Key Events This Week:

Monday:

No significant data.

1:30 ― Narayana Kocherlakota, president of the Minnesota Fed, delivers a luncheon speech to business leaders in Sioux Falls, South Dakota.

Treasury Auctions:

• 11:30 ― 3-Month Bills
• 11:30 ― 6-Month Bills
• 1:00 ― 2-Year Notes

Tuesday:

8:30 ― Revisions to third-quarter GDP are expected to boost the measure to an annualized rate of 2.4%, up from the original projection of 2%. Estimates from the 64 economists polled by Thomson Reuters range from 2% to 2.8%.

“Recent economic indicators such as business and wholesale inventories, new residential construction and net external demand point to a stronger economic activity in 3Q10 than previously estimated,” said economists at BBVA.

Forecasters at IHS Global Insight say inventory accumulation should provide a bigger boost than original estimates, while foreign trade should be less of a drag. However, private nonresidential construction should see large downward revision.

Projecting into the current quarter, IHS says to expect 2.5% growth.

10:00 ― Existing Home Sales are expected to take a slight hit in October. Forecasters expect to see an annualized pace of 4.50 million sales, down from 4.53 million in September. Estimates from 60 economists range from 4.20 to 4.80 million. The pessimism largely stems from the 1.8% drop in September’s pending home sales index, versus the consensus call for a 3% gain. The PHSI tracks contract signings, thereby anticipating secondary market sales by a month or two.

Against the consensus, economists at Nomura Global Economics look for a 1.5% increase to 4.60 million sales.

“Despite rapid growth over the past two months, the level of existing home sales remains a bit low compared to pre-federal tax credit levels,” they wrote. “We therefore think sales could rise further this month, despite the weakness in the pending home sales index (a leading indicator of existing home sales).”

On the lower end of the spectrum, economists at IHS Global Insight expect a 6% tumble.

“The Pending Home Sales Index slipped 1.8% in September, and mortgage applications to buy homes fell during October, according to the Mortgage Bankers Association,” they wrote. “The foreclosures mess which led to halts in foreclosures from some mortgage lenders contributed to the expected decline in sales.

2:00 ― Given the unprecedented attacks on the Federal Reserve in recent weeks, there should be lost of appetite to read the FOMC Minutes of the Nov. 2-3 policy meeting. The resulting communique detailed the central bank’s plan to renew quantitative easing efforts with $600 billion of new asset purchases. The minutes should detail how much support chairman Ben Bernanke had in launching the program.

“The QE2 decision is under attack from many quarters ― including from some members of the committee ― and markets have reacted violently since the meeting,” said economists at Nomura. “There is a clear need for formal communication on the latest policy action from the Fed. Indeed, the minutes of the last FOMC meeting specifically noted that the committee itself regards this document as ‘an important channel for communicating participants' views about monetary policy.’”

The minutes will also provide the Fed’s first updates on GDP, unemployment and inflation since the late June meeting.

“We expect major downward revisions to the Fed's forecasts for growth and core inflation, and an upward revision to forecasts for unemployment,” said Nomura.

Treasury Auctions:

• 11:30 ― 4-Week Bills
• 1:00 ― 5-Year Notes

Wednesday:

7:00 ― In the latest MBA Mortgage Applications survey for the week ending Nov. 12, mortgage loan application volume fell a precipitous 14.4%. Refinancings declined 16.5% to their lowest level since July; purchases fell 5%, ending a three week uptrend.

One reason for the sharp drop was a rise in interest rates. The average contract for a 30-year fixed-rate mortgage moved up to 4.46% from 4.28%.

“Rates increased sharply last week due to stronger economic data and lingering uncertainty regarding the structure and impact of the Fed’s QE2 program,” said the MBA. “Mortgage applications, particularly for refinances, dropped in response.”

Economists at Nomura note that purchase applications, despite three weeks of gain before last week’s fall, continue to languish at low levels. “This may indicate downside risks to our home sales forecasts for the next few months,” they added.

8:30 ― Durable Goods are expected to be flat in October following a 3.5% advance one month before. Forecasts are all over the place however, ranging from -2.7% to +4.5%. Not all news is bad though; the core index, defined as non-defense spending excluding aircraft, is anticipated to rise 1% after falling 0.2% in September. The discrepancy arises from September’s 105% monthly climb in non-defense aircraft parts.

Economists at Nomura, looking for a 0.5% increase overall, said October’s industrial production report signaled “very strong growth in business equipment output” and suggests a healthy underlying trend in capital expenditure ― “and therefore core durable goods orders.”

8:30 ― The October Personal Income & Outlays report is anticipated to show wages and consumption rising amid flat inflation. Economists predict income will rise 0.4%, following a 0.1% cut one month before, while consumption will pick up 0.5% after rising 0.2%. Core inflation, which excludes volatile energy and food prices, is set to be unchanged for the second month, providing the Federal Reserve with a defense of its reflationary QE2 measures.

Economists at BMTU note that year-to-year personal income began expanding in December 2009 following eleven months of decline. The growth rate was 3.1% in September.

“While that’s the best growth rate in income since late 2008, it is still about half of the historical average,” BTMU says. “Wages were up +1.7% year-over-year in September, which is the third consecutive month they’ve outpaced inflation since the recession began in December 2007.”

Forecasters at IHS Global Insight look for wages and salaries – which they call “the best guide to underlying trends” – to rise 0.5% in October.

