“HVCC” my new best friend and $729,750 is finally here.

I am the first to admit that if I had to make a living as a day trader, I would be bankrupt within a month. I guess my fallback plan of being a mortgage consultant will have to do for now, but it seems as if common sense and fundamental laws are being broken every day. Yesterday was a perfect example. The “Bank Stress Test” results were leaked out to the public and further confirmed what everyone already knew. Citi, Bank of America, and Wells Fargo will all require additional capital to stay in business. So what happened? Citi and BofA stock went up 17%, while Wells Fargo went up about 16%. HUH???

The long awaited temporary $729,750 Jumbo Conforming loan amount program has been rolled out by lending institutions everywhere. There are some minor guideline differences from the permanent $625K limit, but all things considered this is a really good loan program to help stabilize the real estate market. Watch out for subordinate financing (2nd mortgages) on refinance transactions and if your client needs cash out, it’s very limited. Second homes and investment properties have been limited to 65% LTV and credit score requirements are stricter than ever. Like I said, minor differences, but the flip side is that it expands conforming pricing some $100K for the next 7 months. Go out and sell!

Last Friday the “HVCC” (Home Valuation Code of Conduct) was put into action. “No employee, director, officer, or agent of the lender, or any other third party acting as joint venture partner, independent contractor, appraisal management company, or partner on behalf of the lender, shall influence or attempt to influence the development, reporting, result, or review of an appraisal through coercion, extortion, collusion, compensation, instruction, inducement, intimidation, bribery, or in any other manner including but not limited to…” To summarize, lending professionals are no longer allowed to “interfere” with the appraisal process for all Fannie Mae and Freddie Mac mortgage applications, and there now exists a buffer between the appraiser and the loan officer. In my opinion, this latest reform to the lending industry comes way too late and is going to cause more problems than it will solve. Think about this for a moment. Here we are right in the middle of a refinance boom and we are about to start adding applications to the system, further impacting lender turn times, before value for the property has been established. Not exactly the brightest move, but only time will tell how this one plays out.

In other news…

Looks like the FDIC is trying to come up with a politically correct term for “junk loans”. They don’t call bad loans “troubled assets” or “toxic waste” any more, instead, they are moving ahead with their “legacy loan” program. Part of the Financial Stability Plan, the Treasury Department has released the details of its public-private investment plan to remove “legacy loans” from bank balance sheets. It is hoped that $1 trillion can be sold using advantageous financing provided by the FDIC and the Federal Reserve (tax payers), including acquisitions of mortgages and mortgage-backed securities. Sales of “legacy loans” should free up obstacles to lending, while sales of legacy securities will unclog the secondary markets and help bring back jumbo financing.

MGIC (Mortgage Insurance) reported its seventh straight unprofitable quarter, posting a $184.6 million loss. Are you surprised? This loss has widened from the $34.5 million loss they posted in the same quarter a year ago, and makes you wonder just how much longer non FHA mortgage insurance transactions are going to be around for.

If you did not know, realtors now have their own credit union. REALTORS FCU serves the 1.2 million members of the National Association of Realtors (NAR), their families and staff. It will offer residential mortgages, along with lines of credit, consumer loans, and checking and savings accounts. The Web site for the credit union is www.realtorsfcu.org. Do you think mortgage lenders will get their own CU soon? I highly doubt it!