Is it the last day of September already? Wasn't it just Memorial Day? Things are getting a little tight here around the Chrisman household. Yesterday my son came to me and told me that "management" knew that I had taken a stapler from my home office. "From now on", he continued, "If you plan on continuing to work here, you'll have to obtain an updated photo ID, and furnish your own salary." It must be that econ class he’s taking…

This morning we had our final revision to the 2nd quarter’s GDP number. Folks always wonder, “Why can’t the statisticians get it right the first time instead of always revising an economic report?” Many of the government’s statistics are revised in the months that follow. Errors in the original number arise from the sampling errors and bias that later prove to be incorrect: initially the government uses a sample to guess at the actual number, but then it turns out that the actual number is different. A house under contract, and counted as a sale, falls out of escrow due to an inspection issue. A sampling of factories that produce shirts indicates “x amount” of shirts being produced, but the actual count turns out that “y amount” were woven. Sometimes the data is just not available when the statistic is released the first time. And so on.

Today we had the ADP jobs number (more job losses than estimated, but it does not include government jobs), and the final GDP number for the 2nd quarter. Later we’ll have the Chicago Purchasing Manager’s survey. The Commerce Department's final number for GDP showed it fell at a 0.7% annual rate instead of the 1.0% decline reported last month, in theory better for the economy and worse for rates especially since he economy is believed to have rebounded in the last few months – or at least leveled off. After the news the 5-yr Treasury and 30-yr mortgage prices are both worse by about .125, and the 10-yr yield’s at 3.32%.

Mortgage rates are doing pretty well, all things considered. The yield curve is flattening, which is helping ARM rates relative to fixed rates. It appears that origination is slowing somewhat, as one would expect given stable rates, continued tight guidelines, and the time of year. The Fed continues to buy their $4-5 billion a day – and many await the weekly Thursday 3PM posting to see if those Fed numbers change. But things became slightly quieter on lock desks last week. The MBAA reported that mortgage applications fell by 2.8% from a four-month high. Refi’s were down less than 1%, but purchase apps were down more than 6%.

According to the Conference Board, we’re slightly less confident than we were last month – Consumer Confidence went from 54.5 to 53.1 and versus the 57 that economists estimated. “So what?” you ask? Well, many feel that, with the commercial loan sector becoming ugly, housing still relatively slow, and unemployment still high, the mentality of the consumer is what is going to pull us through. After that news came out yesterday the bond market improved slightly, and as you would expect it did not help the stock market.
 
Are you doing any VA loans? In some markets an increase in the VA loan limit, along with no required down payment, has brought additional homes within reach of military buyers. Of course VA loans include tougher appraisals and closer scrutiny of the properties, along with the VA requiring that repairs and termite work be completed before escrow closes. In addition, VA buyers get their upfront fees repaid if escrow does not close, while other buyers have to absorb such costs. The delinquency rate on VA loans is lower than most other loan types, making them attractive to servicers. Interestingly, many low-cost, foreclosure homes do not qualify for VA loans since they must be “move-in ready” and undamaged which is often not the case.

GMAC Bank Correspondent Funding (GMACB) Approved Correspondents please note for all 5/1 ARM transactions and/or transactions subject to a temporary interest rate buydown, borrowers must be qualified based on the greater of the Note rate or the fully indexed rate (margin plus current index value). These updated guidelines are effective for all loans locked or trades committed on and after October 1, 2009.

The National Mortgage News reports that under the terms of some proposed legislation, Nonbank mortgage lenders would be required to register with the (proposed new) Consumer Financial Protection Agency (CFPA), which would be given the power to conduct financial exams and take enforcement actions.” "Nonbanks will be subject to a level of supervision and scrutiny that is no less burdensome or comprehensive than that governing traditional banks and thrifts and will fully reflect the risks posed by these previously unregulated entities," according to an outline of the CFPA bill. According to the story, the bill removes federal pre-emption of state and local laws and creates a new agency with extensive new powers that could conflict with bank safety and soundness regulators.

For some, the only time that they think of "USDA" is when it's on the label when they're figuring out which pork chop to buy. But with the changes going on in the FHA world, some originators in rural areas are toting out the ol’ USDA program that has $0 down and 100% financing. It began back in the 1940’s to help farmers, but has apparently gained traction this year with USDA guaranteed loans hitting 120,000 in the first nine months of 2009, up from roughly 35,000 in all of 2007. The USA program offers, for very specific rural areas, 100% financing with no MI, SFR,  condo, or PUD (manufactured housing is allowed if the unit if 12 months old or never and never has been occupied), and the borrower’s income is limited to 115% of the US median income, adjusted to number of people in the household. There are no sale price restrictions, no declining markets issues, no cash reserve requirements, and the loans can be manually underwritten or go thru USDA’s AUS GUS. At the current time, the USDA does not require a minimum credit score of 620 - if the score is below 620, verification of rent will be required. Step right up! http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

Tomorrow the new rules adopted by the Federal Reserve will go into effect, requiring greater diligence on the part of mortgage lenders and brokers who make high cost loans (1.5% or more above the average prime mortgage rate) for borrowers with weak credit. Originators can’t make one of these loans without verifying that a borrower could repay the loan in the conventional way, and not simply through a foreclosure sale. In addition to that change, FHA appraisers must be certified – hopefully they were aware of this months ago!

A salesman goes up to a house and knocks on the front door. It's opened by a little fifteen year-old boy who has a lighted cigar in one hand, a glass of whiskey in the other and a Penthouse magazine tucked under his arm.
Salesman: "Hello son. Is your mom or dad home?"
Little boy: "What the heck do you think?"