Phil Grossfield's Blog

A LITTLE EXTRA…

Monthly Archives: December 2012

Operations; Forgiven Debt; Cookies Everywhere

cookiesMy Schedule…and A Little Extra:   The difficult thing about working out during the holidays is having a variety and abundance of cookies and cake and other sweet lovelies everywhere…EVERYWHERE!  Yesterday I worked out but the damn cookies are everywhere.  Well, I guess it’s better than eating the cookies and not working out, right?  After the holidays are over its back to moderation.  Well, using my definition of moderation I guess it’s going to be a little more drastic than that.

My Operations Update:  Operations is overwhelmed.  I know it’s not your concern…you just need to get what you need to get done.  But you should know that the holidays have put a stranglehold on Operations.  The staff is coming in early and staying late.  They are cranking out a record number of doc sets and funding figures.  Operations is already overbooked on docs and funding capacity for the remainder of the year.  Purchases are getting lots of love, particularly shortsale purchases…refis are taking a back seat.  I’m not asking you to back off because I understand your position, but I am asking for your understanding.  If you need help, bring it my way.

My Market Watch:  Once again Bonds are holding firm and opened with the same rates as yesterday and Friday…but once again I focus my attention on the Fiscal Cliff which has been and will continue to dominate the headlines and the market this week.  I have been hearing all sorts of things on the negotiations…too many things to list here.  Like you I’m just waiting to hear what they come up with.  One thing I thought was interesting is the concern over forgiven debt tax treatment for those doing a foreclosure or shortsale.  For example, if you shortsale today the remaining debt the bank forgives is not considered income and therefore there is no federal tax on that forgiven debt.  On Tuesday that reprieve ends, unless they include a provision in the Fiscal Cliff plan.  That particular provision will affect a lot of homeowners and our industry.  Again, when a Fiscal Cliff plan is put into place, or even the news that a plan will be put in place, expect the bond market to suffer as stocks jump on the news.  When that happens it means traders are pulling money out of the bond market to invest in stocks instead.  To what extent I don’t know but when bonds are sold off our rates/prices worsen.  Call your clients and discuss this with them.

Also, negative statements from the hill that no Fiscal Cliff plan will be passed will push stocks down and the bond market will  improve as a result…but this is short-term.  Remember what I’ve been saying…a Fiscal Cliff plan when passed will improve the stock market as traders pull money out of bonds to put into stocks.  Conversely, news that impedes the Fiscal Cliff plan will push stocks lower as traders invest in bonds and when that happens rates/pricing typically improve.  Be still my beating heart…if future news that a Fiscal Cliff plan is reached, or it is close, then bonds will tank…it’s going to be a roller coaster.  If you want to discuss with me, email or call….  My Disclaimer

My Schedule: Available all day.

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Drag My Sorry Ass Out Of Bed

kingMy Schedule…and A Little Extra:   I’ll tell you why it was not easy to drag my sorry ass out of bed…but first let me start this post by saying I had a wonderful long weekend and I trust you did too.  Yesterday I received a lot of clothes…I needed clothes.  I also got a nice Starbuck’s coffee mug with pictures of my family all over it…that was my favorite gift (other than the hand-made drawings my kids made).  I also got a waffle-maker from the in-laws and that’s a pretty nice gift I must say…I’m the breakfast chef in my house so I’m looking forward to whipping up some Belgian waffles!  The other fun gift I got was a Slingbox from my bother-in-law.  I’m excited to try that out…it’s supposed to transmit anything from my TV (whether recorded or live) to my laptop, iPad and iPhone…I do love me some technology…I’ll try setting that up tonight.  The gift I gave myself was a new membership to a gym…yes, it’s time to get back into shape.  Now normally when I make a commitment like this I’ll set a start date such as New Years Day and then eat and drink profusely until then.  But I just can’t wait until New Years Day…it’s out of control.  So this morning I was up at 5:10a and in the gym by 5:45a for spin class.  And man, let me tell you it was not easy to drag my sorry ass out of bed this morning.  But now I have Belgian waffles on my mind, and more importantly, all the clothes I received yesterday are a size too small…hmmm, you think that was a hint?

