Insight on DU changes

Market Color:  Each day SI includes a estimate of how long interest rates will remain low as a percentage.  You would expect the Federal Reserve to clearly telegraph the beginning of any rate increases.  Plenty of people scour the speeches Federal Reserve Governors make as well as Chairman Bernanke.  Investor speculation seems to be higher after the improved jobless claims report on Thursday, and the lower unemployment number posted on Friday.  Is it to premature?  Stocks and the dollar improved today as investor speculation on when rates will rise are starting to increase.  The dollar rose against other currencies ahead of comments from Federal Reserve Chairman Ben Bernanke, who will speak before the Economic Club of Washington. Bernanke has insisted that the Fed plans to keep rates low for the foreseeable future, but investors believe that as the economy improves, the central bank might move to raise rates and withdraw some of its support measures. That could reverse the dollar’s months-long slide and put a dent in the stock market’s advance and our mortgage rates.  After a full week of economic news, this week promises to be light. We do have the sizeable auctions ($74 billion), but in terms of scheduled releases today, tomorrow, and Wednesday we have nothing of substance, Thursday we have the Trade figures and Jobless Claims, and on Friday we have Retail Sales and the Imports/Exports data.   Right now, the futures market is pricing in an 80% chance that the Fed keeps rates somewhere between 0% and .25% through March 16th, 2010.  Currently, the Ten Year yield is at 3.47%.  And 30 year mortgage are up about 8/32nd’s or .25% better than our close on Friday.

 

Market News: Implode O Meter, that wonderful website that keeps track of all failed mortgage companies records another former investor GEM used to work with. AmTrust Bank, a big wholesale and correspondent lender, has failed last Friday and taken over by their regulator.  Its regulator blamed a high concentration of loans in hard-hit states for its demise. The institution had weathered the Great Depression, but the Great Recession was more than it could handle.  AmTrust was founded in 1921 and ranked among the country’s top 15 wholesale mortgage lenders. AmTrust was the 128th FDIC-insured bank failure during 2009.
The creation of a Consumer Financial Protection Agency would ensure that loan brokers have a vested interest in the performance of mortgages they facilitate, according to HUD secretary Shaun Donovan. The CFPA could end “abusive” yield spread premiums and impose a “duty of best execution” on brokers to make sure they put borrowers into affordable mortgages,” the Department of Housing and Urban Development secretary told a Consumer Federation of American conference. In addition, the broker’s fee could be paid over time, instead of in a lump sum at the closing table giving brokers “skin in the game” the secretary said. The National Association of Mortgage Brokers top lobbyist Roy DeLoach said NAMB has a long-standing policy against abusive YSPs that act as incentives for brokers to steer borrowers into riskier, higher cost loans. He noted that NAMB supports a provision in a House-passed bill (H.R. 1728) that prohibits incentivized YSPs. As long as the broker’s fee can be financed inside the interest rate, “we are supportive,” he said. However, NAMB believes brokers should be paid at closing. In terms of best execution, the NAMB lobbyist noted that wholesale lenders, not brokers, underwrite and approve the loans. “The lenders have all the information we have before the loan goes to close,” Mr. DeLoach said. SI believes we have a ways to go, but some form of this legislation will emerge in the first quarter of next year.

Product News: GMAC announcement about the launch of DU 8.0

Minimum Credit Score Requirement With the exception of DU Refi Plus, loan casefiles that are underwritten and submitted through DU Version 8.0 with a minimum representative credit score below 620 will receive an Ineligible recommendation. Total Expense Ratio With this release, the maximum allowable total expense ratio in DU will be revised to 45 percent. If current debts exceed the maximum allowable total expense ratio, the loan case file will receive an Ineligible recommendation. DU will no longer return a Refer recommendation on loan casefiles that would have otherwise received an Approve Recommendation but had exceeded the maximum allowable total expense ratio. DU Refi Plus loan casefiles submitted to DU Version 8.0 will continue to be subject to the maximum allowable total expense ratio currently applied to DU Version 7.1 DU Refi Plus loan casefiles. Foreclosures DU will be updated to include the following requirements for borrowers with foreclosure completion dates of more than 5 years, but within 7 years from the credit report date: Purchase of a principal residence will be permitted with a minimum down payment of 10 percent and a minimum FICO of 680. Purchase of a second home or investment property will not be permitted Cash-out refinances will not be permitted for any occupancy type. Bankruptcies Loan casefiles where DU identifies a Chapter 13 bankruptcy that was discharged within the last 24 months; dismissed within the last 48 months; or filed but neither discharged nor dismissed within the last 48 months will receive a Refer with Caution/IV recommendation and is not eligible. Loan casefiles where DU identifies a non-Chapter 13 bankruptcy that was filed, discharged, or dismissed within the last 48 months will receive a Refer with Caution/IV recommendation and is not eligible. Expanded Approval (EA) Recommendations DU Version 8.0 will no longer issue EA-II and EA-III recommendations. Revised Mortgage Insurance (MI) Coverage Reduced MI and Lower-Cost MI will no longer be offered with DU Version 8.0. Please note that GMAC Bank will not participate in the simplified MI option. New and Updated Underwriting and Eligibility Policies The DU documentation for Age of Credit Documents will be updated to reflect a credit report expiration of 90 days from the date of the credit report for purchase and refinance transaction. DU will issue a Verification message on all DU loan casefiles requiring that a completed and signed Form 4506-T is obtained for all borrowers at both application and closing. DU will issue a Verification message on all DU loan casefiles requiring a verbal verification of employment VVOE is performed and documented for each borrower. These updated guidelines for submission to DU 8.0 are effective for all loans locked or trades committed on and after December 11, 2009.   Loans locked before December 11, 2009, under the previous DU Version 7.1 guidelines, must be purchased and funded by GMAC Bank on or before January 30, 2010 . Loans locked before December 11, 2009 under the previous DU Version