I called CitiMortgage to check on when my 4.75% 30-yr balloon adjusts (2010, but my trigger finger is getting itchy), when the customer service representative finished the call by telling me that I qualified for a Citi HELOC. I was elated. She explained that there were no fees, no costs, no application procedure, just a signature, and asked if I would like a loan agent to call me. I told her, “No thank you, but I am in the mortgage business and am having trouble making the payments so could Citi modify my note to 4.50% and extend this interest rate to 2018?” She replied, “Uh, well, uh…” so ended the call.

Countrywide’s CEO Angelo Mozilo announced that he has decided to voluntarily relinquish his rights to approximately $37.5 million in cash severance payments, post-closing consulting fees and continued perquisites due him under the BofA/CW purchase. Mr. Mozilo will not receive any cash payments in the merger or upon any related termination of employment other than amounts that he has already earned in full, such as retirement benefits and deferred compensation. "My primary focus today -- as it has been for the past 40 years -- is to do what is in the best interests of Countrywide's employees, customers and shareholders," Mr. Mozilo said.

Speaking of which, Countrywide lost $422 million in the fourth quarter, in spite of promising investors that they would to return to profitability. Yet another indication on just how tough this market is! Investors have speculated Bank of America may try to lower its bid, although the stock is moving around the $6/share level.

Late last week Goldman Sachs stated that the markets are expecting a 50 basis point cut by the Federal Open Market Committee (FOMC) following last week’s 75bp easing. Lehman opined that the big selloff after the cut suggests “one of two things: that monetary policy has become less effective in driving short-term behavior in financial markets (perhaps because of poor communication), or that the counterfactual – what would have occurred in the absence of a rate cut – was in fact quite severe.” Prior to this morning’s Durable Good number, there was an 82% probability for a 50bp cut to 3.00% and 28% probability for a 25bp cut to 3.25%. The Fed would probably prefer to hold rates steady not be viewed as reacting to the market, but this is not the time for that.

The sales of new homes plummeted 26.4% in 2007, including a 4.7% decline in the month of December – their lowest level since February 1995! In spite of that, and a decent 2-yr auction, mortgage prices (and Treasury securities) worsened slightly yesterday as stocks rallied. There weren’t many surprises in the State of the Union address (the first televised address was in 1947 by Harry Truman) last night. The Durable Goods (things that last more than 3 years, like airplanes and dishwashers) mentioned above were unexpectedly strong, up 5.2%, and ex-Transportation up 2.6%. Later today, the January US consumer confidence index is expected to decline to a 2-year low offsetting December’s increase, and the Treasury will auction $14 billion in 5-year T-notes (slightly larger than most recent 5-year auctions). With all of that, the 10-yr is in the mid-3.60’s and mortgage prices are worse by about .125 in price.

GMAC is preparing to announce more changes to their guidelines, but they will include changes to their conforming SISA (ending today), foreign national policy (to be available for the conforming fixed rate products only), and their Expressway product (SIVA requiring 4506, DTI max 45, and changes to the LTV and FICO bands).

Bubba went to a psychiatrist. "I've got problems. Every time I go to bed I think there's somebody under it. I'm scared. I think I'm going crazy."

"Just put yourself in my hands for one year," said the shrink. "Come talk to me three times a week, and we should be able to get rid of those fears."

"How much do you charge?"

"Eighty dollars per visit, replied the doctor." "I'll sleep on it," said Bubba.

Six months later the doctor met Bubba on the street. "Why didn't you ever come to see me about those fears you were having?" asked the psychiatrist.

"Well eighty bucks a visit three times a week for a year is an awful lot of money! A bartender cured me for $10. I was so happy to have saved all that money that I went and bought me a new pickup!"

"Is that so! And how, may I ask, did a bartender cure you?"

"He told me to cut the legs off the bed! - Ain't nobody under there now !!!"

Rob