So, what are the ramifications over the next year?
Lord love you, Elvis, this just got published this morning.
I'm going to have to go look at cash-out characteristics in recent jumbo pools to get a better sense of how many additional loans this will pick up.
It looks to me like Freddie wants to play with the Big Loans. The price suggests Fannie will get the no-cash-outs. Of course Freddie will get all the cash-outs. With the requirement to pool separately, Freddie might end up being the only reasonable execution for anyone who does even one cash-out in a whole pool, unless someone wants to go the cash window (cash loan sales instead of pools in the guarantor programs) with the Freddie-only stuff.
We're looking at the NACA program and a very others to see how rates compare across the spectrum for o/o loans on tradional conforming caps. NACA is backed by Citi and BoA so this is bound to get interesting.
Thanks, Tanta. Not looking for all the answers, just some possible play-outs. Still haven't wrapped my arms around how this will impact housing and the economy, so any projections are appreciated.
I assume that once the Debtstar is complete, the mortgage industry in Amerika will be fully socialized. At that point, they'll make sure "housing only goes up!" and all losses are passed on to the taxpayers. Wonderful!
The question is not quite what is allowed in isolation; the question would be what is allowed in combination. Stated income is now possible on (formerly) jumbo; that alone has potentially huge ramifications. The question I have is if stated incomes have different CLTV requirements, and if the cash-outs can be combined with stated-income.
Could this indicate that Fannie is in a worse fiscal position than Freddie? Or that Fannie is just more realistic about its fiscal position than Freddie?
The question I have is if stated incomes have different CLTV requirements, and if the cash-outs can be combined with stated-income.
First, all loans have to meet the published guidelines. Loan Prospector won't waive those. I see nothing that excludes cash-outs from potentially getting the "Accept Plus" response from LP.
It is possible that LP will only come up with the "Accept Plus" documentation at an LTV/CTLV that is signficantly lower than the maximum. You can't really say, because it's an AUS: it looks at the total file, and if it likes what it sees enough, it may (but does not have to) allow this "Accept Plus" documentation. So it all comes down to loan-level facts.
That is different from the way most non-GSE jumbo lenders approach things. They may allow stated income as "borrower directed," meaning the borrower can just ask for and get a stated income loan (if he meets the requirements for a stated income program). The Freddie program is a "lender-directed" deal, meaning that all loan data is submitted to LP, and it decides how much income documentation is required.
The problem with a debt-based monetary system such as ours, which is what the Federal Reserve Notes are, is that the instant such a system goes into operation, more money is owed to the issuing bank than is actually in existence. New money must be brought into the system from outside to keep such a system going.
But once you lose that revenue stream from manufacturing, and you start having a trade imbalance that takes money out of the system (currently a billion and a half every day), the debt starts piling up. And all the heads of state and heads of corporations can do is try to shuffle that debt around, to conceal it, or to stick someone else with it, usually the ordinary working people IE: The Tax payer. This is why even as 1 out of every 5 households falls behind on their mortgage payments, the government won't cut taxes. Their goal is to shift their debt onto you (along with being able to pay for $4000 an hour call girls).
The problem we all face is that money has ceased to be a medium of exchange and has become a product all by itself. We see debt packaged and sold like a product, passed back and forth, and what everyone seems to have forgotten is that without real jobs making real products that can sell in the real world, the money needed to ultimately pay off all our debt just simply is not there any more.
We do not have a liquidity crisis. We have a solvency crisis. Our political and corporate leadership turned their noses up at the very manufacturing that made our nation prosper. They sent it to other countries so they wouldn't have to look at it. And in the process, they pulled out the very foundation of what makes an economy operate....Looks a lot like a Fascist Blueprint to me.
"p.s. what is up with people asking for hat tips?"
we shouldn't complain, i had posted the steve waldman data and some analysis in the comment section of krugman's blog long before he posted it, but that was sent down the NYTimes memory hole. that's the MSM for ya, soon to be phased out.
personally, i LOVE cr's and tanta's blog, the quality and good work that is done here all these years and am loathe to post elsewhere. except occasionally on Dr. Setsers blog and a few other spots.
