Happy holidays and congratulations to all of you who have weathered what will undoubtedly go down in history as one of the most trying years for our industry.  It's during this season that we traditionally look back over the past year and count our blessings, though many might argue that they were few and hard to find in 2008.  As expected, we faced many challenges this year.  If the "experts" are correct, 2009 will be more of the same.  And yet, I find myself thankful for many things.

Lenders are increasingly implementing mortgage modification programs in order both to settle class-action lawsuits and as a way to improve returns on their investments.  With housing prices continuing to decline, some lenders have found it increasingly cost-effective to allow borrowers to modify mortgages, rather than foreclosing and having to maintain properties or dispose of them at a loss in a weak housing market.  These programs have typically been available only for borrowers who are significantly (usually 60 days or more) behind in payments on first mortgages on their primary residences.

Back in September 2008, we wrote about New York's new subprime home loan law and the audit DocMagic, Inc. had developed to assist in identifying such loans.  That article is available here.  Based on feedback from our DocMagic customers, we have added some additional information to the audit results that are displayed when a loan meets the definitional requirements of a subprime home loan.  Specifically, the audit will now return back the following data points used in making the subprime home loan determination: the loan application date; a description of the commitment rate used (e.g., 30YRFIX); the actual commitment rate used; the commitment rate publication date; the subprime home loan threshold; and the loan fully-indexed APR .  For example, for a 30-year fixed rate, first lien loan with an application date of December 1, 2008 and an APR of 8.109%, if the loan was determined to be a subprime home loan, the audit would read as follows:

When Maine adopted their anti-predatory loan law effective January 1, 2008 (described more fully here), they also created many other categories of loans: "residential mortgage loans," "subprime mortgage loans" and "rate spread home loans."   "Residential mortgage loans" include generally any owner-occupied loan not exceeding the Fannie Mae conforming loan limit, but excluding reverse mortgages, construction loans and non-consumer purpose loans.  "Subprime mortgage loans" are defined as residential mortgage loans that are either nontraditional mortgages in the Interagency Guidance on Nontraditional Mortgage Product Risks (basically, interest-only and negative amortization loans) or "rate spread home loans."  A "rate spread home loan" is defined as a loan for which a rate spread must be reported under HMDA, or any "high-rate, high-fee mortgage" as defined under Maine's anti-predatory law.  Regarding rate spread home loans, it is important to note that rate spread home loans are not all high rate, high fee mortgages. Put another way, while high rate, high fee mortgages are by definition rate spread home loans, the converse (rate spread home loans are high rate, high fee mortgages) is not true.

The Federal Housing Finance Agency (FHFA) has announced that the 2009 conforming loan limits (representing the maximum loan amounts Fannie Mae and Freddie Mac can purchase) will remain at $417,000 for most areas in the U.S.  This is the fourth year in a row where the maximum conforming loan limit has gone unchanged.  In addition, FHFA announced 2009 "jumbo" conforming loan limits applicable in so-called "high cost" areas.  The maximum 2009 jumbo conforming loan limit is now pegged at $625,500, down from the $729,750 maximum applicable in 2008.  To view a copy of FHFA's release, click here.  Links to the 2009 high-cost area loan limits and 2009 loan limits for all counties are available in the release itself.

When HUD recently issued its final rule under the Real Estate Settlement Procedures Act (RESPA) (available here), the new, standardized Good Faith Estimate (GFE) form and revised HUD-1/HUD-1A Settlement Statements received, quite understandably, prominent and extensive publicity.  No doubt, we too will be commenting often on these new disclosures leading up to the January 1, 2010 mandatory usage date.  However, what some might have missed are the technical revisions made to the transfer of mortgage servicing disclosure requirements.  The revisions are "technical" because RESPA itself was modified in 1996 (!) to simplify the mortgage servicing transfer disclosure requirements although HUD's regulations (Regulation X) were never amended.  In fairness, HUD has in the past proposed revisions to Regulation X to conform to the simplified disclosure requirements, but no final rule was ever finally adopted until now.  The revised disclosure is radically different from, and simpler than, its predecessor.  Gone are, for example, the disclosures regarding transfer practices and requirements, historical servicing transfer quartile percentages, and complaint resolution provisions, and in their place are simple statements of intent with respect to servicing transfer.  The old regulatory disclosure requirements and sample language are available here.  The new regulatory disclosure requirements and sample language, respectively, are available here and here. The revised mortgage servicing transfer disclosure becomes effective on January 16, 2009 and can be viewed here.

DocMagic, Inc.'s Compliance Department has prepared two new disclosures for the state of Maryland in response to an announcement by the Maryland Commissioner of Financial Regulation in October, 2008 of the adoption of several proposed regulations affecting reporting and disclosure requirements.  DocMagic made these disclosures available on November 3, 2008, the effective date of the regulations.

The current Standard Flood Hazard Determination Form (SFHDF) is scheduled to expire on October 31, 2008.  However, a replacement form has yet to be developed.  Not to worry!  FEMA has extended the expiration date of the current SFHDF to the date that is six (6) months after the date that the replacement form is approved.  Until then, the current SFHDF can be used; after that date, the revised form will be mandatory.  To review a copy of FEMA's announcement, please click here.

During DocMagic's recent participation in the MBA 95^th Annual Convention in October, 2008, DocMagic transcended its commitment to providing superior customer service to its customers by donating DocMagic bunnies to a child care facility in Des Moines, Iowa, that services low-income families.  Over 85% of these families receive childcare subsidies, and many parents are immigrants from war-torn countries like Somalia.

This month DSI posts updates to the loan programs of ABN AMRO Mortgage Group, Inc., Bear Stearns, Branch Banking and Trust Company, Chevy Chase Bank, FSB, Credit Suisse First Boston (Correspondent), EMC Mortgage Corporation, Encore Credit Corporation, First National Bank of Arizona, Flagstar Bank, FSB, GMAC Bank, Hyperion Capital Group, LLC,  Morgan Stanley, Opteum Financial Services, LLC, Sovereign Bank - Wholesale, Taylor, Bean and Whitaker Mortgage Corp., UBS Investment Bank,and U.S. Bank N.A. to its Compliance page.  Find out the description of each investor's loan program, which promissory notes, prepayment riders and addenda are used, and what the rate caps and interest-only periods are for variable rate loans by visiting our Investor Updates page.

In our August, 2008 issue, we mentioned that although the Washington model disclosures - the Disclosure Summary - Fixed Rate Loans (WADSF.MSC) and the Disclosure Summary - Variable Rate Loans (WADSV.MSC) -- were in draft form, DocMagic was making them available anyway, because Substitute House Bill (SHB) 2770 arguably required a disclosure of material terms since its effective date of June 12, 2008.

In order to keep DocMagic software users better apprised of document changes and additions as they occur, DSI posts listings of all newly created and revised documents. Here is the list of forms created or modified in October and November, 2008.

The U.S. Treasury security yield values for November and December 2008 may be viewed online here.  The yield is determined as of the 15th day of the month immediately preceding the month in which the creditor receives the application.  The yield value is used for Section 32 and most state high-cost tests.  These values will, therefore, be used for loan applications received by the creditor in December 2008 and January 2009.

To view this month's and last month's list of announcements or newsletters related to our mortgage industry, please click here.