WE’RE HEARING the private-label jumbo MBS market has slowed to crawl mainly due to higher mortgage rates. But the government shutdown is also having an impact on this private market which Republican lawmakers are trying to encourage and grow.
It seems the growth of PLS market was partially based on low mortgage rates. Since the Federal Reserve started talking about tapering, that advantage has disappeared. Banks don’t want to buy securities because they expect further increases in rates.
But they are buying whole loans. Hybrid adjustable-rate jumbos are particularly popular, one lender said.
After strong RMBS (residential mortgage-backed security) issuance during the first half the year, only one deal was issued in September. Four RMBS deals are presently in the pipeline, which are slated to be issued before the yearend.
A new survey by Kroll Bond Rating Agency discovered investors are very dependent on the IRS 4506-T form, which lenders submit to the Internal Revenue Service to verify the mortgage applicant’s income and check other tax return data.
It seems four out of the five investors surveyed won’t purchase a loan unless the loan file has a 4506-T form that’s been processed by the IRS.
The IRS can’t process those 4506-T requests until the Republicans and President Obama find a way to resolve the shutdown.
One RMBS issuer told Kroll the government should be “up and running before the lenders have exhausted their pipeline.” If not, they will have to re-evaluate their position.
“The investors will not purchase loans without having an executed IRS 4506-T in the file,” said Kroll senior director Michele Patterson. “It affects jumbos whether they are securitized or sold as whole loans,” she said.
MOST READ/EMAILED: It turns out the same content was both the most read and the most emailed for the site this week. That was Brian’s piece on the good-old IRS gumming up the mortgage works in aid of the government showdown. Because the IRS stopped processing some forms and Wells and Chase Home Mortgage said they needed those forms to be filed, lending was threatened. Now the mortgage bigs have backed off and they’ll do one without a filed form as long as the borrower has signed it and they will go to the IRS after this shutdown finally shuts down.
BEST BLOG OF THE WEEK: Ted Cornwell says those pesky millennials may be screwing up the mortgage patterns set by their elders. In his blog he points out “The New Urbanism” (known as Yuppiedom back in the day) these millenials enjoy, and says they enjoy it so much they may never make that “drive until you qualify” drive out into the suburbs. Or, you can do what your humble authors do: live in the suburbs but work in the city!
COMMENT OF THE WEEK: “!@#$%^&*(!” But seriously folks, we get a wide range of comments to our blogs and hope you make use of this opportunity to be interactive with us. We are hoping that our news stories can also be retrofitted to allow blog comments. We’ll keep our eyes (and ears) open for some colorful comments from now on! As editors and writers we love it if people actually read and react to our wonderful work, so we’re even kindly disposed toward the negative remarks (don’t abuse this, btw).
OH THOSE CRAZY VINERS: Our posters at www.mortgagegrapevine.com are far-ranging thinkers not always limited to thinking about the quotidian, like mortgages. Now, as the baseball season reaches its climax, some gentle repartee has been exchanged online about the Boston Red Sox, who remain in the running for the Fall Classic. Hard for us to get excited, being fans of the Washington Nationals and the New York Mets as we are. Now, it has been a couple of years since the Mets won the World Series. The last time was 1986, and who was that against? Ah yes, that team of destiny from Beantown.
Mark Fogarty is editorial director of the SourceMedia Mortgage Group and has been commenting on the mortgage market since 1984. Brian Collins is the group’s senior editor and D.C. bureau chief. He has worked the mortgage beat since 1988.