Could this indicate that Fannie is in a worse fiscal position than Freddie? Or that Fannie is just more realistic about its fiscal position than Freddie?
p.s. what is up with people asking for hat tips?
Bacon dreamz is just teasing me. He isn't really so psychically fragile that he must solicit hat tips. That's today's story and I'm sticking to it.
This is amusing to the extent that Fannie has historically been the looser of the two, whenever they differed on anything. I'm not sure it's a direct issue of "fiscal position."
Do notice the pricing differentials. Freddie is making some hefty pricing adjustments for these differences. And part of it could be an "advertising" issue. It wouldn't necessarily hurt Freddie to say it'll take "Accept Plus" on these things if they go into LP and reprogram it to be much stricter about Accept Plus.
Fannie did say that they were not taking loans through DU at the moment. I interpreted that to mean that they will do so before year-end, but they want to do some tinkering with DU first.
What would really help is a then vs. now matrix of lending guidelines. The ultimate question is what is the impact on RE valuations? As lending standards tighten, more and more potential buyers are priced out for a given piece of real estate.
Another question is what is the impact on MEW?
In absence of analysis, comparative commentary is appreciated. I still don't understand how these lenders are managing to loan money at 90+% CLTV. Many estimates call for price depreciation in excess of 10%. I don't get it.
If I'm not mistaken DU (Fannie) has always been tougher than LP (Freddie) on cashouts. If I remember correctly a DU approval needed higher reserves and was less sensitive to LTV than LP on cashouts.
Allen, could be that under the old presumed habits of buyers, someone with a fico of 720 didn't walk away if the house dropped slightly below loan value. we will see if that holds true.
It's a business/client relationship. The GSEs do compete in a sense. For instance, Wells had a C30 express product (Conf 30yr) that was sold to Freddie that was very similiar to the Fast and Easy 30yr that Countrywide sold to Fannie. One was approved via LP (Freddie's AUS) and the other was through DU (Fannie's AUS).
Hi,
It's very, very difficult to get an "Accept Plus" approval on a cashout loan in Freddie's Loan Prospector. Not sure it even exists, unless possibly LTV is well below 50%.
Thanks, Tanta. I have a question, though: where does the FHA come into all this? It seems to me that their standards are way looser than Fannie's or Freedie's. And now they can guarantee jumbos as well. Why should I go to Fannie for an 80% LTV jumbo when I could get a 97% jumbo guaranteed by FHA? FHA could potentially take over the entire market, as they seem to be able to offer both low rates and loose underwriting. Is there something I'm missing here? There must be, I hope.
Rob Dawg writes:
There's an UrberRant™ on "LFKAJ potential volume" real soon now.
I would guess you type around 100 words per minute. Multiply that x 3 hours or so...
Yearning to Learn | 03.12.08 - 1:15 pm | #
I, too, have noticed a correlation between the time Tanta is absent from the comments and the length of her posts (with adjustments for the number and complexity of course.) And if they're long enough, you can take a guess what author's she's been reading.
i think you guys are getting your hopes up. that's a serious amount of data she's going to have to re-wade through now. i suspect Freddie just ruined Tanta's weekend.
I agree, bacon. A couple of things pop into mind - Adverse Selection which could skew Freddie's numbers down the road or Fee Income. Nothing like doing what no one else will do to guarantee lots of new fee dollars.
Margins on selling conforming loans to Fannie & Freddie just got smaller. On top of the doubling of guarantee fees (for now), the GSEs are forcing many customers to the cash window only, not allowing them to swap mortgages for mortgage passthrough securities. This counterparty credit precaution is going to put those sellers at a disadvantage to swap-enabled originators.
Given how many complex decisions are required for the LFKAJ requirements, I'm not at all surprised Fannie and Freddie didn't come up with the same lists.
