According to the Washington Post, the Bush administration today (at 11AM EST) will propose a way to help ease the wave of mortgage defaults: the government would allow more people to refinance with FHA insurance if they fall behind on adjustable-rate mortgages. People who have missed mortgage payments are now ineligible for FHA insurance. In the plan they would be eligible if they fall behind “only because the amount they are required to pay each month increases”. The officials said the administration can make this change without congressional approval, but other details will require legislation. The peak for resetting loans will be in October, when the rates on some $50 billion worth of mortgages are likely to rise by 2 percentage points or more. Interest costs are rising faster than pay. According to the Census Bureau, last year the median household income rose 0.7% (to $48,201). But if a borrower’s payments are rising faster than the 0.7% average growth rate, then they are rising faster than incomes - which is a problem.

Yesterday I mentioned that Chase is rumored to be undergoing major changes to their corporate structure. True or not, it will probably not impact their focus on mortgage banking and purchasing loans, so I apologize for any confusion this may have caused. As one senior Chase official wrote to me, “Let the world know we are doing terrific and setting new origination volume records each month.”

H&R Block reported a net loss of $303 million for the fiscal quarter ended July 31, blaming Option One for about two thirds of the total loss. Possibly H&R Block may stop making new loans through Option One Mortgage to revive a planned sale of the unit after these serious losses, and/or they may sell just Option One's loan-servicing business to hedge-fund manager Cerberus Capital which agreed in April to purchase the entire subsidiary. Under the original terms of the sale, which earlier this month was pushed back to December from October, H&R Block must keep the unit running with cash infusions until the transaction closes. Ouch.

Barclays in “downsizing” its EquiFirst subsidiary but apparently still committed to mortgage lending. A spokesman said, “This is an EquiFirst-made decision in response to the contraction of the industry and to make sure we have a future in the mortgage lending business…Barclays is committed to the non-prime business and very supportive of EquiFirst and its management.''

Astoria made changes to their SIFA (Stated Income / Full Asset) program, including the maximum loan amount being reduced to $1,000,000, the Non Owner Occupied category is no longer available, the Second Home property type is no longer available, minimum credit score requirement has been increased to 700, maximum “net” cash out has been reduced to $100,000, and maximum LTV/CLTV reduced to 50%/50% for cash out transactions.

Nat City changed their “Expanded Approval” price adjustment. In addition, in an unusual move, Nat City reportedly left Countrywide Securities off of their list of approved counter-parties for assignment-of-trade agreements, but that could be for any number of reasons.

The market today? We had Personal Income +.5%, Personal Consumption +.4%, the core PCE Deflator +.1%. Economists believe that these numbers indicate that inflation is still under control (which the Fed likes), but the market reaction has not been great. The yield on the 10-yr is up to 4.57%, and A-paper 30-yr mortgage prices are currently worse between .125 and .250. Fed Chairman Bernanke is speaking at 7AM PST, in what is viewed as one of the most important speeches of his career.

When everyone on earth was dead and waiting to enter Paradise, God appeared and said, "I want the men to make two lines - one line for the men who were true heads of their household, and the other line for the men who were dominated by their women. I want all the women to report to St. Peter." Soon, the women were gone, and there were two lines of men. The line of the men who were dominated by their wives was 100 miles long, and in the line of men who truly were heads of their household there was only one man.

God said, "You men should be ashamed of yourselves, as I created you to be the head of your household! You have been disobedient and have not fulfilled your purpose! Of all of you, only one obeyed. Learn from him.” God turned to the one man, "How did you manage to be the only one in this line?"

The man replied, "My wife told me to stand here."