We’re supposedly going to hear of the auto bailout plan for the automakers, since the bailout fell apart last week in Congress. (Apparently the bailout fell apart because it was designed by the same people who make the Chevy Malibu.) This morning, however, we’re receiving news that the Bush Administration will be providing auto makers low cost loans, via the TARP, to the automakers, with strings attached. They will need to restructure, getting tough concessions from creditors, suppliers & the labor union.

Mortgage lock volumes have increased 3-4 times where they were a month or two ago for most lenders. Companies are hiring temporary workers and paying overtime again, which of course increases overhead. Some lenders are increasing their profit spreads to slow things down. With fewer lenders left in the business, those remaining are reaping the benefits, even if not all of the potential borrowers can qualify.

Where are companies originating 30-yr mortgages? Wall Street firms say that 60% to 70% of their production is between 4.75% and 5.125%, 20% is 5.25% or above, and a smattering below 4.75%. This “smattering” is only supposed to increase, whereas the higher mortgage rates are expected to diminish, especially with investors are unwilling to pay high premiums for loans that may pay off early. Brokers thinking about locking are grappling with two things. First, the 10yr yield has now improved for six consecutive sessions as the market continues to respond to the Fed’s quantitative easing program. On the other hand, if a broker locks now, they will basically be losing 4 out of 10 business days next week for processing, underwriting, etc.

The 10-year yield hit a record low of 2.066% Thursday morning, with the 30-year yield also approached the record low of 2.58%. Mortgage rates have lagged, of course, given the uncertainty about mortgage-backed securities. Yes, the government will buy them, but with foreclosures only temporarily on hold and the big drop in rates, with more expected, investors are unsure about where mortgages should actually trade. Historical relationships between home loans and mortgage bonds shows rates should be at least half a percentage point lower – but that was then and this is now. And remember that jumbo mortgages are one-step removed from the vanilla product being securitized, and at this point are being held by large investors. (Hence some of the great rates for jumbo loans at the branch level.) The title of one e-mail that I received yesterday from a Wall Street firm said, “MBS have completely disconnected from Treasuries.”

Yesterday, besides the Jobless Claims, Leading Economic Indicators fell 0.4% in November, falling for the fifth time in seven months. Also, the Philadelphia Fed Factory Index increased to -32.9 in December, after having a -39.3 reading in November. Manufacturing is still contracting quite rapidly, but the report contained a mixed message, with some sub-indexes improving but some showing further deterioration. Overall they paint a weaker picture than the headline. With no news today, we find the 10-yr yield “up to” 2.10% and mortgage prices slightly worse.

GMAC Bank reminded everyone that, “Due to the recent bankruptcy filing by LandAmerica's holding company and the related credit rating agency downgrades of the LandAmerica subsidiaries”, they will no longer accept title commitments, title insurance policies, or Insured Closing Protection Letters from Land Title Insurance Company, LandAmerica NJ Title Company, or Title Insurance Company of America. GMAC Bank will accept title commitments, title insurance and Insured Closing Protection Letters from Lawyers Title Insurance Corporation, Commonwealth Land Title Insurance Company, and United Capital Title Insurance Company.

Here in California the Highway Patrol is cracking down on speeders heading into the Bay Area. For the first offense, they give you two Raider tickets. If you get stopped a second time, they make you use them.
Q. What do you call 47 millionaires around a TV watching the Super Bowl?
A. The Oakland Raiders.
Q. What do the Oakland Raiders and Billy Graham have in common?
A. They both can make 70,000 people stand up and yell “Jesus Christ”.
Q. How do you keep the Oakland Raiders stay out of your yard?
A. Put up a goal post.
Q. Where do you go in Oakland in case of a tornado?
A. To Oakland-Alameda County Coliseum - they never have a touchdown there!
Q. What do the Oakland Raiders and a possums have in common?
A. Both play dead at home and get killed on the road.