Hover over this image for caption and link ↓↓↓

Economic Worries
Yesterday’s stock market drop dominated the financial news. And a slowing economy helps rates and mortgage loan agents, right? (It’s a two-edged sword.) So the markets did not pay much attention to Non-Farm Productivity increasing over 6% during the fourth quarter of 2009. Efficiency in the last nine months of 2009 soared at the fastest pace since 1966 as companies cut worker hours even after sales stabilized. Factory Orders for November were up 1%, better than expected. And 4Q09 GDP was 5.7% at the first reading last week. But the focus, and one of the reasons given for stocks taking a beating, was on Jobless Claims which hit a 7-week high.

There is certainly a lot to be nervous about. There is the concern that around-the-world budget deficits will need to be financed by issuing more debt. California, with the 8th largest economy in the world, is continuing to have budget problems. On top of all that, oil prices declined over 5% while gold prices also fell, down over 4%. The dollar was weaker to the yen, but firmer to the euro as the risk aversion trade returned, and this helped Treasuries and mortgage security prices, dropping rates to December levels. more…

What Do Foo Fighters Know Mortgage Rates?
Why can’t automated answering services at mortgage companies be more like the one at Nestle Crunch’s Hotline at 800-295-0051? When asked if you want to continue in English or Spanish, just wait for about 10 seconds, listen to the options and press “4”. Listen to the options again, and then press “7”. (It is worth trying a few times if the line is busy.)

“I know what you’re thinkin’
We were goin’ down.
I can feel the sinkin’
But then I came around.” more…

Goodbye, 2009. Typing “2009″ is so much easier than typing “2010″, but such is life. And folks who are better at using words than I am (”than me”?) say 2010 is pronounced “twenty-ten”, not “two-thousand ten”. Speaking of “2’s” and “1’s”, The U.S. Treasury had a record year of debt sales last year, selling more than $2.1 trillion in bonds and notes, a record and more than the amount in the previous two years combined.

Rates Up on Fewer Jobless Claims, 4yr High For ISM Index
Why are rates where they are? The answer is stronger-than-expected economic news. Well, Thursday morning we learned that Jobless Claims unexpectedly fell by 22,000 to 432,000, which is their lowest level in almost a year and a half. Continuing Claims fell by 57,000. So the thinking goes that “if fewer people are filing jobless claims, the employment picture is starting to look a little rosier, which means that the economy must be doing better…” We also had the ISM Index print its highest level in almost 4 years. more…

Cashtration (n): The act of buying a house, which renders the subject financially impotent for an indefinite period of time.

More On New Good Faith Estimate
It seems that many companies are just resigned to putting aside money to write their borrowers a bunch of checks, or argue with investors, for the first several months of 2010. Here is a good overview of issues with the new Good Faith Estimate and the financial press perception.

Mortgage Apps Lowest In 2 Months
The MBAA confirmed it by coming out with the recent applications data: demand for U.S. home loans fell last week to the lowest level in almost two months. Mortgage applications dropped 10.7% in the week ended December 18, with refinancing down over 10% and purchases down over 11%. more…

Employees at a pizzeria in Ireland were fired for watching porn on the job. Isn’t that disgusting? Irish people attempting to make pizza!

Small to Mid Size Mortgage Companies Expanding
What isn’t disgusting is the number of mortgage companies which are interested in expanding. For example, First Centennial Mortgage, out of Illinois, is sending out e-mails looking for originators. First Priority Financial, a retail shop out of California, announced that they were buying Austin Perry Financial, a wholesaler also based in California. CMG Mortgage has been expanding, as has Opes Advisors, Stearns Lending, American Pacific, etc., etc. – the list goes on. This is an interesting trend, as perhaps small to mid-size bankers are indeed seeing the origination “pie” shrinking in 2010, and are looking to maintain volumes and increase market share. And the hiring is not only taking place in the loan officer arena, but also operations and back office support.

Weak Treasury Auction, Jobless Claims Up, Trade Balance Narrowed
Rates were not the mortgage banker’s friend yesterday. The 10-yr auction was not the best, with a bid/cover ratio slightly less than other recent auctions, less foreign demand, and one trader said it was “somewhat sloppy”. This morning we’ve seen Jobless Claims and the Trade numbers – and that does it for news. The U.S. trade deficit narrowed unexpectedly in October by over 7% due to the weak dollar helping boost exports while demand for imported oil fell to its lowest daily level since January 2000. In fact, U.S. exports of goods and services were the highest since November 2008 and imports the highest since December 2008. This is good news for the economy, not so good for rates. Jobless Claims, however, rose more than expected last week, and was up 17,000 to a seasonally adjusted 474,000 in the week ended Dec. 5 from 457,000 in the prior week, the Labor Department said. This is bad news for the economy, good for rates. The new 10-yr yield is currently 3.46% and mortgage prices are worse by between .125 and .250. more…

In her new book, “Going Rogue,” Sarah Palin says she doesn’t like vegetarians. Palin says all vegetarians should go back to Vegetaria, where they came from. Unlike Conan O’Brien, from whom that line came, many investor bulletins are not concise. And I may have seen more releases from top investors of greater length, but I really don’t remember when. In case you’re not interested, I’m listing the guideline roundup last on today’s report—lenders are listed alphabetically.

