by Rob Chrisman

Posted

There are certain indisputable truths. For example, to name one, mankind existed, and even managed to thrive, for tens of thousands of years without fabric softener. So why can't the definition of "signing" or a loan "closing" or "funding" or "settlement" be nailed down and instituted the same way everywhere?

A borrower signs the loan docs, the documents are reviewed and the loan funds, it records the next day and then the loan is considered closed, right? "Settlement means the process of executing legally binding documents regarding a lien on property that is subject to a federally related mortgage loan. This process may also be called ''closing'' or ''escrow'' in different jurisdictions."

But HUD may contradict its own law when, in their Consumer Booklet, on page 24, they refer to the disbursement date on line 901 of the HUD-1 as the "Close".  This is contrary to the regulation which is clearly stated, "900 Series, Items Required by Lender to be Paid in Advance...These are charges which the lender requires to be prepaid at settlement..."Line 901 lists the daily interest charges collected for the period between the date of your settlement and the first day of the next month.  This charge is disclosed in Block 10 of your GFE.  In this example, the loan closed on 1/31/10, and the interest on the GFE was calculated with a 1/31/10 closing date so the charges are the same on both.  This amount on Line 901 may differ from the amount on the GFE if the settlement date changes."

And some originators have noticed that investors treat these terms differently, and as a result have had to mirror investors' particular position on what those words mean depending on the investor. Many group closing and signing in the same category and funding in another. Closing may be the day that the docs are dated, funding may be the day that funds are disbursed (or recorded in escrow states), and signing may be the day that the docs are actually signed. The closing or funding date is the date that docs are signed/notarized in an escrow state.  Many lenders still think that the escrow disbursement is the funding date, but this is only used for HUD insuring & warehouse lending purposes (i.e., interest calculations, days on the warehouse line).

On a refinance, "signing" is often the date the borrowers sign the docs of course which may be synonymous with "closing." Some lenders label "the closing" as the event in which the buyer and seller all attend and sign all the necessary documents. East of the Mississippi the money is wired from the lender to the attorney's office to be disbursed at closing assuming that everything is signed  correctly and there are no missing documents. The documents signed by the buyer and seller are faxed to the lender's closing department while everyone is still at the closing and the closing department will authorize the funds to be disbursed: funding the loan. But "funding" for a refinance is the date of the disbursement of funds In New York, for example, on a purchase all three terms become one and the same.

Of course, buyers and sellers can pre-sign the closing docs if they are prepared by the title company in advance. In Illinois this is fairly common, especially for sellers. But if there is a traditional purchase, all parties often sign, close and fund all in the same day at the same time at the title company or attorney's office!  For REO's and short sales this doesn't work, and the seller (or bank) signs wherever they are located and buyer signs at the title company or attorney's office. This can create delays in the funding, which in turn can impact the rate lock period, which now can create the need for a new HUD and TIL due to the APR changes. Some loan agents wind up having to make their borrower sign the same form more than once, which adds to borrower confusion.

In the past agents knew that the loan was sealed up by the time docs went to title because, for the majority of loans, all the prior-to-doc conditions were in and signed off.  In the current environment, however, QC audits, re-underwriting, funding reviews & challenges, etc. have plagued many lenders and investors so often the period between signing, funding, and recording is an anxious time for all parties involved.

"Q: Can a loan originator provide a GFE without a property address?

A: Yes, a loan originator can determine that a property address is not one of the required pieces of information that the loan originator needs in order to issue a GFE. It is important to note that a loan originator must consistently apply its policy on the information it deems necessary to issue a GFE, and the RESPA rule requires a loan originator to issue a GFE whenever it receives information sufficient to complete an application for a GFE." For this, and 62 more pages of "Frequently Asked Questions" about HUD and RESPA and GFE, including things like font size, check out http://www.hud.gov/offices/hsg/ramh/res/resparulefaqs422010.pdf

I am, from time to time, asked to provide production statistics for agents giving presentations, or folks looking to see who the big residential or commercial lenders are. One good sight provided by Cindy with RPM Mortgage is http://mortgagestats.com/

Flagstar, in a sign of the times, has paired up with MI company Genworth to offer a low-down payment mortgage benefit designed to cover a home buyer's mortgage payments if he or she becomes involuntarily unemployed. "Job Loss Protection" covers a borrower's mortgage payment (principal, interest, taxes and insurance) of up to $2,000 a month for up to six months during their benefit period, with a maximum of three monthly payments per job-loss occurrence in the event of involuntary unemployment. The benefits are paid directly to the mortgage company just as if the borrower had made the payment, although the vesting period is 60 days after closing, and payments begin 30 days from the date of involuntary unemployment. Coverage stays in place for up to three years after the loan closes and the mortgage insurance remains in place.

