Mortgage Banking Weekly Highlights
Week Ending July 31, 2009

Capital Markets
On July 30, 2009 the Dow Jones Industrial Average rose to its highest level in nearly nine months with a gain of 84 points and the Nasdaq Composite Index traded above 2,000 for the first time since October, 2008. The boost is attributed to another round of earnings reports that gave investors optimism about the economy.

On July 30, 2009- Fannie Mae released its Monthly Summary report containing information about Fannie Mae's monthly and year-to-date activities for the gross mortgage portfolio, mortgage-backed securities and other guarantees, interest rate risk measures and serious delinquency rates. The report can be viewed at: www.fanniemae.com/ir/monthly.

Lender Processing Services, Inc has recently published its Mortgage Monitor, which reports on industry data collected as of June 30, 2009. The report indicates that the nation's housing market may be turning a corner toward recovery. According to the report, new delinquencies dropped to their second-lowest level in the last year, and the percentage of loans rolling to a more delinquent status declined across all product types. Moreover, the gap between loans improving and loans deteriorating narrowed slightly. LPS cited several factors that appear to be contributing to improvements in the housing market. First, at current interest rates, there is a lowered risk of increased defaults associated with outstanding hybrid adjustable-rate mortgage (ARM) resets.

Second, liquidity is becoming increasingly available again to borrowers who are in some stage of delinquency. A dramatic improvement in borrower credit quality has created a significant decline in first-payment defaults.

Finally, the impact of homeowner aid programs, most notably the federal government's Making Home Affordable program, may be contributing to the resolution of many delinquent loans in the pipeline, LPS says.
Details can be found at: http://www.lpsvcs.com/Pages/default.aspx.

The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending July 24, 2009. The Market Composite Index, a measure of mortgage loan application volume, was 495.4, a decrease of 6.3 percent on a seasonally adjusted basis from 528.9 one week earlier. On an unadjusted basis, the Index decreased 6.0 percent compared with the previous week and increased 16.1 percent compared with the same week one year earlier.

The Refinance Index decreased 10.9 percent to 1862.1 from 2089.7 the previous week and the seasonally adjusted Purchase Index remained unchanged from one week earlier at 262.0.

The four week moving average for the seasonally adjusted Market Index is up 2.6 percent. The four week moving average is down 0.5 percent for the seasonally adjusted Purchase Index, while this average is up 5.2 percent for the Refinance Index.

The refinance share of mortgage activity decreased to 52.6 percent of total applications from 55.5 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.5 percent from 4.8 percent of total applications from the previous week.

Freddie Mac released its results of its Primary Mortgage Market Survey® (PMMS®)on July 30, 2009, in which the 30-year fixed-rate mortgage (FRM) averaged 5.25 percent with an average 0.7 point for the week ending July 30, 2009, up from last week when it averaged 5.20 percent. Last year at this time, the 30-year FRM averaged 6.52 percent.

The 15-year FRM this week averaged 4.69 percent with an average 0.7 point, up slightly from last week when it averaged 4.68 percent. A year ago at this time, the 15-year FRM averaged 6.07 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.75 percent this week, with an average 0.6 point, up slightly from last week when it averaged 4.74 percent. A year ago, the 5-year ARM averaged 6.07 percent.

One-year Treasury-indexed ARMs averaged 4.80 percent this week with an average 0.5 point, up from last week when it averaged 4.77 percent. At this time last year, the 1-year ARM averaged 5.27 percent.
Details can be viewed at: http://www.freddiemac.com/pmms/release.html.

State
Oregon-July 30, 2009-passed a bill imposing restrictions on negative amortization loans. The bill prohibits mortgage bankers, brokers and loan originators from negotiating or making a negative amortization loan without regard to the borrower's ability to repay the loan. In addition, the bill restricts prepayment penalties on negative amortization loans to the first twenty-four months of the loan and prohibits a lender from collecting any prepayment penalty on an existing negative amortization loan in return for or as a consequence of refinancing the loan. The bill is effective January 1, 2010. Details can be viewed: http://www.oregon.gov/DCBS/docs/measures/2009report_leg.pdf.

New Jersey-July 30, 2009-passed a bill that amends provisions pertaining to the six month foreclosure forbearance period required for "high risk mortgage" loans. The bill requires lenders to notify borrowers of the right to obtain a six month period of forbearance. The bill also requires a borrower to make a written request to the lender in order to receive the forbearance. The bill went into effect July 2, 2009. Details can be viewed at: http://www.njleg.state.nj.us/2008/Bills/AL09/84_.HTM.

HUD/Ginnie Mae
On July 30, 2009, The Government National Mortgage Association (GNMA) issued Memorandum # APM 09-14: Buyout Policy Changes to Support the FHA Home Affordable Modification Program ("FHA/HAMP"). Ginnie Mae is pleased to announce its support, effective immediately, for FHA’s Home Affordable Modification Program (“FHA/HAMP”), which is being implemented pursuant to the “Helping Families Save Their Homes Act of 2009,” P.L. 111-22, enacted on May 20, 2009. The FHA/HAMP initiative is designed to provide additional loss mitigation strategies for FHA-insured loans. Issuers will be permitted to repurchase FHA loans from Ginnie Mae pools if a borrower has been approved to participate in FHA’s trial modification program and the loan has been in a state of continuous default for more than 90 days, as of the date of repurchase. Until the
loan has been removed from the pool, Issuers are reminded of their continued obligation to advance
scheduled remittances of principal and interest to investors, as required by the security. Under the new guidelines, which will go into affect on August 15, current FHA borrowers will now be able to permanently reduce their monthly mortgage payments if they seek and receive a modification from their current mortgage company or loan servicer. Previously, only borrowers whose loan was owned by Fannie Mae or Freddie Mac were eligible for the Obama Administration's loan modification programs. The new guidelines are in addition to changes announced earlier this month to assist borrowers with negative equity as high as 125 percent loan to value. The new modification guidelines will utilize a partial claim option. FHA has used this partial claim mechanism in the past to allow servicers to advance funds to bring a delinquent mortgage current. Details can be viewed at: https://www.ginniemae.gov.