The FED's MBS Purchase Program Nearing End Of Funds Allocation
Fed MBS Program Update: 94% of Funding Used
The Federal Reserve today reported on their weekly purchases of agency mortgage-backed securities (MBS).
In the week ending February 3, 2010, the Federal Reserve purchased a total of $17.63 billion agency MBS. In those five days the Federal Reserve sold $5.63 billion (supported the roll market) for a net total of $12 billion MBS purchases.
The goal of the Federal Reserve's agency MBS program is to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally. Only fixed-rate agency MBS securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae are eligible assets for the program. The program includes, but is not limited to, 30-year, 20-year and 15-year securities of these issuers.
Since the inception of the program in January 2009, the Fed has spent $1.17 trillion in the agency MBS market, or 93.83 percent of the allocated $1.25 trillion, which is scheduled to run out in March 2010. This leaves $77.08 billion left to purchase MBS coupons in the TBA market.
- $450 million was used to buy 30 year 4.0 MBS coupons. 3.75 percent of total weekly purchases
- $7.45 billion was used to buy 30 year 4.5 MBS coupons. 62.08 percent of total weekly purchases
- $2.68 billion was used to buy 30 year 5.0 MBS coupons. 22.29 percent of total weekly purchases
- $675 million was used to buy 30 year 6.0 MBS coupons. 5.63 percent of total weekly purchases
- $300 million was used to buy 15 year 4.0 MBS coupons. 2.50 percent of total weekly purchases
- $300 million was used to buy 15 year 4.5 MBS coupons. 3.75 percent of total weekly purchases
30.6 percent of the mortgage-backs purchased were Fannie Mae MBS, 47.1 percent were Freddie Mac coupons, and 22.3 percent were Ginnie Mae. 94 percent of purchases were 30 year MBS coupons.
The Fed's daily purchase average was $2.40 billion per day, which is unchanged from last week's daily average of $2.40 billion per day. If the Fed were to evenly disperse the remaining $77.08 billion over the next 8 weeks, they would average $1.92 billion purchases per day or $9.64 billion per week.
Given the slowdown in the mortgage market, this should be enough to offset new loan production supply from originators.
Below is a chart illustrating the evolution of the Federal Reserve's Agency MBS Purchase Program. Notice over the past few months the Fed has reduced their purchases and used remaining funds to offset new loan production supply, 4.50 (RED) and 5.00 (GREEN) MBS coupons specifically, which has helped keep mortgage rates low relative to benchmark Treasury yields. Overall, weekly purchases continue to decline, yet mortgage valuations remain stable.
Top Metro Areas by Mortgage Lending Volume, 2008
Top Metropolitan Areas by Lending Volume
| 1 | Los Angeles-Long Beach-Glendale, CA | $88,630,823 |
| 2 | Chicago-Naperville-Joliet, IL | $77,057,094 |
| 3 | New York-Wayne-White Plains, NY-NJ | $70,930,690 |
| 4 | Washington-Arlington-Alexandria, DC-VA-MD-WV | $53,638,942 |
| 5 | Atlanta-Sandy Springs-Marietta, GA | $39,917,873 |
| 6 | Seattle-Bellevue-Everett, WA | $38,110,276 |
| 7 | Phoenix-Mesa-Scottsdale, AZ | $37,299,327 |
| 8 | Riverside-San Bernardino-Ontario, CA | $34,543,195 |
| 9 | Santa Ana-Anaheim-Irvine, CA | $33,078,199 |
| 10 | Oakland-Fremont-Hayward, CA | $32,758,992 |
New HUD/FHA Condo Guidelines
December 7 has been set as the date for the new condo review and approval requirements. For cases pulled on and after December 7 the condo project must either be currently approved on the approved condo list at https://entp.hud.gov/idapp/html/condlook.cfm or must be reviewed and approved before the case can close with FHA financing.
HUD offers two approval options: DELRAP and HRAP.
DELRAP stands for Direct Endorsement Lender Review Approval Process and HRAP stands for HUD Review Approval Process. HUD agreed to allow experienced lenders the option of taking on responsibility for reviewing and approving some projects while choosing to submit others directly to HUD for their expertise on others.
1. The project must include no less than two units
2. All projects must be covered by hazard and liability insurance and applicable projects must provide evidence of coverage for flood insurance and fidelity bond insurance when required.
3. For projects whose master insurance policy does not include interior unit coverage, evidence of the borrower’s HO6 coverage must be obtained and provided.
4. Right of first refusal is now deemed acceptable as long as it does not subject any person to discrimination as listed or defined under the Fair Housing Act regulation 24 CFR part 100.
