The Valley Meets its Peak

Many title agents and those looking to become title agents were severely deterred after the housing bubble burst and left America in a state of panic. Both long-time agents and many on the cusp of their licenses began seeking new opportunities. But were things ever as bad as once stated?

The talk throughout the country was panic-stricken, but the talk inside the industry slowly started to level out. The advice given to worried title agents: Wait out the storm. As advertised, the “crisis” was bad, but after the numbers became public that only 9% of subprime homeowners were defaulting on their mortgages, the mass hysteria has turned to a manageable melee.

With President Obama’s new housing plan set to realign the natural order, the prospect of home ownership once again becomes a dream and not a nightmare. Title agents will be needed; and if you’re hoping to pursue this type of career, know that your services as a title agent will be required after the smoke clears.

Continuing Ed for Title Agents

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Mortgage Market Update

It is a little after noon and high time to get this update delivered to you as you may be wondering where it is.  I just arrived back from a flight from St. Thomas where the day was beautiful, though I actually forgot what day of the week it really was in all honesty.  Unfortunately, the mortgage backed securities market is far from being beautiful and the outlook remains ugly.

Last week saw many headline events that brought some confusion into the bond markets.  With continued job market weakness, the Jobless Claims reaching a rolling 4-week average of 619K and painting a very bleak future, at least for the short term.  Inflation was also on the minds of traders as yet another stimulus package was signed into law by Barack Obama and followed by increases in the PPI numbers.  CPI calmed the markets a bit, but if you look solely at the core numbers, inflation is far from being thrown into the back seat and may simply be a sleeping giant.  By week’s end, mortgage rates had bounced around and ended basically where they started.

This week will start of slow, but will have plenty of data coming into play.  Despite the level of data, however, the only typically major player will be Friday’s Chicago PMI numbers.  Here is this week’s schedule of data and known events…

  • Monday:  3-month T-Bill Auction (1:00), 6-month T-Bill Auction (1:00)
  • Tuesday:  Case-Shiller HPI (9:00), Consumer Confidence (10:00) Bernanke Testimony (10:00), 4-week T-Bill Auction (11:30), Duke Speech (12:00), 2-year T-Note Auction (1:00)
  • Wednesday:  MBA Purchase Applications (7:00), Existing Home Sales (10:00), Bernanke Testimony (10:00), EIA Petroleum Status (10:30), 5-year T-Note Auction (1:00)
  • Thursday:  Jobless Claims (8:30), Durable Goods Orders (8:30), New Home Sales (10:00), Money Supply (4:30)
  • Friday:  GDP (8:30), Chicago PMI (9:45), Consumer Sentiment (9:55)

As I mentioned before, the Chicago PMI is the only major player typically.  However, you have Bernanke testifying to the Senate on Tuesday and the House on Wednesday, each of which could stir the markets.  Additionally, other data may play a larger than normal role, such as the Jobless Claims have been lately.

As we look at the charts, the picture is not very bright to say the least.  Mortgage backed securities have failed to penetrate their overhead resistance for the forth time, two of those times within the last week.  Adding to that fact, stochastics have again turned negative with a negative crossover pattern and plenty of space remaining before becoming oversold again.  In a normal market, these signs all point to mortgage rates climbing, but we are not in a normal market so things can change quickly.

What is abnormal about the markets?  Actually, not a whole lot.  The abnormalities rest primarily in Bernanke and his government buddies.  They have the ability to talk up, or otherwise artificially inflate the markets, as they have done so in the past.  Currently, mortgage bond traders have seen through the crap and are trying to drive mortgage rates higher.  This can be seen in the markets because the Fed increased their buying of FNMA 4.5% coupons, having purchased $8.0B last week alone and failed to get prices through resistance.

The bottom line is that it appears the markets are stronger than the Fed right now, which means mortgage rates will continue to hold steady, or break out higher unless the Fed manages to push them through the ceiling, a task they have been unable to accomplish thus far.

What does Mortgage Modification mean to the Title Industry?

By Jeanne Johnson of LandRecs.com

The Title Insurance industry has slowed to a crawl. Most of the business at the closing table is either a foreclosure or a short sales. And with Congress’ plan to modify existing mortgages, even that pittance will be drying up. 

Congress plans to modify existing mortgages to lower rates so borrowers can afford their monthly payments.  How does this affect the title industry you ask? In the past, when mortgages were modified, title policies were still in the picture, because intervening liens were a concern. For example, let’s say Sam Smith wanted to modify the terms of his loan by increasing the loan amount. You were the first mortgage lender. If you modified the loan, you had to worry about what that would do to your 1st lien position. If there was a second mortgage or a tax lien on the property, changing the terms of your loan might bump you into second place or third place. The title industry therefore stepped forward with updates to the policies. we checked for intervening liens, we got subordination agreements from the secondary lien holders, we recorded lots of documentation, and endorsed the policy with matching fees for our work.

So, how is this different? Think about it. Titles on all of these troubled loans have already been insured. But this time, they likely won’t need to be insured again. The new loan modification law will generally decrease the interest rate and that will be an advantage to any secondary lien holders, putting them in a stronger position. Therefore, the modification should stand on its face, and no endorsements should be needed. So, there won’t be any need for that title review, or an endorsement to the policy, or new title insurance premium fees. Their might be a pittance for sitting down with the consumer to sign the modification agreement and record it (and with the new RESPA law, title companies won’t even be able to mark up the recording fee.)

Loan modifications are good for the consumer, and good for the economy. They help neighborhoods. They keep banks out of the painful REO business. But they provide little role for title companies. Ouch – another big ding for an already hurting industry.