When S&P downgraded the United States (remember that?), it did absolutely nothing to Treasury rates, and certainly didn't seem to motivate Congress to do much about it. Now we have word from Moody's that it may downgrade a plethora of U.S. banks.

I like dogs. Maybe I should move to Detroit and bring a case of Alpo. An article in Bloomberg by Chris Christoff notes, "As many as 50,000 stray dogs roam the streets and vacant homes of bankrupt Detroit, replacing residents, menacing humans who remain and overwhelming the city's ability to find them homes or peaceful deaths. Dens of as many as 20 canines have been found in boarded-up homes in the community of about 700,000 that once pulsed with 1.8 million people. (Trivia: there are two cities that have gone from having populations greater than 1 million to less than 1 million - Detroit and ancient Rome.) "Poverty roils the Motor City and many dogs have been left to fend for themselves, abandoned by owners who are financially stressed or unaware of proper care. Strays have killed pets, bitten mail carriers and clogged the animal shelter, where more than 70 percent are euthanized." Many remember the pets saved and relocated when New Orleans flooded - hopefully groups can do the same here.

In issuing a "Notice of Incompleteness" under the Equal Credit Opportunity Act, what is a "reasonable time frame" to give the applicant for completion of the application? I received this note: "We are a lender with a current policy of allowing an applicant an additional thirty (30) days beyond the initial thirty (30) day ECOA requirement to complete an 'incomplete application'. In accordance with policy, if the application is not completed within this thirty (30) day period, the loan needs to be moved to withdrawn by the applicant or is deemed a cold lead. However, we are finding that this policy requires many files to be disposed of well before the applicant has either finished shopping lenders, or chosen a house to buy. Is it possible for us to change the thirty (30) day period for the applicant to complete the application to sixty (60) days?" Looking at the legal verbiage, I don't know if it helps or not. "In issuing a 'Notice of Incompleteness', the creditor must provide a 'reasonable period of time' for the applicant to complete the application."  [12 CFR § 1002.9(c)] Can you imagine telling your squabbling 4-year olds, "You guys need to be reasonable!"

In a recent Bankers Advisory posting, Paul McSheffrey, writes, "The Washington Post recently featured an article "Thousands of Marylanders are losing homes in second wave of foreclosures", which discusses the large backlog of foreclosures in the state. As mentioned in the article, the foreclosure timeline in Maryland is now among the longest in the nation. Some of the reasons for this backlog include the various rules involved in foreclosing a residential property in Maryland. "Some present rules under judicial foreclosure the lender must: file a complaint with the Circuit Court in the county where the property is located in order to commence foreclosure proceedings. If the court determines that a sale would be appropriate, a trustee is appointed to conduct the sale. Before a public sale may take place, a notice of sale must be given indicating the time, place, and terms of the sale. The notice must be placed in a newspaper of general circulation at least once per week for three weeks. The first publication must be no less than fifteen days before the sale and the last publication must be no more than one week before the sale. No later than thirty days after a sale is made, the trustee must file a report with the court explaining the fairness of the sale. After the report is filed, the clerk of the court will file a notice in a local newspaper explaining that the foreclosure sale will be ratified by the court thirty days after the date of the notice unless exceptions to the report are made. If there are no exceptions to the report, the final order of ratification of the foreclosure sale is made by the court. Of course, non-judicial foreclosures involve a different procedure. How does your state rank in timelines? Fannie shows us.

The VA hasn't changed their net value percentage since 2001; it has remained at 11.87%. The agency had elected not to make changes to the figure in recent years citing many extenuating circumstances including data difficulties from the implementation of a new computer system. In addition, due to the prolonged recession and the privatization of the property management function the VA opted to avoid any significant changes which could adversely impact the ability of veterans to obtain housing loans. However, the Department of Veteran Affairs announced earlier this month, that the percentage used to determine Net Value for properties will increase to 14.95%. The change will take place effective October 8, 2013. As many may know, and for some who do not, the NVP is defined as the fair market value of a property less the costs estimated to be incurred by the VA resulting from the acquisition and disposition of the property. Costs associated with the acquisition and disposition of a property, other than those for property improvement, are estimated as a percentage of the fair market value. For those that want some bedtime reading.

Bank closures have really slowed, but bank & credit union mergers roll on, for various reasons including financial strength or combining redundant departments to save money, and here is a partial list for the last 2-3 weeks. In no particular order...Blue Hills Bank ($1.2B, MA) will acquire a 3 branch division of Sovereign known as Nantucket Bank for an undisclosed sum. Sovereign is a sub of Banco Santander. Triumph Bank ($416mm, TN) will buy the mortgage division of Merchants & Planters Bank ($93mm, TN) for an undisclosed sum. First Community Bank ($625mm, SC) will acquire Savannah River Banking Co. ($157mm, SC) for cash (60%) and stock (40%) of about $33.6mm.