5. No greater than 25% of the total project’s floor space may be used for commercial purposes.
6. No more than 10% of the units can be owned by a single individual or investor.
7. No more than 15% of the unit owners are allowed to be delinquent on their HOA fees.
8. Evidence of a minimum 50% pre-sale must be presented in the form of any of the following:
A direct builder certification requires the builder to sign and certify as to the following:
The undersigned hereby certifies that in lieu of providing (1) Copies of sales agreements and evidence that a mortgagee has issued approval; or (2) Evidence that units have closed and are occupied; the Developer/Builder has attached to the signed and dated certification, a list documenting all units sold, under contract or closed (i.e., and excel spreadsheet). This information will be used to document the required minimum presale requirement of 50 percent.
Title 18 U.S.C. 1014, provides in part that whoever knowingly and willfully makes or uses a document containing any false, fictitious, or fraudulent statement or entry, in any matter in the jurisdiction of any department or agency of the United States, shall be fined not more than $1,000,000 or imprisoned for not more than 30 years or both. In addition, violation of this or others may result in debarment and civil liability for damages suffered by the Department.
9. At least 50% of the units must be occupied by owners or sold to owners who intend to occupy.
10. Projects consisting of three or fewer units must not have more than one unit encumbered by FHA financing.
Projects consisting of four or more units must not have greater than 30% of the total number of units encumbered by FHA.
HUD will be tracking the number of cases assigned in each project and the FHA concentration will be listed within the condo approval data screens at https://entp.hud.gov/idapp/html/condlook.cfm.
11. The homeowners association budget must be reviewed for adequacy to ensure sufficient funds are available to maintain and preserve all amenities and features unique to the condominium project.
Government Moratorum Expiration Forces Jump In Illinois Foreclosures
Not only is the housing crisis far from over in the state of Illinois it may be getting worse. Thank you to the out of state banks lending in this state inconjunction with the state governments meddling in the foreclosure process through moratoriums.
Foreclosure filings jumped 56 percent in October, resulting in the highest monthly total for Illinois since January 2005, according to a new report from RealtyTrac.
Illinois had the third-highest number of foreclosures in the nation last month with 19,946, and was the only state with a foreclosure rate in the top 10 to see an increase in foreclosure activity.
The report cites a recently passed state law that gives homeowners extra time to avoid foreclosure as possibly having created pent-up activity.
Since the law went into effect in April, Illinois foreclosure activity had decreased for three straight months before the October spike.
Nevada, California and Florida posted the highest foreclosure rates in October. Illinois ranked sixth.
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Awaiting FHA's Audit Results
FHA Audit Due Wednesday Morning
11/04/2009 morning the Federal Housing Administration (FHA) will release their mortgage insider anticipated audit of its finances.
The details about how much capital is left in its single family insurance reserve fund which covers losses on its massive amount of covered homes is being awaited. FHA commissioner David Stevens has stated that the government entity and single family home loan insurer won't need tax payor money to weather the recession and housing crisis.
FHA's David Stevens told National Mortgage News last month that the stories of a mismanaged fund are essentially groundless. A spokesman for the agency said it does not anticipate releasing any results that will vary widely from "what we've already signaled."
Recently FHA has tightened its underwriting guidelines and taken administrative action against certain lenders that it believes were abusing and violating its guidelines.
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Home Buyer Tax Credit Needs Boost. Stop Dabbling and Knock This Downturn Out !
Home Buyer Tax Credit Needs Boost to Stimulate
October 9, 2009
Simply extending the $8,000 first-time homebuyer tax credit will not provide much stimulus for the economy, according an IHS Global Insight economist. "The first time buyers who were going to use it would have used it already," said Global Insight economist Patrick Newport. Congress has to "expand it in some way to have any impact," he said. The Obama administration and congressional Democrats are discussing ways to create more jobs and stimulate the economy and a homebuyer tax credit extension is in the mix. The first-time homebuyer tax credit is due to expire November 30 and the National Association of Home Builders and others are pushing for an extension that expands the tax credit to all home buyers. NAHB president and CEO Jerry Howard says it would kick start the move-up market, generate more sales and construction, and create 350,000 jobs. But it would cost the government $30 billion to $35 billion for a full year. "To get the most bang for the buck, it is has to be in effect throughout the spring and summer home buying season," Mr. Howard said.
Increased Purchase Transactions Point to a Recovery
Continued increases in purchase activity suggest a housing recovery could help increase loan application volumes going forward.
The MBA's Weekly Mortgage Applications Survey: The Refinance Index decreased 7.2% from the previous week. The seasonally adjusted Purchase Index increased 1.1% from one week earlier. This is the third gain in the Purchase Index in the past four weeks, MBA stated.
