's or loan officer's compensation. It does, however, provide a safe harbor to facilitate compliance with the anti-steering rule if the consumer is presented with loan offers for each type of transaction in which the consumer expresses an interest (that is, a fixed rate loan, adjustable rate loan, a reverse mortgage, etc.); and the loan options presented to the consumer include the lowest interest rate for which the consumer qualifies, and the lowest points and origination fees, and the lowest rate for which the consumer qualifies for a loan with no risky features, such as a prepayment penalty, negative amortization, or a balloon payment in the first seven years."

HERE is the full story on originator compensation

"Last week you mentioned the HARP program.  FNMA offers the DU REFI PLUS program, for those with a FNMA owned mortgage, up to 125% LTV with no MI.  Try to find a wholesale lender that offers up to 125%.  Actually it is virtually non-existent even on the retail side, at least in my area.  Also, not everyone has a FNMA loan.  So many more homeowners would be helped, if everyone that has great credit, good verifiable income, and cash reserves could refi up to 125%.  Too many cannot refi to lower rates, and are making a "business" decision to throw their keys in the middle of the room and walk out the door.  The "banks" are not helping, by denying those good borrowers an in-house refi to a lower rate, because they know they cannot go anywhere else - a captive audience.  It does no good for the neighborhood and the community when the banks are so self-serving.  There should be some way to use CRA to get the banks to actually do something beneficial for good borrower/homeowners in their communities."

States are focusing on the SAFE Act for their originators - perhaps regulators are surprised at how few have signed up or passed the test. States like California are doing their best to help: READ MORE

Is the 30-yr mortgage in the United States' DNA? Maybe, maybe not - it is relatively new and not widely popular in other nations. Check out THIS STORY

Wholesale investors are still seeing incomplete GFE's, in spite of months having passed since the implementation of the new policies. What seem to be the primary problems? The Fee Details submitted do not match Block 1 on the GFE, Block 2, Block 8, or do not match Blocks 3-7 on the GFE. The GFE Important Dates section is incomplete. The first column of the tradeoff table on Page 3 is incomplete, or the Originator section is incomplete, or the GFE "Initial deposit for your escrow account" section is incomplete. (I see a pattern here.) The "Property Address" section of GFE does not match registration. Lastly, "Your Adjusted Origination Charges" section is not completed.

With all of the government programs kicking around and loans being modified right and left, what happens to these borrower's credit scores? Loan modifications are still hurting borrowers' credit scores (FICO's drop over 100 points if you're down 3 payments), but regulators and legislators say people's participation in such programs should end their delinquent status - "hey, they're trying!" There are over 3 million borrowers who have received permanent modifications, but now have such poor credit scores that obtaining another loan is near impossible. (And there are those that say modified borrowers shouldn't be able to anyway!) The Consumer Data Industry Association (primarily made up of Equifax, Experian PLC and TransUnion) created a special status code last year for credit files that had been modified under HAMP that has been used since last November. For credit scores, there is very little difference between a short sale, a deed-in-lieu, or a foreclosure. Lenders and servicers agree that a loan modification just can't be ignored, in spite of what some politicians want.

Yesterday's "summit" on Freddie and Fannie had little or no impact on the markets. One of the big issues facing regulators as they grapple with the future of Freddie and Fannie is acceptance by overseas investors of whatever takes their place. Overseas the investors know the Agencies, and are comfortable buying their bonds. Currently money managers from China, Japan, etc., are demanding Ginnie Mae securities (backed by VA and FHA loans) due to the explicit government guarantee. But there is little reason for any agency MBS to perform much better or worse than any other class of agency MBS. The likelihood of F&F not existing with some kind of government backstop is becoming smaller and smaller. The probable outcome will be the government offering many an insurance wrap, similar to the flood insurance they offer in areas where insurance companies won't offer it. The plans for the agency's reform isn't due till 2011 - until then expect plenty of rumors to circulate as we saw a few weeks ago with the supposed massive government refinance.

Tuesday was not a good day for rates. Mortgages saw waves of selling with over $5 billion being sold - more than twice the rough average. So here in the last few business days the 10-yr sank to a yield of 2.56%, about 1.5% lower than April's levels - no one expects rates or markets to move in one direction all the time. The yield on the 10-yr seems pointed toward 2.50% rather than 3.50%, and yes, 30-yr 3.5% MBS's have neared a price of 101. (This price is not being reflected on retail rate sheets, by the way.) That being said, Industrial Production and Capacity Utilization were was stronger than expected. With no Treasury auctions, the Fannie/Freddie meeting out of the way, and no market-moving economic news scheduled today, perhaps we'll be quiet. Mortgage investors are still concerned with the volume, or lack of refinancing, spreads between Ginnie & Fannie and the housing market in general. To start the day we find the 10-yr back down to 2.60% and MBS prices roughly unchanged/slightly better than Tuesday afternoon.

A woman went to a pet shop and immediately spotted a large, beautiful parrot. There was a sign on the cage that said $50.00.

"Why so cheap?" she asked the pet store owner.

The owner looked at her and said, "Look, I should tell you first that this bird used to live in a house of ill repute, and sometimes it says some pretty vulgar stuff."

The woman thought about this, but decided she had to have the bird anyway.   She took it home and hung the bird's cage up in her living room and waited for it to say something.

The bird looked around the room, then at her, and said, "New house, new madam." The woman was a bit shocked at the implication, but then thought, "That's really not so bad."

When her two teenage daughters returned from school, the bird saw them and said, "New house, new madam, new girls."

The girls and the woman were a bit offended but then began to laugh about the situation considering how and where the parrot had been raised.

Moments later, the woman's husband Eric came home from work

The bird looked at him and said, "Hi, Eric."