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1-30-2009

You can sleep in your car, but you can’t drive your house.” Ford lost many billion for 2008, and with the recent run-up in mortgage rates, maybe you can get a car loan at less than 6%. Because it seems that 30-yr conventional fixed-rates are up at the 6% level again, at the mortgage-banker level, if you want a one point rebate. (If the borrower wants to pony up a point, rates in the low 5’s are attainable, using the unusual buy-down of 1:1.)

Are mortgage rates getting you down? Don’t blame the NY Fed – they’re going as fast as they can, to the tune of almost $17 billion last week of MBS purchases. http://www.newyorkfed.org/markets/mbs/index.html

OK boys and girls, here is your word of the day: “monopsony”. A monopsony exists where there is only one buyer of a product, as opposed to a “monopoly” where one seller controls the market. Although there is a minor amount of interest by investors in owning securities backed by mortgages, most would agree that at this point the Fed is the primary buyer, and that we are approaching a monopsony, which, like a monopoly, is rarely good. Use that word tonight during Happy Hour.

Why should your company be any different from Wells’ wholesale? After January 23, Wells’ brokers have to submit their complete credit package, including income and asset documentation for all borrowers, within 10 calendar days of their lock date. In a story published by Market Watch, Wells Fargo said their applications were up 158% during its fourth quarter versus a year earlier, with their pipeline hitting $71 billion by the end of 2008. Wells also claims that its mortgage market share rose to 12%, based on third quarter 2008 data, from 10% a year earlier.

Fair Isaac has something new to talk about. They will start offering the revamped score, "FICO 08," to lenders. Fair Isaac believes that the new score will do a better job of predicting borrower defaults, be more forgiving of one-time slipups, take a harder line on repeat offenders, and in general will do a deeper analysis of borrowers with poor or thin credit histories. The score will still range from 300 to 850.

Yesterday was not a good day for Treasury or mortgage rates, or the housing industry. New-Home Sales fell 14.7% in December, and are down 45% from December 2007! This represents the 5^th straight month of declines. Durable Goods, as I mentioned yesterday, were also down for the 5^th month in a row. Regardless, the Treasury auctioned off $30 billion of 5-yr notes, and it did not go as well as hoped. At this point the last thing on the Fed’s mind is inflation, and in fact deflation is on the minds of many.

How about today – do we need more news that the economy is doing poorly? Will the 10-yr Treasury make up some of the nearly 2 points in price that it lost yesterday? We have already seen Gross Domestic Product, which showed that the U.S. economy shrank at its fastest pace in nearly 27 years in the fourth quarter. It dropped at a 3.8% annual rate, the lowest pace since the first quarter of 1982, when output contracted 6.4 percent. For 2008, GDP rose 1.3 percent, the slowest pace of growth since 2001, when the economy expanded 0.8 percent. U.S. employment costs rose last year at the slowest pace on record, with the Employment Cost Index increasing 2.6% in the 12 months to December, down from a 3.3 percent rise in 2007. The numbers indicate that companies have been cutting overtime and reducing workers' benefits like pension contributions. We still have the Chicago Purchasing Manager’s survey and the University of Michigan Consumer Confidence survey later, but for now the 10-yr stands at 2.80% and mortgages are about .250 better in price than yesterday late afternoon.

1-29-2009

The US Post office is requesting that they no longer delivery mail on Saturday’s as a way to save money. Makes sense to me. With all of these lay-offs (Kodak is shedding 3,000 jobs), closings (Starbucks is shutting down another 300 outlets, leaving ex-mortgage bankers with no choice but to drive farther for a latte), showing that the economy is bad, why aren’t mortgage and Treasury rates lower? Simple – the government needs to issue more debt to pay for a rescue. And in order for all of this supply to attract investors, yields have moved higher. Remember Econ 101.

Citing data from LPS Applied Analytics, a mortgage-data research firm, the Wall Street Journal reports that about 6.9% of prime, jumbo loans were at least 90 days delinquent in December, up from 2.6% in the year earlier period. Delinquencies of non-jumbo prime loans that qualify for government backing increased to 2.1% from 0.8%. Defaults on jumbo mortgages tend to result in outsized losses for lenders given that expensive homes are much more difficult to sell when the real-estate market sours. According to the article, three lenders accounted for nearly half of all jumbo loans made in the first nine months of 2008. The top two originators, Chase and WaMu, made more than 25% of all jumbo loans. In addition, BofA and Wells Fargo each accounted for 11% of the jumbo market.