Freddie is being consistent: they expect a further 10% drop in house prices and want at least 10% down. By their models, these guidelines won't stick them with piles of underwater mortgages.
RacerX writes:
If I'm not mistaken DU (Fannie) has always been tougher than LP (Freddie) on cashouts. If I remember correctly a DU approval needed higher reserves and was less sensitive to LTV than LP on cashouts.
Sorry, RacerX, but you're wrong. I can give you scads of examples where the cash-out refi, with all parameters equal presented to LP returned a Caution/Eligible, and DU returned an Approve/Eligible. DU is definitely the looser of the two AUS engines.
As as someone observed earlier, it is IMPOSSIBLE to ever get an Accept Plus from LP on a cash-out refi. Or at least, I've never seen one, despite a low LTV.
I was hoping someone with more knowledge than me would answer Daniels question about FHA now doing jumbos and why someone wouldn't just go to them with a 97% LTV loan versus 80% or 90% with Fannie/Freddie.
I am wondering the same thing and am hope there are some additional hurdles before you can get a jumbo via FHA with 3% down.
underwriter53, I've got to admit it's been awhile, but I'm almost certain we had more than one DU refer on a cashout turned around by running them through LP. The difference was in DUs reserve requirements.
I was hoping someone with more knowledge than me would answer Daniels question about FHA now doing jumbos and why someone wouldn't just go to them with a 97% LTV loan versus 80% or 90% with Fannie/Freddie.
You have to pay mortgage insurance for FHA and the interest rates tend to be a little higher. If you can afford the down payment you will pay less per month and overall.
Allen, could be that under the old presumed habits of buyers, someone with a fico of 720 didn't walk away if the house dropped slightly below loan value. we will see if that holds true. emphaiss added
IMHO that won't be a problem. The problems are:
1. Borrowers who owe MASSIVELY (say a year of income)more than the house is worth. There is a big difference between being 20k underwater and 100k underwater. I'm not sure what the "crush depth," is for the average FB, but I'd bet that there IS one.
2. The widespread nature of this RE bust. We've certainly had serious regional declines before but pooling managed to greatly decrease the risks. This time, declines are widespread enough that pooling will not save us.
So, what are the ramifications over the next year?
Yessss...your transformation to the darkside is almost complete.
6 months ago:
GSE Countrywide
|----X-----------|
reality
today:
GSE Countrywide
|-----------X-----|
reality
1 year from now:
GSE = Countrywide
Ok, so my illustration didn't quite come out as I planned.
No matter.
The Debt Star is nearly complete.
So, what are the ramifications over the next year?
Lord love you, Elvis, this just got published this morning.
I'm going to have to go look at cash-out characteristics in recent jumbo pools to get a better sense of how many additional loans this will pick up.
It looks to me like Freddie wants to play with the Big Loans. The price suggests Fannie will get the no-cash-outs. Of course Freddie will get all the cash-outs. With the requirement to pool separately, Freddie might end up being the only reasonable execution for anyone who does even one cash-out in a whole pool, unless someone wants to go the cash window (cash loan sales instead of pools in the guarantor programs) with the Freddie-only stuff.
Jeeze, I don't miss having to do that stuff.
Interesting.
We're looking at the NACA program and a very others to see how rates compare across the spectrum for o/o loans on tradional conforming caps. NACA is backed by Citi and BoA so this is bound to get interesting.
Thanks, Tanta. Not looking for all the answers, just some possible play-outs. Still haven't wrapped my arms around how this will impact housing and the economy, so any projections are appreciated.
oh someone downstairs totally linked to this. ahem.
oh someone downstairs totally linked to this. ahem.
Yeah, well, someone else was busy writing this post at the time someone linked.
For ONCE I was ahead of you. By a couple of minutes. Give me my moment in the sun.
Tanta..use Sun screen we need you!
I assume that once the Debtstar is complete, the mortgage industry in Amerika will be fully socialized. At that point, they'll make sure "housing only goes up!" and all losses are passed on to the taxpayers. Wonderful!
