Loan Think

If it looks like a refi boom and quacks like a refi boom, then it must be one. Correct? Not so fast. One thing's for certain: loan applications are swelling the inboxes of brokers and LOs. But how many of these loans will actually close, given declining home values and the absolutely horrible job picture? One broker told us he's getting two to three referrals a day but notes that wholesale underwriters are telling him it now takes almost two weeks to complete and approve a file. "It used to be 24 hours," he said...

According to one media outlet (which shall remain nameless), some lender somewhere is offering a 3.99% fixed-rate mortgage. Of course, this general media outlet isn't telling the listener all about the points and GSE "adder" fees they must pay to get the loan. Which brings me to a point: Over the past few weeks I've been talking to bankers and brokers about the "refi" boom. They all admit that yes it's here. Loan applications are flooding their desks. But they're not so sanguine about how many of these apps will pull through and actually fund. One N.J. area loan officer told me that during the past week he took in 35 applications. "Basically, I can't close any of them," he said, noting that even though the FICOs are north of 700 GSE "adder fees" which ding the consumer for high LTVs (among other things) ultimately will make the loans too expensive for the applicant…

HUD DELAYS ENFORCING "REQUIRED USE" DEFINITION OF RESPA UNTIL APRIL 16, 2009

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.

Mortgage bankers say Fannie Mae plans to hike its "adverse market delivery" fees effective April 1. One grid shown to National Mortgage News indicates that a borrower will pay 2.25% if he/she has a FICO score between 620 and 639 and the LTV is north of 97%. The mortgage banker who sent the grid told us, "I hear that Fannie has a possible policy" whereby yield spread premiums could disappear. She adds, "what does this means for consumers?" Stay tuned…

State attorneys general are getting one last chance to overturn a decade of federal court decisions that have turned national banks into sovereign enterprises that can thumb their noses at state consumer protection laws and their enforcers. The Supreme Court has decided to review a decision by the Second Circuit Court of Appeals that essentially frees national banks from all state scrutiny.The appeals court ruled that four national banks did not have to respond to former New York AG Spitzer's request for information about their mortgage lending practices. Mr. Spitzer wanted information to determine if they unfairly placed minorities into higher cost mortgages.The Bush administration sided with the national banks and their regulator - the Comptroller of the Currency - in urging the high court to reject the AG's petition for review. But chief justice John Roberts is very leery of the national banks and the timing could not be better. It gives the Obama administration a chance to weigh in before oral arguments this spring. [It will be interesting to see what his Solicitor General says]. And a new Comptroller should be overseeing the national banks, which have become dependent on capital infusions from the government.Meanwhile, Comptroller John Dugan who so ably shielded national banks from state interference will likely be back at his old law firm. Mr. Spitzer went after the banks because their mortgage lending reports suggest possible disparities between the treatment of whites and minorities. But further data is needed to determine actual discrimination. Mr. Spitzer tried to get that data, but the national banks sued with the blessing of the Comptroller. The second circuit ruled the national banks did not have to respond to the AG's request because it represents an "unlawful exercise of historical powers" as defined by the comptroller and previous court decisions. In other words, state officials can't visit, investigate or interfere with the business or conduct of a national bank period. And in this case, only the comptroller can investigate possible lending violations against the citizens of New York. Now comptrollers are generally picked from the ranks of bank attorneys. They are groomed to be hawks when it comes to expanding the national banking system. They are not known for being tough regulators or protecting consumers from some of the biggest banks in the world. But they do like to win court cases to preempt state laws and keep state regulators at bay. And they have used the Chevron Doctrine - which says federal courts should show deference to a regulator's interpretation - to the up most advantage. In 1984 when the Supreme Court puts its stamp of approval on the Chevron doctrine, regulators were expected to be regulators. But that was 25 years ago before regulators morphed into deregulators. Is it likely those justices would defer to regulators who defer to bank executives and treat them like clients? Would they defer to regulators who use their preemptive powers to exempt national banks from state lending laws that are targeted at curbing abusive subprime lending practices? In making their last stand, 49 state AGs have filed an amicus brief in support of New York AG Andrew Cuomo, who has taken up Mr. Spitzer's case. The state AGs argue that the appeals court erred in its deference to the comptroller. "This case pushed Chevron beyond its intended and reasonable limits," the AGs say. "The court failed to recognize the inappropriateness of Chevron deference in cases where sensitive issues of federalism are at stake." The court also erred by failing to consider the Comptroller's "agency bias and a self-serving preemption agenda," the brief says.P.S. At a regulatory reform hearing recently, Maryland banking commissioner Sarah Bloom said: "Yes, the current crisis has both revealed and created weaknesses and gaps in our regulatory system, but even more, I submit that it reveals the gap in regulatory and political will in Washington. Perhaps the resilience of our financial system during previous crises gave policy makers and regulators not only a false sense of security, but also greater willingness to defer to powerful interests in the financial industry who assured them that all was well."

Mortgage bankers and brokers have been complaining to me for weeks about the "adder" fees Fannie Mae and Freddie Mac have been tacking on for low FICO scores, high LTVs, and the like. But what about the market for investment properties where someone buys a home to rent out (presumably) and needs a loan? Remember that market? One Connecticut mortgage executive notes that the GSEs have reduced the allowable outstanding mortgages limit to four from 10. She said this has "killed any chances solid investors had for conventional financing on investment properties. It doesn't matter if the credit score is 900 and the LTV is 20%"…

Interest rates are now below 5%, refi applications have surged in the past couple of weeks, so will lenders continue to do business as usual or will they embrace vendor’s technology to address this current surge? As we close the door on one of the worst years in the mortgage industry’s history, what lessons have we learned? Will we simply repeat our recent history?

We're in a refinancing boom and Wilbur Ross's American Home Mortgage Servicing business in Irving, Texas, has $41 billion in residential receivables to protect. There's talk making the rounds that American Home is in discussions with a vendor to outsource the targeted refinancing on its servicing portfolio. Meanwhile, Mr. Ross is buying a large stake in First Bank & Trust of Indiantown, Fla. And according to a report in our sister publication American Banker, he is part of a group considering a run at the troubled BankUnited of Coral Gables, Fla., once one of the largest payment option ARM lenders in the nation...

THIS JUST IN: A major regional bank scuttled a $2.1 billion auction of mostly delinquent mortgages in December, leaving a number of bidders steamed (and that's putting it nicely). "I'd like to punch them in the nose," one "scratch and dent" investor told us. Late Friday, a representative from the bank said it really had no intention of selling the mortgages in the first place but just wanted to see what bids they might get. For the full story see the Monday edition of National Mortgage News. Don't subscribe? Call 800-221-1809. A subscription includes access to all the premium news on NMN's website, too...