My Market Watch:  Bonds are holding firm and opened with the same rates as Friday…but make no mistake, news on the Fiscal Cliff will dominate the market this week.  There are but 4 days left to come to a resolution and my guess is they’ll do it and when they do, expect the bond market to suffer and the stock market to  jump.  When that happens it means traders are pulling money out of the bond market to invest in stocks instead.  To what extent I don’t know but I do know when bonds are sold off our rates/prices worsen.  As I have repeatedly advised, take this opportunity to call your clients so you can explain the situation.  Make sure you put a disclaimer in there somewhere…just like I do….  My Disclaimer

My Schedule: Recovering but available all day.

Happy Holidays! Fiscal Cliff Vote Cancelled

holiday2013_2My Schedule…and A Little Extra:   In my house we have both Hanukkah and Christmas (guess which holiday came from my side of the family) and so we get two celebrations each year.  This year more than most I really enjoyed getting a tree since I was out-of-town and my wife went with the kids without me.  I’m just kidding…a little.  I do enjoy watching the kids decorate it though.  But more than anything, I truly enjoy having it in our family room…it’s nice (a picture of my family room on the left).  And after 10 years of marriage (or is it 11?) I’ve become comfortable to our own family tradition this time of year and now feel safe that I won’t explode into flames for being sacrilegious.  I truly enjoy this time of year.  But I hear a lot of grumbles…this time of year is particularly challenging in our line of work since lending timelines get too far extended while simultaneously the pressure to end the year strong bears down on us.  And then there’s the excessive shopping of unnecessary purchases (I’m going stocking stuffer shopping this afternoon…ugh).  But c’mon!  It’s a joyous time of year…a time when there’s a great reason to be happy and jolly.  My son asked me this morning how many more sleeps until Christmas…I told him two more sleeps until grandma and grandpa visit, then one more sleep till Christmas Eve and then one more sleep until its Christmas…four more sleeps!  I’m going to embrace the holiday, and damn it, I insist you do too! 

HAPPY HOLIDAYS!!

My Schedule: Available all day…need to buy stocking-stuffers this afternoon.

My Market Watch:  Bonds are doing better today which means pricing is better.  This is on the news that the vote in the House for the Fiscal Cliff Plan was cancelled…yes cancelled because there was not enough support and they knew it.  They would rather cancel the vote than surely have it denied.  As I have said, passing the Fiscal Cliff Plan will bode well for stocks, but not bonds.  Well, since the vote was cancelled, stocks are doing terrible and bonds are responding well.  The inverse relationship between the stock market and bond market is holding true.  Nonetheless, there is tremendous pressure for them to get something done so don’t be surprised to see something passed next week after the holidays.  When that happens I predict the stock market will jump and the bond market will worsen…that means rates/pricing will get worse.  So again, after the holiday weekend, I advise you take the opportunity to have conversations with your clients to explain the situation.  My Disclaimer

The Fiscal Cliff Explained

cremebruleeMy Schedule…and A Little Extra:   The “Fiscal Cliff” refers to tax increases and spending cuts to sharply reduce the deficit in 2013.  Without getting into the details, which I would have a difficult time explaining anyway, the new tax and spending laws, if not adjusted before the end of the year, will increase unemployment and ultimately put America into a major recession in 2013 – we’d be jumping off the “cliff.”  In short, there have been several compromises to tax increases and spending over the last several administrations…these compromises are set to expire.  We have to do something or the deficit will continue to rise at a daunting pace.  But our economy, and arguably the world economy, is as fragile as the topping on a delicate crème brulee…if we increase taxes and reduce spending too quickly and too sharply, most predict a very unfavorable outcome.  And that is why there are heated debates about we need to do and to what extent.  Please feel free to reach out to me…I’d love to hear your thoughts….

My Market Watch:  Bonds are holding steady currently down -6bps since rates came out.  All the focus is on the fiscal cliff discussions.  From what I’m reading, a successful fiscal cliff resolution would bode well for the stock market and is likely to worsen rates.  I would have some serious conversations with your clients now to explain the situation.  Moreover, you need to put your skill set to use by getting them to understand that locking in is protection guaranteed but floating is a dangerous game these days.  I trust you know how to do this expertly.    My Disclaimer

My Schedule: Available all day until 4:00p and then done.

