USDA Update

The

USDA funding extension was passed in the appropriations supplemental bill earlier this week and is expected to go to the President for signature this week.

The bill permits USDA to charge 3.5% premium and .5 annual fee, however, USDA has indicated they will not implement an annual fee at this time.

While the President has not signed the bill yet, it is a virtual certainty that he will. In the meantime, Chase is purchasing USDA loans utilizing conditional commitments. Attached below is the most recent announcement from Chase with more information.

SWBC will begin allowing USDA loans to close effective Monday, August 2, 2010. The first payment dates for these loans must be no sooner than October 1, 2010.

Mortgage Rates: Are We Witnessing a Loan Pricing War?

Call me crazy but I think we've been witnessing a lender price war in the primary mortgage market.

Yesterday we talked about lenders "buying the market". (HERE is an explanation of "buying the market"). I originally described this behavior as "mixed", some lenders were better while others were worse, but then I looked back at my rate tracking spreadsheet and noticed a rotating pattern of aggressive pricing strategies. Of the majors, Wells and GMAC were buying the market last month, Chase and Bank of America had their moment in the sun, and right now I believe Citi might be trying to buy the market.

It's almost like they've been taking turns....

It makes sense though. Certain lenders have significantly longer loan processing turn times than others, some lenders are priced super aggressive while others seem content to linger toward the high side of the recent rates range. And yesterday we noticed mortgage loan pricing was insulated/less sensitive to the movements of MBS prices in the secondary market. The same thing happened today! MBS prices rallied and most lenders didn't reprice for the better, only a handful did. (Leaves room for improvement in the AM if related markets cooperate)

This means the "best executed" lock/float strategies have been a factor of identifying what lender is "buying the market" at the time of application or upon receipt of useful appraisal, as opposed to pacing the ups and downs of MBS prices and related markets. In general, direct lenders and mortgage brokers are nimble enough to access a wide range of investors at the same time. (Defend yourselves Retail!)

This might be over-analyzing the primary mortgage market for consumers, but I've been publishing screenshots of my rate tracking spreadsheet over on MBS Commentary. I think they might be better used on this channel.

What you see below is a day over day comparison of two separate mortgage rate metrics. For now I want to focus solely on the "Pricing Δ" column. This data shows the day over day change in the price mortgage investors are willing to pay to purchase your loan from a lender. Each note rate has a price. The pricing below assumes the borrower's rate quote is locked in for 30 days.

A RED number means they investor is willing to pay less for your loan. A BLACK number means investors are willing to pay more for your loan. These day over day price changes correspond to the discount points a consumer is charged. When pricing declines, lenders increase consumer borrowing costs. When pricing rallies, lenders reduce consumer borrowing costs (they're usually slower to give than to take though).

You'll notice that lenders reduced loan pricing today. Don't worry, 4.375% on a conventional 30 year fixed loan is still attainable, it's just going to cost you about 0.25% to 0.35% (of your loan amount) more (in discount points). The higher up your note rate is, the less sensitive your borrowing costs are to these day over day changes.

Although consumer borrowing costs (closing costs) might've moved marginally higher over the past week, lifetime low rates are still available.

The best advice I can offer consumers is: Make sure you ask your loan originator as many questions as it takes for you to totally understand the terms of your loan and rate lock. If your lender informs you that your rate will be higher because your credit score is below 720, ask why. Don't be shy to request a breakeven timeline on the discount and origination points you're being charged. Make sure you're not missing out on a cheap permanent buydown (ask your lender!).

And if you do lock your loan, don't abandon your loan officer if another lender comes along and offers to cut your application fees in half. I'm not saying you shouldn't shop your mortgage rate, just make sure you give first dibs to the originator whose been working hard for you. (They have to work hard in this environment)

by Adam Quinones at Mortgage Rate Watch

Can Mortgage Rates Go Any Lower?

Well, here we are on "hump day" and mortgage rates are still detached from the price fluctuations of the secondary mortgage market. Instead, the ups and downs of consumer borrowing costs continue to be driven primarily by the capacity constraints of major lenders, the market makers for mortgage rates.

One misconception is record low mortgage rates have drawn out a hoard of "fence sitting" borrowers who are bustling with excitement to refinance. Yes, media coverage of record low mortgage rates has attracted attention from some homeowners, but the crowds just don't compare to the mini-frenzy we witnessed in early 2009. This tells us the capacity constraints of major lenders are not totally due to an increase in loan applications.