"Looking at the Purchase Index's seasonally adjusted, four-week moving average gain of 0.8%, MBA said this behavior is consistent with the view that home sales hit bottom earlier this year and are now in a gradual recovery".
Other non purchase related data: The share of refinancing applications decreased to 52.3% of total applications from 54.2% the previous week and the seasonally adjusted, four week moving average for the Refi Index is down 2.0%. The adjustable-rate mortgage share of activity increased to 5.8% from 5.4% of total applications the previous week.
The average contract interest rate for 30-year fixed-rate mortgages increased to 5.38% from 5.17%, with points changing from to 1.18 from 1.02 for loans with an 80% percent loan-to-value ratio, the association reported.
Are Obama's Mortgage Regulations Naive or Scapegoating?
The Mortgage origination business model has been the same since I started in the mortgage business in the late 80's. Brokers sell what is created by the GSE's or the secondary market, plain and simple!
For decades mortgage retailers had many reduced down payment mortgages such as VA, FHA and many CRA programs. These loans were very well performing loans, including the ones with the DAP's.
Why did mortgages get so bad starting in the early 2000's? Massive greed, The Fed, The SEC, HUD, Fannie Mae and Freddie Mac. Throw Barney Frank in there too!
Greed: Bankers, Wall Street, Mortgage Brokers and dare I say it-Borrowers turned their sensibilities off and acted like pigs at the easy money mortgage feeding trough. The only borrowers we should feel sorry for are those that are still paying their mortgages on-time, where is their bailout?
The FED: The Fed's easy money policy allowed new channels of mortgage funds to be created through the use of PLS's - private lable securitizations. These were the subprime and other exotic products that are driving foreclosures. The Fed handed the bankers a diet rich in super cheap money ( Washington Mutual is a prime example )
The SEC: The regulatory agency that arguably allowed the most global damage. This dead and rotten giant missed oversight of Credit Default Swaps which were the true cause of the global financial crisis. Also, don't forget a single man (Madoff) completely fooled an entire government agency. Welcome to regulation and regulators.
HUD: HUD locked out many mortgage brokers from originating FHA loans, hence forcing the secondary markets to create "FHA look alike programs". HUD also continues to mandate horribly lengthy and difficult to understand disclosures and forms for borrowers.
Fannie Mae and Freddie Mac: Seeing early in the decade that they were missing huge profits from the exotic loans, and being led by executives such as Franklin Raines ( paid 70 million in 5 years ), the business model went from asset stewardship to executive bonuses. The fat twosome of Fannie and Freddie cannonballed into non-conforming (exotic) loan pools soaking everyone in the global financial system.
Barney Frank: Representative Frank had an intimate secual relationship with Herb Moses a Fannie Mae executive. Mr. Frank literally had intimate knowledge of the internal workings of Fannie Mae and even with that knowledge stated to the public that Fannie Mae was solvent in July of 2008 two months before the company started to implode. Many investors continued to buy stock in Fannie Mae.
The governments actions or lack of appropriate action has had toxic results. Maybe they should look inward first?
S.A.F.E Act - Federal Mortgage Origination Registry
The FDIC, Office of Thrift Supervision and National Credit Union Administration along with others has through a unified front proposed a joint system to register residential mortgage loan originators. “The S.A.F.E. Act requires the above agencies and others to jointly develop and maintain a system for registering residential mortgage loan originators across the country that work for national and State banks, savings associations, credit unions, and Farm Credit System institutions, and certain of their subsidiaries,” the FDIC said in a statement.
Loan originators would be required to be registered with the Nationwide Mortgage Licensing System, along with the American Association of Residential Mortgage Regulators.
As part of the registration, originators would be subject to a background check and required to provide fingerprints and would hopefuly be barred from originating loans until registered.
Lenders Pushing for More CRA Programs... Its A good Thing
CRA programs from 1990 to 2000 offered fantastic opportunities for home loan consumers via great entities like Nationwide and NorthAmerican mortgage. Two great companies that were gobbled up by big box banks Cal Fed and Washington Mutual. These CRA loans were written with sensible debt ratios and had capped loans to moderately priced homes that have always been the bread and butter of the industry- great loans with low default rates.
Lenders are pushing the Federal Housing Finance Agency to open up Fannie Mae and Freddie Mac to purchase mortgages that banks originate to satisfy their Community Reinvestment Act obligations. CRA was created in 1977 to spread homeownership opportunities across more economic demographics.
"The GSEs have made it a practice of avoiding CRA-related mortgage loans," the Consumer Mortgage Coalition says in a comment letter to FHFA. "We would encourage FHFA to implement this statutory mandate even though HUD failed to do so," CMC executive director Anne Canfield says.
