Employees at a pizzeria in Ireland were fired for watching porn on the job. Isn't that disgusting? Irish people attempting to make pizza!

What isn't disgusting is the number of mortgage companies which are interested in expanding. For example, First Centennial Mortgage, out of Illinois, is sending out e-mails looking for originators. First Priority Financial, a retail shop out of California, announced that they were buying Austin Perry Financial, a wholesaler also based in California. CMG Mortgage has been expanding, as has Opes Advisors, Stearns Lending, American Pacific, etc., etc. - the list goes on. This is an interesting trend, as perhaps small to mid-size bankers are indeed seeing the origination "pie" shrinking in 2010, and are looking to maintain volumes and increase market share. And the hiring is not only taking place in the loan officer arena, but also operations and back office support.

Unfortunately rates were not the mortgage banker's friend yesterday. The 10-yr auction was not the best, with a bid/cover ratio slightly less than other recent auctions, less foreign demand, and one trader said it was "somewhat sloppy". This morning we've seen Jobless Claims and the Trade numbers - and that does it for news. The U.S. trade deficit narrowed unexpectedly in October by over 7% due to the weak dollar helping boost exports while demand for imported oil fell to its lowest daily level since January 2000. In fact, U.S. exports of goods and services were the highest since November 2008 and imports the highest since December 2008. This is good news for the economy, not so good for rates. Jobless Claims, however, rose more than expected last week, and was up 17,000 to a seasonally adjusted 474,000 in the week ended Dec. 5 from 457,000 in the prior week, the Labor Department said. This is bad news for the economy, good for rates. The new 10-yr yield is currently 3.46% and mortgage prices are worse by between .125 and .250.

Federal-funds futures contracts show an 18% probability that the Fed will increase the target rate from 0% to at least 0.5% by March, up from 11% odds a week ago.  The odds are about 50/50 for higher overnight rates by June and 90% that overnight rates will be 1% higher in a year. Granted, Fed Funds are not the same as mortgage rates, but they're in the same species, and the market almost seems like it is looking to be spooked by something that is not going to happen for several months, and that most everyone expects anyway. (The next actual Fed meeting is Dec. 15-16.) Besides, a 0% Fed Funds rate is not normal, nor is the Fed buying Treasury bonds (which it has stopped), nor is the Fed buying mortgage securities, which is set to end in about four months ($16 billion a week right now).

Most analysts feel that the Fed won't assume that the unemployment numbers give them the green light to raise rates, so don't look for anything immediately. But even if they hold steady for another six months, the supply & demand-driven bond markets will be well out in front of the Fed's moves whenever it occurs.  Do don't be surprised if rates creep higher!

On to exciting program and investor news!

HUD sent out Mortgagee Letter 2009-51, adopting the Appraisal Update and/or Completion Report (Fannie Mae Form 1004D/Freddie Mac Form 442/March 2005). "The FHA is adopting the Appraisal Update and/or Completion Report, Fannie Mae Form 1004D/Freddie Mac Form 442/March 2005. This is a dual-purpose form. Part A, Summary Appraisal Update Report, provides for updates of existing appraisals when the appraiser concurs with the original appraisal report and updates the appraisal by incorporating the original appraisal report. Part B, Certification of Completion, provides for compliance repair and completion inspections for existing and new construction dwellings." This is for case number assignments after 1/1.

This week GMAC has released a flurry of changes for their correspondents, although correspondent clients of other investors will definitely recognize similarities. GMAC announced the extension of the First-Time Homebuyer Tax Credit, the revision of FHA Second appraisal requirements, the roll out of Fannie's DU 8.0 this weekend, clarified the Freddie Mac Relief Refinance Open Access products, and the new FHA condominium approval process. On the

"condominium project eligibility and insurance requirements" front, FHA and added a new condominium approval process by permitting Direct Endorsement Lenders to determine project eligibility, review project documentation and certify compliance with FHA regulations, reduced the minimum required number of units in a condominium project from four to two, reduced the owner-occupancy ratio within a condominium project from 51 percent to 50 percent, reduced the pre-sales percentage within a condominium project to 50 percent, increased the FHA concentration level to 30 percent, eliminated the one year waiting period for projects that have been converted to condominiums, and eliminated the Spot Loan approval process.

GMAC Bank Correspondents also noted that, for the Freddie Mac Relief Refinance -Open Access products, clients must evaluate the Condominium Project, represent and warrant that the Condominium Unit complies with Freddie Mac eligibility requirements. And for this product, a field review is required if the loan amount is $625,500 or greater and the LTV, CLTV, or HCLTV is greater than 80 percent, or the property is valued at $1,000,000 or more and the LTV, CLTV, or HCLTV is greater than 75 percent.

Finally, GMAC is adopting the Fannie DU 8.0 credit score and underwriting guidelines (if a borrower has less than a 620 FICO or a DTI higher than 45, they'd better go elsewhere).

But speaking for Fannie's rollout this weekend, Bank of America's correspondents should know that BofA will be implementing the same changes. The minimum credit score required for loans underwritten using DU Version 8.0 is increased from 580 to 620 (except for DU Refi Plus loans currently serviced by Bank of America). "The maximum DTI ratio allowed for loans underwritten using DU Version 8.0 is lowered to 45%, with flexibility offered up to 50% when approved by DU." Bank of America also told clients that the Reduced Mortgage Insurance (MI) and Lower Cost MI option will be retired for loans underwritten using DU Version 8.0 and Loan Prospector (LP). Even though Fannie has a new Minimum Mortgage Insurance Coverage option, currently Bank of America is not accepting the minimum MI coverage amounts and will require all DU 8.0 loans (requiring mortgage insurance) meet their standard coverage requirements.

Bank of America reminded their clients that DU Version 8.0 will not issue Expanded Approval Level II and III recommendations. Any Expanded Approval decision (I, II or III) using DU Version 7.1 must be locked by tomorrow, but loans that receive an EA-I recommendation will continue to be eligible for purchase with the exception of Agency High Balance, DU Refi Plus, Interest-only loans, 6-month ARMs and 5/1 ARMs with 5-2-5 caps. In addition, 5-year and 7-year balloon programs will no longer be offered - lock them by tomorrow. In fact, BofA has set forth 2/26 as the last day that they will purchase loans with credit scores less than 620, loans underwritten under previous two-unit owner-occupied interest-only LTV guidelines, etc. - any loans with DU 7.1 characteristics.

Freddie Mac told clients in mid-November that MIDANET "had five critical version updates since November 23, and a final version upgrade will happen on December 14. You must be on version 98.03.59 by midnight on December 11 to ensure you do not experience reporting and loan purchase transmission delays."

In yesterday's commentary I stated that "Flagstar will no longer accept new registrations of 3- or 4-unit properties on either Fannie or Freddie programs." As a correction, Flagstar will accept those under the conforming programs, just not under the superconforming or high balance programs.

In addition, US Bank clarified that their recent changes are for the new Fannie changes. US Bank is going to require a 45 DTI when running LP on their Fannie products.  However, they will follow the LP findings if the client is using a Freddie product.

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