I am Hopeful

abeMy Schedule…and A Little Extra:   Lincoln made me feel hopeful.  I forgot to mention that in my post yesterday where I drew an analogy between the 13th and 2nd amendments.  When I got out of the movie I was sad because Lincoln was shot and killed (spoiler alert!) but I felt hopeful because so much was accomplished.  The movie does a terrific job of illustrating just how difficult it was to pass the 13th amendment…after all there was a civil war still in process.  In a nutshell, there was tremendous pressure and desire to end the war and it was believed that trying to force passage of the 13th amendment would stammer the possibility of a cease-fire.  So, when I learned just how challenging it was to get the amendment passed, it gave me a sense of hope.  Yes, we have mental illness that has the capacity to destroy lives.  Yes, we have a violent culture in America that is growing.  Yes, we have gridlock.  But we have a legislative system that works if we can get together for the overall greater good.  I received a large number of comments on my post yesterday with varying opinions on gun laws, mental illness, constitutional rights and the like.  But I received only one opinion about what happened in Connecticut.  I am hopeful.

My Market Watch:  Heads-up this morning…the bond market is fluctuating.  The primary reason is renewed hope over discussions on the Fiscal Cliff which has given stocks a boost.  When stocks do well most traders are selling off bonds.  What that means to you is that rates/pricing might worsen…if you have a price-sensitive transaction and you are thinking about locking, this might be a good time to have a discussion with your borrower about locking in.  Why?  Because when bonds sell off the price worsens which makes lender rates/prices worse.  For now, it appears things have stabilized and maybe Cap Markets has already priced in these concerns.  Late this morning is a 5-year Note auction.  I think traders are pessimistic after an auction yesterday came in with a D rating which is not good.  It might be another reason why bonds were selling off.  My Disclaimer

My Schedule: Available all day until 4p and then done.

I Quit, Done, I’m Outta Here; Lincoln

My Schedule…and A Little Extra:   My wife cried uncontrollably, “Why!?!”  After the initial horror of grasping the loss of those precious young lives and the others affected, her mind like every parent immediately refocused on her own seven and four years old kids…the target age of the shootings.  Not safe at school…not safe at the mall…not safe anywhere.  When I was 7-8 years old I was practically independent…I rode my bike to school and even went to the mall…after all, Tron, Pac Man and Star Wars were waiting for me at the arcade.  Now you can’t let your kids go to the bathroom without worrying they’re in danger.  But shootings at school?  Unthinkable.

My way of dealing with it on Friday was to avoid the news…I concentrated on work.  On Saturday night my wife and went to the movies…we saw Lincoln. Yes we knew it was a heavy movie and probably not the right medicine but we really wanted to see it.  Good Lord…the previews at the movie were so extremely violent I swear I was uncomfortable from the get-go.  My wife was squirming in her chair…we kept looking at each other…what is wrong with us Americans?  We glorify violence…the more ghastly the better.  Maybe there is some sort of death-toll requirement in Hollywood, you know like a formula they came up with…‘if we have 12 people brutally murdered within the first 15 minute of the movie then the movie’s success is 15% more likely, 20% if we add a lot of blood and guts.’  The directors in Hollywood must have special meetings to contemplate the most gruesome and horrific scenes possible…and then they go for shock value beyond that.  Sure, maybe I was over-sensitive but the previews made us altogether uncomfortable…and then the first scene of the movie was the civil war.

The movie however was fantastic in every aspect and I can’t recommend enough that you go see it.  Lincoln and so many others dedicated themselves to the abolishment of slavery…it was morally reprehensible…evil.  And they barely passed the amendment…but they did.  Although the intentions of the 2nd amendment were honorable, I can’t help but think there is an analogy to the 13th amendment.  I mean, Lincoln worked to abolish slavery not only to free the bound, but also to free the unborn shackled.  Maybe it’s time we reconsider the 2nd amendment which indirectly guarantees more deaths of future Americans.  In modern times is the 2nd amendment necessary…is it outdated either in full or in part?