The GSE regulator is in the process of revising Fannie's and Freddie's affordable housing goals for the first time. The National Association of Affordable Housing Lenders says the GSEs continue to ignore $50 billion of CRA-eligible multifamily loans that banks are forced to hold in portfolio. The FHFA proposal only requires Fannie and Freddie (combined) to purchase $9 billion of affordable multifamily loans in 2009. "We urge you to withdraw this proposal, and reconsider how the GSEs can better support the recovery," says Judy Kennedy, NAAHL president and chief executive.
Stimulating the bottom end of the housing market tends to trickle up sales spurred by move up buyers.
BankUnited Scooped up by Private Equity Firms
Bank regulators seized Florida lender BankUnited and sold it to some of the most powerful private equity firms in the world. Those firms included: Wilbur Ross's WL Ross & Co, Carlyle Group, Blackstone Group, and Centerbridge Partners.
These private equity firms are putting up over $900 million of capital to rescue the bank, the largest independent bank in Florida.
The failure comprised the largest bank failure year to date and will cost the FDIC about $4.9 billion.
The FDIC said it is close to providing more guidance for how private equity firms can invest in failing banks. The government is looking for ways to better use the $1 trillion worth of parked private equity capital.
In my opinion, the takeover of the bank by private equity firms should be seen as an exceptionally positive trend for the economy. Private equity firms are starting to buy on sentiment that things will soon start to improve.
California Affordability Skyrockets for First Time Buyers !!!
The percentage of households that could afford an entry level home in California skyrocketed to nearly 70% in the first quarter of 2009 from 46% just a year ago, according to California Association of Realtors. California affordability has jumped recently because home prices have fallen off a cliff and mortgage rates are at historic lows.
The High Desert (Victorville, Riverside, Moreno) had the greatest level of affordability at 83% with San Luis Obispo County and Orange County at the lowest level of affordabilty hovering at about 50%.
In Los Angeles County affordability increased to 55% from 30% a year ago. The entry level home is selling for about $257,970.
Mortgage Crooks Should Move out of Florida... Hurry Come to California
Our mortgage regulators are deaf, dumb and blind.
Governor Charlie Crist is expected to sign legislation calling for annual criminal background checks for mortgage originators in Florida. Background checks, fingerprints through the state and the FBI will be SOP. Exception: Misdemeanors for fraud and theft may only carry five year bans, while some other felonies will draw a seven-year ban- same old liberal bullshit.
Brokers will required to submit personal credit reports annually to the State and everyone selling loans will need to be registered with the Nationwide Mortgage Licensing System. An investigation conducted last year found that one in four mortgages was “tainted with fraud” in 2007 probably because 10,000 former criminals were allowed to sell mortgages.
The new regulations may be the toughest in the country and represent the biggest changes to the state’s mortgage laws in roughly 50 years. Our opinion is that they don't go far enough to raise the standard. Florida is trying to shake its image as the number one state in the country for mortgage fraud... where will the criminals relocate?
Come to California is less humid here plus our regulators are asleep at the wheel.
-->Mortgage Cram Downs - Not So Fast
Legislation allowing bankruptcy judges to modify loan balances and terms of mortgages associated to primary residences hit another roadblock. The cram down legislation attained a yes vote in the House of Representatives in March but failed to attract the required votes in the Senate and will now be removed from a broader housing rescue bill.
Opposition came from all Republicans and a small group of Democrats in the Senate. The bill has been lobbied against by the banking industry, including groups such as the Mortgage Bankers Association who argued that it would scare off investors requiring higher interest rates to attract them back.
From a reverse opinion, a report from Credit Suisse found that if such legislation were to become law foreclosures could be reduced by 20 percent as it would prompt banks and lenders to step up loan modification efforts. The National Association of Homebuilders recently reversed its stance and now supports a temporary provision that would allow such modifications.
Mortgage Cram Downs - Not So Fast
Legislation allowing bankruptcy judges to modify loan balances and terms of mortgages associated to primary residences hit another roadblock. The cram down legislation attained a yes vote in the House of Representatives in March but failed to attract the required votes in the Senate and will now be removed from a broader housing rescue bill.
Opposition came from all Republicans and a small group of Democrats in the Senate. The bill has been lobbied against by the banking industry, including groups such as the Mortgage Bankers Association who argued that it would scare off investors requiring higher interest rates to attract them back.
From a reverse opinion, a report from Credit Suisse found that if such legislation were to become law foreclosures could be reduced by 20 percent as it would prompt banks and lenders to step up loan modification efforts. The National Association of Homebuilders recently reversed its stance and now supports a temporary provision that would allow such modifications.