With the larger lenders allocating newly hired labor to loan modification & loss mitigation departments, lending operations staff have been left to "fend for themselves". Support staff are expected to be multi-tasking, multi-talented, highly productive members of the team. Mistakes can be costly and often times even "kill" a deal. Anxiety is high. Stressing the situation further are recently implemented "quality control" standards. These risk management practices slow the origination process because they mandate an acute attention to detail. Plain and Simple: all i's must be dotted and all t's must be crossed. The entire origination process has slowed down a step or two. Consumers, this is why your loan officer may have recommended a 45 day lock period, they have learned to expect the unexpected.

I've been thinking a lot lately about the question: Can Mortgage Rates Go Any Lower???

I've approached the question from several angles. The "double-dip" great recession option is still on the table. That means we can't rule out the idea that benchmark Treasury yields might return to record lows and take mortgage rates along for the ride. That theory doesn't hold much water in my opinion though, this is largely due to technical considerations surrounding the securitization of mortgages. But there's a wild card we haven't talked about in while: If the economy does "double-dip", the Federal Reserve has made it clear they will "act accordingly" to prevent the spread of contagion. With the Fed essentially out of conventional policy bullets, the door is open for more quantitative easing, aka more MBS purchases.

If that scenario played out, the "best execution" 30 year fixed mortgage rate could move as low as 3.875%. The one hang up I have with this outlook is the fact that we already experienced an environment like this and mortgage rates failed to move lower than current levels. Remember last year when the Fed was buying MBS and benchmark Treasury yields were at record lows?

One reason why this time might be different: The competitive lending environment. A loan pricing war amongst the major lenders...

Let's say mortgage rates don't decline further and refinance demand eventually exhausts itself. If this were to happen and purchase activity didn't pick up enough to offset the production slowdown, lenders would be looking for ways to stimulate activity and the Fed would be looking for ways to redistribute wealth around the economy. A new wave of refinances would occur if mortgage rates fell to 4.00%. Two birds, one stone?

This seems like a logical option, unfortunately there is a major mismatch between the credit/collateral demanded by lenders and the credit/collateral supplied by borrowers. So unless we find a way to reduce the risks of origination, many borrowers will remain locked out of the refinance market, even if rates fall to 4.00%.

With that in mind, we have to start thinking about the idea of another attempt at HARP & DU REFI PLUS. Perhaps we might see the Fed launch some variation of a privately-funded, streamline refinance program that includes a de minimis government guarantee on the loan paper? Either way the government will still be involved in some capacity. One of the biggest reason mortgage rates have been so resilient lately is their implicit/explicit government guarantee. Mortgage-backed securities have benefited from their own "flight to safety", especially from overseas investors.

That's where we go full circle on my "rates going lower" theory. I suppose the first step of this scenario coming true is the "double-dip". Some folks say the deflationary spiral has already taken hold, others say we're dealing with a crisis of confidence and the underlying economy is actually building momentum. Working in the housing market I am exposed to excess amounts of negativity, but I also see evidence of a bottom. Either way, I know the Federal Reserve is standing "at the ready" if conditions take a turn for the worse.

The best 30 year fixed mortgage rates remain in the 4.375% to 4.625% range. The "best execution" rate for a well-qualified borrower is still 4.50%, for both conventional and FHA/VA. No borrower should be quoted a rate over 5.25%

by Adam Quinones at Mortgage Rate Watch

Geithner: U.S. Should Retain a Mortgage Backstop

Treasury Secretary Timothy Geithner said Sunday the government should retain "some type" of federal guarantee to ensure that Americans can easily finance home loans, in what could be the latest salvo between the Obama administration and Republicans over the future role of the public sector in the housing market.

The statement cuts to the heart of one of the most vexing policy questions in Washington: what to do with the costly government-run mortgage giants Fannie Mae and Freddie Mac.

Both companies were taken over by the U.S. in 2008 as they teetered towards collapse. So far, the Treasury has injected $145 billion in taxpayer aid to keep them afloat and that figure could climb in the coming months.

Republicans have said the firms and their distortive role in the housing market need to be addressed immediately. They say that their quasi-government nature allowed them to grow so large they helped fuel the financial crisis.