“Higher employment, a longer working week, and increased hourly earnings all drove wages and salaries higher in October,” they said.

8:30 ― Many will be watching the Initial Jobless Claims report to see if the trend in claimants continues to fall. There were 439k and 437k new claims in the weeks ending Nov. 13 and Nov. 6, respectively, which drove the 4-week average to the lowest level since September 2008. A sustained number below 450k is generally indicative of private job growth in the US economy.

“Recent claims reports have increased our optimism about the state of the US labor market,” said economists at Nomura. “If we see another good report this week we will likely push up our forecasts for nonfarm payroll employment growth.”

10:00 ― The Reuters / U of Michigan Consumer Sentiment report bumped up 1.6 points in mid-November to 69.3. The current economic conditions index climbed 3.1 points to 79.7 and the expectations component moved up less than one point to 62.7. Revisions are expected to be minor, with analysts forecasting a 0.2 point gain to 69.5.

“The index of consumer sentiment remains quite low despite higher stock prices and improving economic conditions,” said economists at Nomura. “Given that the index was as high as 76.0 in June, we think further increases from 69.3 are quite plausible. The inflation expectation components of this report signal little risk of deflation.”

10:00 ― New Home Sales, the final bit of new data for the holiday-shortened week, is expected to show the annual pace of sales rise to 310,000 in October, from 307,000 one month before. Last month’s positive employment report provides the hope for more sales in the final quarter of 2010. Extremely low mortgage rates are also a nice incentive.

Analysts at Nomura look for the index to jump 4.2% to 320,000.

“The post-tax credit bust in new home sales looks to have ended, and building sentiment has started to pick up (albeit slowly and from a very low level),” they noted. “Given that new home sales remain quite low, we see room for further increases.”

Treasury Auctions:

• 1:00 ― 7-Year Notes

Thursday:

Happy Thanksgiving! Markets closed.

Friday:

No significant data. Markets are closing early.

Question of the Day:

Realtors Ask Mortgage Industry to Ease Underwriting Policies

The National Association of Realtors® (NAR) used the forum of its 2010 Conference in New Orleans to urge the lending industry to make things easier to qualified buyers to become homeowners. NAR appealed primarily to the public sector, i.e. FHA, Fannie Mae, and Freddie Mac, which it said account for more than 90 percent of the mortgage market, saying that lenders refuse to make loans without assurance that FHA will insure them or the GSEs will buy them.

Vicki Cox Golder, NAR President, said that the government agencies are impairing their own mission to provide mortgage liquidity to home buyers with unnecessarily restrictive limits on the availability of credit. "These policies are delaying recovery both of the housing market and the larger economy."

"Under current practices, many would-be home buyers who could responsibly, affordably become home owners are unable to do so," said Golder. "NAR wants to ensure that anyone who is able and willing to assume the responsibilities of owning a home should have the opportunity to pursue that dream."

NAR also called on FICO Corp. and private lenders to amend certain rules on the utilization of credit, how negative credit scores will affect future home purchases, and to change how they report and treat loan modification and payment plans. The Association also expressed its intentions to work with all public and private parties to encourage them to assess their credit policies on an ongoing basis.

NAR said it will also develop educational materials for its members and consumers about credit issues, including the importance of good credit, lender credit policies, and how to find a fair and affordable mortgage.

By: Jann Swanson

Largest Lenders Control Mortgage Industry. Time to Engage Community Bankers

I've been very busy over the past few weeks answering questions regarding the foreclosure mess and the accompanying “robo-signing” dilemma.
What surprises me are not the concerns over systematic risks surrounding the issue or whether or not fraud has occurred, but the fact that everyone I’ve spoken to is shocked that something like this could have happened.

To this I say, have you not been paying attention?

The government initiated HAMP program has failed to address loan modifications effectively and short-sales have failed to efficiently mitigate housing's losses.

These two outcomes have played out for the same reason: Four major banks control over 75% of the nations mortgage servicing. The GSE’s failure too can be linked to Fannie and Freddie controlling over 70% of the nations mortgage-backed securities market during their hay day. Too much control in the hands of the few has ultimately ended in chaos.

The same four major banks have controlled the majority of the mortgage servicing for the past two decades. During that time their primary responsibilities have been the collection of monthly remittances, payments to bond-holders and submission of the accompanying reports. This responsibility was relatively straight-forward and with the ability, in the past decade, to send processes off-shore the profitability grew at an enormous rate.

As annual mortgage volume grew from $500 billion in 1990 to an excess of $3 trillion in 2006 so too did the number of outstanding mortgage accounts that were being serviced by the large financial institutions. As these numbers continued to grow, so too did the number of delinquent files. Unfortunately loan servicers are not properly set up with the experienced personnel or the technology required to effectively managing these delinquent assets. As a result, too many delinquent accounts are being managed by institutions that have not adequately prepared for such an anomaly and we've experienced a massive back-up in the modification/loss mitigation process.

The solution is not simple but it’s doable...

First congress MUST redesign the nation’s Housing finance System to adequately supply the necessary liquidity to meet its future housing needs. This can only be accomplished if congress is willing to address an entire system overhaul and not just Fannie and Freddie.

