On top of the previously announced 10 basis point increase in Fannie Mae and Freddie Mac guarantee fees, Fannie and Freddie have published new Loan Level Price Adjustments (LLPAs) which will be effective April 1, 2014. The primary effect of the adjustments is to increase LTV/Credit Score LLPAs by 25 to 150 basis points. Offsetting these increases somewhat, the 25 basis point Adverse Market Delivery Charge will be eliminated for all states except New York, New Jersey, Connecticut, and Florida.
On August 31st, FHFA announced another increase in the guarantee fee (G-fee) charged by Fannie Mae and Freddie Mac on the loans they insure. The amount of the increase is set to average 10 basis points, but the amount of the increase may vary by product and seller. The increase is to be effective on loans sold directly to Fannie or Freddie beginning in November and for any loans to be pooled in a mortgage-backed security (MBS) with a December 1st or later issue date. Longer term locks already reflect this increase. Short term locks may as well, depending who is buying the loan and whether the loan will be pooled in a MBS. If they don't now, they will very soon. G-fees are paid by the borrower from the interest paid on the loan or are collected upfront as a cost to the borrower. The cost is approximately five times the increase in G-fee. The effect of this increase in G-fee on the borrower has been masked somewhat by recent price increases in the MBS market. Loans locked at prices before the G-fee increase was added will incur heavy extension fees, if required, so timely delivery of well documented, [...]
This morning, FHFA announced their enhancements to the HARP refinancing program. Operational details of the plan are to be released on November 15. Only loans that were purchased or guaranteed by Fannie Mae or Freddie Mac on or before May 31, 2009 and have a current LTV over 80% are eligible. In addition, the loan must be current, no late payments in the last six months and no more than one late in the last 12 months. There are no restrictions on who may refinance these loans. Program guidelines include: *No limit on LTV, if new loan is a fixed rate loan (current LTV must be above 80%) *Loans previously refinanced under HARP not allowed *Certain agency fees will be waived if new loan is a shorter term loan *Appraisals not required where Agency AVM is available *Certain originator Reps and Warrants will be waived Borrowers can determine if their loan is owned or guaranteed by Fannie or Freddie at http://www.fanniemae.com/loanlookup/ or http://www.freddiemac.com/corporate/ If you need additional information about this blog post, please visit our website MBSQuoteline.com or call 800-627-1077.
Mortgage companies and mortgage originators will be significantly affected by what Congress does in the final Financial Reform bill. The bill made it through the House and Senate Conference Committee last Friday. Glen Corso, Executive Director of the Community Mortgage Banking Project, returned to the show today to describe what the bill now looks like. He focused on the two provision directly affecting the mortgage industry: Risk Retention and Loan Officer Compensation. The current Risk Retention provision actually improved in the conference committee. There is still a requirement for originators to retain 5% of the risk on the loans they originate and sell. This would be devastating for the industry, except for the fact they the bill exempts almost all of the loans being made today. The bill says that the requirement to retain risk does not apply to government guaranteed loans (FHA, VA, and USDA) and all other loans “well underwritten. Well underwritten loans are loans that are fully documented and have reasonable ratios, are not negative amortization loans or loans with large payment adjustments possible. Most Fannie and Freddie qualifying loans would meet this definition. Glen believes the bill will allow an allocation of the retained risk between [...]
So overall, lenders seem to be content with HVCC. That’s one out of four. But how about appraisers? The popular method for lenders to comply with HVCC has been to contract with an appraisal management company (AMC) to handle the appraisal process (though some are managing the process internally). In this arrangement, the appraisal order is placed with the AMC by a non-production person in the lender’s office, the order is assigned on a random basis to one of the appraisers in a pool, and if the appraiser accepts the order, the appraisal goes forward. Sounds simple enough and workable, right? Most appraisers I’ve talked to are somewhat ambivalent on the issue. They’ve lost business from long term, cultivated, relationships but picked up business from others in the random assignment process. There’s a middleman now (remember the AMC) and middlemen have to get paid. We’ve all heard of AMCs demanding appraisers to accept a lower fee for reports to be on their panel. A common refrain is less qualified appraisers that otherwise might not be able to get business on their own, gladly step in on these terms with the result being poorer quality appraisals. So, appraisers have had to [...]
The industry has had a year to operate within HVCC guidelines and the benefits of it pretty clearly depend on just whom you ask. May 1, 2009 marked the implementation of another regulation on the mortgage industry when Fannie Mae and Freddie Mac adopted the Home Valuation Code of Conduct (HVCC) as a result of an agreement between their regulator, the Federal Housing Finance Agency (FHFA), and the New York State Attorney General. One of many initiatives aimed at improving loan quality in the wake of the subprime market meltdown (and we’re finding quality problems weren’t limited to the subprime market) HVCC’s intent was to ensure appraiser independence in the valuation process, thereby improving appraisal quality. Doing so, it was reasoned, would better serve lenders because they would get more accurate valuations on which to base their loan decisions. And borrowers as well would be protected from obligating themselves on loan amounts based on inflated property values. So is HVCC working? Well, who are you asking? Basically you have four different players in the origination process impacted by HVCC- the lender (and we’ll include Fannie and Freddie in this category to keep it simpler), the appraiser, the originator and the [...]
“Skin in the game. Most mortgage bankers, especially those who have experienced a loan buyback, feel like they have some. If Senate bill S3217, Restoring American Financial Stability Act, is passed in its current form mortgage bankers will learn what “skin in the game means to the current Administration. This bill calls for mortgage bankers to retain the risk on 5% of the loans they originate. The language in the bill is not clear, but some have suggested that retaining risk means funding a reserve with cash. Lets do some math. If a mortgage company is really efficient, it might earn 1% on the loans it originates and sells. If they are required to hold 5% as a risk reserve, it will not take long for mortgage bankers to originate themselves into bankruptcy. Who would participate in this business? Glen Corso, Managing Director of Community Mortgage Banking Project, joined the show today to discuss his efforts to lobby the Senate to add an amendment to the “skin in the game provision of S3217. The amendment would exclude “well underwritten loans from the risk retention requirement. Think Ginnie, Fannie, or Freddie loans. They cannot be defined that way because we may [...]