Speaking of Wells Fargo, their Wholesale Lending group will require two new requirements for FHA and VA transactions: a minimum loan score of 620 is required, regardless of any automated underwriting system (AUS) decision, and a payment history for FHA streamline refinances and VA interest rate reduction refi loans. (No 30-day or greater mortgage lates in the most recent 12 months will be allowed for FHA Streamline Refinances and VA IRRRLs.)

Rates moved higher yesterday, in spite of the House passing the Stimulus Bill (with no Republican support, for those of you playing along at home, as they believe the bill includes too much spending and not enough tax cuts). Things were relatively stable, even with the stock market rallying on financial stocks’ improvement, until the Fed’s announcement. As expected, they are leaving overnight rates alone. But bond market investors were disappointed that the policy statement did not include an immediate intent to begin purchasing government bonds – they have an “inclination” to do so.

Today does not look rosy either. We have a $30 billion 5-year note auction by the Treasury, with the market still swallowing $40 billion of 2-yr notes. We already saw Jobless Claims rise 3,000 last week, up to 588,000, with the moving average increasing to 542,500 from 518,250 the week before. Durable Good orders fell for the 5th month in a row, and dropped 2.6% in December following a November revised decline of 3.7%. Later we can look forward to New Home Sales, expected down slightly. In spite of being “over sold”, prices have moved down more, and rates higher, mostly due to the auction ahead of us. As I type this the 10-yr is at 2.70% and 30-yr mortgage prices are about .250 worse in price.

1-9-2009

A sandwich walks into a bar. The bartender says, "Sorry we don't serve food in here."

Speaking of food, this morning I was pouring the half & half over my Coco Puffs (hey, you only live once) when yet another ad came on the radio about how I could stiff-arm the credit card companies. In the past I would usually run up my credit card, and then refi or do a home equity loan to pay off the balances. Now I can’t do either, so how am I supposed to pay off my credit card bills? Maybe I should listen to the ads on the radio…Banks and households loaded up on debt during the boom years and used the money to buy assets that are now falling in value. They are now working furiously to pare the debt and get rid of the assets. The painful process, known as deleveraging, involves less consumer spending and less lending by banks, two critical engines of growth. It is a big problem.

Nonfarm payroll (and I don’t imagine farm payroll is doing that much better…) dropped 524,000 jobs in December, and experts believe that a rapidly deteriorating economy promised more significant losses in the months ahead. More declines in rates? Perhaps, and I would opine probably. December’s job losses brought the total for 2008 to 2.45 million, and the unemployment rate jumped to 7.2% in December from 6.8% in November (it was 5% last April!). The news was roughly as expected, and we find the 10-yr at 2.47% and mortgage prices slightly worse to begin Friday.

GMAC stated that, “Due to the recent purchase of LandAmerica Title by Fidelity National, GMAC Bank will again accept title commitments, title insurance policies, and insured closing protection letters with no reinsurance requirements from the following companies: Lawyers Title Insurance Corporation, Commonwealth Land Title Insurance Company, United Capital Title Insurance Company, LandAmerica NJ Title Insurance Company.”

How much mortgage-backed securities has the Federal Reserve been buying? The program, begun this week, has bought $10.2 billion of Fannie Mae, Freddie Mac and Ginnie Mae securities, with the bulk being $3.45 billion of 30-year bonds with 4.5% coupons (which usually includes 4.75%-5.125% mortgages) and $3 billion of 30-year 5%’s (5.25-5.625%) per the New York Fed’s Web site. In other words, they are will on their way to the $500 billion targeted for purchase by the end of June.

And others are buying mortgage debt. The headline read, “FDIC Un-nationalizes Some Debt”, but it turns out that the federal government is going to let Private National Mortgage Acceptance (“Penny Mac”, run by several ex-Countrywide folks, who many say helped get us into this mess in the first place) service a portfolio of loans that had been owned by failed First National Bank of Nevada. The nearly $500 billion in mortgages sold could serve as a model for the government to put nationalized mortgages into efficient private hands, and it gives an indication of how much investors might be willing to pay: 30-50 cents on the dollar. Asset Manager Blackrock has a sizable stake in PennyMac and served as an adviser on the deal.

