“When I read about the evils of drinking, I gave up reading." (Henny Youngman)

Are there any subprime wholesalers left? Another one is gone: “We regret to announce that BayRock Mortgage Corporation has decided to discontinue all wholesale operations effective immediately.” (The last marketing e-mail that I saw from them said, “You may now have unlimited 30 and 60 day mortgage lates even if you have a previous bankruptcy/foreclosure (previous guidelines required perfect mortgage history if there was a previous BK/FC). Along with the new relaxed subprime guidelines we still offer some of the industries lowest subprime rates and THE best service in the business. And remember we do not require Title or Appraisal in order to get your loan into underwriting.” Those were the days!

What happens to the mortgage industry and the housing market if the economy slows more than it already has, or goes into a recession? Well, if there is 20% less loan production, but 40% fewer lenders, isn’t that a good thing for those still remaining? Of course. Many “experts” and economists are predicting fewer lenders in six months, and those lenders will be doing “vanilla” product. And if the economy slows further, it will further weaken the housing market, and people will be less likely to buy homes – although the refinance business will certainly help! And, in a different way of thinking, if housing prices continue to fall people may not put their homes on the market, reducing supply and helping prices. In addition, note modifications may bolster consumer confidence among those homeowners, which may in turn help the overall economy to some degree.

Speaking of note modifications, President Bush is expected to unveil a broad plan today aimed at helping homeowners struggling with their mortgages. The plan has multiple parts, including a proposal to freeze interest rates on certain subprime loans for five years, fast track other borrowers toward refinanced loans and allow state and local governments to use more tax-exempt bond programs to fund refinancings.

What is the latest on conforming limits based on state or county? Countrywide’s CEO Angelo Mozilo wrote an editorial yesterday in the Wall Street Journal, saying “Here is the problem: The federal government now imposes a cap on the size of mortgages that government-sponsored enterprises (GSEs) and the Federal Housing Administration (FHA) can hold or insure. This cap is simply too low to meet the needs of buyers in many communities across the country.

To mitigate this problem, Congress needs to temporarily raise the limits it now imposes on Fannie Mae, Freddie Mac and FHA mortgages by 50%, to $625,000.

This reform should be temporary -- 12 months ought to be long enough. It should be done nationwide -- homeowners across the country need to be able to take advantage of it.”

This morning the 10-yr stands at 3.96% and 30-yr A-paper mortgage prices are roughly unchanged from yesterday afternoon. Jobless Claims fell by 15,000 last week to a seasonally adjusted 338,000 from a slight upwardly revised 353,000 the prior week, the Labor Department said. The four-week moving average of new claims, considered a more reliable indicator of the job market's health, rose for the second straight week, climbing to 340,250 in the week ended Dec. 1 from 335,500 the week before. Tomorrow is the “big daddy” of economic releases: Non-farm Payroll, the Unemployment Rate, and Hourly Earnings are announced at 8:30AM EST, expected at +70-100k, 4.8%, and +0.3% respectively. An ideal scenario would be a higher unemployment rate than 4.8%, a much smaller increase in jobs than is expected and no change in the earnings portion. The last number of the week is the University of Michigan’s Index of Consumer Sentiment.

Three sisters ages 92, 94, and 96 live in a house together. One night the 96 year old draws a bath.  She puts her foot in and pauses.  She yells down the stairs "was I getting in or out of the bath?"

The 94 year old yells back "I don't know. I'll come up and see."  She starts up the stairs and pauses. "was I going up the stairs or down?"

The 92 year old is sitting at the kitchen table having tea listening to her sisters.  She shakes her head and says "I sure hope I never get that forgetful".  She knocks on wood for good measure.

She then yells "I'll come up and help both of you as soon as I see who's at the door."