Phil Grossfield's Blog

Something Rdiuculouslous.  I’m tired…real real real real tired. I was up most of the night, again, last night. Wednesday night I didn’t sleep at all…not a wink, and last night I slept a little, but not enough. Sleep seems like a dream, if you know what I mean…HEY, that rhymes!  So, if I say something incoherent to you today, or if I type something rdiuculouslous, please forgive me. I’m happy…but I’ve got tired eyes.                                                           

Fannie Mae announced yesterday it was postponing its Gfee and LLPA (adjustment) increases. This is GREAT NEWS because it should result in more competitive pricing, at least in the short-run.

Announcement SEL-2014-01: Pricing Update Change
In Selling Guide Announcement SEL-2013-09, Pricing Update, Fannie Mae announced plans to increase single-family guaranty fees and implement changes to loan-level price adjustments and other related pricing fees at the direction of the Federal Housing Finance Agency (FHFA). On Jan. 8, 2014, FHFA directed Fannie Mae to delay implementation of all of these changes until further notice. In its news release on Jan. 8, FHFA indicated that it would give not less than 120 days’ notice after completing the evaluation before implementing any changes. Read the announcement here.

DEADLINE FOR NON-QM ATR LOANS IS TODAY!  UPLOAD BEFORE 3pm. Tomorrow QM kicks in so if you have any loans you’re concerned about then I advise you get them uploaded today before 3pm.  If you upload after then you will be subject to the new QM rules.

I ADVISE 45-DAY LOCKS ON EVERYTHING. Turn-times are fast…fast like lightening fast. But free lock extensions are going away and if you need more time, for whatever reason, I will not be able to assist. I have been making an argument to get some relief, and I’m gaining headway, but the safe bet is to lock for 45 days to avoid issues down the road. For now, Interbank is being advised by legal that it has no choice but to require you to extend at a cost and redraw docs, even if it’s a purchase.  Let me know if you want specifics…

My Market Watch: Bonds Flat; Fed Minutes Released, Jobs Report Is Tomorrow. This morning the 30-year Fannie Mae bond is flat. As a result, rates are the same as yesterday.

Yesterday the Fed released their minutes from last month’s Fed meeting. If you recall, this was the meeting where they announced QE Tapering, new policy of decreasing the amount of bonds the government buys. The minutes revealed many members believe the economy is and will continue to recover at a good clip, and, that many members supported a more significant taper. Frankly, I’m surprised we didn’t see a bond sell-off after learning this, but I’ll take a passive response to this kind of news every time.

Jobs Report Tomorrow.  The Jobs Report tells us how many new jobs were created in December. Traders use this information to determine if the economy is stronger or weaker, and then they buy and sell stocks based on that information. Simply put, if the report indicates more new jobs than expected, then traders conclude the economy is stronger. That should make sense…more new jobs = stronger economy. On the other hand, if the report indicates less new jobs in December than anticipated, then traders will logically conclude the economy is weaker. Traders buy stocks when the economy looks strong and they buy bonds when the stock market is a bad bet. Therefore, most of the time there is an inverse relationship between when traders buy and sell bonds and stocks. Here is a good way to look at the analysis:

Tomorrow it is expected that 200,000 new jobs will be reported for December. Because the ADP Employment report yesterday was stronger than expected, I recommend locking rather than floating. It’s a conservative approach but it makes feel all warm and fuzzy inside.

My Disclaimer

She swam from Cuba to Florida. You didn’t hear about this? She was 64 years old when she did it last year…it was her 5th attempt. How do you not know her? Yesterday I wrote a post about Janet Yellen being confirmed as the next Fed Chair…she is the first woman to hold the position. I referenced Diana Nyad as an example of a strong woman…I got several emails giving me the impression people didn’t know who she was.

Diana Nyad is the definition of perseverance. She swam 28 miles around Manhattan for charity. If I tried to swim 1 mile I’d throw-up and then drown and then throw up again after already being dead. She is fun to watch break records and raise money for worthy causes, but she is even more fun to listen to because she is so strong-minded. Whenever I feel like tossing in the towel, like I did last night while I stayed awake with my sick son, I thought of Diana. Last night I didn’t sleep a wink…and I was okay with it. Hell, if Diana could swim from Cuba to Florida in jelly and shark infested waters, then what do I have to complain about?

Bonds Are Down; Fed Minutes From Dec Released Today, Initial Jobless Claims is Tomorrow & Payroll is on Friday. This morning the 30-year Fannie Mae bond is down about -25bps. As a result, rates are worse than yesterday.

The culprit is the ADP Employment report which indicated more new jobs created in December than anticipated. This report is interpreted by traders as strength for the economy…more new jobs means the economy is improving. Whenever traders feel the economy is improving they typically invest in stocks and pull money out of bonds to do so. When that happens rates worsen.

This afternoon the Fed releases their minutes from last month’s Fed meeting. If you recall, in this meeting they announced QE Tapering, a new policy of decreasing the amount of bonds the government buys. We all knew this was going to happen eventually, and quite frankly most believed it would’ve happened much sooner. But the detail in the minutes will shed some light into the discussions leading to the decision, and depending on how these notes are interpreted the market might shift once again. Although I’m in the car all day, I’ll do my best to keep you apprised…

Janet Yellen Confirmed. She is the first woman to hold the illustrious position, and it’s about time. I am a firm believer that women are the future of this country. Simply put, I’m a feminist. First, women are stronger than men…there are several examples of this including the struggle over sheets, pregnancy-birth, and feminine hygiene-maintenance. But I’ll use Carrie Mathison from Homeland (fiction example) and Diana Nyad (real-life example) as my primary examples of strength. Second, let’s face it, women think differently than men…and different thinking is what we need…that’s my opinion anyway. And finally, women certainly couldn’t do any worse than men have done, am I right?

Fed Minutes From Dec Released Tomorrow, Initial Jobless Claims is Thursday & Payroll on Friday. It’s a big week but I’m mostly interested in what the Fed minutes say…this was the meeting where QE Tapering was announced. It should be an interesting report…make no mistake about it, this could be a volatile week…

CHANGES NOW IN EFFECT! 
Your GFE MUST be correct when you upload the submission package. When you took the application and when you locked is irrelevant.

FOR EXAMPLE, let’s say you took a loan application on December 27th, registered the loan in the Interbank portal on December 28th, and locked the loan online on December 29th. Your processor now wants to upload the submission package today. Because the submission package is being uploaded in January, you are now subject to your NEW JANUARY COMP PLAN AND OUR NEW $799 LENDER FEE. The fact your borrower signed an application in December and you locked in December is irrelevant. Your GFE must be correct…if it’s incorrectly based on our old $699 Lender Fee or on your old 4th quarter comp then you’re screwed because your GFE would be a compliance violation and therefore your loan and your lock would be cancelled.

If this is not 100% clear then please let me know…. For a comprehensive list of QM/ATR changes please contact me ASAP.