On Facebook I saw repeated comments like, “It’s ridiculous to live in this violent country where we encourage guns.  I’m outta here, done, I quit, I’m moving to Europe!”  My wife also expressed such concerns and said she wanted to move.  I participated in some respectful yet heated debates on Facebook about the 2nd amendment and gun control laws.  I argued that the statement guns don’t kill – people kill, is not relevant when you see stats like in the graphic below which was circulating on FB (I have not verified its accuracy).  One of my neighbor friends elegantly pointed out the right to bear arms has been guaranteed to our citizens for more than 200 years…it is very dangerous to start picking and choosing which constitutional rights to restrict.  I had another close friend and former law school classmate argue that it’s just not feasible to close the door on gun laws, it’s ingrained into our society and impossible to scale back we have enough guns on the streets in America to arm the nation for the next millennium.  But in my opinion, particularly when I see stats about handguns in America, something has to change…both legally and culturally.  Your thoughts?

guns

My Market Watch:  Very little activity other than a D rating on an auction…might move bonds south and if so rates might worsen…I’ll let you know if anything changes….  My Disclaimer

My Schedule: Available all day.  J

The Hobbit; Too Harsh?

hobittMy Schedule…and A Little Extra:   I saw The Hobbit last night…it was just okay.  Certainly not the epic Lord Of The Rings and most definitely not Peter Jackson’s best work.  Some scenes were, eh, cheesy…that is, way too far beyond the realm of plausible.  I mean, we go to these movies knowing that trees don’t really come alive and that mountains don’t really fight each other during a storm, but we put aside that mindset and live within the author’s imagination.  But at the same time the plausibility of what is happening must stay within a certain boundary.  You can’t have a group of 15  fall 1000 feet down a mountainside with boulders flying everywhere and everyone just gets up and walks away unscathed.  Does that make sense? Also, having read the books when I was a kid, I found myself trying to remember since the movie seemed very different from my memory.  I was disappointed but I still found it entertaining….  |   Was it too harsh?  My post yesterday received many comments when I insisted the LO must be more proactive with expiring documentation and how you have to manage expectations of your client.  Most of the comments agreed with me but then added something about how the lender has to take responsibility for its delays.  I don’t disagree.  But I feel at ease knowing Interbank usually steps up and does the right thing most of the time, particularly when it comes to lock expirations. Anyway, I love this kind of commentary…it’s healthy.

My Market Watch:  Very little activity…I’ll let you know if anything changes….  My Disclaimer

My Schedule: Available all day.  J

Successful LOs/Processors Defined

proactiveand A Little Extra:  With the holidays the timelines for lending has gotten a bit crazy…and extended.  Are your docs expiring at the time of CTC?  Interbank issues a refi loan decision in about 10 business days which is 15-18 calendar days.  Depending on when and what documents you upload will in large part determine the remainder of the process.  Be proactive…I know you know this already but I have to say it because of what I see…get us expiring documentation before we have to ask.  More importantly, manage your client’s expectations!  I know you experience frustration too, but nothing frustrates me more than when I hear an LO say “I’m afraid to go back to the borrower and ask.”  Really?  Who trained you?  Did you explain at the onset that this is perhaps the most challenging lending environment ever?  Did you explain lenders must deal with unnecessary government intervention and compliance threats?  Did you explain the lender will be requiring updated documents and other items during the process?  For the love of all things holy in this land we call earth…that’s your job, is it not?  This way the borrower won’t get too frustrated when you have to go back to them.  If you are not proactive then Audit will catch it and you will find yourself scrambling for updated documentation in order to get CTC and docs out.  My best LOs/Processors do not wait for Interbank to tell them what is expired.  Manage expectations and be proactive.  Everyone knows the accepted age for loan documents:

  • Paystubs must not be older than 90 days at funding and must be dated no more than 30 days from the loan application.  So when we underwrite the paystub cannot be more than 30 days old, but when the loan funds it cannot be more than 90 days old.  For example, if the Note date is 12/1, then paystub cannot be older than 9/1, but if we issued a lending approval on 11/15, then it can’t be older than 10/15.  Oh, and by the way, stubs must include the employer name, borrower name, and YTD earnings.
  • Bank Statements must not be older than 90 days at funding and must be dated no more than 45 days from the application date.  While we’re on the subject, we need all pages and any large deposits ≥25% of the monthly gross income must be sourced and documented.
  • The Credit Report cannot exceed 90 days at time of closing (which is the date on the Note).  If it is going to expire for sure then email me and I can try and get the DO released so you can get it updated.  FYI, when updating the credit report, the old case file must be used or the findings will go from 8.3 to 9.0 resulting in much more restrictive underwriting and appraisal requirements.
  • The Appraisal cannot exceed 90 days at time of closing.  I have been successful in getting an extra week on occasion but no more, and a recert is possible if it expires.