Congress should also provide the Federal Home Loan Banks the authority to securitize mortgages. This would serve two purposes. It would first help to deleverage the percentage of the mortgage-backed securities market that the GSEs currently enjoy. After all that is what got them into the situation they find themselves today. Owning 70% of the MBS market was doomed to failure. Allowing the FHLB to securitize would also allow the industry to begin to shift some of the servicing responsibilities from the few to the many. Engaging the community banking system to assist in the de-leveraging of the big players should be a goal of the administration. More importantly, however, moving the servicing back down to these local bankers in local markets makes much more sense and improves the odds of future catastrophic failure of our mortgage system.

If the market ever expects housing to contribute 25% to 30% of GDP again, it will require congress to completely overhaul the housing finance system, de-leverage those institutions that have enjoyed the “too big to fail” status and let the private markets control housing rather than the socialized housing system currently in place.

by Joe Murin

FHFA Releases Framework for Dealing with Foreclosures. Borrowers Must Play Ball

Statement By FHFA Acting Director Edward J. DeMarco On Servicer Financial Affidavit Issues

“On October 1, FHFA announced that Fannie Mae and Freddie Mac are working with their respective servicers to identify foreclosure process deficiencies and that where deficiencies are identified, will work together with FHFA to develop a consistent approach to address the problems. Since then, additional mortgage servicers have disclosed shortcomings in their processes and public concern has increased.

Today, I am directing the Enterprises to implement a four-point policy framework detailing FHFA’s plan, including guidance for consistent remediation of identified foreclosure process deficiencies. This framework envisions an orderly and expeditious resolution of foreclosure process issues that will provide greater certainty to homeowners, lenders, investors, and communities alike.

In developing this framework, FHFA has benefited from close consultation with the Administration and other federal financial regulators.

The country’s housing finance system remains fragile and I intend to maintain our focus on addressing this issue in a manner that is fair to delinquent households, but also fair to servicers, mortgage investors, neighborhoods and most of all, is in the best interest of taxpayers

Four-Point Policy Framework For Dealing with Possible Foreclosure Process Deficiencies

1. Verify Process -- Mortgage servicers must review their processes and procedures and verify that all documents, including affidavits and verifications, are completed in compliance with legal requirements. Requests for such reviews have already been made by FHFA, the Enterprises, the Federal Housing Administration, and the Office of the Comptroller of the Currency, among others. In the event a servicer’s review reveals deficiencies, the servicer must take immediate corrective action as described below.

2. Remediate Actual Problems -- When a servicer identifies a foreclosure process deficiency, it must be remediated in an appropriate and timely way and be sustainable. In particular, when a servicer identifies shortcomings with foreclosure affidavits, whether due to affidavits signed without appropriate knowledge and review of the documents, or improperly notarized, the following steps should be taken, as appropriate to the particular mortgage:

a. Pre-judgment foreclosure actions: Servicers must review any filed affidavits to ensure that the information contained in the affidavits was correct and that the affidavits were completed in compliance with applicable law. If the servicer’s review indicates either (a) that the information in a previously filed affidavit was not correct or (b) that the affidavit was not completed in compliance with applicable law, the servicer must work with foreclosure counsel to take appropriate remedial actions, which may include preparing and filing a properly prepared and executed replacement affidavit before proceeding to judgment.

b. Post-judgment foreclosure actions (prior to foreclosure sale): Before a foreclosure sale can proceed, servicers must review any affidavits relied upon in the proceedings to ensure that the information contained in the affidavits was correct and that the affidavits were completed in compliance with applicable law. If the servicer’s review indicates either (a) that the information in a previously filed affidavit was not correct or (b) that the affidavit was not completed in compliance with applicable law, the servicer must work with foreclosure counsel to address the issue consistent with local procedures. Potential remedial measures could include filing an appropriate motion to substitute a properly completed replacement affidavit with the court and to ratify or amend the foreclosure judgment.

ci. Post-foreclosure sale (Enterprise owns the property): Eviction actions: Before an eviction can proceed, servicers with deficiencies must confirm that the information contained in any affidavits relied upon in the foreclosure proceeding was correct and that the affidavits were completed in compliance with applicable law. If the servicer’s review indicates either (a) that the information in a previously filed affidavit was not correct or (b) that the affidavit was not completed in compliance with applicable law, the servicer must work with foreclosure counsel to address the issue consistent with local procedures before the eviction proceeds. Potential remedial measures could include seeking an order to substitute a properly prepared affidavit and to ratify the foreclosure judgment and/or confirm the foreclosure sale.

cii, Real Estate Owned (REO): With respect to the clearing of title for REO properties, servicers must confirm that the information contained in any affidavits relied upon in the foreclosure proceeding was correct and that the affidavits were completed in compliance with applicable law. If the servicer’s review indicates either (a) that the information in a previously filed affidavit was not correct or (b) that the affidavit was not completed in compliance with applicable law, the servicer must work with foreclosure counsel to address the issue consistent with local procedures and take actions as may be required to ensure that title insurance is available to the purchaser for the subject property in light of the facts surrounding the foreclosure actions.

d. Bankruptcy Cases: Servicers must review any filed affidavits in pending cases to ensure that the information contained in the affidavits was correct and that the affidavits were completed in compliance with applicable law. If the servicer’s review indicates either (a) that the information in a previously filed affidavit was not correct or (b) that the affidavit was not completed in compliance with applicable law, the servicer must work with bankruptcy counsel to take appropriate remedial actions.

3. Refer Suspicion of Fraudulent Activity -- Servicers are reminded that in any foreclosure processing situation involving possible fraudulent activity, they should meet applicable legal reporting obligations.