Thank you for taking the time to review this blog. Please refer back often to see the latest news in the mortgage and real estate industry and commentaries about what it means to you.

1-5-2009

Watching rates go up for no sustainable apparent reason is about as much fun as putting away Christmas ornaments and taking the tree to the curb. As they say, “A rising tide raises all boats”, and low rates have helped every lender still in the ring, big or small, regardless of geographic concentration. U.S. Bank’s refi applications more than doubled last month. Fifth Third, the Ohio area’s largest lender, reported that refinance activity accounted for almost two-thirds of loan applications in December compared with one-third a month earlier. Even the Bank of Kentucky’s applications doubled from November to December.

GMAC Bank's parent company, GMAC Financial Services, announced that the Federal Reserve Bank has approved its application to become a bank holding company. On top of that, the U.S. Treasury announced that it will purchase $5 billion in senior preferred equity from GMAC, and agreed to lend up to an additional $1 Billion in support of their reorganization as a bank holding company.

Not much happened to the economy in the last 4-5 days, aside from dire numbers coming from retailers which ordinarily would help rates. Yet we find the 10-yr Treasury hit 2.50%! It has come back down slightly from there, but keep in mind that a) The market was overbought, suggesting that a correction was due, b) we have supply ahead with a 3-yr and 10-yr auction this week on Wednesday and Thursday, and a 10-yr TIPS auction tomorrow, c) how much lower did anyone think that rates were going to go, in the near term? Fortunately mortgage rates and doing better than Treasuries, which makes some sense given that they did not participate in the big move down. Currently the 10-yr is at 2.43%, and mortgage prices are perhaps .5 better in price than late last week, although it seems that no one is quite sure of where they should be priced!

There is no news today, aside from Construction Spending. Tomorrow we have the Commerce Department’s November Factory Orders data. This data gives us a fairly important measurement of manufacturing sector strength, both in durable and non-durable goods, and is expected down 2.6%. Also Tuesday will be the release of the minutes from the last FOMC meeting. This will give market participants insight to the Fed’s thinking and concerns regarding inflation and monetary policy. The usual Jobless Claims on Thursday, and then the final report of the week comes Friday morning when the Labor Department will post December's employment figures. Current forecasts call for a 0.3% increase in the unemployment rate up to 7.0%, and Nonfarm Payroll -500,000.

Author:
C Tiller

Subject:
Loan Modifications-CitiGroup Mortgages

Date Posted:
2009-01-12 17:40:57

2-18-2009

Today's News ...

Today, President Obama announced his Homeowner Affordability and Stability Plan and referenced the role that Freddie Mac will fulfill in assisting borrowers through a new refinance initiative and a new loan modification program. We are pleased to support this initiative and look forward to working with the Administration.

We support this important effort and expanding our role in keeping families in their homes, strengthening communities, and bringing stability to the nation’s housing market. We are currently finalizing the program and operational details with the Federal Housing Finance Agency, the Department of the Treasury and other industry participants. We plan to announce additional details of the initiative, including how customers servicing Freddie Mac-owned mortgages will participate, in early March.

At this time, the only publicly available information on the Homeowner Affordability and Stability Plan is posted on the Treasury Department’s Web site, www.financialstability.gov. We encourage you to review this preliminary information now, and anticipate the release of additional details in early March. In addition, it is important that you direct all consumer inquiries to this Web site for more information. Freddie Mac’s (800) FREDDIE call center will also direct consumers to this Web site until more information is available.

We appreciate your patience as details and operational requirements are finalized

1-12-2009

Whether you spell it cramdown, cram down, cram-down, or CramDown, the subject was in the news last week. Basically Citigroup reached a compromise with lawmakers to allow bankruptcy judges to modify terms of existing mortgages, and industry-wide legislation is probable. Both houses introduced bills allowing bankruptcy judges to permanently reduce mortgage balances to the property's fair value on principal residences, among other measures. Citigroup’s agreement, in addition to addressing existing mortgages and not future loans, permits bankruptcy modifications as long as filers previously contacted their lender in an attempt to secure a loan modification prior to filing (for new filers) or requesting the mortgage be modified in bankruptcy (for existing filers).

