If it's a slow Friday afternoon in the office today, and you enjoy optical illusions.

I'd like to say that there are no illusions in Washington D.C., but I can't. Remember that just because a bureau doesn't have a director doesn't mean that it can't set rules, policies, and carry out extensive audits! The Senate said "no" to confirming Richard Cordray as the director of the CFPB, which brought this response from President Obama: "I will not take any options off the table when it comes to getting Richard Cordray in as director of the Consumer Financial Protection Bureau. The bottom line is, we're going to look at all of our options. My hope and expectation is Republicans who blocked this nomination will come to their senses." Republican leaders said they intended to combat Obama's recess-appointment threat by keeping the Senate technically in session throughout the holidays. Read all about the mess.

"Rob, one loan program that seems to be forgotten or arbitrarily lumped in with the FHA program is the VA Home Loan Program, which allows veterans and service members to attain a federally guaranteed home without a down payment. The program is enveloped in a set of rules and requirements, beginning with stringent eligibility requirements that veterans, active duty, guard or reserve, and military spouses must meet to obtain a Certificate of Eligibility through the Veterans Administration.  Although loan approval is not guaranteed once a certificate is awarded, the certificate allows those who are apply for a VA home loan (http://www.veteransunited.com/). Additionally, there are occupancy requirements to make sure the homes will be used as a "primary residence." In order to seal the deal on their VA loan, potential homeowners must prove they will use the residence they are purchasing within a "reasonable time," which is typically two months following closing on the loan or by the time the house is finished for custom built properties. There are also ongoing occupancy requirements that impact individuals who travel frequently or spend long periods of time away from home, in addition to serve members who may be up for deployments and permanent change of station orders." So wrote Kevin Peria with Veterans United.

Kevin continued, "The loans are still made through private loans just as other home loans are, but are backed by a VA guarantee for a maximum of 25 percent of a home loan amount up to $104,250, which limits the maximum loan amount to $417,000. Borrowers can borrow the reasonable value of the property or the purchase price, whichever is less, in addition to the funding fee. The VA Home Loan Program is just one of many public services provided to veterans as a result of the original GI Bill. These veterans programs have been supplemented through the Post-9/11 GI Bill and the Veterans Opportunity to Work Act of 2011, which passed in November: (http://www.gibill.va.gov/benefits/post_911_gibill/index.html).

"The most recent legislation, known as the VOW Act (http://veterans.house.gov/vow), provides significant tax credits to businesses hiring unemployed and disabled veterans.  Additionally, the law builds on an existing education and jobs retraining program for unemployed veterans and establishes a new project helping the Labor Department to determine new ways for veterans to utilize their specialized training to obtain licenses needed for certain civilian jobs. Also signed at the same time as the VOW Act was the Consolidated and Further Continuing Appropriations Act of 2012, which renewed the expired higher loan limits for VA loans for another two years, through Dec. 31, 2013. For next year, the loan limits for counties in the contiguous U.S. will be between $417,000 and $625,000, depending on the median county price. There were no decreases in loan limits as a result of the legislation." (If you have any questions, write to Kevin Pearia at kpearia@veteransunited.com.)

Yesterday the commentary discussed the FHA program for underwater borrowers with negative equity, and I received these corrections Joel Harrison: "The program has been extended to 12/31/2013, and the product's compare ratio has been separated in Neighborhood Watch but Ginnie has not indicated that they are separating it when considering an Issuer's delinquency ratios. In case any of your readers are interested they can contact me for an outlet to originate these loans (broker or correspondent) at joelh@bankersportfolio.com.

I also received notes asking, "Why would borrowers continue to make car loan payments when they know that as soon as they drive it off the lot it is worth less than the loan and not make payments on home loans?!"

Also, "I would like to comment on your response to the AE in CA regarding the upside down equity position. First, I agree with you that in a normal - or even a slightly unusual market - a homeowner should honor his commitment to the lender. Simply walking away from a debt obligation should not be minimalized. However, these are not ordinary times and these are not ordinary circumstances - look at the predominance of short sales. Aren't these people in essence walking away from their financial obligation to the bank? Homeowners today are faced with a still-declining market and the concern is not whether they can afford their home, it is whether they can afford to sell their home 2, 3, 5, or 7 years from now without penalty. Perhaps it is better to walk away now than to deal with damaging additional financial consequences in the future when tax forgiveness is no longer available. I agree that an owner should do everything possible to repay their debt, and I am angered and frustrated with former homeowners who walk away from their obligation without any sense of remorse (and I have spoken to several who have done so and feel quite justified with the decision).

"However, tell this to the homeowner in my neighborhood who bought his home in good faith for $670,000 in 2007, only to see the same model across the street sell for $438,000 a few months ago. Is there really a likelihood that the property's value will increase over $200,000 in the next 5 years? How about 10? Forget about equity, the concern is what if their family income changes during this time, affecting their ability to handle the payments? Oh, and they are currently in the 4th year of a 5-year fixed ARM at 6.50% (I/O) that they obviously cannot refinance out of and they won't qualify under HARP II because the loan is not Fannie or Freddie? Let's not forget that THESE people bought the home in good faith, only to be betrayed by an economic meltdown that was heavily impacted by corrupt lending practices and a government they trusted to look out for their best interests. These people are looking for help and a solution. What happens when their loan goes fully amortized and they cannot refinance due to equity issues? So, again, while I agree with you that a homeowner should do everything possible to meet an obligation, we also need to acknowledge the magnitude of these historic circumstances and understand that there are victims of the economy and of our housing crisis. It is in our collective best interests to look for solutions. People like this homeowner want to stay in their homes, but at some point in time reason has to come in to play along with the resignation that they are fighting a losing battle. Integrity and common sense collide - and we all lose this battle."

Turning to the markets, rates really aren't doing a heckuva lot. But at least they're drifting lower: the 10-yr T-note closed at 1.97% and MBS prices improved by about .250. Whether or not that is passed on to LO's remains to be seen, however. The economic week winds up this week with the International Trade Balance (expected to be narrowly wider at -$44 billion but which came in at a 43.5 billion deficit) and at 9:55AM the University of Michigan Survey.

In Europe, the EU leader's summit offered some preliminary takeaways. The European Council released a statement overnight detailing elements of a deal reached during phase 1 of the summit talks.  Things are subject to change, but the broad contours of this agreement look like they will stay in place - we'll learn more during a press conference today. The deal looks a bit better than investors were thinking as 23 of the 27 EU Leaders have agreed to adopt a new "fiscal pact" that "significantly coordinates" economic policies (the UK is a big holdout although it wasn't expected that all 27 would get on board w/this type of a deal). In the early going we find the 10-yr back up to 1.99% and MBS prices worse by about .125.

NATURAL BORN CITIZENS BEWARE.....
This just might make your day a little brighter!! You, who worry about Democrats versus Republicans--relax, here is our real problem.

In a Purdue University classroom, they were discussing the qualifications to be President of the United States. It was pretty simple. The candidate must be a natural born citizen of at least 35 years of age.

However, one girl in the class immediately started in on how unfair was the requirement to be a natural born citizen. In short, her opinion was that this requirement prevented many capable individuals from becoming president.

The class was taking it in and letting her rant, and many jaws hit the floor when she wrapped up her argument by stating, "What makes a natural born citizen any more qualified to lead this country than one born by C-section?" Yep, these are the same kinds of 18-year-olds that are now voting in our elections! And they walk among us.


If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com . The current blog discusses the time frames for borrowers returning to A-paper status after a short sale or foreclosure. If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what's going on out there from the other readers.