4. Avoid Delay -- In the absence of identified process problems, foreclosures on mortgages for which the borrower has stopped payment, and for which foreclosure alternatives have been unsuccessful, should proceed without delay. Delays in foreclosures add cost and other burdens for communities, investors, and taxpayers. For Enterprise loans, delay means that taxpayers must continue to support the Enterprises’ financing of mortgages without the benefit of payment and neighborhoods are left with more vacant properties. Therefore, a servicer that has identified no deficiencies in its foreclosure processes should not postpone its foreclosure activities.

FHFA will provide additional guidance should it become necessary.

-------------------------------------

Notice I called attention to the phrase "the servicer must work with counsel". I am not sure if this guidance was intended to be a solution or not. If it was, it seems like the borrowers who have claimed to be victims of "robosigning" will still need to be dealt with individually, on a case by case basis, which tells me only time will heal this problem. It also means borrowers must be willing to work with servicers. This is a technicality that can be corrected if all parties involved are willing to play ball. Unfortunately common sense tells me that borrowers will not give in without a fight.

The FHFA made the consequences clear/guilt tripped all the robosigned folks...

"Delays in foreclosures add cost and other burdens for communities, investors, and taxpayers. For Enterprise loans, delay means that taxpayers must continue to support the Enterprises’ financing of mortgages without the benefit of payment and neighborhoods are left with more vacant properties. Therefore, a servicer that has identified no deficiencies in its foreclosure processes should not postpone its foreclosure activities."

Foreclosures should go as scheduled if the servicer has all their ducks in a row. Let’s get on with the correction process already....

by Adam Quinones
in an article from Mortgage News Daily

All States Join Nationwide Mortgage Licensing System. Verification Checkpoint Provided

The presser below was released this morning by the Conference of State Bank Supervisors
Washington, D.C.—Less than 34 months after its official launch, all 50 states have joined the Nationwide Mortgage Licensing System and Registry (NMLS, or the System). Hawaii became the last state to join NMLS on Monday, thereby ensuring improved supervision of non-depository mortgage lenders, brokers, and mortgage loan originators maintaining licensure through a single system shared by all state mortgage regulators.

“NMLS was built to be the foundation of a coordinated and transparent system of mortgage supervision implemented by state regulators,” said Neil Milner, CSBS President and CEO. “Having all 50 states on the System provides greater transparency within the mortgage industry and makes information available to consumers as they obtain mortgages from state-licensed entities.”

“This milestone is a testament to the hard work and commitment of state mortgage regulators,” said Gavin Gee, Director of the Idaho Department of Finance and Chairman of the State Regulatory Registry LLC (SRR). A limited liability company established by CSBS and the American Association of Residential Mortgage Regulators, SRR operates NMLS on behalf of state regulators. “State regulators have demonstrated their ability to coordinate on an unprecedented level to enhance supervision of the residential mortgage industry and protect consumers,” Gee continued.

Launched in January 2008 with seven states (ID, IA, KY, MA, NE, NY, RI), NMLS now includes 58 state agencies from all 50 states, the District of Columbia, and the territories of Puerto Rico and the U.S. Virgin Islands. NMLS currently tracks nearly 16,000 mortgage companies holding over 30,000 licenses and over 126,000 mortgage loan originators holding over 207,000 licenses.

MORE BACKGROUND INFO: The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the Farm Credit Administration, and the
National Credit Union Administration published in the Federal Register a joint final rule implementing the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) on July 28, 2010. The rule took effect on October 1, 2010, institutions were expected to implement appropriate policies, procedures and management systems to ensure compliance.

REMINDER: At this time there is no licensing action required in the Nationwide Mortgage Licensing System (NMLS) of any mortgage loan originator who is an employee of a federally insured depository institution or an owned and controlled subsidiary of such a depository institution that is federally regulated. HOWEVER these loan officers will soon be forced to comply with licensing laws....the final rule further provides that Agency-regulated institutions must: require their employees who act as residential mortgage loan originators to comply with the S.A.F.E. Act’s requirements to register and obtain a unique identifier, and adopt and follow written policies and procedures designed to assure compliance with these requirements. It is expected that these loan originators will have to obtain a unique identifier, and maintain this registration on the NMLS system sometime in early 2011.

While it might seem "sketchy" that some loan officers face tougher testing standards than others, this is not the case. Even before the SAFE Act, loan officers employed by banks, savings associations, credit unions or Farm Credit System (FCS) institutions and certain of their subsidiaries regulated by a Federal banking agency or the FCA, were already required by Federal regulations to pass a series of tests similar to those taken by independent mortgage originators who must already comply with NMLS today.

Consumers you can check the licensing status of your mortgage professional HERE.

READ MORE ABOUT NMLS REQUIREMENTS

by Adam Quinones - Map by Google Maps

FHFA Releases Framework for Dealing with Foreclosures. Borrowers Must Play Ball

“On October 1, FHFA announced that Fannie Mae and Freddie Mac are working with their respective servicers to identify foreclosure process deficiencies and that where deficiencies are identified, will work together with FHFA to develop a consistent approach to address the problems. Since then, additional mortgage servicers have disclosed shortcomings in their processes and public concern has increased.

Today, I am directing the Enterprises to implement a four-point policy framework detailing FHFA’s plan, including guidance for consistent remediation of identified foreclosure process deficiencies. This framework envisions an orderly and expeditious resolution of foreclosure process issues that will provide greater certainty to homeowners, lenders, investors, and communities alike.