The Mortgage Bankers Association, and others, opposes the issue, due to the many issues that are unresolved and the destabilizing affect on the market. The industry’s concerns are well based. Losses from bankruptcy cram downs could be significantly larger than servicer-driven modifications, and the potential for high plan failure rates could further increase losses and charge-offs without stemming foreclosures or accelerating a housing recovery. Bankruptcy filings could double or more, increasing credit card charge-offs. Some fear a massive sell-off that would worsen valuations, threatening further balance sheet write-downs. Although it is believed that less than 1% of existing mortgages would be impacted, industry experts feel that cram-downs lower whole loan valuations. Since mortgage and home equity loans are, on average, 40% of large banks’ loan books, CramDowns of principal would lower that value, hurting bank equity. Home equity loans are in the first loss position in a cramdown scenario, and it is believed that for many borrowers bankruptcy could become a more attractive option, accelerating default rates.

Our web site: www.gogetthemortgage.com or call 877-235-7012 for assistance

Author:
C. Tiller

Subject:
Treasury Rate and the present economy

Date Posted:
2008-12-23 13:21:52

May 13, 2009

First I find out that TANG (the orange drink that I was raised on) was not developed in space or for astronauts. It actually came along a year before NASA was created, and marketing wizards tied the two together! Now Cheerios is under fire. The Food and Drug Administration posted a warning letter to General Mills saying that the promises to “lower cholesterol and reduce the risk of heart disease and cancer” may be exaggerated. The FDA allows food companies to make nutritional claims backed by scientific studies, but believes that the labeling on Cheerios has gone beyond what the science supports.” Who knows what will be next – maybe I will find out that my practice of burning goat entrails in the back yard doesn’t lead to lower rates.

When the US Government took over Freddie and Fannie (are they still two separate companies?) they may have underestimated the amount needed. Now they expect the takeover to cost taxpayers $171 billion. Budget details released by the administration project that the companies are likely to need $92 billion more to cover losses. Fannie Mae and Freddie Mac have already received or requested $79 billion in aid as losses have mounted. Fannie Mae posted a $23 billion loss last week, prompting a $19 billion government investment, and Freddie Mac asked for another $6.1 billion in government aid after reporting a $9.9 billion quarterly loss. Including this, Freddie Mac has drawn $51.7 billion of its $200 billion lifeline from the Treasury Department. Last quarter, when it reported a loss of $23.9 billion, the company asked the government for $30.8 billion.

Federal Agricultural Mortgage Corp. (AGM), better known as Farmer Mac, was created by Congress in 1988 to buy mortgages and other loans that banks made to farmers and ranchers. Of course, given that their business model was aided by securitizing those loans, they are not immune to the credit market problems although Farmer Mac just reported a profit of $33 million. They reversed a prior-year loss caused by derivative losses, but core results slumped on loss provisions as loans in danger of going bad continued to rise. Farmer Mac’s capital surplus exceeds $67 million, compared with $13 million at year's end. Like their cousins, they have also received help, in effect being rescued by a lending group's $65 million capital injection last autumn. Farmer Mac's 90-day delinquencies were 1.9% of its portfolio as of March 31, or 0.61% excluding ethanol loans, up from 1.35% at the end of the year.

ING has been around a little longer – since 1743 to be precise. ING is the largest Dutch financial-services company, and they reported their third consecutive quarterly loss (about $1 billion, worse than expected) because of equity write downs, higher loan-loss provisions and reorganization costs.

The impact of the real estate downturn is definitely making itself felt in the commercial market. If you own a bond backed by commercial real estate, and vacancies have shut down the cash flow so that the servicer doesn’t have money to remit to you, what is the next step? http://www.reuters.com/article/ousiv/idUSTRE54B65Q20090512

Mortgage applications here in the United States fell last week by 8.6%, down to their lowest level since mid-March. Don’t tell me everyone who can refinance already has! The Mortgage Bankers Association said refinance applications fell 11.2% (the lowest since mid-February), but the purchase loan index climbed 0.5% to where they were a month ago.

US Bank is still apparently making a decent market in jumbo ARM lending, which is a program that some markets still need. For loans up to $1 million here in California (and Nevada) they will go up to 75% LTV, and can even add a 2nd on there and go as high as $1,350,000. And for a 70% LTV they’ll go up to $1.5 million, or $1.85 million with a 2nd. Nice to see.

