What are brokers and reps saying out there? "It seems the faucet turned off mid January.  My brokers have very little and it seems every community bank is terrified of Friday’s and the FDIC." "I’m still pretending to be a Mortgage Broker in this wonderful economic climate, all I seem to be doing is paying for licenses, taking exams and foolishly marketing my services.” “Things are good here - people are getting back out looking and people are listing - just what we need!” “Dealing with the current GFE hassles is about as easy as folding a fitted sheet!” Lastly, “Rob - The following is an actual underwriting condition from a large wholesale lender which is known for having the best wholesale pricing for conforming loans. (As background, the borrower is a staff attorney for the Federal Reserve Bank of NY.) ‘Please provide a signed letter from CPA stating if [client’s first name] has 25% or more ownership in Federal Reserve Bank. If ‘yes’ he should be run as self employed.’”

Locks appear to have picked up this week, but the MBAA reported that mortgage applications last week were down for a third consecutive week. Apps were down 8.5%, with refi’s down almost 9% and purchases down a little over 7%. Purchases are down to mid-1997 levels. As a percentage of applications, refi’s are hanging tough at 68% if total activity - is your company ready if they dip below 50%? The MBAA now forecasts refinancings will fall to a range of $500 billion to $600 billion this year from $1.4 trillion in 2009.

As I tell groups whenever I speak, you can’t drive through a downtown anywhere in the United States without seeing “For Rent,” “For Sale,” “For Lease” signs, or plain empty storefronts. It turns out that the default rate for commercial property mortgages held by U.S. banks more than doubled in the fourth quarter and may peak at 5.4 percent at the end of 2011, according to a study by Real Capital Analytics Inc. The default rate for loans on office, retail, hotel and industrial properties jumped to 3.8 percent from 1.6 percent a year earlier. The default rate for loans on apartment buildings rose to 4.4 percent from 1.8 percent. Commercial property values, which fell 29% in December from a year earlier, are down 41% from the October 2007 peak, according to the Moody’s/REAL Commercial Property Price Index. Unfortunately for banks here in the US with between $100 million and $1 billion in assets, they hold 25 percent of commercial property loans outstanding and 15 percent of apartment loans. The biggest banks, those with more than $10 billion in assets, hold about half of commercial loans and two-thirds of apartment loans.

Freddie Mac said yesterday that it lost $7.8 billion in the fourth quarter, or $26 for every man, woman, and infant in the United States. On the plus side, it was better than the $23.9 billion Freddie lost in the same quarter a year ago, and apparently doesn’t need more money (for now) than the $51 billion in taxpayer aid it already received. For all of 2009 the company lost $21.6 billion versus 2008’s loss of $50.1 billion. But Freddie Mac's chief executive, Charles Haldeman, warned of a "potential large wave of foreclosures" still to come

Wells Fargo’s wholesale group alerted patrons on the subjects of fees paid by the seller (Per HUD, “all seller-paid fees must be disclosed on the GFE – including transfer taxes. If seller-paid fees are not disclosed on the GFE, then you are required to provide a refund to the borrower for any amount that exceeds tolerance limitations – regardless of whether or not the seller actually paid the fee. The only exception is fees that are required by state law to be paid for by the seller: Must be legally required by the state or local government and the purchase contract alone will not satisfy this requirement.”), and the disclosure of government fees. Starting in mid-March, Wells Fargo wholesale will begin sending an e-mail message confirming that the appropriate amount of the government fees listed below have been disclosed – brokers will be responsible if the disclosed amount of a government fee changes at any time without evidence of a valid changed circumstance.

U.S. Bank’s Consumer Finance Wholesale Mortgage Division sent customers a revised list of states with restricted LTV’s, with more states improving than worsening. For example, USB will go to 90% on 1st mortgages with no MI (including jumbos and cash out products) and up to 85% on 2nd mortgages, in AL, AK, AR, CO, CT, DE, GA, ID, IN, IA, KS, KY, ME, MD, MA, MN, MO, MT, NE, NH, NM, NY, NC, ND, OK, PA, RI, SD, TN, VT, VA, WV, WI, WY. In the states of IL-NJ-OH-OR-SC-UT-WA USB lend up to 90% on 1st mortgages, and to 80% on 2nd mortgages. Finally, in AZ-CA-FL-MI-NV (it’s “Tier 1” states) the wholesale division goes to 75% on 1st and 2nd mortgages.

Yesterday’s $42 billion 5-yr auction did not go well. It goes back to the “What if we held an auction and nobody bid?” Indirect bids, which in the past indicated a level of interest from foreign entities but in the last year became a little convoluted, have been on a roller coaster: Tuesday’s 2-yr hit over 53% of the auction while yesterday’s was the lowest since July at 40%. Not good. The Bernanke testimony (rates need to remain low), along with the much worse-than-expected New Homes Sales data, muddled the picture somewhat for investors yesterday. The good news for mortgage folks is that dealers are reporting heavy selling, and selling is often powered by locks, so current locks must be picking up.

The New Home Sales data was particularly bad. In January sales dropped 11%, the worst on record and erasing all the gains from last year. Nationwide, inventory represents over a 9 month supply – the highest in almost a year. And year-over-year the median price for a new home fell in January by 2.4%, to $203,500 from $208,600 a year ago. Regionally, January new-home sales dropped 35.1% in the Northeast, 11.9% in the West, and 9.5% in the South. Sales rose 2.1% in the Midwest.

And although Mr. Bernanke said the economy still needs the Fed's support via low rates, he said the central bank is prepared to tighten credit when the time comes to prevent inflation. A first step toward tighter credit could involve the Fed draining the more than $1.0 trillion in excess reserves banks have accumulated after the central bank bought mortgage-backed securities and U.S. Treasury securities to combat the financial crisis, most likely through reverse repurchase agreements.

This morning the markets are being pushed around by Jobless Claims, the GDP, a $32 billion 7-yr note auction, and continued testimony from Ben Bernanke. Prior to the 8:30AM EST numbers the yield on the 10-yr was back down to 3.66%. Durable Goods were up 3% for January versus December’s +1.9%. (Ex-transportation the number was -.6%.) Jobless Claims showed an increase of 22,000 to 496,000, with a four-week moving average creeping up by 6,000 to 473,750. Immediately after the news the yield on the 10-yr dropped to 3.64%, and mortgage prices are better between .125 and .250, depending on coupon.

We were dressed and ready to go out for the New Years Eve Party. We turned on a night light, turned the answering machine on, covered our pet parakeet and put the cat in the backyard.
We phoned the local cab company and requested a taxi. The taxi arrived and we opened the front door to leave the house.
As we walked out the door, the cat we had put out in the yard scoots back into the house. We didn't want the cat shut in the house because she always tries to eat the bird.
My wife goes on out to the taxi, while I went back inside to get the cat. The cat runs upstairs, with me in hot pursuit.
Waiting in the cab, my wife doesn't want the driver to know that the house will be empty for the night. So she explains to the taxi driver that I will be out soon, “He's just going upstairs to, uh, say goodbye to my mother.”
A few minutes later, I get into the cab.
“Sorry I took so long,” I said, as we drove away. “That stupid thing was hiding under the bed. I had to poke her rump with a coat hanger to get her to come out! She tried to take off, so I grabbed her by the neck. Then, I had to wrap her in a blanket to keep her from scratching me. But it worked! I hauled her fat rump downstairs and threw her out into the back yard!”
The cab driver hit a parked car.

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.)