THIS MORNINGS QUICK LOOK
- TOUR DE MTG FINANCE – Fannie Freddie Concerns
- PRODUCT HIGHLIGHT – In Lieu of W2’s
- JACKISM OF THE DAY- My Drinking Habit
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FANNIE FREDDIE CONCERNS
After my article yesterday on the LLPA and DTI changes that are going to hit the streets for new customers in the next month or two I received a couple questions on why I think they are doing it and the frustration from people out there.
This article is my opinion only and I cannot support it in any way but for what it is worth I hope it will help you understand and explain it.
Both Fannie and Freddie are run by the U.S. Govt since the collapse in 2008 BUT both Fannie and Freddie are for profit corporations that have stock holders and want to and need to make a profit. The same as you and the same as me. They are in business to succeed so keep that top of mind.
The Agencies are doing what we call a money grab in areas that they can with Cash Out loans, higher DTI’s, 2-4 unit properties, investment properties and higher end borrowers that can afford a bit more of a hit. That is why they will lose some of the higher end buyers to FHA but many will stay conventional due to down payment and life of loan FHA premiums.
But the ones that they lose for the higher end buyers they are picking up a lot of the lower score borrowers below the 680 mark by improving their rates so they will pick up lower credit score customers and then make more money off of the higher end borrowers that will still buy houses.
In addition, the agencies make money off of their G-Fee which is currently around 25 BPS. With the new increase in lower scores they are likely going to raise the G-Fee by another 25 BPS so that means they will be increasing the G-Fees on all loans since they are taking more risk on the lower score customers but the net effect is a much larger revenue stream from G-Fees to offset potentially new claims with lower scores.
The G-Fee if you do not know is part of the payment strip when a borrower pays. As an example if the rate is 6%. Of the 6% interest received for each payment .25% of that interest goes to servicers like Flagstar to service the loan then .25% goes to the agencies for the G-Fee then the investor (Wall Street) gets the remaining 5.5%. But now the agencies may increase it to .5% of the interest.
They have lost 60% of their volume the same as you and they have families they take care of and systems and processes to pay for and a business to run so they are making the necessary changes to make it all work.
On the other side is FHA who is a Non-Profit company that insures loans but does not guarantee them so they are the insurance fund of last resort and they only charge a .06 or 6 BPS of the interest each month to insure the loans so that will give a bit of an advantage to FHA due to a much less G-Fee but keep in mind FHA is for maximum home ownership and not for profit.
In the end the LLPA’s is not much of a difference from what it is now net net for the agencies to what it is going to be. We did a modulation of Flagstar’s loans we have closed with the agencies. And if you take the same parameters of the old LLPA’s and then apply them to our past year in loans and apply the new LLPA’s they are actually making 3 BPS less but add all the new lower score borrowers they will pickup and the G-Fee revenue it will be an advantage to their bottom line.
Actually pretty interesting how they make these numbers work. Again, this is just my humble opinion with no basis to back it up : ) But feel free to use it to explain it to those who do not understand.
Product & Guideline Highlight Knowledge That Gives You An Edge Over Your Competition
IN LIEU OF W2’S
Many of the files coming in or about to close are going to require the 2022 W2’s by the end of the month.
In lieu of waiting for the 2022 W2 to come in by the employer we can accept the following documents.
– Final paystub from 2022 showing the YTD earnings.
– For FHA loans after January 31st FHA does require W2 so that will be needed on FHA.
OR
– Get a fully executed VOE completed by the employer or third party VOE showing the earnings for 2022.
As a reminder as well always look at the AUS to see what it is requiring. It is not always the same and sometimes folks over send what is not required.
Lastly, if the AUS is requiring a YTD stub with 30 days worth of earnings on it you may need to get the final stub from 2022 as well to get the YTD earnings requirement met.
Hope this helps!
Jackism of the Day Truths and Thoughts that make you go hmmm
MY DRINKING HABIT
ADDICTION OR HABIT
This article is very personal and near and dear to my heart so you are getting a bit of who I am at a deeper level than most are willing to reveal but if I struggled with it then you may be as well.
For my entire marriage (28 Years) I come home from work or out of my office and around 5 – 6 PM I would have a cocktail with my wife on the deck or patio or whatever. I would only have one or two sometimes but never get drunk. It was more about that period between work and starting the evening before dinner but we pretty much did it 5 – 7 nights a week and likely closer to the 7 unless I was doing something else.
This always bothered me to understand if I had a drinking problem or not. It always scared me actually but that is not an easy thing to break as many of you reading this understand. From time to time I would quit for 45 days and I did that from time to time to say I don’t have a problem and then after 45 days I was good and went right back to nightly cocktails. Drinking never impacted my work, family, finances or anything else but it was a daily habit I did not always like about myself. At the time I would classify it as denial for sure but one that had no bad side effects.
After much prayer, testing my will power, quitting, swearing it off, going back and everything else I think I finally have it figured out kind of.
For me at least and this will be different for everyone else. It was a habit the same as coffee is for many people, a cocktail of any sort, marijuana or your drug of choice is a habit we form and they are very difficult to break especially with alcohol. I will not bore you with the details but alcohol has a part of it that 24 hours after last use it sends a reminder to your body you have a need and it takes about 14 days before that to goes away. Same as caffeine in your coffee and everything else out there.
So what did I do? On September 11th of last year my wife and I decided that we do not want or need to have that habit in our life anymore but we also did not say we can never have it again. Therefore, we took every bit of alcohol in our house and we gave it away to other family members. HA! Nothing like looking out for your family.
We went cold turkey for 3 months to get it out of our system completely. Now we have a rule that no alcohol is allowed in our home overnight. If I want to have a cocktail at night I have to go to the liquor store, get a small expensive bottle then anything remaining gets poured down the drain that night. Since Sept 11th 2023 I have done that twice and had two cocktails each time. I don’t miss it at all now after this many months and really have limited desire for it in my life. We can have a drink if we go out or if we go on vacation (which I did a lot on my cruise), if we go camping or whatever so it is not out of our life it is just no longer part of it on a daily basis. I sleep a lot better and I have lost 40 pounds since Sept 11th as well but that is much more about my exercise and new eating habits.
For me it was a habit and taking it out of my home cured us of it which makes me happy it was not truly an addiction. For others I know it is an addiction but for those of you who want to kick the habit give above a try. The first 45 days is not easy but it is well worth it. As a side note something I do enjoy is my wife and I having that moment on the patio chatting between work and dinner so a great substitute is non-alcoholic beer. They are very good if you have never tried one and it creates the same ambiance without the use of alcohol.
It is always my hope that the things I write about and experience can help others become a better person themselves and know you are not alone. We are all messed up and we all have habits that may be better off not having them.
