There has been no progress today toward a resolution to the government shutdown. Fortunately, the initial impact of the shutdown on mortgage originations has been small. The biggest concerns are obtaining transcripts from the IRS and social security verifications from the SSA. Certain Government produced economic reports will not be available. The Construction spending report due out this morning was not issued. The Non-Farm Payrolls report due on Friday may be affected. The impact on the mortgage market of this lack of data is difficult to anticipate. At this time, Fannie, Freddie, and Ginnie say they will continue to operate as normal. VA says that they, too, will have no disruptions in services. FHA, however, expects delays due to reduced staffing. Origination companies, correspondent banks, and warehouse lenders may react differently as they access the risks associated with an extended shutdown.
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“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 [...]