The Obama administration has said the firms should not return to their original state. But they haven't gone as far as some Republicans that have hinted at abolishing the functions the companies performed, such as offering mortgage guarantees.

Mr. Geithner promised the administration would "bring fundamental change" and said it wouldn't "preserve Fannie and Freddie in anything like their current form" during a Sunday appearance on NBC's "Meet the Press."

But, he added, "there's going to be a good case for taking a look at preserving or putting in place a carefully designed guarantee so, again, homeowners have the ability to borrow to finance a home even in a very difficult recession."

The stance illustrates the challenges facing lawmakers as they seek to remake the companies, which own or guarantee more than half of the nation's $10.2 trillion in mortgages.

For decades, a fuzzy, "implied" guarantee allowed the companies to borrow cheaply because investors assumed—correctly, it turned out—that the government would bail the firms out if they ever floundered. The arrangement allowed Washington to hide the expense of the generous subsidies that lowered borrowing costs for homeowners by making the 30-year fixed-rate mortgage widely available.

The administration has promised to sketch out more details by early next year. Last week, a 90-day public comment period established by the Treasury closed after drawing scores of responses from an array of market participants.

By NICK TIMIRAOS and DAMIAN PALETTA

Buyback Risk Locks Some Borrowers Out of Refi Market; Jawboning on Fannie and Freddie; Anecdotes from the Trenches;

One patient came in and said, "Doctor, I have a serious memory problem." The doctor asked, "When did it start?" The man replied, "When did what start?"

That line is short and to the point. Generally speaking, markets like news when it is short and to the point - borrowers are different than traders, who are different than investors, who are different than analysts, who are different than economists. So when the Fed Chairman uses the double adjective "unusually uncertain" to describe the economic outlook, one's opinion, and how one reacts to that quote from last week's testimony, will be different. There is no question that rates are great, and much better than many had forecast for this time of year. But if the Federal Reserve doesn't know what the US economy is going to do in the near (or far) future, what are small business owners, builders, etc., supposed to do?

One important factor which is influencing mortgage rates is that FNMA/FHLMC debt is attractive at present and is finding many buyers. This debt has higher yields than Treasuries and is de-facto backed by the Treasury department. With mortgages there will always be questions on duration mismatch and early pay-offs, but if both Freddie & Fannie pools and Treasury debt are guaranteed by the US government, why not obtain the higher yielding paper? On average the mortgages which comprise the debt are of substantially higher quality than those of, say, 2-7 years ago. These are fully documented, low debt ratio, high credit score, true A-paper loans. For the most part, we are past the worst in terms of real estate value erosion so there will be fewer "walk-aways" by folks who owe more than the property is worth. READ MORE ABOUT HIGH DEMAND FOR AGENCY MBS: http://www.mortgagenewsdaily.com/mortgage_rates/blog/164288.aspx and HOW IT HAS AFFECTED MORTGAGE RATES: http://www.mortgagenewsdaily.com/consumer_rates/164487.aspx

Not only are rates helping originators, but mortgage banker profit margins are currently very high. When rates dropped in April, instead of following the MBS prices tick-for-tick, many firms built in higher spreads both to build up their reserves and to limit volumes (have to watch that overhead!). All of this is easier to do now than in the past, given the lower competition. And as I have mentioned in the past, would you rather do 1 loan and earn a 2 point profit or 2 loans and earn a 1 point profit? Doing more loans for less margin, other things being equal, strains a firm's capital, warehouse lines, operations staff, exposure to buybacks, etc.

Although no move is expected until 2011, a story in the Wall Street Journal (http://online.wsj.com/ar)on Freddie's and Fannie's future stated that Treasury Secretary Geithner said the government should retain "some type" of federal guarantee to ensure that Americans can easily finance home loans.

Fannie and Freddie were taken over by the government in 2008, turning their implied government guarantee into an explicit guarantee and receiving almost $150 billion in aid. On "Meet the Press", Mr. Geithner promised the administration would "bring fundamental change" and said it wouldn't "preserve Fannie and Freddie in anything like their current form" but that "there's going to be a good case for taking a look at preserving or putting in place a carefully designed guarantee so, again, homeowners have the ability to borrow to finance a home even in a very difficult recession." Since F&F own or guarantee more than half of the nation's $10.2 trillion in mortgages it is not a "slam dunk" issue, and the Treasury received many responses during the 90 day public comment period (which ended last week).