For ONCE I was ahead of you. By a couple of minutes. Give me my moment in the sun.
sigh. fine, you can have the front page glory. i'm going to have another bloody mary.
The question is not quite what is allowed in isolation; the question would be what is allowed in combination. Stated income is now possible on (formerly) jumbo; that alone has potentially huge ramifications. The question I have is if stated incomes have different CLTV requirements, and if the cash-outs can be combined with stated-income.
I'm going to have to go look at cash-out characteristics in recent jumbo pools to get a better sense of how many additional loans this will pick up.
that's what you get for promising us estimates. sucker.
Could this indicate that Fannie is in a worse fiscal position than Freddie? Or that Fannie is just more realistic about its fiscal position than Freddie?
p.s. what is up with people asking for hat tips?
The question I have is if stated incomes have different CLTV requirements, and if the cash-outs can be combined with stated-income.
First, all loans have to meet the published guidelines. Loan Prospector won't waive those. I see nothing that excludes cash-outs from potentially getting the "Accept Plus" response from LP.
It is possible that LP will only come up with the "Accept Plus" documentation at an LTV/CTLV that is signficantly lower than the maximum. You can't really say, because it's an AUS: it looks at the total file, and if it likes what it sees enough, it may (but does not have to) allow this "Accept Plus" documentation. So it all comes down to loan-level facts.
That is different from the way most non-GSE jumbo lenders approach things. They may allow stated income as "borrower directed," meaning the borrower can just ask for and get a stated income loan (if he meets the requirements for a stated income program). The Freddie program is a "lender-directed" deal, meaning that all loan data is submitted to LP, and it decides how much income documentation is required.
The problem with a debt-based monetary system such as ours, which is what the Federal Reserve Notes are, is that the instant such a system goes into operation, more money is owed to the issuing bank than is actually in existence. New money must be brought into the system from outside to keep such a system going.
But once you lose that revenue stream from manufacturing, and you start having a trade imbalance that takes money out of the system (currently a billion and a half every day), the debt starts piling up. And all the heads of state and heads of corporations can do is try to shuffle that debt around, to conceal it, or to stick someone else with it, usually the ordinary working people IE: The Tax payer. This is why even as 1 out of every 5 households falls behind on their mortgage payments, the government won't cut taxes. Their goal is to shift their debt onto you (along with being able to pay for $4000 an hour call girls).
The problem we all face is that money has ceased to be a medium of exchange and has become a product all by itself. We see debt packaged and sold like a product, passed back and forth, and what everyone seems to have forgotten is that without real jobs making real products that can sell in the real world, the money needed to ultimately pay off all our debt just simply is not there any more.
We do not have a liquidity crisis. We have a solvency crisis. Our political and corporate leadership turned their noses up at the very manufacturing that made our nation prosper. They sent it to other countries so they wouldn't have to look at it. And in the process, they pulled out the very foundation of what makes an economy operate....Looks a lot like a Fascist Blueprint to me.
"p.s. what is up with people asking for hat tips?"
we shouldn't complain, i had posted the steve waldman data and some analysis in the comment section of krugman's blog long before he posted it, but that was sent down the NYTimes memory hole. that's the MSM for ya, soon to be phased out.
personally, i LOVE cr's and tanta's blog, the quality and good work that is done here all these years and am loathe to post elsewhere. except occasionally on Dr. Setsers blog and a few other spots.
Could this indicate that Fannie is in a worse fiscal position than Freddie? Or that Fannie is just more realistic about its fiscal position than Freddie?
p.s. what is up with people asking for hat tips?
Bacon dreamz is just teasing me. He isn't really so psychically fragile that he must solicit hat tips. That's today's story and I'm sticking to it.
This is amusing to the extent that Fannie has historically been the looser of the two, whenever they differed on anything. I'm not sure it's a direct issue of "fiscal position."
