Well, if you can't fix your brakes, make your horn louder. Odd logic is somewhat humorous. But as any LO or servicer knows, just because you modify someone's mortgage doesn't mean they are going to start making their payments. "New delinquencies on reworked mortgages held by bonds without government backing jumped in September, a sign that some of the fuel for housing's recovery isn't sustainable, according to JPMorgan Chase. A record of more than 28,000 modified home loans within so- called non-agency securities turned delinquent, a rise of 24 percent from the prior month, JPMorgan analysts said in a Nov. 16 report. The share of all non-agency loans between 30 and 60 days past due soared 0.44 percentage point to 3.54 percent, the highest since February 2010, data compiled by Bloomberg show." Here's the story.

Hopefully FAMC doesn't have that problem! Franklin American Mortgage Company is expanding their Correspondent Underwriting group located in Irving, TX.  Numerous underwriting positions are available including AVP Correspondent Underwriting Trainer as well as front line Conventional Underwriters, Risk Analysts and various other underwriting support positions. Candidates must be productive, focused and very organized. To view all openings and the job requirements please submit your resume directly to resumes@franklinamerican .com and put "Correspondent Underwriting" in the subject line.

"Rob, I don't hear much about Europe impacting our mortgage markets. Is it all squared away?" Heck no - we'll be dealing with it for years. But it has been moved to the back burner - remember our markets sometimes have limited attention spans and memories. So now we're occupied by the fiscal cliff - something a little more pressing. After that is resolved, we'll be on to something else, like China, or the Mideast. But returning to Europe, due to German-inspired excessively speedy austerity in Greece, Spain and Portugal, the world is watching while the Euro-zone economy is quickly entering a recession. Worse, those three economies are shrinking by more than the spending cuts and tax increases they're imposing, thus worsening their debt-to-GDP ratios. Watch for more rating agency downgrades as a result (if you still care about rating agency opinions), and in fact France was downgraded overnight by Moody's.

"What do you hear about Impac Mortgage? Didn't its focus on Alt-A cause it to go bankrupt?" Impac might have been down, but not out. It is, in fact, watching its business skyrocket. Here is some recent news on its origination volumes.

"Where did Cole Taylor Mortgage come from? I hear it has the 'hot hand' in servicing deals with Fannie." Cole Taylor is doing very well, as are most other lenders - the margins are great. Taylor Capital Group, its owner, reported an increase in net income in the 3rd quarter of 18%, and so far for 2012 net income of $40 million (versus $9 million in 2011!). Mortgage banking revenues increased to $41 million, up 77% from the 2nd quarter of 2012, and its mortgage servicing rights increase to $53 million - it is servicing over $6 billion.

In another example of expansion, in the third quarter Stearns Lending funded $3.1 billion of home mortgages, an 88% improvement over the past 12 months.

"How much is Franklin American servicing? The company is private, and I don't know where to find that information." I don't know either - my first response is to ask your FAMC rep! It is rumored that the company is retaining about 90% of its originations, and the portfolio is approaching $20 billion. If that is true, good for FAMC! In general, if the price the aggregators pay a lender for servicing rights is less than the cash flow value, and the lender has the cash/financing and internal structure to service the loans itself, that is the way to go!

"Is builder business coming back? For example, did Envoy Mortgage launch a builder division last month?" Yes, builder business is coming back. Hope springs eternal, right? Believe it or not, many housing markets are tight, and Realtors actually complain of a lack of listings. So builders, with their optimism running at high levels, are re-entering the business, scrambling for lots in good areas, and have started building again. And yes, Envoy, which lends in 47 states, launched a division in early October to cater to builders. There are niche products, of course, but the problem for Capital Markets folks with builder business is, of course, hedging the darned stuff. The MBS market is most liquid 1-3 months out, and builder business goes out 6-9 months. Is the LO going to financially stand behind a 9 month rate lock? Of course not.

(When I was running Capital Markets, and I'd quote a rate and price to an LO with a builder client who wanted to obtain pricing six months out. Yes, the fixed income markets have been relatively stable, but who knows where they'll be six months from now when the builder finishes construction? As a quick tutorial, one can't really sell a mortgage-backed security today that settles (closes) in six months. But companies turn to options, like puts and calls. I'll keep this basic and short! Buying a "put" from a broker-dealer gives you the option (not the obligation) to sell something in the future at a certain price. Recently puts on Fannie 3's, containing 3.5% 30-yr mortgages, were being sold at about 1 point in February and nearly 1.625 in April. Said another way, a builder who likes the rates and pricing six months from now could pony up 1.625 and the lender use it to buy a put - but most LO's never want to hear that, nor do builders, who often want lenders to guarantee today's rates and prices. Still, many lenders offer extended locks out to 90 days - the MBS market actively trades out there, and sometimes investors like Chase or PHH will go out 120 days IF the client pays a deposit (often 1%). But capital markets folks continue to remind LO's that there is no free money. The commitments are rarely transferable, meaning that if the builder finds a buyer, and then the buyer cancels, the rate lock can't be given to someone else. And other lenders may offer some custom construction clients some type of float down option at today's prices - but usually the borrower pays interest until then.)

