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what's next Good to Great Positive news on the housing front shows things are continuing to pick up steam in the housing sector. Now vs. next Originations in the first quarter fell by 6.2 percent from Q4 2012, but shot up by 13.8 percent over last year's figures. In total, the estimated origination volume from all U.S. lenders equaled $505 billion, priming second-quarter business to increase by 13 percent quarter-over-quarter. Wells Fargo led the pack with 22 percent share of the profits, and Stonegate Mortgage had the biggest quarterly improvement. On the servicing side of things, Wells, Bank of America, and Chase held the top three spots (respectively), despite that each firm shrunk its portfolio over the quarter. The drop in originations is yet another sign that the refinance boom is starting to fade. Ally Financial saw the biggest tumble where mortgage production fell by 38 percent from fourth-quarter 2012, causing it to create a plan to wind down its consumer mortgage lending business. Ally could potentially set the pace as other banks begin to move from refinancing to focusing on the purchase side of the house. Fannie Mae and Freddie Mac both gave the green light to the new Streamlined Modification Program, which will offer assistance to distressed borrowers before the effective date of July 1. Now, borrowers who 90 days behind in mortgage payment, will be able to request a modification without having to submit financial or hardship documentation. To be eligible, the loan must be a first-lien mortgage that is at least a year old with a loan-to-value ratio equal to or greater than 80 percent. The Streamlined Modification Program is another program designed to prevent foreclosure and preserve homeownership for distressed borrowers. The move does not reduce the loan balance and is generally regarded as a win for homeowners. Still, there are those who argue that borrowers would actually save money by documenting their incomes and expenses and however the reduction of documentation is designed to encourage homeowners to act quickly in response to to avoiding foreclosure. Fannie Mae posted another record profit, according to the GSE's latest earnings report. In Q1 of this year, the mortgage giant reported pre-tax income of $8.1 billion, the largest in its history. In the fourth quarter of 2012, the GSE reported pre-tax income of $7.6 billion and $2.7 billion from Q1 2012. Fannie announced it will pay $59.4 billion to the Treasury by June 30, bringing the total to $95 billion. The GSE is well on its way to repaying its billion-dollar "loan" to the public. Fannie Mae, so far, has received $116.1 billion from U.S. taxpayers. The good news is that as of the first quarter of 2012, Fannie has not requested additional funds from the US Treasury. Continued earnings continue to feed the conversation on whether GSE reform is really the best strategy for the market, or whether they should remain as a revenue source. Time will tell. More Americans are getting back to work, according to the most recent jobs report from the Bureau of Labor Statistics (BLS). The report beat economists' predictions that payrolls would grow by 153,000 and that the unemployment rate would remain at 7.6 percent. But, the report showed that the economy added 165,000 jobs in April and the unemployment rate dropped to 7.5 percent. The labor force—the sum of employment and unemployment—rose for the month, with employment increasing 293,000 and unemployment falling 83,000. The continued drop in the unemployment rate and the continued addition of jobs to the market has given the Fed the confidence to stay the course of action it has taken. The Fed vows to keep interest rates at its historic low of 0 to 0.25 percent until the unemployment rate falls—and remains for a significant amount of time, to be determined by the Fed—below 6.5 percent. Inflation has remained relatively tame since the Fed announced plans for reversing its course on monetary policy. The most recent Senior Loan Officer Survey showed that mortgage loans are, indeed, becoming easier to obtain despite firm credit restrictions. Of the banks surveyed, 1.6 percent reported tighter loan standards in the second quarter, and 9.4 percent said they eased somewhat, while 89.1 percent said standards were unchanged. More banks reported stronger demand in the second quarter for subprime loans, with 16.7 percent saying that demand has increased and 83.3 percent saying it is unchanged. Survey results suggest a trend in lending that may not be completely accurate. A bank that is no longer tightening lending standards does not necessarily suggest a loosening of credit. Future homeowners will have to work hard to improve their credit scores and save for a down payment before lenders decide to approve an application. In the survey, 32.7 percent said they were less likely to approve a borrower with a score of 580, 30.9 percent said they were less likely to approve a borrower with a score of 620, and roughly 3.4 percent said they were less likely to approve an applicant with a FICO score of 660. The M Report | 19

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