Do notice the pricing differentials. Freddie is making some hefty pricing adjustments for these differences. And part of it could be an "advertising" issue. It wouldn't necessarily hurt Freddie to say it'll take "Accept Plus" on these things if they go into LP and reprogram it to be much stricter about Accept Plus.
Fannie did say that they were not taking loans through DU at the moment. I interpreted that to mean that they will do so before year-end, but they want to do some tinkering with DU first.
Countrywide is primarily Fannie and Wells is a primarily Freddie lender.
That's today's story and I'm sticking to it.
yeah, that's true. teasing Tater is my favorite hobby in the whole wide world.
It appears to me that since the announcement the GSE's raised the conforming limit, all mortgage rates have gone to hell in a hand basket.
ARMs are in the mid 6's....when a month and a half ago they were at 5%.
Could this be because RMBS investors see more risk? Or is the market just coming completely unhinged?
What would really help is a then vs. now matrix of lending guidelines. The ultimate question is what is the impact on RE valuations? As lending standards tighten, more and more potential buyers are priced out for a given piece of real estate.
Another question is what is the impact on MEW?
In absence of analysis, comparative commentary is appreciated. I still don't understand how these lenders are managing to loan money at 90+% CLTV. Many estimates call for price depreciation in excess of 10%. I don't get it.
RacerX - what are the factors that make that so (wells primarily freddies/cfc fannie)? Is is the nature of the borrower or is it relationship driven?
If I'm not mistaken DU (Fannie) has always been tougher than LP (Freddie) on cashouts. If I remember correctly a DU approval needed higher reserves and was less sensitive to LTV than LP on cashouts.
Allen, could be that under the old presumed habits of buyers, someone with a fico of 720 didn't walk away if the house dropped slightly below loan value. we will see if that holds true.
thanks
yeah, that's true. teasing Tater is my favorite hobby in the whole wide world.
bacon dreamz | 03.12.08 - 12:51 pm | #
Some times I worry about you,...
Lord love you, Elvis, this just got published this morning.
That is NO excuse.
You are Tanta-on-High, most exulted to the Uber-nerds.
You've had hours to post on this.
I would guess you type around 100 words per minute. Multiply that x 3 hours or so...
you should have had a 18,000 word post detailing this deal by now!!!!
you should have had a 18,000 word post detailing this deal by now!!!!
Do I sense a revolt?
Are you revolting?
There's an UrberRant™ on "LFKAJ potential volume" real soon now. I can tell because my refresh finger is itchy.
It just looks to me that these new terms just don't seem materially better than many of the Jumbos of recent vintage.
RacerX - what are the factors that make that so
It's a business/client relationship. The GSEs do compete in a sense. For instance, Wells had a C30 express product (Conf 30yr) that was sold to Freddie that was very similiar to the Fast and Easy 30yr that Countrywide sold to Fannie. One was approved via LP (Freddie's AUS) and the other was through DU (Fannie's AUS).
Countrywide has it's own propietary AUS (Clues/Clout). It's not the same as DU but the majority of conforming loans are sold to Fannie
Hi,
It's very, very difficult to get an "Accept Plus" approval on a cashout loan in Freddie's Loan Prospector. Not sure it even exists, unless possibly LTV is well below 50%.
Anyone have a link to track MBS live (and free)?
Thanks,
MB
Yeaning...
18K words...dont encouraqge her ;)~
I think it is ironic that on this great blog, freddie states house prices may have fallen a third...
then come out with their looser guidelines..
admitting their willingness to assume higher conforming limits on houses they believe still have two -thirds of the way to drop...
INCONCEIVABLE
Do I sense a revolt?
Are you revolting?
Some might call me "revolting" but I'm definitely not revolting against an 18,000 word post!
I am, as it is oft said, an uber-nerd. I've never met a verbose soliliquay I didn't like!
66.(6) year loan coming to a theatre near you. God bless the GSEs!
