It seems like just yesterday when I was emailing realtors regarding some of the changes that Fannie Mae had made limiting loans to individuals who have more than four financed properties.  Then I receive this update to which changes the guidelines (Announcement 09-02):

Multiple Mortgages to the Same Borrower
To support prudent lending for housing investment, Fannie Mae is changing our current limit of four financed properties per borrower. We will allow five to ten financed properties per borrower, with certain eligibility and underwriting requirements, including a 720 minimum credit score and 70-75% maximum LTV/CLTV/HCLTV (depending on the transaction and property type). The requirements apply to any loan being delivered to Fannie Mae, regardless of whether Fannie Mae is the investor on the borrower’s other mortgages.

Stay tuned – more changes are I am sure on the way!

 By Anthony Garritano

NEW YORK-Now is as good a time as any to really talk about the problems that exist in the mortgage space. And certainly there are a few problems out there. Gone are the days when it’s best to keep everything close to the vest to maintain a competitive advantage. The industry has to open up and communicate, and let’s face it open communication is what the Internet, and more specifically, blogs are for. And slowly but surely, the industry is getting this message.

For example, Cyberhomes recently launched a blog that extends the full potential of information exchange and social networking to professionals in the real estate and mortgage industries. CyberhomesBlog.com delivers writing and analysis of real estate trends and technology. Cyberhomes.com is the home and neighborhood evaluation portal launched in 2007 by Fidelity National Financial Inc., a Fortune 500 provider of products, services and technology solutions to the financial and real estate industries. “Internet and social networking technology have brought us to the point where a well designed and maintained blog can now serve an entire industry the way the water cooler, bulletin board, break room and even test kitchen once served a single office,” said Reggie Nicolay, Cyberhomes’ director of social media in a prepared statement.

Also, Bill Adamowski has taken the idea of blogging even further by launching MorLinkz, the first professional online networking community dedicated to the mortgage industry. Free to mortgage professionals, the MorLinkz network enables its members to connect with each other and collaborate online. In addition, members can post jobs, find jobs, get industry news, discover new business opportunities, publish blogs, participate in forums, etc.

January 2, 2009

By Paul Muolo

Capitalism is a wild and wacky game. And it’s not for those with weak guts, which brings me to the case of IndyMac whose long awaited sale was announced by the Federal Deposit Insurance Corp. Friday afternoon. The new “owners” of IndyMac are essentially a bunch of hedge funds that are well known for some of their contrarian bets in financial services. First and foremost among those private hedge funds is Paulson & Co., led by hedge fund guru John Paulson, who made a killing (a $15 billion killing) by shorting the ABX Index back in 2007 and early 2008. The ABX gauges the value of subprime bonds and we all know what happened there, don’t we? For some reason the FDIC didn’t mention Mr. Paulson’s $15 billion winning bet against the B&C market in its press release. The FDIC’s original investment banker on the sale of IndyMac was Lehman Brothers, which went bust a few months after getting the assignment. The advisor to the consortium? That would be Merrill Lynch & Co., which helped cause the subprime crisis by financing dozens of subprime lenders, buying their loans and packaging them into securities (CDOs) for sale to institutional investors in the U.S. and overseas. (Lehman did that too.) Like I said, capitalism is a wild and wacky game. But who knows any more, really? If John Paulson is putting his reputation (and a little bit of his money) on the line, maybe this actually signals a “bottom” in the mortgage and credit crisis. For the full story on the sale of IndyMac visit: http://www.nationalmortgagenews.com/…

How’s the refi boom looking these days? Answer: it depends on who you ask. On Friday I interviewed Brian F. Benjamin who runs Two River Mortgage & Investment of Red Bank, N.J. Last week, Brian said he received 15 calls for jumbo mortgages where the loan amount was north of $1.5 million. But of those 15 it looks like he will only be able to close two loans. Brian, who operates as a broker, said many lenders have tightened jumbo guidelines by so much that borrowers don’t have a chance. “Some will only do the loans if the LTV is 50% or better,” he said. He also complained about Fannie Mae “adders” where the GSE charges extra points and fees for low FICO score mortgages. He gave an example on a $275,000 mortgage where the borrower has a 659 FICO. The total “adders” (fees) came to 2.55 points. I asked him if the fees were going to the lender or Fannie. His reply: “It’s going to Fannie one way or the other — directly or indirectly,” he said. Meanwhile, one rank and file retail LO for a top ten ranked lender — who requested his name not be used — told us he’s getting “lots of calls” on refinancings via the company’s 800-number. But it’s not a slam dunk by any means. The biggest problem with the applicants who are looking to refinance is “not enough equity,” he said, “or poor credit.” Stay tuned…

By Paul Muolo

Want to Help a Struggling Mortgagor? Give Him a Job

Plenty of ink has been spilled in the trade press about loan modifications. And plenty more will be spilled throughout 2009 and then some. Do loan mods work? Should the government spend taxpayer money to restructure thousands, if not hundreds of thousands of delinquent mortgages? Good questions one and all.