In developing this framework, FHFA has benefitted from close consultation with the Administration and other federal financial regulators.

The country’s housing finance system remains fragile and I intend to maintain our focus on addressing this issue in a manner that is fair to delinquent households, but also fair to servicers, mortgage investors, neighborhoods and most of all, is in the best interest of taxpayers

Four-Point Policy Framework For Dealing with Possible Foreclosure Process Deficiencies

1. Verify Process -- Mortgage servicers must review their processes and procedures and verify that all documents, including affidavits and verifications, are completed in compliance with legal requirements. Requests for such reviews have already been made by FHFA, the Enterprises, the Federal Housing Administration, and the Office of the Comptroller of the Currency, among others. In the event a servicer’s review reveals deficiencies, the servicer must take immediate corrective action as described below.

2. Remediate Actual Problems -- When a servicer identifies a foreclosure process deficiency, it must be remediated in an appropriate and timely way and be sustainable. In particular, when a servicer identifies shortcomings with foreclosure affidavits, whether due to affidavits signed without appropriate knowledge and review of the documents, or improperly notarized, the following steps should be taken, as appropriate to the particular mortgage:

a. Pre-judgment foreclosure actions: Servicers must review any filed affidavits to ensure that the information contained in the affidavits was correct and that the affidavits were completed in compliance with applicable law. If the servicer’s review indicates either (a) that the information in a previously filed affidavit was not correct or (b) that the affidavit was not completed in compliance with applicable law, the servicer must work with foreclosure counsel to take appropriate remedial actions, which may include preparing and filing a properly prepared and executed replacement affidavit before proceeding to judgment.

b. Post-judgment foreclosure actions (prior to foreclosure sale): Before a foreclosure sale can proceed, servicers must review any affidavits relied upon in the proceedings to ensure that the information contained in the affidavits was correct and that the affidavits were completed in compliance with applicable law. If the servicer’s review indicates either (a) that the information in a previously filed affidavit was not correct or (b) that the affidavit was not completed in compliance with applicable law, the servicer must work with foreclosure counsel to address the issue consistent with local procedures. Potential remedial measures could include filing an appropriate motion to substitute a properly completed replacement affidavit with the court and to ratify or amend the foreclosure judgment.

ci. Post-foreclosure sale (Enterprise owns the property): Eviction actions: Before an eviction can proceed, servicers with deficiencies must confirm that the information contained in any affidavits relied upon in the foreclosure proceeding was correct and that the affidavits were completed in compliance with applicable law. If the servicer’s review indicates either (a) that the information in a previously filed affidavit was not correct or (b) that the affidavit was not completed in compliance with applicable law, the servicer must work with foreclosure counsel to address the issue consistent with local procedures before the eviction proceeds. Potential remedial measures could include seeking an order to substitute a properly prepared affidavit and to ratify the foreclosure judgment and/or confirm the foreclosure sale.

cii, Real Estate Owned (REO): With respect to the clearing of title for REO properties, servicers must confirm that the information contained in any affidavits relied upon in the foreclosure proceeding was correct and that the affidavits were completed in compliance with applicable law. If the servicer’s review indicates either (a) that the information in a previously filed affidavit was not correct or (b) that the affidavit was not completed in compliance with applicable law, the servicer must work with foreclosure counsel to address the issue consistent with local procedures and take actions as may be required to ensure that title insurance is available to the purchaser for the subject property in light of the facts surrounding the foreclosure actions.

d. Bankruptcy Cases: Servicers must review any filed affidavits in pending cases to ensure that the information contained in the affidavits was correct and that the affidavits were completed in compliance with applicable law. If the servicer’s review indicates either (a) that the information in a previously filed affidavit was not correct or (b) that the affidavit was not completed in compliance with applicable law, the servicer must work with bankruptcy counsel to take appropriate remedial actions.

3. Refer Suspicion of Fraudulent Activity -- Servicers are reminded that in any foreclosure processing situation involving possible fraudulent activity, they should meet applicable legal reporting obligations.

4. Avoid Delay -- In the absence of identified process problems, foreclosures on mortgages for which the borrower has stopped payment, and for which foreclosure alternatives have been unsuccessful, should proceed without delay. Delays in foreclosures add cost and other burdens for communities, investors, and taxpayers. For Enterprise loans, delay means that taxpayers must continue to support the Enterprises’ financing of mortgages without the benefit of payment and neighborhoods are left with more vacant properties. Therefore, a servicer that has identified no deficiencies in its foreclosure processes should not postpone its foreclosure activities.

FHFA will provide additional guidance should it become necessary.

-------------------------------------

Notice I called attention to the phrase "the servicer must work with counsel". I am not sure if this guidance was intended to be a solution or not. If it was, it seems like the borrowers who have claimed to be victims of "robosigning" will still need to be dealt with individually, on a case by case basis, which tells me only time will heal this problem. It also means borrowers must be willing to work with servicers. This is a technicality that can be corrected if all parties involved are willing to play ball. Unfortunately common sense tells me that borrowers will not give in without a fight.

The FHFA made the consequences clear/guilt tripped all the robosigned folks...

