“Keep skunks and bankers at a distance.” So the saying goes. Hopefully that pertains to bankers and not mortgage bankers, not that bankers are bad! Speaking of mortgage bankers, the attached letter from the MBAA detailing the key points of the new Housing Bill will hopefully answer many questions that originators have.

Fallout is

a)       something that happens to loan agents when they drink too much and open the car door,

b)       something that happens to Janet Jackson whenever she sings with Justin Timberlake,

c)       something that lenders and investors are cracking down upon, regardless of the reason.

All of the above? Seriously…Any person dealing with secondary marketing and hedging knows that when a loan is sold by them on a mandatory basis, they are on the hook for that loan. The investor expects that loan, regardless of market move. This expectation is slowly trickling down to agents and brokers – investors are tired of fallout being a “one-way street”. If an agent locks a loan with a lender, and rates improve, they will often call the lender and try to renegotiate – saying the borrower is backing out, or take the loan elsewhere. How would an agent or broker like it if the opposite happened: rates worsened, and the lender called them and said, “Sorry, we cancelled your lock – the investor is backing out because rates moved.”?

The kids and I dined at Bennigan’s the other night in Charleston, West Virginia. And this morning I read that the parent company of Bennigan’s, “an Irish-themed bar and grill with about 200 sites across the country, filed for bankruptcy, a move that will put hundreds of employees out of work and leave many landlords with empty retail space during a painful time in the real estate market. A sister brand, Steak & Ale, will also close.” A sign of the times – higher rates ahead in this climate? Don’t bet on it.

UBOC sent a letter out that said, “As a result of our ongoing review we are discontinuing our Stated Income/Stated Asset (SISA) loan program effective with all locks and new submissions on or after August 1, 2008…The Portfolio Express program designed to make the refinance of an existing Union Bank loan easier and requires less documentation will still be available.” It would appear that UBOC is focusing on their own servicing portfolio.

HSBC is making several changes to their underwriting policies for refinances and subordinate financing & “soft market” loans, effective Friday August 1. These include “Refinance on Vacant Properties Not Permitted. Properties Purchased through Foreclosure/Auction - Any property purchased through foreclosure auction from a bank is subject to the lower of the purchase price, plus documented cost of improvements or the new appraised value.  The appraiser must comment on the influence of the foreclosure on market value.  Buyers/auctioneers premium paid to acquire a foreclosure property cannot be added to the purchase/contract price. Rate&Term refinance with less than 1 year seasoning - Additional Requirement.”

Yesterday’s Case-Shiller index showed a steep drop, but economists quickly adjusted it for seasonal factors, which improved it. Its measure showed that prices are down “only” 13.8% at an annual rate in May, versus more than 20% in first three months of the year, although the unadjusted number was -15.8%. In addition, the Consumer Confidence Index rose to 51.9 in July from 16-Year Low of a revised 51 in June, better than expected. Both the stock and bond markets moves are definitely dependent on the current thinking about whether or not we’ve see the worst of the credit crunch. While we’re talking about the market, there is no news scheduled for release today, but there are two reports scheduled for tomorrow: the quarterly Gross Domestic Product (considered to be the best indicator of economic growth - it is the sum of all goods and services produced in the U.S., and is expected to show our economy growing at a 2.3% pace), and 2nd Quarter Employment Cost Index (ECI) that measures employers’ costs for wages and benefits. It is considered to be an important measurement of wage inflation, and is expected +.7%. The 10-yr seems content with a yield of 4.05% and mortgages are roughly unchanged from yesterday afternoon.

My wife and I were sitting at a table at my high school reunion, and I kept staring at a drunken lady swigging her drink as she sat alone at a nearby table.

My wife asked, “Do you know her?”

“Yes,” I sighed, “She's my old girlfriend. I understand she took to drinking right after we split up those many years ago, and I hear she hasn't been sober since.”

“My God!” said my wife, “Who would think a person could go on celebrating that long?”

And then the fight started...

Rob