Apropos of this, he mentioned Greenspan’s hyper-anal management of the Fed, and how he used to read reports of vacuum sales in Cleveland to help him decide what to do.  Anyway, I immediately thought of myself, sitting staring at the bond charts many days, agonizing over 5bp ticks up and down, and trying to forecast what’s happening.  I can’t do it.  The comfort is that nobody can.  My RateWatch e-newsletter is meant to perform a service to you, separating signal from noise so that when something happens that matters, you’ll know, and in the meantime you can do what you like without worrying about the markets sneaking up on you from behind.

Thus this post, in which I tell you that we have reached a new high in bonds.  Not and intra-day high.  Not a high for May, or even for 2012.  This is a new ALL-TIME high.  That means that the rate environment is at new lows.  For most programs (the new FHA streamline, for example), that will most likely NOT mean a rate move downward.  FHA rates move differently from conventional rates, and tend to clump around quarter points, so where we would be at 3.75%, for instance, if the market improves, it would have to improve a LOT in order for us to move down, because we’re trying to move down to 3.5%, not just to 3.625%.  Add to this bank reluctance to go any lower at all on mortgage rates, and you have a situation where the media will get breathless, but it won’t mean that much to you and me.  If you want more on that, hit me back and I’ll explain.

Suffice it to say, though, that rates are terrific.  This is not meaning an explosion in housing, though, for reasons that should be obvious, but upon which I will elaborate at another time.  Bask in the sunshine, people.  Summer is here.

Currently, if you do a new FHA loan, you will have mortgage insurance up-front and monthly.  The up-front fee is 1.75% of the loan amount, and the monthly factor is 1.25, or $1250 a year per $100,000 of loan amount (a $200,000 loan would have $2500 of monthly MI, or $210/mo).  That’s expensive.  In fact, what it means is that unless your rate is currently 5.25% or higher, you can’t refinance.

Not shouldn’t.  Can’t.  Streamlines also carry the provision that unless the monthly payment – principal, interest, and mortgage insurance only – drops by at least 5%, no refinance is permitted.  We have had people that were going to save a hundred dollars a month that were unable to refinance, because it wasn’t enough.

Now, though, there will be a new set of rules.  The qualifying factors are:

1. You must meet all FHA requirements (no mortgage lates in the last 12 months, credit over 640, clean title or subordination of the second mortgage)
2. Your loan must have been endorsed by FHA before June 1, 2009 (we can look this up.  It is NOT the date you closed)

Simple.  And the benefits are excellent:

• Monthly MI factor is reduced to .55% from 1.25%, from $2500 on $200,000 to $1100, from $210/mo to $90/mo.
• Up-front MI is reduced to .01%.  Yes, that’s right.  $10 for every $100,000 you finance.
• No additions to FHA current rates, which are in the high 3% range
• No appraisal.
• No additions to your current loan balance.  All fees are paid by the lender and FHA.  Your final loan amount cannot exceed your current principal balance plus one month of interest.
• You skip a month of mortgage payment.

What this means is that if you can meet the 5% payment reduction threshold (called the “net tangible benefit”), you should refinance.  Your interest rate drops and there is nothing tacked onto the loan.  You will be money ahead before the ink dries on the new deal.

As you might deduce from this, we are fairly busy working on these.  One catch: no case number can be assigned to your file before June 11.  Right now we are able to pull a case number, underwrite, doc, close, and fund between June 11 and June 25, the last day to close loans in June for funding before July.  However, if we do not get paperwork back on your loan, and have a complete file, before the 5th of June, we won’t be able to make it, and we’ll have to get it done in July.  Word to the wise.

UPDATE, June 20:  All streamlines for June are cleared to close, a few days early.  The staff here has absolutely killed it getting these done.  Everyone will close on time (yes, even you, out in Boston) and we’re going to fund early.  Good news all around.

But there is some bad news, too.  Wells Fargo issued a statement that they will not accept any more streamlines, except for those it already services, after Tuesday the 19th of June, and US Bank will stop taking them Friday the 22nd.  There have been rumors that all the other lenders will shortly follow suit.  We therefore have a very tight window to take advantage of here, of we’re going to do a streamline for you.  Please contact us immediately at cjones@city1st.com, or call us at 801-653-3923.  It can still happen, but we have no time to waste.

Interesting idea.  Bad execution.  This is a government specialty.

The proposal focuses on writing down mortgage balances for homes that are both underwater (of course) and behind on payments, in other words, those homes most likely to be foreclosed on.  That makes sense.  Except, as congressional Republicans correctly point out, this is a gigantic incentive for homeowners to get behind so as to be able to take advantage of the program.