"Delays in foreclosures add cost and other burdens for communities, investors, and taxpayers. For Enterprise loans, delay means that taxpayers must continue to support the Enterprises’ financing of mortgages without the benefit of payment and neighborhoods are left with more vacant properties. Therefore, a servicer that has identified no deficiencies in its foreclosure processes should not postpone its foreclosure activities."

Foreclosures should go as scheduled if the servicer has all their ducks in a row. Let’s get on with the correction process already....

by Adam Quinones
in an article from Mortgage News Daily
Statement By FHFA Acting Director Edward J. DeMarco On Servicer Financial Affidavit Issues

What is loan to value ratio (LTV)?

A loan to value ratio (LTV) is a ratio used by mortgage lenders to figure out what amount of a mortgage they will loan you based on the appraised value of the property (or purchase price of the property, whichever of the two numbers is lower). Lenders consider the LTV ratio whether you are purchasing new property or refinancing property you currently own. The loan to value ratio may depend on the type of property - commercial or residential, or primary home, secondary home or investment property. The loan to value ratio may even vary depending on whether the property is a single family home or a condominium.

As an easy example, let's assume that a couple is purchasing a single family primary residence. The couple walks into the local bank to apply for a mortgage. The lender tells the couple that it can loan up to an 80% loan to value on the purchase price or the appraised value of the home the couple is looking to purchase. Let's say that the purchase price is $100,000. So, in this example, the loan to value ratio is 80:100 or 80%. Multiply the LTV ratio by the purchase to figure out the amount of money the bank will loan. Eighty percent of $100,000 is $80,000, which means that the couple will need to come up with a down payment for the difference of $20,000.

The lower the loan to ratio value for a property, the more risk that the lender associates with the property type or borrower. So if a borrower has a low credit score, a history of making late payments, or a high debt-to-income ratio, the borrower is likely to receive a lower loan to value ratio from lenders than those borrowers with higher credit scores, who pay their mortgage on time, and have a low debt-to-income ratio.

For properties that are located in the United States, the typical LTV ratio is 80%. This is because an 80% LTV ratio allows the lenders resell the mortgage to the federal government on the secondary market. Borrowers can obtain higher loan to value ratios, but they will usually have to pay private mortgage insurance on top of their regular mortgage payment. Private mortgage insurance protects the lender since they are exposing themselves to more risk by loaning a borrower a higher loan to value ratio than they normally would.

Fixing Core Failings of the Mortgage Industry: Data Quality, Transparency, Auditability

The mortgage industry has always been cursed by its inability to prioritize initiatives that promote and ensure the efficacy of processes versus the efficiency of processes. Things were so bad that during the thick of the origination and housing boom, a 2007 Mortech study uncovered that two-thirds of lenders had no (zero) system for managing financial or operational risks. It’s always been far easier to justify investments and quantify returns on investments in the areas of loan sales and production than on quality assurance.

We all recognize that a lack of data quality, transparency, and auditability are core failings of the mortgage industry. Efforts to validate the integrity of loan data and quality of loan documents have been underway since the discovery of meta data and XML data (machine and human readable data) and eventually SMART documents over ten years ago.

President Clinton gave mortgage companies ammunition to fight fraud and improve processes with the enacting of E-SIGN legislation in July of 2000. The federal law gave “...electronic signatures, contracts and records the same validity as their handwritten and hard copy counterparts...”

E- Signatures became the linchpin to a fully automated, auditable, and rules based process – the eProcess. Loan software companies and document preparation companies quickly followed suite to be a part of the paradigm shift. Inaccurate and incomplete loan documents could not be signed until they were fixed. Loans would not – could not -progress unless everything was accurate. Anyone electing to “E-SIGN” documents went through rigorous and multi-pronged identification processes – even biometrics - that had virtually eliminated identity fraud cases. A digital seal was applied to the document and the embedded loan data was protected by a “hashmark” that ensured data could not changed once the document was notarized. The very things that could have prevented the mortgage and foreclosure debacle at its core are available, but for how long?

Last week, President Obama vetoed a bill that was designed to facilitate electronic mortgages and e-commerce, in large part over fears that the legislation would make it easier for servicers to get foreclosures approved by the courts. The bill (H.R. 3808) is called the Interstate Recognition of Notarizations Act and required state and federal courts to recognize paper or electronic documents with seals from out-of-state notaries.

White House press secretary Robert Gibbs said - “The President will not sign H.R. 3808...our concern is the unintended consequences on consumer protections, particularly in light of the home foreclosure issue and developments with mortgage processors. So the President is exercising a pocket veto, sending that legislation back to Congress to iron out some of those unintended consequences."

“Tapping the brakes” on 3808 is regrettable but understandable as the industry deals with yet another unprecedented issue. However, we need to be alert to the risks associated with condemning service providers and technology providers for what are really problems of procedures and policy. We as an industry need to be looking forward to the things that validate, mitigate, and share risks. Data driven rules and workflow go a long way toward solving to issues related to poor loan quality. E-Signatures and eNotarizations are the very sorts of things that ensure efficient processes can be performed at scale without deterioration of quality or efficacy.

by Tim Rood

a Mortgage News Daily article

Purchase Demand Rallies Ahead of FHA Updates. Seller Concession Reduction Still in Limbo

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending October 1, 2010.

The MBA's loan application survey covers over 50% of all U.S. residential mortgage loan applications taken by retail mortgage bankers, commercial banks, and thrifts. The data gives economists a snapshot view of consumer demand for mortgage loans.