My Market Watch:  Rates came out slightly worse than yesterday at the end of the day and bonds are holding steady at the moment.  I’ll be watching today to see if there is any movement and do my best to give you a heads up if I see volatility….  My Disclaimer

My Schedule: Today I have a couple of appointments and then I’m going to the pre-launch of The Hobbit tonight.  So excited!  J

The Very Fiber of America Homeownership

My Schedule…and A Little Extra:   One of my Brokers wrote this and I liked it so here it is with is permission (emphasis added):

WHAT I THINK – I’ve been at this mortgage brokering business for 25 years. In my earlier years borrowers would be mortified and embarrassed to broach the subject of foreclosure. Short-sale wasn’t even a term back in the day. Recent times have certainly seen changed values. A recent study by ID Analytics and JZ Analytics found that 32 percent of respondents say that homeowners should be able to walk away from their mortgages without any consequences. This entitlement mentality, if it continues to fester, may ruin the very fiber of America homeownership. Nobody will want to invest in mortgages, not even the U.S. government. Pride, responsibility and fair dealings continue to fade away as important values to too many Americans. It’s sad enough that some borrowers have not been able to pay their monthly mortgage payments. Then came the “won’t pay borrowers” – those that have the means to pay but refuse to pay. The ultimate chutzpah now goes to those pathetic borrowers that think there should be no consequences for walking away from their home loan. Yes, the banksters have been so horrible on so many levels. But, come on. Two wrongs don’t make a right. Entitlement thinking is nothing short of mental cancer. Chapter One of the homebuyer education course that HUD recently announced will be mandated for FHA borrowers should start with the definitions for accountability and consequences. Maybe this can get us back on track to the good old days.  

Let me know your thoughts….

chart1

My Market Watch:  Friday is the big monthly Jobs Report which will no doubt affect trading and push rates/pricing in one direction.  In general terms, a strong Jobs Report will give traders the indication the economy is doing well since more people are working.  Therefore, a strong Jobs Report motivates traders to put their money into stocks rather than bonds and when that happens rates/pricing typically get worse.  On the other hand, if the Jobs Report comes in weak, then traders conclude the economy is not doing well and they will pull their money out of stocks and invest in bonds instead.  When that happens, typically rates/pricing get better.  Let me know if you have any questions, okay?   My Disclaimer

My Schedule This Week: Tomorrow I travel to Chicago for our annual Sales Conference and Holiday Party.  I will be traveling most of the day Wednesday and will be generally unavailable all day Thursday and Friday while in training meetings.  I am taking suggestions if you would like me to bring anything up about our procedures, etc.

My Schedule Today: Very busy day for me…I have a 10:30a appointment in Irvine and a 2:30p appointment in San Diego.  In-between I will be driving, eating, returning phone calls and trying to get caught up on emails….

Snickers

snickersMy Schedule…and A Little Extra:   Every night after she’s tucked in and the lights are out, I tell my daughter a story.  Sometimes it’s just a simple short adventure but most of the time I tell her a story that has some kind of a moral problem and resolution.  For example, last night I told her a story about three friends that were in a store in the candy section…one of the girls put a candy bar in her pocket to steal and encouraged the other two girls to do it too.  Then I drag out the story for dramatic effect and ultimately come to the moral dilemma and resolution.  I’m hoping my stories teach her the difference between right and wrong, integrity, honor…you get the idea, right?  Anyway, I think last night’s story came on ears that were too tired.  When I completed the story I asked her if she understood or had any questions.  She had but one question, “Daddy, what kind of candy bar was it?”  Snickers.

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