Good news is, there’s a way to have your cake and eat it, too.  It just has to focus on rewarding correct behavior instead of deadbeat-itude.

Try this: Fannie Mae will write down up to 10% of the home value of any homeowner that purchased before 2009 and is 1) underwater by 10% or more  3) current on all payments and 4) remains so for the next 12 months and 5) misses no payments for the 12 months after the writedown.  No recriminations here; if you’re behind now but you get caught up, you qualify in a year, and you can keep the money if you stay that way another year.

If you want to means-test this, so that you’re only offering the assistance to those that are in serious danger of payment-inability foreclosure, then do that with an underwriting process that pays something to lenders, and requires a front-end DTI of over 40% or some such.  [The reason you do this through lenders is so that you don't have to hire half a million underwriters to process the applications.]  You don’t have to do this, though.  The date stamp by itself would eliminate opportunism and focus the program on those that are really stuck by the market crash.

Yes, this is likely to be really, really expensive on a raw dollar basis.  It will, however, virtually eliminate any new defaults.  The incentives to make and keep making payments are far in excess of the potential benefits of foreclosure, with none of the negative side effects.

Yes, there will still be a lot of foreclosures over the next year or so as the program gets rolling (which were supposed to be dealt with by HAMP).  But no program that deals with those is going to reduce the future likelihood of new waves of foreclosures (see HAMP, next-to-complete failure of).  At least this way we can start to clear out some of the new foreclosure possibilities, and reduce incoming.

To say nothing at all of what will happen to the real estate market when this program hits.  We have six years of pent-up demand looking for an outlet, and the number one killer of new deals is lack of equity in current housing stock.  Put a program like this in place, and the boom will be frightening.

This is a proposal that could actually get some support from both sides of the aisle.  It would have exceptionally beneficial effects on repayment rates and on the broader housing market.  And it could be the long-awaited first step toward winding down the GSEs participation in the mortgage market, putting that back where it belongs.

Even Your Mother Won’t Call You Back is the first of four books; the second of which, How Not to Suck, is appearing in May, and the third, Seeing the Invisible Man, in October.  All of them are generally about marketing and communications, though written through my perspective as a loan officer and branch manager.  Feedback is that anyone in business can benefit from the advice, and I hope and believe you will find that to be true.

The book is an outgrowth of an article I wrote for the Scotsman Guide a couple of years ago.  After a few dozen more articles about everything from work-life meshing to what a good business card should look like, for Scotsman, the Niche Report, and others, I’m happy to have a book out there to go with them.  Sample chapters are available at the link above, too, so nothing to lose.

• No LTV limit! Reality: all of our lenders have capped the LTV at 105% on any loan that they don’t already own.  There are rumors out there of lenders that haven’t done this, but I have yet to speak to anyone that has closed a loan with any of them.
• No CLTV limit! Reality: CLTV (that’s the first and the second together) is capped at 110%, except for loans already owned by the new lender.
• No credit requirements! Reality: straight hogwash.
• New underwriting software will incorporate all the new HARP guidelines! Reality: No.  Not really.  It is true that the new update no longer outright rejects the file.  It issues, however, an “expanded approval”, which only one lender even pretends to take a look at (and, see above, no one I know has closed a loan with them).  The rest reject that outright.

Piece number one is in place, and it’s as good as we could have asked for.  Wells Fargo, one of the last true behemoths left in the industry, issued its guidance for HARP 2.0 this week, and essentially, they will go along with the software decision.  They cap the refinancing of non-owner properties at 105% LTV, but otherwise they will take the decision of the Desktop Underwriter.

This is exceedingly good news.  It means that we will likely see HARP implemented as originally announced so many long winter months ago.  For details on that, click here, but in a nutshell:

• no maximum LTV
• appraisal waivers in many cases
• reduced documentation for income and assets
• reduced price and rate penalties

The qualifying remains the same:

• loan must have been sold to Fannie or Freddie by May of 2009 (no refinances since)
• no mortgage lates in the last six months; no more than one in the past year

The other shoe will drop this weekend when we get the software out for a test drive.  So stay tuned for that.  Things look very good, though.

The one possible hiccup here is going to be loans that carry mortgage insurance.  Those are specifically incorporated into the HARP program, but in all cases the mortgage insurer has to go along with the deal, so there’s an extra step involved.  One insurer, United Guaranty, has already said they will NOT go along.  The others have held fire, but it is anticipated that they’ll play ball.  Much more on that as we go.

For new HARP overview, click here.

On that date, Fannie and Freddie will roll out the updated computer underwriting system updates that will make it possible for lenders to have slightly more confidence that they’ll be able to sell these HARP loans to the big clearinghouses.

