Countrywide

Countrywide cut several of their products last month but surprised some when they went for an 11.5 billion-dollar credit line to help bail them out of their financial troubles.  They plan to scale back on Jumbo loan originations and tighten up on LTV and credit requirements.  This should increase the number of loans that are saleable to Fannie and Freddie; however, Countrywide was infused with hope as Bank of America bought a portion of the company, giving it and the industry some much needed help.  Following the trend of safer products, Countrywide will soon offer Freddie Mac's Home Possible program.

Indymac Bank

Indymac responded in much the same way as Countrywide, making stricter LTV requirements for Conforming Alt-A and Jumbo loans.  Non-conforming Alt-A programs were discontinued entirely - effective August 23rd.  They also eliminated their 40 due in 30 programs, NonPrime programs, Option ARMs and their Ultra Jumbo products.  Indymac adjusted documentation and credit requirements for other risky loans.  2-year prepayment penalties are no longer allowed; however, 1 and 3-year prepayment penalty options are still available, subject to state restrictions.  Prepayment penalties are completely prohibited, as of August 17^th, for fixed rate loans under the Alt-A Conforming First Mortgages Program.  Indymac's My Community Mortgage and Fannie Flex 97 and 100 are currently popular options.

GMAC

GMAC decided to eliminate a number of their Jumbo products completely.  Programs include Jumbo 1- month, 6-month and 1-year, including interest-only options (program codes - 919, 922, B18-B19, Q54-Q57 and P63-P66.)  Since a lot of their product line lies in the ALT-A realm look for them to continue adjusting in the future.

Flagstar

Flagstar suspended their builder/spec product, bridge loan, 2nd Mortgages, HELOCS and Advantage Line of Credit and Advantage PITI Abatement programs.  Flagstar also made significant adjustments to some of their riskier loans.  Instead of eliminating them all together, they modified the programs and re-introduced them in new forms.  Their new Jumbo Fixed and ARM products allow for both full and stated income with loan amounts up to 2 million and credit scores down to 680, in addition to LTV's up to 95%.  They also re-made their option arm to follow a 5/1 LIBOR with the potential for negative amortization.  This not only allows for SIVA, but also goes up to 95% and down to a 620 credit score.  These moves almost seem to contradict current market trends; and, shows that Flagstar may be trying to pick up business where others have dropped out due to risk.  Following trends though, Flagstar introduced their Freddie Mac Home Possible product with options including 100, 80-20, Alt 97, along with a 5/1 and 7/1 CMT ARM.

AmTrust

AmTrust announced pricing riskier loans much higher in order to deter originators from selling types of loans that may be difficult to re-sell.  Other investors have done this as well.  In effect they are dropping these products; however, instead of making them completely unavailable, all of the pricing for these particular products became offsheet, dropping some lender's rate sheets down to 1 page.  This saves work in purging product lines completely and allows for the appropriate response to market trends.

To comply with the predatory lending provisions of Colorado HB 132, SB 85, SB 203, & SB 216, AmTrust Mortgage has limited the type of low documentation programs for loans on properties located in the State of Colorado on or after August 1st, 2007.

BB&T

BB&T increased the minimum credit score on certain Alt-A features, reduced the maximum LTV/CLTV on Alt-A features and eliminated their PiggyBack Second Mortgage products.  BB&T also released their annual updates to their ARM Disclosures.  They are being revised and will be released soon by the MBS forms department.

CitiMortgage

Following another market trend, CitiMortgage will not purchase loans exhibiting maximum financing in markets experiencing declining values.  The maximum LTV/CLTV/HCLTV permitted for those products must be reduced by 5%.  Their declining market list is posted on their web site and will be updated periodically as market conditions change.  The Prime Second Lien Fixed Rate Interest Only (FRIOL) loan products were discontinued effective August 20th.  CitiMortgage also recently discontinued their Expanded Product line including 40/30 Balloon, 2/28 and 3/27 LIBOR ARMs (including interest-only options), along with their 2/38 and 3/37 ARM Balloons.

The Federal Reserve Is Prepared to Act

Last week at the annual central bank meeting in Jackson Hole, Wyoming, the Federal Reserve Chairman Ben Bernanke said the Federal Reserve is ready to act if the credit woes hit the economy.  This is good news for investors who have been hopeful that the Federal Reserve will cut the federal funds rate. 

Bernanke reasserted that it is not the Federal Reserve's responsibility to bail out lenders and investors who made risky financial decisions. Even though Bernanke feels the lenders and investors should be held accountable for their financial decisions, he said the central bank would respond if the mortgage market's instability begins to substantially affect the overall U.S. economy.

Lawmakers React to the Mortgage Crisis in Washington

As Congress gets ready to reconvene, Washington insiders are predicting many proposed changes to the mortgage industry.  The biggest change will likely come from The House Financial Services Committee.  Chairman Barney Frank, D-Mass, is expected to propose an anti-predatory lending bill, which will federally regulate mortgage brokers.  The bill will likely make mortgage-backed securities investors partly liable for problem loans, too. 

Senator Charles Schumer, D-NY, also stated his intention to address the mortgage crisis.  Schumer wants to allocate one hundred million dollar in an appropriations bill for housing counseling.  He believes this counseling will prevent people from entering into mortgages they cannot afford.

Finally President Bush is waiting to sign into law the FHA Modernization bill.  This new FHA bill is designed to lower down payments, provide more pricing flexibility and allow FHA to insure larger loans.

Pennsylvania Note Changes Announced

Pennsylvania recently announced new requirements for all notes and security instruments.  These new requirements were laid out in Pennsylvania Senate Bill 860.  This bill amends the PA Plain Language Consumer Act of 1993.  The most notable amendment to the bill requires that contracts under seal include the following language:  "This is a contract under seal and may be enforced under 42 PA C.S. Section 5529(b)."  Fannie Mae and Freddie Mac have authorized changes to their documents, which are now available on their web sites.  The ProClose® Compliance Department is creating these forms to be available in September.

Nevada Addresses Mortgage Foreclosure Crisis

Nevada recently passed new legislation to address the state's growing foreclosure problem.  Assemblyman Marcus Conklin, D-Las Vegas, was the primary sponsor for Nevada Assembly Bill 440, which is designed to help buyers get additional credit counseling prior to borrowing.  The bill also applies new rules for lenders who do not follow standard loan procedures.  This bill is particularly important in Nevada because it was ranked as the top state in foreclosures for the past year.  Legislators hope this bill will help curtail the high number of foreclosures in their state.  The ProClose® Compliance Department has reviewed the legislation and is making the necessary changes to our documents.

Why is my Florida MI surcharge not calculating properly?

Answer:

Surcharge percentage must be entered as a decimal in the MI section of the Loan Program tab. For example:  a surcharge of 1% should be entered as .01 in the surcharge field.