• Indymac laid off 2,403 employees, or 24% of their total workforce, yesterday. It included 470 sales staff in addition to closing operation centers in Tampa, Philadelphia, Boston, Columbia and Kansas City.
• Speaking of lay-offs, Citigroup posted a net loss of $9.83 billion, and recorded $18.1 billion in pre-tax write-downs and credit costs on subprime related direct exposures in fixed income markets & a $4.1 billion increase in credit costs in its U.S. consumer business, mainly because of higher current and estimated losses on consumer loans. Citi said it would eliminate 4,200 jobs and cut its quarterly cash dividend by 41% to 32 cents from 54 cents. Citi raised another $12.5 billion via the private placement of convertible preferred securities, including a $6.88 billion investment from Singapore.
• First American, the largest U.S. title insurer, will split into two publicly traded companies by separating its financial information and underwriting businesses, and their stock rose 7.1%. The unit with the title and specialty insurance operations will be spun off to shareholders, the Santa Ana-based firm said in a statement Tuesday. The existing holding company, to be renamed, will consist primarily of businesses that provide data on mortgages, properties and credit. The company cut 1,100 jobs in the fourth quarter, and remaining employees are rumored to have taken a 10% pay cut.
• Taylor Bean made changes to their Declining Market criteria (“Declining property value, as indicated on the appraisal, as determined through an Appraisal Review, or as listed on the Declining Market Worksheet, the max allowed LTV must be reduced by 5%, regardless of AUS.”) and made changes to their mortgage insurance and jumbo loan restrictions (“removed payment shock requirements; however, excessive payment shock should be reviewed cautiously, added Declining Market verbiage, etc.)

An estimated $1.3 trillion in subprime mortgages are outstanding. About one-tenth of those are now in foreclosure. Some are predicting that foreclosures will grow to a staggering $400 billion – a real stretch according to many. Financial institutions have already written off over $100 billion the value of their nonprime mortgage assets. A loss of $150 billion would be less than 12 percent of the approximately $1.3 trillion in subprime mortgages outstanding. Most subprime borrowers aren't going to default, and even if 25% do and lenders recover 50%, 25% of $1.3 trillion in subprime mortgages is $325 billion, and a 50% recovery would mean a loss of about $160 billion. Aren’t we almost there?

As most expected, rates continue to decline with the yield on the 10-yr Treasury Note down into the 3.60’s and mortgage prices somewhat improved. After our stock market fell, Asian stocks fell about 4% ahead of this morning’s Consumer Price Index numbers. CPI was +.3%, year-over-year +4.1%, with the core rate (ex-food & energy) +.2% and +2.4% year-over-year. This is somewhat more inflationary than analysts were expecting. The market is clearly pricing in a 50 basis point ease in two weeks, with a slight chance of a 75 basis point cut.

Private Jones was assigned to the induction center where he was to advise new recruits about their government benefits, especially their SGLI insurance. 

It wasn't long before Captain Smith noticed that Private Jones had almost a 100% sign-up record for the insurance, which had never happened before. Rather than ask about this, the Captain stood in the back of the room and listened to Jones's sales pitch.

Jones explained the basics of the SGLI Insurance to the new recruits, and then said. "If you have SGLI and go into battle and are killed, the government has to pay $200,000 to your beneficiaries. If you don't have SGLI, and you go into battle and get killed, the government has to pay only a maximum of $6,000." 

"Now," he concluded, "which bunch do you think they will send into battle first?"

Rob