Some things we now know that we didn’t a little bit ago:

• the “no LTV limit” is a real thing, and most lenders are apparently going to honor it
• the “no job” thing is not real.  It is possible that there will substantially reduced income documentation requirements, that might include no paystubs.  There will probably be employment verification, though.
• the “no appraisal” thing is a fraud.  There will be waivers available, but to get one you’ll have to have an LTV in the 75% range, which if you did, you’d have already refinanced, wouldn’t you?
• the “good to go even with MI” is likely to be real.  There are still some details to be worked out – I’m told that Wells Fargo, for instance, won’t touch them – but we think these loans will end up being do-able.
• the “use HARP twice” rule is NOT going to be happening.  If you got your loan after April 2009, you’re ineligible.

The bottom line is that it’s good, and there will absolutely be a huge number of people applying for these loans starting about right now.  If you want to get in on the act, contact me and I’ll get you in at the front of the line.

As I referenced here and here, the new Home Affordable Refinance Program rules are now out to lenders.  Step one was FHFA (the government consolidator of Fannie and Freddie) issuing rules, which they did in October, the next step was Fannie and Freddie sending the final rules to the lenders, and that happened yesterday.  The final step is the actual program issuance from the lenders, and that hasn’t happened yet.

So we know what the rules will be, but we can’t submit loans yet.  Soon.  December 1, is the best estimate.

The rules are:

• you must have a Fannie or Freddie loan (find out here for Fannie and here for Freddie)
• you must have closed the loan before June of 2009
• you must be current on your loan
• you must not have missed more than one payment in the last 12 months
• you must have a credit score of 620 or better
• you must not have mortgage insurance (except in some cases)

And that is it.  Really.

You’re okay if:

• you have a second mortgage
• you owe more than your home is worth
• you owe 5 times what your home is worth
• you owe a billion times what your home is worth
• you don’t have income
• you don’t have a job at all
• the home is a rental
• pretty much anything else

I know, right?  You could be upside down by 50% and just have lost your job, and you’d probably still qualify if you meet the top set of criteria.

Email me at cjones@city1st.com for more.  Takes about 5 minutes to tell if you’re going to be good to go.

• loan limits are ELIMINATED.  That’s right.  No 150%, no nothing.  There are no LTV limits at all.  That sometimes means on Fannie and Freddie’s end that there are no appraisals required.  More on that below.
• loan-limit pricing is eliminated for borrowers that reduce the terms of their loans.  That’s not quite what I predicted.  That will mean that there are slightly better-than-market rates available to borrowers who move from 30- to 20- or 15-year fixed, and it also means that all types of mortgage, fixed and adjustable, are available in this program.
• one-time-use is RETAINED.  That was a surprise, and an unwelcome one.  It means that if you already did a refinance in the last 30 months (anytime since May of 2009), you aren’t eligible even under the new rules.

Additional stuff: guidance to lenders won’t be out until November 15, and that means that first delivery under this program won’t be available until December 1 at the earliest.  Delivery of loans over 125% will probably not happen until the first quarter of 2012.  So it’s hurry up and wait at the moment.

Other possible stuff: Fannie and Freddie are going to reduce the commitment that lenders make to them when selling the mortgages, so that should mean greater participation in the program (again, see below).  Also, there may be an elimination of the subordination hurdle, meaning that all second mortgages would automatically be subordinated and second-mortgage holders could not block refinances under HARP.  Which they don’t anyway, but still.

NOTE: Here’s where the fine print is.  While most conforming mortgages go to Fannie and Freddie (the term “conforming” comes directly from Fannie and Freddie), not all of them do.  If your loan isn’t owned by Fannie or Freddie (check here) this won’t help you.  Also, lenders sell loans to Fannie and Freddie, so in the origination phase they take the risk.  Many of them are less than sanguine about it, so they put what are called overlays over the federal requirements, tightening the credit restrictions.  So even though Fannie and Freddie have one set of guidelines, lenders are free to have tougher ones, and they likely will.  If one lender says you can’t do it, another may say you can.  This is one reason it will pay to work with a correspondent lender, like, say, me.  I work with a whole swath of banks, so if it’s out there, I’ll have it.

All in all, I guess two cheers for the new program.  It will help a lot of people.  It just won’t help as many as I thought it would.

All the other rules, however, apply.  If you think you want to take a run at this, get on the board now, otherwise you’ll be stuck with long lock periods and your rate will stink, comparatively.  Our board is filling up, so get on it.  Contact info is on this page, on the home page, or heck, just email me at cjones@city1st.com.  Here’s a link to a form you can fill out your information, as well:  http://bit.ly/sQmXhJ