An editorial was quick to point out that, in a twist of fate showing where things stand, Freddie and Fannie have become more central than ever to our mortgage business. The two companies have been nationalized. They underwrite the vast majority of all new home loans, and they own or guarantee about half of all the mortgages outstanding. Per the WSJ editorial, "There's simply no room in this story for two giant government-sponsored enterprises that distorted the housing and credit markets, took advantage of implicit government guarantees to operate at leverage ratios that would have made Lehman Brothers executives blush, and finally, and predictably, collapsed under the weight of that leverage and their bad bets on the housing market."

READ MORE ABOUT REFORMING THE HOUSING FINANCE SYSTEM: http://online.wsj.com/article/SB10001424052748703995104575389621503405044.html?mod=WSJ_topics_obama

There has been some press lately about a "national mortgage" since the government seems to be gathering things under their umbrella. A Barclays analyst wrote..

"A national 4% mortgage rate to all borrowers makes no sense at this stage. This strategy would require the government to subsidize this program and increase their already enormous balance sheet. What is far more likely is GSEs indemnifying the originators from early pay default risk for their existing g-fee loans. For each loan that gets put back to the originator, they lose 50 cents on a dollar. We believe this a large reason why originators have been focused on refinancing the most pristine borrowers (High FICO, Low LTV, and low DTI). In addition, anecdotally it appears that borrowers with very high DTI can't even get a mortgage. Bottom line, there is no reason why the GSEs can't provide amnesty for existing borrowers and at the same time insulate the originator from early default put back option. If the liability to the originator is removed, there is no reason why they can't refinance the $1.8 trillion of '04-'08 mortgages."

That being said, at this point many of these borrowers either no longer qualify under current guidelines, or their properties are underwater. Barclays estimates that even with rates in the mid-4% range (250 basis points below their mortgage rate) only 1 out of 10 borrowers in the 06/07 6.5s can refinance over the next year. "Absent of a policy change, this number is not going to change considerably even if mortgage rates continue to grind lower. Clearly these borrowers have combination of high LTV, high to infinite DTI , low FICO and low documentation.(higher LLPAs)

Why can't the government implement a strategy that all existing borrowers who have been current on their mortgages for the past 2-3 years be exempt of these requirement subject to ~ 50 bp higher g-fee? By waiving the LTV/DTI/FICO/Doc requirements in lieu of 2-3 years of being current on their payments, as a means to a streamline refinance program, the government will increase the agencies g-fees, lower the borrower's monthly payments, and provide incentive for remaining homeowners to stay current on their mortgage so that they can take advantage of a streamline refinance program in the future.

Comments from the originator trenches....

A processor wrote to me and said, "Scientists believe that to make a pound of honey, it takes 50,000 miles of bee flight. Now it seems that it takes that many steps in doing a mortgage, with the difference being that bees have had millions of years to adapt."

A loan officer wrote and said, "New legislation created to control compensation during the 'Golden Years' when the markets were not normal are forcing originators out of the business since the 'Golden Years' no longer exist. Current markets are still not normal and could be called the 'Suffering Years' as the business cycle continues to struggle to return to normal.Originators, real estate agents, appraisers, title attorneys, etc., have always had to endure good and bad business cycles, but the government adding all these 'fixes' for a market that no longer exists to one of the worst markets ever makes getting through it even more difficult while it reduces competition and increases costs to the consumer. Who wants a minimum wage employee to help you with the biggest purchase of your life?"

One loan agent said, "Underwriters have come up with some of the most insane conditions I've ever seen. Some are so ridiculous all you can do is laugh. I recently had a 58-yr old borrower, with credit scores above 800, who was purchasing a second home. The LTV was roughly 60% and the DTI ratio was 30%. The borrower, through our underwriter, was asked by a major lender to provide a letter of explanation of why he had 8 mortgages in his life time. And he provided it."
An error was made yesterday in the description of Freddie Mac's HARP product. It is not true that only the current servicer can originate a Freddie Mac HARP ("Relief Refinance Mortgages"). Any Freddie Mac Seller can originate and deliver Relief Refinance Mortgages to Freddie using "Open Access". Some investors, such as Wells Fargo, have overlays which restrict this product, whereas others such as Flagstar, Fifth Third, etc offer the "Open Access" programs where they will take any lenders' Freddie Mac deals. HERE:http://www.freddiemac.com/sell/factsheets/relief_refi_open_access.html is the official guidance from Freddie.

