Here is an email I just received from my Wall Street buddy Rob:
All I ask is for a chance to prove that money can’t make me happy. Want some good news? Go to the gas station: oil is back down to $70/barrel. On to mortgages:
Countrywide said that “disruptions in credit and secondary mortgage markets pose a risk to the company and could hurt its financial condition in the short-term”. CW made the disclosure in a filing with the Securities and Exchange Commission, supplementing other “risk factors” the company had outlined in its annual report. Payments were at least 30 days late on about 20% of “nonprime” mortgages serviced by Countrywide as of June 30, up from 14% a year earlier. For all loans, delinquencies were 5%, up from 3.9%.
WAMU’s wholesale channel is either formally or informally classifying smaller originators as “priority” or “non-priority” accounts. There are obvious differences in service levels, depending on where you fit in.
WAMU warehouse is implementing changes as to the types of loans and the warehouse advance amount for warehousing. The maximum non-conforming market value that WAMU will accept is 97 for non-conforming and non-government loans! All non-conforming loans must have a specific takeout commitment for each loan. WAMU will no longer warehouse the following types of non-conforming mortgages: second lien mortgages, non-owner occupied mortgages, NINA/NINR, SISA’s, mortgages with CLTVs greater than 90%, or mortgages with FICO scores less than 660.
The Bank of Walnut Creek ceased taking applications and funding loans.
According to the National Mortgage News, Investment banker Nomura Securities has closed its nonconforming mortgage conduit and laid off staff in its fixed-income research department.
Nat City is making the changes to the Non-Conforming price adjustments: FICO’s less than 660 now have a 5 point hit, FICO’s 660–679 are a 1 point hit, etc., and the following non-conforming products will be discontinued: “Follow the Findings”, 40 year terms, and 40 due in 30’s. Lock extensions under these products will not be permitted.
Anworth Mortgage Asset Corp. announced that its Belvedere subsidiary was in default on two of its repo lines and had unpaid margin calls on others, and analysts assume that the company will lose 100% of this amount.
NovaStar Financial posted a net loss of $52.9 million, compared with a profit of $34.7 million a year earlier. Loan volume fell 73% to $773.7 million, and the real estate investment trust said it is having more difficulty selling loans it makes.
CitiMortgage improved prices from 50-100 basis points on the non-agency Alt-A, ARM, and Jumbo fixed.
Bank of America announced that they were limiting the maximum LTV/CLTV for all Cash-Out Refinance and all Non-Owner Occupied (Investor) transactions is limited to 70% on SIVA, SISA, Stated Income Combo Home Equity Loan Program, NINA, and their “No Ratio loan” programs. In addition, all new registrations and locks for LTV/CLTV greater than 70% for Investment Property and Cash Out Refinances on these programs have been suspended.
Deutsche Bank/CLG announced that MortgageIT is closings its correspondent division and moving that function to wholesale.
Remember Wednesday when stocks rallied, credit tightened, and mortgage prices worsened? That flipped yesterday as issues in Europe and the US prompted liquidity injections from the ECB and the Fed: stocks crumbled and the front end of the treasury market (impacting ARM rates) shot up. 30-yr A-paper product was better by about .125, but no one likes uncertainty, and every investor is now questioning the backing of any investment they make, whether it is commercial paper, money market funds, stocks, etc., so, they will lean toward the “No credit-risk” paper, like US Treasuries, FNMA, FHLMC, GNMA’s, etc.
According to Merrill Lynch, traders are speculating that the Federal Reserve will cut interest rates at an emergency meeting as soon as next week. Investors see the chances of a quarter-point reduction in the Fed’s key rate on any day from Aug. 16 at higher than 50%, and the market appears to be pricing in a substantial risk that the Fed will be forced to do an emergency inter-meeting cut in August,’ according to ML.