Back to interest rates. It appears that stock markets are coming under some pressure in here, as the news about the economy continues to be mixed. This morning we had U.S. retailers reporting that sales fell for a second straight month in April, mostly attributed to gasoline and electronic goods purchases. Retail Sales were -0.4% after falling by a revised 1.3 percent in March, but analysts were expecting sales to be flat. U.S. import prices climbed again in April (+1.6%) as imported oil prices posted their sharpest jump in more than seven years. But import prices on a year-over-year basis were down over 16% due to gas. Export prices rose 0.5 percent in April after a revised 0.7 percent decrease in March but were down 6.8 percent from April a year earlier. The news has helped the bond market, which has been oversold recently, and we find mortgage security prices better by .125-.250 and the 10-yr yield back down to 3.12%.

In case anyone was wondering how to shampoo a cat:

Put both lids of the toilet up and add 1/8 cup of pet shampoo to the water in the bowl.
Pick up the cat and soothe him while you carry him towards the bathroom.
In one smooth movement put the cat in the toilet and close the lid. You may need to stand on the lid.
The cat will self agitate and make ample suds. Never mind the noises that come from the toilet, the cat is actually enjoying this.
Flush the toilet three or four times. This provides a 'power-wash' and rinse'.
Have someone open the front door of your home. Be sure that there are no people between the bathroom and the front door.
Stand behind the toilet as far as you can, and quickly lift the lid.
The cat will rocket out of the toilet, streak through the bathroom, and run outside where he will dry himself off.
Both the commode and the cat will be sparkling clean.

Yours Sincerely,
The Dog.

5-5-2009 Industry News

Last week was "Take Your Kid to Work Day." Supposedly this week, thanks to the economy, there's a new special day for parents and kids: "Take Your Kid to Where You Used to Work Day." This day shows them that daddy and mommy didn't always just sit around in their underwear.

Here are some quotes from real-live people in the mortgage business, concerning the HVCC & FHA loans:

“You are correct. Bank of America doesn't buy without an appraisal on VA IRRL's.”

“I am sure that Countrywide/BofA will NOT purchase them at all. The problem with GMAC and Citi is that they both keep you on the hook for 24 months for payments rather than the normal 1-4 months.”

“Bank of America Home Loan (they don’t want them referred to as B of A, they get very testy about that) does not buy any VA Streamlines with or without appraisals. Also, loans sold to Citi have a 24 month early payment default on those without appraisals, so why would you want to do that?”

“We at _____ Mortgage are invoking HVCC for FHA loans along with conventional loans. Maybe we are just stupid, but especially with TPO loans – this seems to be what the investors want. We also have been requiring at a minimum an AVM, and in most cases an appraisal, on VA IRRRL’s. We thought this would at least mitigate the VA no bid potential. Again, I’m not sure if we are just stupid or ahead of the game, but the performance level of IRRRL’s is very poor.”

“We're requiring HVCC over at ____ Mortgage for conventional and FHA. Only VA is excluded over here.”

“EverBank is requiring HVCC on all their files (FHA and Conventional). They appear to be the only one at this time. However, with that said the folks at EverBank seem to be ahead of the market with restrictions that have turned out to be where most end up.”

“Flagstar has been requiring HVCC appraisals for all our loans since January 1, but I think they've been flexible. Flagstar now requires them on everything (including FHA), unless it's a streamline VA or FHA loan. They also waive the appraisal on the new Fannie/Freddie 105 CLTV programs if you elect to use the automated value generated by DU. On Flagstar’s VA IRRRL and FHA-to-FHA Streamlines, they require a credit report IF the existing loan wasn't done at Flagstar.”

“I haven't heard anything on the VA IRRRL appraisals. But I do know that Countrywide hasn't purchased them for a long time. They say that if it blows up, unlike FHA, VA only reimburses them on somewhere around 50% of the loan. So, they don't feel good about buying a loan without an appraisal when they have so little protection if it gets sideways. But it makes sense why you wouldn't want to do that, especially in a soft real estate market.”

Chase is raising the minimum FICO scores for certain categories of FHA loans. For purchase and rate and term refinancing, on FHA loans above $417,000, they require a minimum 640 score. Cash out refi’s above $417k require a 660 score, along with all non-credit qualifying streamline refinances. (Other programs remained at 620.) I believe that Citi, for example, is already at 660 for loans above $417,000.

