When yesterday’s dust had settled the 10-year note recovered from being worse in price by .625 to close nearly unchanged at a yield of 3.17%, and MBS prices were also about unchanged by the end of the day. MBS selling volumes have picked up somewhat this week. And with some lower delinquency numbers, Jay Brinkmann, MBA’s chief economist noted, “Most of these numbers continue to point to a mortgage market on the mend. Short-term delinquencies remain at pre-recession levels. Loans 90 days or more delinquent have now dropped for five straight quarters and are at their lowest level since the beginning of 2009. Foreclosure starts are at the lowest level since the end of 2008 and had the second largest drop ever. The percentage of loans somewhere in foreclosure is down from last quarter’s record high and also had one of the largest drops we have ever seen, although the reasons for the drop will differ from market to market.” There is no scheduled news for today (or for early next week for that matter), and rates are pointing toward unchanged from Thursday afternoon.

Rob Christman

So why aren’t significant numbers of customers and clients moving on to other banks? For you and me, “switching costs” are a real hassle. Shutting down a bank account, with its credit card or utility bill-paying links, transferring the account, and setting up all the links isn’t anyone’s idea of a good time. The same goes for refinancing – it is often easier for a borrower to do it with the same company that already holds your loan. And no matter how much one gripes about their bank, more often than not a big-name bank’s name is reassuring. Most developed nations have a more concentrated banking system than ours. But too much concentration of the financial industry increases risk, since a handful of dominant players are more likely to make the same kind of mistakes. But unless consumers rise up to move their money to credit unions or smaller banks, the market isn’t going to deal with the problem – and that means Washington might have to.

Rob Chrisman

There will be no civil fraud trial for Angelo Mozilo. On Friday he agreed to settle fraud charges with the U.S. Securities and Exchange Commission by paying a fine of $67.5 million. It is the highest fine ever for an executive of a public company, although critics are quick to point out that in 2007 alone Mozilo took in $121.5 million from exercising Countrywide stock options and was awarded another $22.1 million of compensation.

In an unrelated, but interesting to compare, story, Peter Bakowski (a mortgage banker in Tampa, Florida) was sentenced by a federal judge to more than 15 years in federal prison with a fine of $16.1 million after he pleaded guilty on charges related to a mortgage fraud scheme. “Officials say the Tampa resident was involved in a $20 million mortgage fraud Ponzi-type scheme. More than 30 victims, including investors and institutions, were affected, as were more than 150 properties. Officials say Bakowski sold the same mortgage to multiple people, and then paid returns on the preceding investor’s investments with money from later investors.”

-Rob Chrisman

www.robchrisman.com

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WASHINGTON, Sept 28 (Reuters) – As many as 30 million U.S. homeowners would be able to refinance their mortgage at record low interest rates regardless of their income, credit history or loan-to-value ratio under a plan to be unveiled on Tuesday by a Democratic lawmaker.

The legislation would allow for blanket 30-year, fixed-rate mortgages at the prevailing market rate, now around 4.3 percent, for anyone seeking to refinance a government-backed loan, Representative Dennis Cardoza told Reuters on Tuesday.

The plan would help a wide swath of borrowers and is much more comprehensive than the narrowly targeted efforts President Barack Obama has tried to date.

11:25 28Sep10 RTRS-U.S. HOUSE DEMOCRATIC LAWMAKER SAYS TO INTRODUCE MORTGAGE MODIFICATION EFFORT TODAY FOR FANNIE, FREDDIE, GINNIE MAE, FHA, VA LOANS
11:25 28Sep10 RTRS-REP. CARDOZA SAYS MORTGAGE PLAN WOULD ALLOW HOMEOWNERS TO REFINANCE AT FIXED RATE REGARDLESS OF INCOME, LOAN TO VALUE OR CREDIT HISTORY
11:25 28Sep10 RTRS-US House lawmaker plans blanket mtg modification bill

Before you start celebrating, some background info is needed. 

We heard rumors of a program like all summer. The MBS market reacts negatively each time the plan is mentioned but valuations always ends up shrugging off the news shortly thereafter. Below are a few comments that we’ve published on the topic:

Rapid Refinance Program: Don’t Bet On It:  Morgan Stanley put out a research piece suggesting a “change” to mortgage refinancing requirements: “The Fed and market forces have pushed mortgage rates to historic lows, yet many homeowners are unable to take advantage because they are blocked from refinancing. This problem could be addressed if the Government merely recognized its existing guarantee on the principal value of a large part of the mortgage market – the mortgages that are backed by Fannie, Freddie and Ginnie – and acted to streamline the refi process. There are 37 million mortgages outstanding whose principal value is backed by the Federal government. When these homeowners apply for a refinancing, the application is subject to a standard underwriting process that involves an LTV test (requiring a property appraisal), an analysis of the borrower’s FICO score, and income verification. We estimate a potential average rate reduction of 125 bp on 50% of the outstanding volume of agency-backed mortgages. In the aggregate, the savings amounts to $46 billion per year.”

Credit Suisse retorted, “(A huge refi effort) faces significant logistical challenges and potentially disruptive market impact including the need to call on the Fed’s balance sheet as a nuclear option. A government-induced refinancing wave will come with ample forewarning in the unlikely case it materializes. We note that all government steps so far have provided ample notice – several months. Simply removing loan level pricing adjustments (LLPAs) is not a panacea. There are additional barriers to refinancing by showing significant differences in prepay speeds across different LTV/FICO ranges that are least affected by LLPAs. These barriers include debt-to-income constraints, documentation constraints, cash constraints (inability to pay for refinancing costs), and originator imposed constraints (for example, restrictive underwriting to mitigate put back risk.) The program would have to be structured as a refinancing program rather than a modification program because the former would cost investors and the latter hits the Agencies.”

…

www.mortgagenewsdaily.com
(Reporting by Corbett B. Daly; Editing by Neil Stempleman)

-Rob Chrisman

www.robchrisman.com

-Rob Chrisman

www.robchrisman.com

-Rob Chrisman

www.robchrisman.com

-Rob Chrisman

www.robchrisman.com