In a low mortgage rate environment, a trend of increasing refinance applications implies consumers are seeking out a lower monthly payment. If consumers are able to reduce their monthly mortgage payment and increase disposable income through refinancing, it can be a positive for the economy as a whole (creates more consumer spending or allows debtors to pay down personal liabilities like credit cards). A falling trend of purchase applications indicates a decline in home buying demand, a negative for the housing industry and the economy as a whole.

Excerpts from the Release...

The Market Composite Index, a measure of mortgage loan application volume, decreased 0.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 0.3 percent compared with the previous week. The four week moving average for the seasonally adjusted Market Index is down 3.0 percent.

The Refinance Index decreased 2.5 percent from the previous week. The four week moving average is down 4.2 percent for the Refinance Index. The refinance share of mortgage activity decreased to 78.9 percent of total applications from 80.7 percent the previous week.

The seasonally adjusted Purchase Index increased 9.3 percent from one week earlier and is the highest Purchase Index observed in the survey since the week ending May 7, 2010. The unadjusted Purchase Index increased 9.1 percent compared with the previous week and was 34.7 percent lower than the same week one year ago. The four week moving average is up 2.0 percent for the seasonally adjusted Purchase Index.


The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.25 percent from 4.38 percent, with points decreasing to 1.00 from 1.01 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The 30-year contract rate is the lowest recorded in the survey, with the previous low being the rate observed last week. The effective rate also decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.73 percent from 3.77 percent, with points increasing to 1.14 from 1.13 (including the origination fee) for 80 percent LTV loans. The 15-year contract rate is the lowest recorded in the survey, while the previous low was observed last week. The effective rate also decreased from last week.

The average contract interest rate for one-year ARMs increased to 7.11 percent from 7.04 percent, with points increasing to 0.24 from 0.22 (including the origination fee) for 80 percent LTV loans.
The adjustable-rate mortgage (ARM) share of activity increased to 6.1 percent from 6.0 percent of total applications from the previous week.

THE MBA SAYS:

“The increase in purchase activity was led by a 17.2 percent increase in FHA applications, while conventional purchase applications also increased by 3.6 percent,” said Jay Brinkmann, MBA’s Chief Economist. “This is the second straight weekly increase in purchase applications and the highest Purchase Index level since the expiration of the homebuyer tax credit program. One possible driver of last week’s big increase in FHA applications was a desire by borrowers to get applications in before new FHA requirements took effect October 4th, which included somewhat higher credit score and down payment requirements.”

Jay hits the nail on the head. While new upfront MIP requirements lower the cost for borrowers at the closing table, the plain and simple truth is the increase in the annual premium (paid monthly) pushes monthly costs higher for homeowners. Hence the uptick in purchase demand, led by FHA loans, before the October 4 case number deadline .

From Mortgagee Letter 10-28

HUD has decided to raise the annual premium and correspondingly lower the upfront premium, except for Home Equity Conversion Mortgages (HECM), so that FHA is in a better position to address the increased demands of the marketplace and return the Mutual Mortgage Insurance (MMI) fund to congressionally mandated levels without disruption to the housing market.

Based on the new authority, effective for FHA loans for which the case number is assigned on or after October 4, 2010, FHA will lower its upfront mortgage insurance premium (except for HECMs) simultaneously with an increase to the annual premium which is collected on a monthly basis. This policy change will decrease upfront premiums for purchase money and refinance transactions, including FHA-to-FHA credit-qualifying and non-credit qualifying streamlined refinance transactions.

What items do home appraisers seek to find that would give higher home values?

The The quick and easy answer would be comps (comparable homes for sale in your area) and location. We all know the first rule of real estate is location, location, location. A home across the street that might be exactly the same as yours could be valued at more because it might fall in a better school district or may not have railroad tracks behind it.

An appraisal is subjective but all appraisers should follow similar guidelines. That is to say 2 different appraisers could come to your house the same day and give you two different values. They try to find homes similar in size, location, and appeal to yours. But as we know all homes are not the same. Even in a development built by the same builder, homes vary in size, location, features, views, lots etc. The appraiser will adjust the homes based on the items. Usually they have fixed costs for things, like a home with an extra half bath would add $5000 or a fireplace would add $2500 to the value. There are also more subjective items like condition, build quality, view etc. This can vary greatly and is based on the appraiser and again comps in the area.

What is APR?

Rarely is there such a simple question in the mortgage industry with such a complicated answer. The true definition of this one even puzzles some seasoned veterans. For those of you not interested in long and complicated, here is a very serviceable and very brief definition: APR is the true cost of money over time.

In other words, your mortgage has a NOTE rate, or the interest rate on your loan, but it also has closing costs, prepaid interest, and other finance charges. The APR is the cost of your normal interest and those finance charges over time expressed as an interest rate relative to the rate you are paying on your mortgage.

· Now for the long and boring stuff:

APR stands for Annual Percent Rate and was made a requirement of mortgage disclosures by the Federal Truth in Lending Act. It is intended to level the playing field among mortgage quotes. For instance, one loan might advertise a 4.5% NOTE rate, while another advertises 6.5% rate. But both of those loan's APRs could be exactly the same, meaning that although the 4.5% loan appears to be the better deal, if you take closing costs and finance charges into consideration, the cost is actually the same as the 6.5% loan. In fact, if you were to sell or refinance the house sooner rather than later, you'd probably pay less interest overall on the 6.5% loan!