US Bank, who rolled out the higher loan limits on jumbo conforming, reminded sellers that they are still doing combos to 75% in California behind the higher loan amounts. “Other positives are a minimum FICO on FHA loans of 600, and still allowing non-occupying co-borrowers for blended ratios on most of our products.”

Videos seem to be all the rage. Here’s one that explains the HVCC: https://www.thinkbigworksmall.com/mypage/tbws/7789/661622 One agent wrote to me and said, “Every legislator should be required to refinance their home to stimulate the economy and use an HVCC appraisal - I think they would understand how convoluted the process is. The HVCC will be responsible for taking a minimum of 10% more "value" out of the market with the poor quality.” Let’s hope that maybe 10% could be added to the market for the same reason.

A couple months ago Fifth Third Mortgage Company, a subsidiary of Fifth Third Bank, announced its intention to participate in the government's Homeowner Affordability and Stability Program (HASP), and at this point it appears to be working: they have worked with more than 11,000 homeowners to refinance more than $1.95 billion in loans. According to the story, the company has already refinanced more than $21 million Freddie Mac-owned or guaranteed mortgages through the Freddie Mac Relief Refinance(SM) Mortgage. Freddie launched that program in early April.

Here’s another example of a relatively new organization that indicates the “sign of the times”: the Rainy Day Foundation. It was established to “create and maintain responsible homeownership and provide tools to educate, counsel, support and financially assist homeowners who experience unforeseen short-term financial problems.”

2-18-2009

Today's News ...

We appreciate your patience as details and operational requirements are finalized

January 26, 2009

I am not a big fan of rumors. (Although they say that language was invented so that people could gossip.) Last Thursday was an example of a rumor whereby CitiMortgage was ending their entire wholesale business channel. It was apparently started by a client, reportedly in Southern California, who was suspended with cause by Citi. One of their account executives sent the message that Citi exited TPO, rather than sharing that his company had been shut off. At this point, Citi’s legal department is probably involved…

This story, however, is not a rumor. Fannie Mae, now the largest foreclosure prevention company in the world, laid off several hundred employees in technology, administration, communications, and their single family unit. They do, however, plan to hire a similar number of people in the Dallas area, where the company bases its anti-foreclosure unit. Overall, the total number of Fannie employees should remain the same in 2009 as in 2008, at just over 5,500.

Speaking of them, Fannie will change its pricing from $50 to $75 per exercised Property Inspection Waiver (PIW) for whole loans purchased on or after February 1, 2009 and MBS pools with an issue date of February 1, 2009 or later.

Last week was not a good week for Treasury yields, although mortgages, on a relative basis, held in better. In fact, Treasuries had their largest price loss since last June, and this week may not help. The Treasury Department will be selling $78 billion in two- and five-year notes and 20-year Treasury Inflation Protected Securities, or TIPS, along with $66 billion in three-, 10-, and 30-year securities next month, which equals to an estimated $62.5 billion in 10- year duration equivalents. That is a lot of supply for the market to absorb, China is closed for the Year of the Ox celebration, and the rules of supply and demand tell us…

We do have a FOMC (Federal Open Market Committee) tomorrow and Wednesday, but how much lower can overnight rates go? Most believe that much of the meeting will be spent reviewing these programs, their effectiveness and challenges the Fed will face in running them and one day unwinding them. Aside from the Fed meeting, rates have a fair amount of news to digest. Today we have Existing Home Sales and Leading Economic Indicators. Tomorrow we have Durable Goods and Consumer Confidence. Nothing on Wednesday, then on Thursday we have Jobless Claims and New Home Sales, followed by Friday’s GDP number, Chicago Purchasing Manager Survey, and Michigan Sentiment Index, and the Employment Cost Index. Rates have crept up, with the 10-yr at 2.64% and mortgages worse by about .125 in price.

The Obama's first night in the White House…

"What a day!" Michelle says.

"Phew, yeah...what a day!"

"I'm exhausted. Could you get the light, Barack?"