Some originators moved into offering mortgage relief services. Most are honest business people, but woe to those who aren't - and unfortunately these are the ones that garner the most publicity. Federal regulators (the FTC) have banned eight individuals and companies from selling mortgage-relief services, settling charges that they used false advertising to deceive homeowners facing foreclosure by paying $29 million in fees that they collected from clients. Some of the companies used names that deceived borrowers into believing the firms were participating in the Obama administration's $75 billion mortgage modification effort, known as "Making Home Affordable." Steven Oscherowitz (Federal Loan Modification Law Center), Loss Mitigation Services Inc., Direct Lender, Dean Shafer, Marion Anthony "Tony" Perry, Bernadette Perry, Salvatore and Nicholas Puglia (Hope Now Modifications and Hope Now Financial Services Corp.) were all either banned from the industry and/or required to pay large penalties.

Monday, once again, due to supply and demand issues, mortgage prices did well relative to Treasury prices. (Things started off quietly, but then traders reported that an "Asian buyer" of size emerged helping prices, and the $1.8 billion in origination sales were easily absorbed.) Even with the yield on the 10-yr Treasury moving above 3%, mortgage prices actually closed the day better by .125. A big surprise came from the report showing that U.S. single family home sales surged (up over 23%) in June coming off a record-low in May. At this sales pace, inventory is at 42 year low. The percentage increase last month was the largest since May 1980, and it partially unwound May's 37% drop. The median sale price for a new home fell 1.4 percent last month to $213,400, and over the last year prices are roughly unchanged. The New Home Sales number pushed rates higher. As mentioned, Monday the 10-yr closed at about 3%, with 30-yr mortgage prices better by about .125. Roughly $1.8 billion was sold, and, as usual, mostly 4 & 4.5% securities. Even though 3.5% securities are trading, and priced just below par, the liquidity is just not there yet for much hedging volume to show up.

A census worker was making his rounds in the hills of Arkansas when he knocked on a cabin door to collect some data.

A lady answered and after his introduction he asked, "How many people live at this residence?"

The lady answered, "Eight".

The census worker then asked the lady if she could give him some more details.

The lady responded "Well there is me, my husband and our six kids. We have two eight year old boys, two six year old girls, and two four year old boys."

The amazed census worker said, "Wow, you got twins each time!"

The lady responded, "Oh no honey, there was hundreds of times we got nothin' at all"

by Rob Chrisman

Housing Finance Reform Now in Focus for Obama Administration

Much to the surprise of many pundits, the recently signed Financial Reform Bill did not outline guidelines for regulators to begin crafting the future of Fannie Mae, Freddie Mac, and Ginnie Mae. Although this was viewed as an oversight by most, it was the right move because it will allow our political and financial leadership to focus on FIXING THE BROKEN HOUSING FINANCE SYSTEM

In April, Treasury outlined their "Housing Finance Reform" objectives. The administration's proposals will be designed to achieve four objectives.

• Mortgage credit should be available and distributed on an efficient basis to a wide range of borrowers.
• A well-functioning housing market should provide affordable housing options, both ownership and rental, for low and moderate-income households.
• Consumers should have access to mortgage products that are easily understood.
• The system should distribute the credit and interest rate risk in an efficient and transparent manner that minimizes risk to the broader economic system an does not generate excess volatility or instability.

At the same time, the Obama Administration released questions for public comment on the future of the housing finance system, (http://www.mortgagenewsdaily.com/04142010_obama_asks_industry_for_input.asp) including Fannie Mae and Freddie Mac, and the overall role of the federal government in housing policy.

1. How should federal housing finance objectives be prioritized in the context of the broader objectives of housing policy?
2. What role should the federal government play in supporting a stable, well-functioning housing finance system and what risks, if any, should the federal government bear in meeting its housing finance objectives?
3. Should the government approach differ across different segments of the market, and if so, how?
4. How should the current organization of the housing finance system be improved?
5. How should the housing finance system support sound market practices?
6. What is the best way for the housing finance system to help ensure consumers are protected from unfair, abusive or deceptive practices?
7. Do housing finance systems in other countries offer insights that can help inform US reform choices?

