FREDDIE TRIPLES QC OF LOANS…HELLO, UNDERWRITER?

IT’S NOT GOING TO GET ANY SMOOTHER TO GET LOANS APPROVED, NOT WITH FREDDIE QCing THE DAYLIGHTS OUT OF ALL LOANS…NO LENDER WILL LEAVE ANY CONDITION OFF THE CONDITIONAL APPROVAL…I AM GETTING CONDITIONS FOR FULL CONDO DOCUMENTATION ON 60% LTV FULL DOC LOANS….NEVER, EVER HAPPENED BEFORE….

(REUTERS)…Freddie Mac, the second- largest provider of funding for U.S. home mortgages, has more than tripled its review of individual loans from pools it buys to improve the quality of its holdings, an executive said on Tuesday.

Lax underwriting standards during the housing boom and resulting delinquencies have prompted Freddie Mac and other big investors to boost their reviews.

 

Freddie Mac (FRE.N: Quote, Profile, Research) has more than tripled its “due diligence” on loans to about half the pools it purchases from lenders from about 15 percent two years ago, Ronald Feigles, a director of conduit risk assessment at Freddie Mac, told Reuters after a panel hosted by the Securities Industry and Financial Markets Association, or SIFMA, in New York.

 

Due diligence firms give opinions on a set of loans taken from pools. They have existed for decades but were less influential during the housing boom when lenders relaxed underwriting standards to raise volume and stay competitive, said Maureen Palmer, a managing director of The Capital Group, a due diligence service in Greensboro, North Carolina.

 

“Our sample sizes have done nothing but grow,” Feigles said on the panel.

 

Freddie Mac also oversees the work of due diligence firms, ratherthan accept information outright, he said.

Fannie Fakes Right….Stands Still……

YOU KNOW, FANNIE AND FREDDIE HAVE RESCINDED THE 5% DECLINING MARKET HIT WHICH OPENS UP 3% DOWN FINANCING…BUT I AM SEEING DO AND DU COMING BACK WITH CAUTION/REFER ON LOANS THAT WERE ACCEPT ONLY DAYS BEFORE….NOW COMES WORD THAT THE MI COMPANIES ARE “NOT TAKING THAT BUS”….MI COMPANIES BALANCE SHEETS ARE IN HORRIBLE CONDITION AND WILL NOW APPROVE “RISKY” HIGH LTV LOANS….FHA WILL BE THE ONLY GAME IN TOWN FOR THE FORSEEABLE FUTURE…..

READ BELOW FROM “THE NATIONS HOUSING” BY KENNETH HARNEY OF THE WASHINGTON POST: 

“Whether that happens anytime soon is far from certain. Almost all private mortgage insurers, which provide loss protection to lenders on loans with low down payments, have adopted highly restrictive policies affecting Zip codes or metropolitan areas they designate as distressed or declining.

MGIC, the largest-volume mortgage insurer, recently expanded its list of distressed markets along with a series of cutbacks on specific types of low-equity loans. As of June 1, MGIC will not insure mortgages on condominium units in Florida. It has also abandoned cash-out refinancings and loans on investment properties.

PMI Group, another major insurer, has banned cash-out refis and investor loans in areas it judges to be distressed. Genworth Financial will not consider applications on second homes anywhere in Florida. AIG United Guaranty no longer will write insurance on condominiums in any of hundreds of Zip codes around the country that are on its declining-markets list.

Asked whether his firm might reevaluate its declining-markets restrictions in light of the abrupt changes at Fannie Mae and Freddie Mac, Terry Souers, a spokesman for Genworth Financial’s mortgage insurance unit, said, “We’re aware of their actions and will take them into consideration to see if additional steps are necessary.”

But Michael J. Zimmerman, senior vice president for investor relations at MGIC, said his company has no immediate plans to abandon declining-market restrictions.

“We’re not contemplating any changes,” he said. MGIC, which reported a $1.4 billion loss for the fourth quarter of 2007 and a $34 million loss for the first quarter of this year, has been hit hard by claims following foreclosures and extended delinquencies in once-booming housing markets.

What’s the trend here? Fannie Mae’s and Freddie Mac’s policy switches should open the door to some additional low-down-payment mortgages — and home sales — in areas once tagged as declining.

But without the participation of private mortgage insurers — who report solely to stock market investors rather than Congress — many borrowers will probably have to turn to the Federal Housing Administration, which accepts 3 percent down and does not have declining-market restrictions.”

Tell me something I don’t know….

ONE MONTH HAS FURTHER HURT THE APPROVAL PROCESS: HIGHER RATES, TIGHTER UNDERWRITING CRITERIA, AND LOWER LTV’S….US BANK WILL ONLY LEND TO 75%….PERIOD….HANG ON, THIS IS GOING TO GET TOUGHER BEFORE IT GETS BETTER..…(Below, from the Christian Science Monitor)

Another reason mortgage rates are rising is because banks don’t want to lend money at the same profit margins as they did during the past few years, when they aggressively made loans for little profit.

“The banks’ perception of risk is changing,” says Alan Rosenbaum, CEO of Guardhill Financial, a mortgage brokerage based in New York. “Some of them don’t want to make loans at all.”

For example, through a mortgage broker such as Mr. Rosenbaum, JP Morgan Chase is offering a jumbo (over $729,000) five-year adjustable-rate mortgage for 8.75 percent. “That is basically them saying, ‘We are not lending,’ ” says Rosenbaum.

Banks have also been tightening their loan criteria. Borrowers today need to have higher credit scores and larger down payments than they did as recently as last year. “All the banks want the best borrowers,” says Bob Moulton, president of the Americana Mortgage Group in Manhasset, N.Y.

“Declining Markets” Policy Repealed?…”Declining DO Findings” Takes Care Of That….

I HAVE A PILE OF DECLINE OR “NEAR DEATH” LOANS ON MY DESK…MY ASSISTANTS DESK, BUT CLOSE ENOUGH….FANNIE MAE DO 7.0 APPROVALS DON’T COUNT FOR MUCH WHEN YOUR FINDINGS ARE DATED 06/08/08 AND THE UNDERWRITER RE-RUNS TODAY, 06/17/08….SEEMS 7.0 IS REPLACING THE “DECLINING MARKETS” POLICY TO LIMIT APPROVALS…A QUICK SEARCH OF GOOGLE FOUND THIS ARTICLE FROM SEATTLEPI.COM:

“…In the final months of 2007, it became clear that home values were falling in many markets across the country. Mortgage giants Fannie Mae and Freddie Mac, which set guidelines for standardized mortgages, announced that they would enforce a “declining markets” policy, which requires higher down payments for loans where house prices are falling.

Borrowers and lenders complained that the policy was scuttling deals. In May, Fannie Mae announced that it would rescind the rule June 1. That happened to be the same date Fannie rolled out the newest version of its loan decision-making software, Desktop Underwriter. It wasn’t a coincidence. A Fannie spokeswoman explained that the company could ditch the declining-market policy because the new loan software “will limit risk layering and assess each loan more precisely.”

And what does that mean? Stephen Swad, Fannie’s chief financial officer, told analysts in May, “We have significantly tightened underwriting and eligibility standards.” In a memo, Fannie told lenders to expect the new software to reduce approval rates….”

I FEEL SO MUCH BETTER…THIS is getting personal now…..75% LTV loan and DO finding don’t work now….NEXT….

It Doesn’t Take A Math Degree…

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