Since my company sells mortgage loans to a number of the instutions who recently volunteered for the U.S. Treasury Stress Tests, I have been anxiously awaiting the results. Although I don’t think the stress tests are a perfect way to judge these banks, its good to know how strong a bank is when we go to sell them millions of dollars of closed mortgage loans.
Since we sell mortgage loans to 8 of the banks of the list, the results could have had a signifigant impact on our business. I downloaded the entire 38 page report (which you can see here http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20090507a1.pdf) so I can read the details behind the result.
There are currenly thousands of articles being posted on the web and will be all over newspapers tomorrow. To me, there is no better source than the Stress Test Results released directly from the Fed. You can read through the actual data without any media spin.
The big news is currently swirling about the results below, but I think the detail behind it hold much more important information. Seeing the way the Fed is weighting different kinds of bank assets can give us some insight into where banks will be putting capital in the future. This could have an unintended side effect of pushing banks away from certain types of lending based on the way they play into the stress tests.
| Institution |
Amount Needed |
| American Express |
None Needed |
| Bank Of America |
33.9 Billion |
| BB&T |
None Needed |
| Bank of New York Mellon |
None Needed |
| Capital One Financial Corp |
None Needed |
| CitiGroup |
5.5 Billion |
| Fifth Third |
1.1 Billion |
| GMAC |
11.5 Billion |
| Goldman Sachs Group |
None Needed |
| Chase |
None Needed |
| KeyCorp |
1.8 Billion |
| MetLife Bank |
None Needed |
| Morgan Stanley |
1.8 Billion |
| PNC Financial |
.6 Billion |
| Regions Financial |
2.5 |
| State Street |
None Needed |
| Suntrust |
2.2 Billion |
| U.S. Bank |
None Needed |
| Wells Fargo |
13.7 Billion |
Comments Off
A few weeks after most lender set a minimum credit score of 580 for FHA loans. FNMA announces revisions to its Automated Underwriting System (Desktop Underwriter) that will include a minimum 580 credit score.
Fannie Mae sets the benchmark for all conventional loans. This is going to raise the bar even further for conventional loans, in addition to the 580 minimum credit score there will be an overall tightening of Desktop Underwriter and the loans it approves.
The announcement states: “Introduction of a 580 minimum credit score for loans underwritten through DU (Desktop Underwriter) or manually underwritten”
Additionally:
“Some loan casefiles will receive more conservative recommendations”
“All DU recommendation levels will reflect improved credit quality”
and “Reduced Approval Rates” in general!
These changes go into effect on May 31st. There is a serious tightening in the overall mortgage market and it has bled well beyond “subprime” we are seeing the effects now on ALL CONVENTIONAL loans and FHA loans. It will soon be more difficult to get a mortgage than it has been in the last 20 years.
Further FNMA is increasing the time period after a foreclosure to 5 years. Previously a borrower could get a FNMA loan 4 years after having a foreclosure, after June 1st 2008 it will be 5 years minimum after a foreclosure.
Borrowers with previous mortgage lates are also being effected. FNMA will no longer purchase a loan where a borrower has been 60 days or more late on the mortgage in the last 12 months! This is a big shift – 1 – 60 day late now excludes a borrower from getting a new conventional loan for 12 months, make sure you pay your mortgage!
Comments Off
We ended up last week with mortgage rates moving lower in Friday due to a high number of job losses. As we all know, bad news for the economy is good news for mortgage rates. This is why in many cases when the fed cuts rates mortgage rates actually get worse (the fed cutting rates is good for the economy and hurts long term rates – but that is a whole different article)
The unemployment rate is up, a clear signal that the economy may be in worse shape than many mortgage bond traders had thought. It will be interesting to see what happens on Monday as rates have been extremely turbulent of the last few days.
The drop we saw in rates on Friday is putting us back near historic lows after shooting up sharply just a last week. Each time rates have dropped in this manner over the past few months the drop has only lasted for a few days. We will be watching the market closely for our clients to determine if now may be the right time to lock in their rate.
Comments Off
A new set of Fannie Mae loan level price adjustments have hit the market for Conventional Loans. These move to further punish lower credit scores and greatly increase the cost of accessing equity through a cash out refinance. These adjustments are going to push even more borrowers into FHA as FHA becomes much cheaper than Conventional Loans in many LTV/Credit Score combinations.
(more…)
Comments Off
Some of my readers have asked about my company.
Our name is R P Funding, you can access our HUD Approval here: R P Funding FHA Approval, or website R P Funding
We currently have two offices in Florida, but we are in the process of opening a third and expanding into Mississippi and Georgia. We are a small Direct Endorsement Lender, giving us the power of being a full service lender with the flexibility of a privately owned company.
We are looking for the right managers to fuel our further expansion.
Comments Off
As with everything else in the mortgage business right now, State Surety Bonds are HARDER to get than ever and at the same time the amounts required by the state licensing boards are HIGHER than ever!
(more…)
Comments Off
I HOPE NOT! This statement angers me more than anything else I am hearing in the mortgage industry right now. Even more than FHA not raising the HECM Limits as a part of the Economic Stimulus Package (but that’s another article all together).
(more…)
Comments Off
I just completed the process of obtaining my non-supervised mortgage approval for FHA loans. This approval allows my firm to underwrite, close and service FHA loans. Unfortunately HUD is currently SWAMPED, every lender and their brother wants to be FHA approved. There is this sentiment that FHA is the New Sub-prime, unfortunately if this is true than FHA will fall to the same fate that sub-prime did. I am very passionate about FHA NOT being Sub-prime and what I think is current happening in FHA Lending because of this misconception. If you would like to read my ramblings on FHA Sub-prime be my guest.
(more…)
Comments Off
I am currently in the process of obtaining warehouse lines for my start-up mortgage banking firm. After 10 years in the industry this turned out to be a much more daunting task than I would have imagined.
(more…)
Comments Off
Understanding and Controlling
Comments Off