Turning to mortgage brokering versus mortgage banking, I received this note. "In North Carolina, if your company doesn't accept deposits, a mortgage company cannot use the word bank in advertising. Joseph Smith has put together a framework in NC that makes sense to me as a mortgage professional and a consumer."

And regarding overall business trends, a Wall Street MBS trader wrote, "Supply has generally been lighter over the past 2 weeks.  We're hearing locks have slowed some into lightly higher rates and perhaps with the seasonal effect setting in.  Higher coupon mortgage securities are recovering some as we're hearing less chatter on the 'Demarco trade.'  Also most accounts are expecting speeds to be pretty flat over the next few months given the lower day count."

On to some recent bank, MI, and investor updates to give you a taste of the industry trends.

On Friday Hometown Community Bank of Braselton, Georgia, was closed and opened yesterday as CertusBank, National Association, of Easley, South Carolina.

Here's some great press for National MI.

Freddie Mac announced, "We are revising the eligibility requirements for our Freddie Mac Relief Refinance Mortgages offering to base the expiration date of the offering on 'Application Received Date' instead of the note date of the mortgage. This change is made possible with the implementation of the Uniform Loan Delivery Dataset (ULDD) and the collection of 'Application Received Date' as a data point. We are also announcing a September 30, 2014, deadline for delivering Relief Refinance Mortgages. As a result of this change, Relief Refinance Mortgages - Same Servicer and Relief Refinance Mortgages - Open Access, must have Application Received Dates on or before December 31, 2013. All Relief Refinance Mortgages must be delivered to Freddie Mac on or before September 30, 2014. Using the "Application Received Date" should make it easier for you to manage your pipeline against the expiration date of the offering. With this change, you'll be able to originate Relief Refinance Mortgages through the end of 2013 and assist more eligible borrowers to refinance with our offering. This includes mortgages originated under the Home Affordable Refinance Program. The Single-Family Seller/Servicer Guide (Guide) will be updated to reflect this revised eligibility requirement in a future Guide Bulletin."

Switching gears into the markets, it is really a holiday week. Friday was another solid day for mortgages as they continued to outperform relative to Treasury prices.  Traders continue to report that the 30-year fixed 3.0% coupon, containing 3.25-3.625% mortgages, pretty much where rate sheets are these days, is about 75% of the over-all production.  Money managers, hedge funds and Fed purchases have continued to remain predominantly in the fixed 3.0% and 3.5% coupon. But how about the liquidity in the 30 year fixed 2.5% coupon? As rates continue to stay here, and companies hunt for volume to support their overhead, watch for margins to be squeezed and lower rates offered to borrowers. So the 2.5% coupon should increase in market share. In fact, trading desks report that liquidity in the fixed 2.5% bond is just starting to take place (gradually). One measure of liquidity, besides the daily volume, is the bid-ask spread - and this is still very wide on a relative basis.

This is a great week for housing market indices. Yesterday we learned that Existing-home sales increased 2.1% in October to a seasonally adjusted annual rate of 4.79 million, the 16th consecutive month of increases, surpassed analysts' forecasts and were up 10.9% year over year.   Inventory fell to the lowest level since December 2002, with the inventory of previously owned homes listed for sale falling to 2.14 million, which represents a 5.4-month supply at the current sales pace, the lowest since February 2006.  The median sales price for October was $178,600, up 11.1% from $160,800 a year earlier.

And this morning we found out that Housing Starts were +3.6% in October (versus up over 15% in September, and at their highest levels since summer of 2008) and Building Permits dropped 2.7% (versus up over 11% in September). All of this has not done much to rates. The 10-yr closed around 1.61%, and this morning we find it at 1.64%. Look for not much change to rate sheets as agency MBS prices are down.

In this time of year of 2013 predictions, let's take a look at previous thoughts on the future. (Part 2 of 3.)
"The wireless music box has no imaginable commercial value. Who would pay for a message sent to nobody in particular?"
David Sarnoff's associates in response to his urgings for investment in the radio in the 1920s.
"The concept is interesting and well-formed, but in order to earn better than a 'C,' the idea must be feasible."
A Yale University management professor in response to Fred Smith's paper proposing reliable overnight delivery service. (Smith went on to found Federal Express Corp.)
"I'm just glad it'll be Clark Gable who's falling on his face and not Gary Cooper."
Gary Cooper on his decision not to take the leading role in "Gone With The Wind."
"A cookie store is a bad idea. Besides, the market research reports say America likes crispy cookies, not soft and chewy cookies like you make."
Response to Debbi Fields' idea of starting Mrs. Fields' Cookies.
"We don't like their sound, and guitar music is on the way out."
Decca Recording Co. rejecting the Beatles, 1962.
"Heavier-than-air flying machines are impossible."
Lord Kelvin, president, Royal Society, 1895.
"If I had thought about it, I wouldn't have done the experiment. The literature was full of examples that said you can't do this."
Spencer Silver on the work that led to the unique adhesives for 3-M "Post-It" Notepads.
"Drill for oil? You mean drill into the ground to try and find oil? You're crazy."
Drillers who Edwin L. Drake tried to enlist to his project to drill for oil in 1859.