Perhaps the most idiotic thing about APR is that the finance charges that contribute to the APR calculation must be manually checked and included by the person originating the loan. Because of this, two identical mortgage quotes could have completely different APRs because one of the loan originators didn't do their job correctly. Even worse for consumers is that the lower APR quote in this example would be the one generated by the inferior originator. My blanket advice is to know the NOTE rate of the loan you are applying for, and know the exact closing costs. Do not trust anyone's calculation of APR.

FHA MIP Updates Go Live on Today; Flood Insurance Officially Extended

On the legislative front, President Obama signed into law S. 3814, a bill that will extend the National Flood Insurance Program(NFIP) for one year to September 30, 2011. And H.R. 3081 passed the House of Representatives, which among other items is the authorization to extend current loan limits for mortgages provided through Fannie Mae, Freddie Mac, and the Federal Housing Administration. Passage of the legislation will ensure that current loan limits for single-family residential mortgages will remain in place until September 30, 2011 at 125% of local median home sales prices, up to a maximum of $729,750 in high-cost areas. The floor for FHA is $271,050; the floor for Fannie Mae and Freddie Mac conforming loan limits is $417,000. The bill also appropriates $20 billion so that FHA can continue making loan commitments through the end of 2010.

Everyone in the FHA biz knows that Monday is a big day. FHA will lower its upfront mortgage insurance premium (except for HECM's) while simultaneously increasing the annual premium, which is collected on a monthly basis. This change will affect purchase money and refinance transactions, including FHA-to-FHA credit-qualifying and non-credit-qualifying streamlined refinance loans. (Hawaiian Homelands Section 247 loans are not affected by these changes, for anyone doing business in the state whose motto is "Ua Mau ke Ea o ka 'Āina i ka Pono.")

Private mortgage insurers have been licking their chops for Monday. They have grappled with credit losses on policies, claims of bad policy rescission, and an inability to compete with FHA's prices on new insurance. So with the increase on Monday could come the restoration of competitiveness of private insurance, potentially letting the companies win back market share and rebuild their reserves. And anyone watching that business has seen MI companies increasing riskier loans in somewhat subtle ways. Most believe that the MI companies, as a whole, are still fairly well capitalized. And of course lenders undoubtedly will benefit from the better prices, service and product diversity after Monday's FHA premium changes.

Most investors have credit and guideline overlays, over and above what the government agencies allow for programs.CitiMortgage, currently ranked #5 in volume among lenders right behind #4 GMAC, releases its overlays monthly. Citi's clients are aware of them, but include restrictions on initial & final 92900A and 92900-LT forms, VA Funding Fee information, source of funds documentation requirements, savings documentation, maximum VA loan amounts ($1 million prior to the VA Funding Fee), etc., etc. In other words, in this environment, borrowers had better have proof of anything or any transaction for practically every investor.

On to the fixed income markets. After some intra-day volatility, mortgage (MBS) prices ended Thursday unchanged from Wednesday's closing prices, with about $2.2 billion being sold. 10-yr notes worsened about .125 in price and moving to 2.52%. This was all after new U.S. claims for jobless aid fell last week, while manufacturing in the nation's Midwest region grew faster than expected in September, supporting the view that economic activity picked up a bit in the third quarter. There are, of course, large-scale trends occurring around the world, with commodities on the rise, the dollar sinking, several European countries still wallowing - so one might ask what a few percentage points in an ISM survey or the NY Fed's Empire Index means. It is a valid question.

Q: How long do you need to wait to get a new mortgage if you have a bankruptcy and a forclosure discharged on your credit?

Mortgage Question of the Day

A:The time frame for recovery after a bankruptcy and or foreclosure is four years as a general rule of thumb.

This time frame can vary based on the circumstances. For example, if your bankruptcy or foreclosure was due to medical reasons then it is possible that you could qualify in as little as 2 years from the time your bankruptcy is discharged or the foreclosure redeemed, which ever occurs last.

If there is no medical reason for the situation and it is due to financial neglect then it is 4 years after the end of the last event, either the home is repurchased or bankruptcy discharged.

One other important point to know is that bank underwriters also want to see 4 years of RE-established credit history so it is important to start working on as soon as possible to help you on the road to recovery.

Q: Once a bank has issued an acceleration notice on a mortgage, how long does it take before a person must leave the propery?

Real Estate Question of the Day

A: An acceleration notice just informs the mortgagor that the debt is due, immediately. It is not a foreclosure notice, and it is not an eviction notice. After acceleration, if the debt isn't brought current, the lender can file a foreclosure action; and in that case, the lender must follow the specific rules in the foreclosure law. These rules usually require notice of the foreclosure sale be published several times in a newspaper, notice to the property owner and other secured parties, and might even require notice to tenants.

At the foreclosure sale, if the lender bids in the mortgage balance, the lender becomes the owner. In some states, there is a redemption period, meaning the former owner can "buy back" the property from the lender by paying off the debt. Rdemption periods vary. However, if there is no redemption period and the mortgage lender owns the house, the former mortgagor has no right to remain in the house from the day of the foreclosure sale. If he stays in the house, the lender must use legal means to evict him. That means filing an eviction notice, which again requires notice to the occupant and legal process. Some jurisdictions are fast with evictions (Virginia) and some are slow (DC). So it depends on where you live. The basic rule is you have no right to occupy the property from the moment it is sold at the foreclosure sale.