Hiring Brisk At Big Banks
A story in the Wall Street Journal confirms what many in our industry already knew, which is that mortgage restructuring is a growth business for hiring. The four key investors/servicers, Wells Fargo, Bank of America, Citgroup, and JPMorgan Chase “have collectively hired almost 17,000 people this year”. Given that almost 7 million households are 30 days or more overdue, that’s a lot of figuring out how much they can afford to pay each month! Wells alone, per the article, has hired 7,000 employees this year; Citi has added 1,400 jobs. more…

Yesterday was a special day. In the late afternoon I visited Costco, which some people feel simultaneously represents everything that is both bad and good about the retail channel. The change in time over the weekend had made it so the setting sun shone through the front entrance, illuminating the Samsung 46 inch plasma, the flannel shirts, AND the pre-lit Christmas tree boxes all at once. It was a tender moment.

What Are Fed Funds?
What are Fed Funds? These are cash balances held by banks with their local Federal Reserve Bank, typically involved in an “inter-bank sale” of a Fed fund deposit for one business day – overnight. And the Fed Funds Rate is the overnight interest rate charged by those banks with excess reserves on hand. Why would this impact the mortgage rate that James & Jen Borrower pay on their mortgage? They don’t, directly, since the credit profile of a borrower, or house, is more complicated and riskier than a bank with excess funds, and an overnight rate is obviously different than a 30 year rate. more…

My boss told me that I should take an “anger management” class in 2010. I told her that I was already angry enough with management.

How much money are mortgage bankers, including management, making? According to the MBAA, average profit per loan is up nicely versus the first quarter moving to over $1,300 on each loan originated in the second quarter. In addition, production volumes were up and average pull through went from 67% up to 73%! Check this out.

Community Lenders Improving Market Share
Although the death of the mortgage banker and broker is greatly exaggerated, a good share of their business has gone elsewhere. Community banks have seen their relative volumes increase, and some believe that they are well qualified to fill the void left by mortgage brokers. These banks are chartered to serve their local markets; their boards are typically influential in the market place, most have adequate capital and can fund their own loans, they have access to seasoned talent pool, inexpensive technology and are not over burdened by regulatory pressure. And many are entering the warehouse business. And what happens to the bulk of their production? They sell many loans to the usual suspects: Wells, BofA, Citi, Chase, etc. more…

US Bank Expansion, CIT Bankruptcy
What do Bank USA, National Association of Phoenix; California National Bank of Los Angeles; San Diego National Bank; Pacific National Bank of San Francisco; Park National Bank of Chicago; Community Bank of Lemont, Illinois; North Houston Bank; Madisonville State Bank of Madisonville, Texas; and Citizens National Bank, of Teague, Texas have in common? Their deposits and assets all became part of US Bancorp after being shut down by the FDIC on Friday. The FDIC and taxpayers (in a roundabout way) are out $2.5 billion. USB, who has not been immune to their stock sliding almost 20% in the last year, has repaid almost $7 billion in TARP money. Friday they added 153 branches with combined assets of $19.4 billion and deposits of $15.4 billion.

And what do Eddie Bauer Holdings and Dunkin’ Donuts have in common? They, along with literally one million other businesses, have both received loans from commercial lender CIT Group. CIT filed for Chapter 11 bankruptcy protection, which analysts say will help bondholders and customers but not stockholders and taxpayers. Apparently we’ve put about $2.33 billion of our money into CIT, which is now the largest firm to go bankrupt after getting a federal bailout. None of CIT’s operating subsidiaries, including Utah-based CIT Bank, were included in the filing, CIT said in a statement. more…

Is there ever a day that mattresses are not “on sale”? Securities are always for sale. I love this kind of talk: “Agency MBS reversed course this week as much of the coupon stack underperformed against duration hedges.” That is what I received from a buddy who works for a large investment bank. What the heck does that mean, and does it mean anything to some broker who has a client waiting for 4.875% to come back? Not really.

How Rates Work & Why They’re Low
On any given day, investors in fixed income securities have a huge number of options from which to choose. They can buy government securities, corporate bonds, municipal bonds, mortgage-backed securities, the list is too numerous to detail here. At the moment, agency MBS securities backed by Freddie & Fannie loans) are looking fairly priced versus Treasuries. And speaking of Treasury securities, the yields on two-year note yields rose above 1% for the first time this month, and the 10-yr Treasury hit 3.50% this morning. more…