This was just posted on the White House blog:

http://www.whitehouse.gov/blog/2010/07/27/moving-forward-housing-finance-reform

Moving Forward on Housing Finance Reform
by Jeffrey A. Goldstein, Under Secretary for Domestic Finance at the U.S. Treasury Department

The housing industry is of vital importance to our country's future. It is a key sector of our economy, supporting millions of jobs in construction, manufacturing, real estate, finance, and other industries. Moreover, for many Americans, their home is their largest financial investment.

That is why the Obama Administration is strongly committed to responsibly reforming our nation's broken system of housing finance, including Fannie Mae and Freddie Mac. And that is why it is so important that we get the reforms right.

Work on this issue is well under way, as the Obama Administration continues to develop a comprehensive reform proposal for delivery to Congress by January 2011. Earlier this year, Secretaries Geithner and Donovan testified before Congress, outlining the principles that will guide the Administration's housing finance reform efforts. In April, the Treasury Department and the Department of Housing and Urban Development issued related questions for public comment, which have received over 300 responses from a broad cross-section of stakeholders. To read the responses, go HERE: http://www.regulations.gov/search/Regs/home.html#docketDetail?R=TREAS-DO-2010-0001 and HERE: http://www.regulations.gov/search/Regs/home.html#docketDetail?R=HUD-2010-0029

That commitment to public engagement will continue. Today, the Administration is announcing that it will hold on August 17 a Conference on the Future of Housing Finance at the U.S. Treasury Department in Washington, D.C. This event will bring together leading academic experts, consumer and community organizations, industry groups, market participants, and other stakeholders for an open discussion about housing finance reform.

As we continue moving forward, it is critical to maintain an open, productive public dialogue about how best to address a housing finance system that everyone – across both sides of the aisle – agrees is in clear need of reform. To help inform this debate, it is useful to offer some context about the Administration's efforts to date in this area and the current state of our nation's housing finance system.

Stabilizing the Housing Market

In September 2008, the Bush Administration put Fannie Mae and Freddie Mac into conservatorship and began injecting taxpayer funds into those firms in order to keep them afloat. When President Obama took office in January 2009, he inherited not only this conservatorship arrangement, but also a mortgage market and economy in free-fall.

From the beginning, the Obama Administration has made clear that the current structure of the government's role in the housing finance market is unsustainable and unacceptable. Fundamental reform was clearly needed. But abrupt change or an uncertain reform process in the midst of the financial crisis could have destabilized an already fragile housing industry and made it even more difficult for Americans to buy a home or refinance a mortgage. Continuing to provide financial support to Fannie Mae and Freddie Mac was the right decision then for the mortgage market and for our economic recovery – and it has played a critical role in stabilizing the housing industry during a period of crisis. Even today, private capital has not yet fully returned to this market. Fannie Mae, Freddie Mac, and other government entities guarantee more than 90 percent of newly originated mortgages. They are practically the only game in town.

Fannie and Freddie under Conservatorship

During their two years in conservatorship, Fannie Mae and Freddie Mac have been tightly supervised and regulated. Fannie and Freddie have made significant progress in improving the credit quality of their new obligations. Since 2008, FICO scores and loan-to-value ratios – both of which are key measures of how likely a borrower is to default – are meaningfully better on new mortgages. Fannie and Freddie have also increased their guarantee fees and risk-adjusted their pricing.

The losses that the federal government has had to backstop are virtually all attributable to bad loans that Fannie and Freddie took on between 2005 and 2007 – during the height of the housing bubble. Unfortunately, we still need to manage the continuing consequences of those poor credit choices.

Of course, none of these facts eliminate the need to take a hard and comprehensive look at long-term solutions for our nation's system of housing finance. But they do offer important context about the numbers behind the headlines on Fannie Mae and Freddie Mac.

Responsible Reform

The size, importance, and complexity of the housing finance market all compel us to craft its reform with great care:

• The U.S. mortgage market is the second largest securities market in the world, after U.S. Treasuries.
• Fannie Mae and Freddie Mac currently guarantee more than $5 trillion in mortgages and hold a total of $1.6 trillion in agency loans and other securities in their portfolios.
• Fannie Mae and Freddie Mac are only one part of a broader housing finance system that includes the Federal Housing Administration, Ginnie Mae, the FHLBanks, other government programs, and a significant private sector role in originating, funding, and servicing mortgage loans.
• For decades, Fannie Mae and Freddie Mac privatized their profits while ultimately putting taxpayers at risk for losses. This type of "heads private shareholders win, tails taxpayers lose" system of misaligned incentives makes no sense for the nation.