Thanks, Tanta. I have a question, though: where does the FHA come into all this? It seems to me that their standards are way looser than Fannie's or Freedie's. And now they can guarantee jumbos as well. Why should I go to Fannie for an 80% LTV jumbo when I could get a 97% jumbo guaranteed by FHA? FHA could potentially take over the entire market, as they seem to be able to offer both low rates and loose underwriting. Is there something I'm missing here? There must be, I hope.
Rob Dawg writes:
There's an UrberRant™ on "LFKAJ potential volume" real soon now.
I would guess you type around 100 words per minute. Multiply that x 3 hours or so...
Yearning to Learn | 03.12.08 - 1:15 pm | #
I, too, have noticed a correlation between the time Tanta is absent from the comments and the length of her posts (with adjustments for the number and complexity of course.) And if they're long enough, you can take a guess what author's she's been reading.
The suspense is killing me,.....
author's=authors
Been typing too damn many plural acronyms.
So, what are the ramifications over the next year?
Lord love you, Elvis, this just got published this morning.
What? Tanta not omnipotent? Next you will assert you cannot turn lead into gold with a wave of your magic wand...
sigh
i think you guys are getting your hopes up. that's a serious amount of data she's going to have to re-wade through now. i suspect Freddie just ruined Tanta's weekend.
I agree, bacon. A couple of things pop into mind - Adverse Selection which could skew Freddie's numbers down the road or Fee Income. Nothing like doing what no one else will do to guarantee lots of new fee dollars.
Margins on selling conforming loans to Fannie & Freddie just got smaller. On top of the doubling of guarantee fees (for now), the GSEs are forcing many customers to the cash window only, not allowing them to swap mortgages for mortgage passthrough securities. This counterparty credit precaution is going to put those sellers at a disadvantage to swap-enabled originators.
Given how many complex decisions are required for the LFKAJ requirements, I'm not at all surprised Fannie and Freddie didn't come up with the same lists.
Freddie is being consistent: they expect a further 10% drop in house prices and want at least 10% down. By their models, these guidelines won't stick them with piles of underwater mortgages.
RacerX writes:
If I'm not mistaken DU (Fannie) has always been tougher than LP (Freddie) on cashouts. If I remember correctly a DU approval needed higher reserves and was less sensitive to LTV than LP on cashouts.
Sorry, RacerX, but you're wrong. I can give you scads of examples where the cash-out refi, with all parameters equal presented to LP returned a Caution/Eligible, and DU returned an Approve/Eligible. DU is definitely the looser of the two AUS engines.
As as someone observed earlier, it is IMPOSSIBLE to ever get an Accept Plus from LP on a cash-out refi. Or at least, I've never seen one, despite a low LTV.
I was hoping someone with more knowledge than me would answer Daniels question about FHA now doing jumbos and why someone wouldn't just go to them with a 97% LTV loan versus 80% or 90% with Fannie/Freddie.
I am wondering the same thing and am hope there are some additional hurdles before you can get a jumbo via FHA with 3% down.
Thanks in advance.
underwriter53, I've got to admit it's been awhile, but I'm almost certain we had more than one DU refer on a cashout turned around by running them through LP. The difference was in DUs reserve requirements.
I was hoping someone with more knowledge than me would answer Daniels question about FHA now doing jumbos and why someone wouldn't just go to them with a 97% LTV loan versus 80% or 90% with Fannie/Freddie.
You have to pay mortgage insurance for FHA and the interest rates tend to be a little higher. If you can afford the down payment you will pay less per month and overall.
Allen, could be that under the old presumed habits of buyers, someone with a fico of 720 didn't walk away if the house dropped slightly below loan value. we will see if that holds true. emphaiss added
IMHO that won't be a problem. The problems are:
1. Borrowers who owe MASSIVELY (say a year of income)more than the house is worth. There is a big difference between being 20k underwater and 100k underwater. I'm not sure what the "crush depth," is for the average FB, but I'd bet that there IS one.
2. The widespread nature of this RE bust. We've certainly had serious regional declines before but pooling managed to greatly decrease the risks. This time, declines are widespread enough that pooling will not save us.