Thursday, May 29, 2008


Variety of items tonight.

Sunday is the official switch to new underwriting guidelines for Fannie Mae. Their Desktop Underwriter (DU) 7.0 that all the brokers use is starting to see a bit of daylight by the early adopters. It will be interesting to see the affect this will have on the market. Fannie has said they will drop the declining market policy. But the mortgage insurers are not following suit so it makes it a moot point. Most everything else seems to a tightening, less risk layering allowed, higher credit scores required and increased fees at all but the highest levels.

Here is a taste of the complaining that will probably heard on the broker boards the next few weeks:

Why not just make it even HARDER! Just cut everything to 80 LTV 700 SCORE FULL DOC and be DONE WITH IT! All the nipping and tucking is getting on my nerves.

If this is going to have a positive or negative affect on the market it probably won't be seen in the numbers until July (reported in August).

Potentially good website to keep an eye on, Confessions of a Subprime Underwriter. A good post tonight regarding how bad appraisals were towards the end of the boom:

As for the appraisal itself the comparable sales which are the ‘meat’ of the report upon which value is justified, could be up to 12 months old as of the appraisal date. So our 6 month old appraisal could have comparable sales up to 12 months old, giving us a grand total of 18 month old comparable sales, and up to 24 months old for new construction.
So here is the lender in March 2006 for example, giving a borrower with a 580 credit score a loan for 100% of the value of his home (no down payment, and often 6% concession from the seller to pay closing costs), on an adjustable rate loan, up to 50% of his gross income in debt, on a home value that is less certain than the weather in Cleveland tomorrow.

Another note, If you're bored and want to see how a bill that would have required lenders in California to ensure a borrower is able to pay any non-fully amortizing mortgage turn into a toothless, worthless piece of legislation, have a gander at AB1830 and it's amendments. If you want to skip to the stuff that is worth anything just read the stuff that is crossed out.

And finally the Quote of the Day goes to BlackRock money manager Peter Fisher care of the WSJ:

"Lenders need someone to prevent them from competing their way to the bottom,"

Apparently someone forgot to tell Greenspan.

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