And speaking of cold, here we are at the World Series...baseball in November in the Northeast. Lots of folks in mortgage banking like numbers and statistics, so here is one question (totally un-mortgage related) that is interesting: how many baseballs does a major league team use per season? It turns out that, on average, a ball only lasts 3-4 pitches (foul balls, scuffs, home runs, end of inning, etc.) so each game consumes roughly 100 balls. So with 30 teams, 162 games, the approximate usage is 220,000 balls per year! The ones that don't end up on fan's shelves are used for batting practice, or by minor league teams.

Most economists believe that although the internet bubble took its toll on stock prices and the stock market in general, the housing bubble has had more of an impact on our sense of well-being. It seems to remind us that, for whatever reason you attribute to the dramatic rise in housing prices (low interest rates, a government mandate to make loans to unqualified buyers, Wall Street, etc.), that the faster something goes up, the faster it comes down. Any time the price that people will pay today depends on the belief that other people will pay even more tomorrow, you have a potential price bubble.

Granted, people view a home differently than a share of stock. But in terms of commodities, if the price of carrots, or hay, goes up 40%, more carrots or hay will soon flood the market. If gold is going up, more mines work overtime and more panners will hit the streams.  But the housing market is slightly different, in that most houses were built in the past, and it takes several months to build new ones. But as owners felt better about the worth of their house, they borrowed against it rather than sell it, leading to other problems. And the sense of rising values made owners feel smarter, better off, and added trillions to our sense of wealth. Since most families own their own homes, we all feel happier when real estate prices are going up. But we’re probably better off if prices are stable or even dropping slightly. It is easier for new buyers to purchase a home and easier for existing owners of starter homes to trade up.

Half of the e-mails that I received yesterday were from investors bettering their pricing. The bond market has savored the economic data in the last few days. (I feel that the word “savored” is not used often enough in mortgage banking circles.)  Not only have rates in general moved down, but mortgage rates especially. The $41 billion 5-yr auction followed Tuesday’s 2-yr auction with no problem at all. Wall Street firms reported decent buying from money center banks and servicers, and of course the old stalwart the Fed, and with origination generally down prices had nowhere to go but up. A solid auction, combined with continued weakness in stocks due to perceived continued weakness in the economy, helped yields drop.

Unfortunately for our industry, Wednesday we learned that New Home Sales, expected to rise, actually dropped 3.6%, and the median price of a new house came in at $204,800, 2.5% better than last month but still down from the $225,200 figure from 2008. Many economists point to the data as a disappointment and another indication that the effect of the first-time homebuyer tax credit has been to borrow from the future and has boosted home sales and housing activity on a temporary basis.

Today we have Jobless Claims, GDP, and a sale of a record $31 billion in seven-year notes. GDP for the 3^rd quarter grew at a 3.5% annual rate, the first time in a year thanks to consumer spending and investment in new home-building. This was a shade more than the 3.3% expected. Consumer spending, which accounts for over two-thirds of U.S. economic activity, was up 3.4% in the third quarter, the fastest advance since the first quarter of 2007, and residential investment jumped at a 23.4 percent rate in the third quarter. And Jobless Claims dropped by 1,000 last week, although the number was higher than expected, to a seasonally adjusted 530,000 in the week ended Oct. 24. After these numbers we find the bond market giving back some of its gains from yesterday: the 10-yr is currently 3.46% and the 5-yr and mortgages are worse by .125-.250.

And eyes continue to be on the tax credit extension, which either prolongs the inevitable or helps the housing market to stabilize and recover, depending on how one looks at it. A Senate committee reached a compromise to extend the credit, and also tacked on a $6,500 tax credit for other primary-home purchasers and raised the qualifying income limits to $125,000 for single taxpayers and $225,000 for joint taxpayers. Under the Senate panel compromise, buyers must have sales agreements in hand by April 30, but they will have until June 30 to go to settlement, the sources said. The measure still faces votes in the full Senate and the House.

Bank of America Home Loans, last week, sent out a clarification on their policy for Higher Priced Mortgage Loans (HPML). “All 3/1 and 5/1 loans, including interest-only, determined to be HPML are ineligible for purchase, FHA Streamline refinances determined to be HPML are ineligible for purchase, but FHA loans determined to be HPML are eligible for purchase by Correspondent Lending provided they comply with all the restrictions outlined in this announcement and in the HPML announcement published by Correspondent Lending on September 18, 2009.” If anyone has questions about determining the average prime offer rate and to help verify HPML status on transaction level, they can go to http://www.ffiec.gov/ratespread/newcalc.aspx

US Bank, announced their “Reduction in FHLMC Cash Out Refinance LTV Limits & Possible Reduction in FHLMC Super Conforming Limits”. Why fight Freddie (or Fannie)? Since FHLMC recently announced a reduction in maximum allowable LTV/TLTV for Cash Out Refinances on 1 Unit, Primary Residence, moving them from 85% down to 80%. Cash-out refinancing for IO products is gone, and don’t try to move any through after November 3 or deliver any after December 11^th.

And don’t try to extend any “Super Conforming” loans with US Bank, or others for that matter, until Congress resolves the issue. The temporary limits, including the famous $729,750, end on December 31 and at this point USB reminds clients that any loan must close by then.

fi yuo cna raed tihs, yuo hvae a sgtrane mnid too
Cna yuo raed tihs? Olny 55 plepoe out of 100 can.
i cdnuolt blveiee taht I cluod aulaclty uesdnatnrd waht I was rdanieg. The phaonmneal pweor of the hmuan mnid, aoccdrnig to a rscheearch at Cmabrigde Uinervtisy, it dseno't mtaetr in waht oerdr the ltteres in a wrod are, the olny iproamtnt tihng is taht the frsit and lsat ltteer be in the rghit pclae. The rset can be a taotl mses and you can sitll raed it whotuit a pboerlm. Tihs is bcuseae the huamn mnid deos not raed ervey lteter by istlef, but the wrod as a wlohe. Azanmig huh? yaeh and I awlyas tghuhot slpeling was ipmorantt!

Rob

(Check out http://www.mortgagenewsdaily.com/channels/pipelinepress/default.aspx. For archived commentaries, check www.robchrisman.com, or to subscribe/unsubscibe write to rchrisman@robchrisman.com.)