Co-op Services CU ($415mm, MI) will acquire Rivers Edge Community CU ($95mm, MI). First National Bank of Scotia ($405mm, NY) will acquire insurance agency The Scautub Agency for an undisclosed sum. Scautub offers auto, home and business insurance. Carolina Alliance Bank ($248mm, NC) and Forest Commercial Bank ($139mm, NC) have announced a strategic merger. After the transaction, CAB's shareholders will own about 60% of the combined bank and FCB shareholders will own about 40%. Regulators closed Bank of Wausau ($44mm, WI) and sold it to Nicolet National Bank ($665mm, WI). Nicolet gets 1 branch, assumes all deposits and entered into a loss-share transaction on the assets.

Croghan Colonial Bank ($630mm, OH) will sell a branch containing $29.5mm in deposits to Farmers & Merchants State Bank ($949mm, OH) for an undisclosed sum. Vintage Bank Kansas ($16mm, KS) will acquire larger The State Bank of Conway Springs ($30mm, KS) for an undisclosed sum. Wells Fargo will buy $1.6B in commercial real estate loans from ING for an undisclosed sum, as ING moves to reduce its US real estate lending exposure. Capital One Financial will acquire multifamily underwriter and servicer Beech Street Capital (MD) for an undisclosed sum. Beech Street is the 6th largest issuer of multifamily loans in the US, originating $4B last year and has 10 offices. Frost Bank ($22.5B, TX) will acquire Western National Bank ($1.4B, TX) for $220mm in cash and stock.

SunTrust Banks ($168B, GA) will finance up to $5B of commercial real estate loans (CRE) originated and managed by MetLife Real Estate Investors. MetLife had $43B in CRE mortgages outstanding in 2012. Allegiance Bancshares ($799mm, TX) will acquire Independence Bank ($219mm, TX) for an undisclosed sum. The parent of 1st Constitution Bank ($813mm, NJ) will acquire the parent of Rumson-Fair Haven Bank and Trust Co. ($236mm, NJ) for $24.3mm in cash (40%) and stock (60%). The parent of Mercantile Bank of Michigan ($1.4B, MI) will merge with the parent of Firstbank ($1.3B, MI) and Keystone Community Bank ($243mm, MI). Mercantile will pay about $151.5mm to create the 3rd largest bank in MI (deposit share). After the transaction, Mercantile shareholders will own about 52% of the stock in the combined company, Firstbank shareholders will own 48% and the board will be comprised equally of Mercantile and Firstbank directors. First Savings Bank Northwest ($879mm, WA) said it will close a unit offering escrow services to reduce expenses. Lastly, Bryn Mawr Trust Co ($2.0B, PA) said it terminated its agreement to acquire MidCoast Community Bank ($281mm, DE) announced in March.

Fannie has updated its servicing policies for borrowers impacted by disasters (defined as earthquakes, floods, hurricanes, or "other catastrophes caused by a person or event beyond the borrower's control").  For properties where the servicer achieves Quality Right Party Contact during the initial 90-day post-disaster relief period and the borrower is  current, 90 days or less delinquent at the time of disaster, or performing under the Trial Period Plan, borrowers may be granted up to 12 months' forbearance (six months if more than three months delinquent).  In cases where the servicer has not achieved QRPC, borrowers may be granted up to three months' forbearance.  Post-disaster income documentation, credit bureau reporting, insurance claim settlement, Streamlined Modification, Cap and Extend Modification, and escrow account guidelines have also been updated.  To view the details in full, refer to Servicing Announcement SVC-2013-16.

Freddie Mac has announced that it will be upgrading Loan Prospector in the late autumn to provide enhanced income documentation feedback messages and that the 2013 Area Median Income Estimates will be implemented into the system on August 25th.

Turning to the markets, in the current QE environment we can figure out what rates are doing by what coupon of MBS the Fed is buying. In this case, yesterday's NY Fed weekly announcement showed a shift to the 4.5% 30-yr MBS (containing 4.75% and higher 30-yr mortgages). This is the highest it's been since April 2010. The NY Fed reminded lenders how rates have gone up since early May. Here in August QE3 for agency MBS purchases, 30-year 4.5s made up 3.5% of 30-year agency MBS gross issuance, up from just a smidgeon (a very technical term) only a month or two ago. Overall, the Fed is still buying about $3 billion a day, and lenders are selling about $1-1.5 billon per day.

And if economic news continues to be decent, yes, a tapering off of fixed-income securities will take place. In terms of news, yesterday's Initial Jobless Claims was higher than expected but it remained below 350k as did the 4-week moving average. And the FHFA reported its House Price Index rose 0.7 percent in June and was up 7.7 percent year over year. So that didn't help bond prices, and agency MBS prices were worse another .125-.250 and the 10-yr closed at 2.90%. This morning we'll have the last scheduled news of the week with July New Home Sales.