Housing finance reform needs to address these and other complex issues responsibly. That is why the Obama Administration is committed to an open and inclusive public dialogue about the future of U.S. housing finance. Given the importance of this task, we want to hear the best ideas from all sides of the debate. Working together with our colleagues in Congress, we believe that this is the right path forward to achieve responsible reform.

------------------------------------------------------------------------

Plain and Simple: the Administration is making it known that it's time to focus on fixing housing. I don't read their announcement as anything more than an FYI though. More "wait and see"...

In the meantime, we have discussed Housing Finance Reform in detail. Below is some background content for your educational enjoyment....

We must focus on three R's: Reform, Reorganize, and Reassure. READ MORE: http://www.mortgagenewsdaily.com/channels/voiceofhousing/135724.aspx

1. Reform: requires that action be taken to reform FHA and Ginnie Mae. (FULL STORY)
   
2. Reorganize: there is an important role for the GSEs in the US housing finance industry of the future - just not in their current form. Fannie Mae and Freddie Mac and merge them into a single organization that combines the best of each organization.
3. Reassure: the community of investors world-wide that the US housing finance industry has been reset on a solid foundation. This is accomplished only when all three legs of the stool are rebuilt and reset - because only then will the requisite level of investor confidence - and in turn private capital - return to the industry as a replacement for the trillions of dollars that are today coming from the US Treasury.

One of Washington’s most respected voices in housing policy says that the Congress should focus its reform on several things, including continued liquidity and stability for long-term, fixed-rate, sustainable mortgages and affordable rental homes. Here are five questions that must be answered about the reformed housing finance system. READ MORE: http://www.mortgagenewsdaily.com/channels/voiceofhousing/148518.aspx

1. Will it support the availability of long-term, fixed rate mortgages for consumers?
2. Will it offer access to capital by as wide a variety of institutions as possible, from small community banks and credit unions to large money center institutions?
3. Will it foster and spread innovation in mortgage products to insure that helpful and sound new products can be made available widely in the marketplace?
4. Will it fulfill a significant duty to serve under-served populations and communities?
5. Will it provide financing both for affordable single family homeownership and rental housing?

GSEs Able to Bypass Bureaucracy on Road to Resolution: While lawmakers will no doubt be able to legislate away some of the risk of the same crisis happening again in the future, we need to be prepared to deal with the next one when it does come. The intervention and ongoing recovery of the GSEs over the past year and a half may have taught us something. Maybe it’s the fact that a quasi-governmental organization is far less encumbered and therefore more effective, even in conservatorship, at crisis management and resolution than a federal agency? Fact is, Fannie Mae and Freddie Mac are not subject to and hamstrung by Federal Acquisition Regulations (FAR) and federal appropriations and budgeting.Ambiguous and urgent problems don’t wait for federal procurement practices that could take many months to approve a required service provider. READ MORE: http://www.mortgagenewsdaily.com/channels/voiceofhousing/148518.aspx

Housing’s image certainly is as battered as it’s ever been. Responsibility for this last recession is rightfully borne by a mortgage market on steroids that was too often lacking in common sense. Thankfully most of us have done our penance and confessed our sins over the past two years. It’s time to begin having the pride and courage to begin again reminding others of the fundamental value of housing to the economy and the democracy.

by Adam Quinones

Flood Insurance, Tax Deadline and USDA Update

Finally, we can resume closing loans with flood insurance!

It is indeed retroactive to June 1.

Tax deadline has been extended to September 30th and USDA unfortunately has not been.

The Congress has passed the following:
· Tax credit processing extension
The Congress has passed H.R. 5623, the Homebuyer Assistance and Improvement Act, which extends the tax credit closing deadline until September 30th. There will also be no gap between June 30th and the date the President signs the bill into law. The extension only applies to transactions in which the purchase contract was signed by April 30th.
· Flood insurance extension
The Senate has passed H.R. 5569 which extends the National Flood Insurance Program until September 30, 2010. The bill is retroactive from June 1, 2010 to the date the President also signs this bill.

USDA

There is still no decision on the USDA extension. Since the Senate adjoined until July 12th, the House must decide whether to accept the supplemental appropriations bill passed by the Senate or it will be necessary to delay final action on the USDA extension until after the July 4th recess.