The devil, as always, is in the details. Loan mods can be tricky and complicated because of the legal ramifications. First, off, what type of loan mod plan are we talking about? If a lender/servicer holds a troubled mortgage in portfolio and the note has not been securitized it’s then up to that lender/servicer to make a decision on a loan mod. But if a mortgage has been securitized and resides in a legal “trust” that’s where matters get complicated.

Some investors (fearing lost income) will not grant permission to modify a note. They fear that they will lose money on not only delinquent loans but that it sets a precedent. They worry that if they grant permission on nonperforming loans what’s next: subperforming and current mortgages that could go delinquent?

There’s an easy solution to getting around investor concerns. The Treasury Department can use some of the $700 billion of TARP money to purchase MBS backed by delinquent subprime loans. Once these securities and trusts are in the hands of Uncle Sam they can break apart the ABS/MBS into whole loans and do what they like with them. (That’s how one mortgage bottom fisher explained it to me.)

The “buy ‘em and break ‘em” concept sounds promising but then again, Treasury has nixed the idea of purchasing MBS and ABS as part of the $700 billion bailout. Of course, that was the Bush Treasury Department. By the time you read this the Obama team will be just about in place and they can do what they want with the remaining $350 billion, that is, if Henry Paulson doesn’t spend it all before Jan. 20.

It’s sort of funny. What started out as a mortgage crisis has now grown into a pan-business crisis affecting homebuilding, insurance, automobile companies and the list goes on and on. And it all started with the little old 30-year mortgage, the “subprime” of the species. The “virus” has infected the entire mortgage body and then some.

But getting back to loan modifications. I remember interviewing Faith Schwartz of the Hope Now alliance back in the summer. The alliance was marveling at what a wonderful job its members (lenders and servicers mostly) had been doing on helping hundreds of thousands avoid foreclosure. It all sounded wonderful but then I asked her if Hope Now knew how many of its two million in modified loans had gone south again? Her reply: we don’t know.

At press time, the Office of the Comptroller of the Currency had just released a study showing that modified loans restructured in 1Q 2008 had a 36% delinquency rate in the 30-plus-day category and 53% in the 60-plus-day category. The 2Q loan mod numbers were about the same: not good. These figures do not take into account the much ballyhooed IndyMac loan mod program which became operative late this summer when the FDIC took control of that once high flying alt-A lender. Who knows, maybe the IndyMac rewrites will be better. (Agency chief Sheila Bair is counting on it.)

For the mortgage industry and government loan modifications boil down to this: Does it make financial sense to rewrite thousands upon thousands of loans if they wind up going bad eventually? It’s a fair question. Consumers do not go belly-up just because their house becomes “under water.” The payments stop when they lose their jobs. One solution might be to get more Americans back to work, which is a tall task given that the unemployment rate is just shy of 7%.

Any veteran mortgage executive knows there are two basic ingredients driving loan demand (and delinquencies): employment and interest rates. Mortgage rates are starting to fall but without blue- and white-collar industries creating new jobs all the loan modification ideas in the world won’t save the industry, or the nation.

FNMA – 30 Year 4.5% Sale 102.12 19bp

Reaction to yesterday’s huge gains in Mortgage Backed Securities has been underwhelming this morning. It could be that today represents a reversal of sorts on the gains that have been made by floating to this point.

I am in a locking bias today – watch for my next post on the outcome.

By Paul Muolo

It’s official: we’re in a recession! (Twelve months and running, apparently.) Historically, recessions usually spell good news for mortgage bankers because the Federal Reserve (in an attempt to work the nation out of the economic morass) usually cuts short-term rates drastically, which is what we saw earlier in the decade under Alan “The Maestro” Greenspan. But short term rates are already at 1% and the mortgage and housing markets (as we all painfully know) are hardly booming. The question on everyone’s mind is this: when will home values stop falling? The key to answering that question is the unemployment rate, not interest rates. This Friday the new monthly employment figures come out, and based on the headlines of the past four weeks don’t be surprised to see the figure north of 7%. As for interest rates, look for the Fed to cut another 50 basis points off the overnight borrowing rate at its next FOMC meeting…