Record setting increase in October existing home sales

The consensus estimate for October existing home sales numbers was + 1.4%. This morning's report indicates an increase of +10.4%. This is great news for our industry.

Mortgage Backed Securities

Last week the Federal Reserve stepped in with more buying of Mortgage Backed Securities (MBS), helping Bond prices recover from news of a weak Treasury Auction. Overall, home loan rates bounced around last week and ended the week very slightly improved.

The Fed's purchase of MBS will end in March 2010.

Homebuyer Tax Credit Passes in a Landslide

On Thursday, Congress authorized the extension of the Homebuyer Tax Credit. The vote was 98 - 2 in the Senate and 412 - 12 in the House. The President's signature is expected within the coming days.

While I had little doubt that Washington would overlook the impact of the tax credit and therefore fail to extend, it must be noted that the overwhelming support in Congress can be directly attributed to the "Invasion of Normandy" style mobilization of the National Association of Realtors and it's members lobbying efforts.

Conventional / FHA / VA Minimum Credit Score moves up to 620 and DTI 45%

Some of you may be surprised by this announcement with regard to the credit score, as it's been the policy for Home Team for quite sometime now. The DTI is a new piece however. I'll explain...

Fannie Mae provides all originators with a software piece called "Desktop Underwriter." You've heard me refer to "DU" as an "AUS" which is another cute acronym representing "Automated Underwriting System." Essentially what DU does is to receive all the details of a loan file from the originators "Loan Origination Software" or "LOS" and test all the information against every written Fannie Mae guideline. Did I mention it does this in seconds?

Although Home Team changed it's policy long before now regarding credit score, that change was based on our agreement with the investors who buy the loans we originate. Effective December 12th 2009, the Fannie Mae AUS known as DU will be updated to version 8.0. Version 8.0 is programmed to find loan files with credit scores below 620 as "ineligible" for delivery to Fannie Mae. This means Fannie Mae will not "buy" or pay any investors to service loans with a score below 620 and therefore no investor will buy such a loan.

DU 8.0 will also find, regardless of credit score, any loan file containing a "DTI" (Debt To Income) ratio greater than 45% ineligible for delivery. DTI is defined as the total of all debts plus the new PITI, divided by the total eligible income. DU will consider "very strong" compensating factors and may allow 50% DTI in such a case.

Analysis, lower DTI ratios are the big deal here. Almost no one is still doing scores under 620 and won’t be after 12/12. However, I have done a significant number of high DTI ratio loans this year with FHA. I've closed 3 loans this month that would not be approved if submitted after 12/12.

If you have buyers that have been pushing for higher home prices, we need to get them on contract and closed before 12/12.

Homebuyer Tax Credit Extension All But A Done Deal - Waiting For Final Vote

The US Senate announced today the terms of the extension of the FTHB Tax credit...only now it's just called the Homebuyer Tax Credit. Details below:

• First-time homebuyers will continue at $8,000 -- same definition as current law.

• Tax credit for “move up” purchasers will be up to $6500. Homeowner must have used previous home as a principal residence for 5 of the 8 previous years.

• Income limits increased and are the same for first-time and “move up” purchasers: $125,000 for single filers/$225,000 for joint filers

• Limitation on eligible home prices has been increased to $800,000

• Time Frame: December 1, 2009 to April 30, 2010 plus 60 day extension if binding contract is in place by April 30, 2010

• Anti-fraud measures have been added

This is great news for our industry going into the holidays and I am glad there will be anti-fraud measures. I will update you when those details are set and available.

Federal Regulators Take Over 7 More Banks - 2009 Total Year To Date 106

Last Friday the US banking system broke a 17 year standing record for number of bank failures in a single year. With the seizure of 3 Florida based banks (Partners Bank, Hillcrest Bank Florida and Flagship National Bank) in Naples and Bradenton Florida and 4 others: American United Bank of Lawrenceville GA., Bank of Elmwood in Racine Wisconsin, Riverview Community Bank in Otsego, Minnesota and First Dupage Bank of Westmont Ill. FDIC estimates 416 currently at risk of failure.

FDIC estimates the cost this year alone of bailing out failed banks tops $25 billion and expects to pay out $100 billion through 2013. FDIC is asking the healthy banks to pay 3 years premiums in advance totaling $45 billion dollars to help ease the strain.

Dont worry too much, FDIC has a blank check at the Treasury up to $500,000,000,000 (there are those pesky zeros again).

Capmark Financial Group (Formerly Known As GMAC Commercial Holdings Corp.) Files For Chapter 11 Bankruptcy Protection

Capmark is (was?) one of the largest equity real estate and mortgage - related investment managers with $3.49 billion in investments under management and has a global commercial mortgage servicing portfolio of more than $288 billion. There's just one little problem...they have $21 billion in debt and only $20 billion in assets.

The plan seems to be that Berkshire Hathaway and/or Leucadia National will but or share in the servicing portfolio. Capmark is heavily in debt to Citibank, Deutsche Bank and Wilmington Trust.

History -

In March 2006 GM divested itself from GMAC Commercial Holdings selling to Goldman Sachs, KKR and Five Mile Capital Partners for 1.5 billion in cash and pay off of all intra-company debt owed GMAC. All in, the deal came to $9 billion. GM retained 21% interest in the new entity, Capmark.

You might remember that in December of '08 the Fed Reserve Board voted 4 to 1 to allow GMAC to transform itself into a bank holding company. In that same month, GMAC drew $5 billion from the TARP. Nice to see that money was put to good use.

ResCap Holding is the parent for GMAC Mortgage, GMAC RFC (Residential Funding Corp), Ally Bank, DiTech.com and Homecomings Financial.