"Yes I can! I will not only get the light, I will shine the light for all Americans and show them the way through the darkness! It is a light that arises from the hopes and dreams of the old and the young, the black and white and yellow and red and brown, the gay and the straight, the rich and the poor! It is a light on whose rays the promise of hope...and opportunity...and achievement...all soar to a distant, brighter future! But it will take all of us, working together in a spirit of shared sacrifice and commitment, to make that light a beacon of progress. And I say to you tonight: This is our moment! This is our bedtime! This..."

"Oh for god's sake never mind, I'll do it myself..."

..............................................................................................................................End January 26, 2009

www.FHA-Home-Mortgage.com

Is it a safe bet to say that, “rates in the short term will be choppy as the market adjusts to all this news, but then slowly trending lower”? Somewhat – but the downside is limited, since short term Treasury rates are already near 0%. Yes, mortgage rates seem to be taking a pause in the high 4’s or low 5’s, and given historical rates should be lower. And there continues to be that pesky problem that in 2008 the darned borrower and property actually have to qualify to make their payments…

And what about price compression? Investors are worried about their recently purchases inventory with rates in the 6’s. Does anyone want to pay a premium for a car that won’t work after it goes off the lot, or a camera that will soon be obsolete, or a mortgage that is refinanced after 3 months? Large investors have their hands full between going back to smaller originators for repurchases and soon-to-be early pay-off penalties.

Do low Treasury rates really matter anyway? Japan had historically low rates, and it took their economy years to come back. Yes, lower rates are better than higher rates, but financial institutions are not going to start lending money because of lower rates. As analysts point out, they will either have to want to lend it, or liquidity will have to come from the US Government, which is what we’re seeing, through the Federal Reserve and Treasury. The Fed can create money by printing it, and the Treasury can borrow money to buy debt. See how that works?

Low rates have not helped the budget dilemma here in California. CalHFA is suspending (temporarily, we hope) all of their programs, including 30-Year Fixed Mortgage products, for moderate income, low income, “Nonprofits & Affordable Housing Partnership Program (AHPP), Extra Credit Teacher Program (ECTP), California Homebuyer’s Down Payment Assistance Program (CHDAP), Extra Credit Teacher Program (ECTP), and School Facility Fee Down Payment Assistance Program (SFF).” This is the result of the action taken by the Pooled Money Investment Board (PMIB) last week - the PMIB loans money to state agencies to advance program funds which will later be repaid through bond issuances. CalHFA uses a PMIB loan to initially fund its Conventional 30-Year Fixed Mortgage and down payment assistance programs. The recent PMIB action froze all such PMIB loans.

The Census Bureau released state population estimates as of July 1, 2008. Utah is the fastest growing state, with its population climbing by 2.5% in the prior year. It was followed by Arizona, Texas, North Carolina and Colorado. Two states actually lost population: Michigan and Rhode Island.

GMAC defines a restructured loan as, “A mortgage loan in which the terms of the original transaction have been changed resulting in either absolute forgiveness of debt or a restructure of debt through either a modification of the original loan or origination of a new loan.” This can result in forgiveness of a portion of principal and/or interest on either the first or second mortgage, application of a principal curtailment by or on behalf of the investor to simulate principal forgiveness, conversion of any portion of the original mortgage debt to a "soft" subordinate mortgage, or conversion of any portion of the original mortgage debt from secured to unsecured debt. GMAC goes on to say that, “Fannie Mae and Freddie Mac will not purchase or accept delivery of a restructured loan refinance. Therefore, all restructured loans are ineligible for conforming loan financing.” And in addition, “Restructured loans are ineligible for non-conforming loan financing.”

Now for something completely different – like economic news. Yesterday the treasury auctioned off $38 billion of 2-yr notes. The results were mixed, with a bid-to-cover of 2.13 and with indirect bidders comprising 30.4% of the participation. But nonetheless rates worsened. Today we already had Gross Domestic Product, which was unchanged in Q3, still falling at a 0.5% annual rate. Personal Consumption during the 3^rd quarter was -3.8%, and the GDP price index was +3.9% - both near estimates. Still ahead, to give air travelers stuck in airports something to watch, will be the housing figures for November New Home sales in November are expected to show a decline of -4.2% month over month adding to last month’s 5.2% decline which brought the index to a 17-year low. Existing Home sales are expected to have fallen -1.2% in November. After GDP, and pre-housing, we have the 10-yr Treasury at 2.20% and mortgage prices worse than yesterday afternoon by about .250 in price.