The MBAA continues to churn out reports. The latest shows that in the four years (2005 through 2008) the US population increased by 3.4 million but that the number of households declined by 1.2 million. And if the number of households (demand) goes down, prices must drop to absorb the supply of apartments and single family homes on the market. The trend of individuals joining households that were already formed was expected to continue into 2009, or until the job market stabilizes. (See definition of "boomerang generation".) This recession has also caused a dramatic increase, almost five-fold, in the rates of overcrowding (defined as having more than one person per room in the household), indicating that many families are doubling up in response to the downturn. I asked the five unemployed guys that I share a bedroom with if this was true, and they didn't agree. They only wanted to know why "phonics" is not spelled the way it sounds.  READ THE FULL STORY

I received an email from HUD yesterday letting me know the FHA is ready to start accepting electronic signatures on third party docs. The presser says, "The Federal Housing Administration (FHA) today announced plans to modernize the application process for FHA mortgage insurance, making the process easier for borrowers and faster for lenders. FHA will begin accepting electronic signatures on third party documents originated and signed outside of the lender's control, such as real estate contracts". HERE IS THE MORTGAGEE LETTER


Yesterday's 30-yr bond auction did not go over as well as the 3-year and 10-year note auctions. For those keeping score at home, the $13 billion 30-yr bond was the second "re-opening" of the February 2040 issue, meaning that the bond actually matures in 29 years and 10 months. Given the continued problems in Greece, we were still seeing some flight to quality, at least in the 3- and 10-yr instruments. Recent 30-yr auctions have seen indirect bidding (a rough proxy for foreign interest) fall from over 40% to the mid-20% range, and direct bids increase from less than 10% to the mid-2-% range. Regardless of an above-average auction yesterday, prices still dropped and rates edged higher. With no news today, the 10-yr is sitting at 3.92% and mortgages are maybe a shade worse. READ MORE

Yesterday I was at my local COSTCO buying a large bag of Purina dog chow for my loyal pet, Sweetie the Wonder Dog, and was in the checkout line when woman behind me asked if I had a dog.

What did she think I had, an elephant? So since I'm retired and have little to do, on impulse I told her that no, I didn't have a dog, I was starting the Purina Diet again. I added that I probably  shouldn't, because I ended up in the hospital last time, but that I'd  lost 50 pounds before I awakened in an intensive care ward with tubes coming out of most of my orifices and IVs in both arms.

I told her that it was essentially a perfect diet and that the way that it works is to load your pants pockets with Purina nuggets and simply eat one or two every time you feel hungry. The food is nutritionally complete so it works well and I was going to try it again. (I have to mention here that practically everyone in line was now enthralled with my story.)

Horrified, she asked if I ended up in intensive care because the dog food poisoned me.

I told her no, I stepped off a curb to sniff an Irish Setter's rump and a car hit us both.

Costco won't let me shop there anymore.

by Patrick McGee on

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After two pretty light days that have caused markets to tumble, Wednesday offers a busy schedule with a mix of fresh data and government policy. The S&P 500, which fell 1.3% yesterday ? its biggest slide in a month ? is looking moderately positive this morning along with the Dow and Nasdaq, but that could change quickly if the Trade Balance at 8:30 comes in worse than anticipated.

Once that report comes out, markets will be looking to the FOMC meeting in the afternoon, which comes out just after the Treasury’s Budget Statement for July.

The FOMC will almost certainly maintain short-term interest rates in the zero to 0.25% range, but markets are looking for comments on its exit strategy from its massive involvement, including whether the central bank plans to extend its plans to purchases government debt.

“Unlike the Bank of England, the Fed isn’t likely to expand its bond purchase program, of which it has completed about one-half,” said analysts from BMO Capital Markets in a morning note. “Of interest is whether it actually declares that it will allow the Treasury purchase program to expire as scheduled in September, or whether it delays that decision until the September 22-23 policy meeting.”

8:30 ? The US Trade Balance shrunk to $26.0 billion in May, a level not seen in nearly ten years, but in June a surge in oil prices is expected to cause the value of imports to expand in June, causing the deficit to widen. The consensus is -$28.5 billion. With petroleum excluded, however, underlying trend should be more encouraging, as a weaker greenback should help boost exports and hurt imports.

“As both domestic and global demand remain weak due to the ongoing recession, both imports and exports are forecasted to drop further in June,” predict the economics team at BBVA. “The decline in imports, however, is expected to be slower than that of exports because the 17.7% jump in oil prices in June could help to offset the downward pressures from demand. As a result, the trade deficit could expand after contracting in May.”

1:00 ? The Treasury Department will auction $23 billion 10 yr Treasury notes. This auction has potential to influence mortgage rates

2:00 ? Hopefully markets don’t give much attention to Treasury’s Budget Statement, as it’s hard to be encouraged knowing that from October to June, the government created a fiscal debt of $1.1 trillion. Bloomberg News notes that over the past ten years the July deficit has averaged $31.7 billion, while the average for the past five years has been $49.2 billion. What’s in store for 2009? Analysts expect July’s deficit to be $190 billion. To some extent, this is old news, but reminders don’t exactly cause rallies.

2:15 ? Federal Reserve chairman Ben Bernanke, who prizes transparency, was clear in his bi-annual testimony last month that the central bank would continue to hold interest rates “exceptionally low…for an extended period.”

So analysts have low expectations for the announcement from the FOMC Meeting. The short term interest rate for lending to banks should remain between zero and 0.25%. Attention will instead shift to Fed commentary on the economic outlook, as well as new remarks on the impending exit strategy. 

Analysts at IHS Global Insight said the central bank’s exit strategy is already in motion, but an unwinding in the balance sheet won’t be seen just yet. “Although the Fed's programs to purchase treasury bonds and mortgage debt are not expected to be changed, the Fed's total balance sheet is expected to continue to shrink on net over the next several months,” they said.