Did you hear about the butcher who backed into the meat grinder and got a little behind in his work? Speaking of work, in the Raleigh, North Carolina area last week the local news reported that the hiring agency Manpower was contacted by Bank of America and Wells Fargo. They were in dire need of temporary workers who have mortgage experience: processors, closers, underwriters and loan originators. They held an open house and it was reported 2,000 people showed up, causing the police to direct traffic and end up being on the local news. (This is good news because the other jobs being advertised in Raleigh start out as saying, "If you come from the mortgage industry your resume will not be considered".)

Locks down last week? You’re not alone - the MBA mortgage application index for the week ending Feb. 6th declined -24.5%. “A falling tide lowers all boats” as they say. Refinancing activity dropped over 30%, and the purchase index was down almost 10% to its lowest level in 8 years. Unless rates come back down (likely at some point), or underwriting loosens up (unlikely), “slowing down” could be in mortgage bankers’ vocabulary.

Yesterday was a “traditional” day where stocks went down and bonds went up. There’s only so much money in the world, right? Locks volumes were heavy, but apparently the Fed buying mortgage-backed securities helped prices, and mortgage rates did well. A lot may happen in the next 3 business days, especially with an early bond market close Friday ahead of the President’s Day Monday holiday. Treasury Secretary Geithner’s “financial stability plan”, which he explained yesterday, was not well received by the equity markets. And Ben Bernanke’s testimony covered very little new ground. Fortunately for the bond market the $32 billion 3-year T-note auction went well at a yield of 1.42%, but we still have today’s auction of $21 billion 10-year T-notes at 10AM PST. The 10-yr is back down to 2.83% and mortgage-backed security prices are roughly unchanged.

Chase Correspondent Lending is increasing the minimum credit score on FHA and VA products to 620 (excluding non-credit qualifying FHA Streamline Refinance loans and VA IRRRL transactions) and eliminating the availability of nontraditional credit on VA products. (Chase does not accept nontraditional credit on FHA or conventional loans.)

The Geithner announcement deserves some scrutiny. He would like a “stress test” for banks with greater than $100 billion of assets, another round of recapitalization via preferred shares, a partnership between private and public entities to purchase troubled assets, and an expansion of TALF to up to $1 trillion to encourage new lending. He was, however, light on details, which made the stock markets nervous. There is still $350 billion left of existing TARP funds (these numbers make my head spin) which will be used to help private sector funds in buying bad assets and restarting the securitization process. The Fed's Term Asset-Backed Securities Lending Facility will be scaled up by a factor of five to $1 trillion and expand to backing other securities. But, as the Washington Post put it, if the stock market drops 400 points on this news, it is probably not a good thing.

Principal Financial Group, based in Iowa, has seen its stock drop off a cliff lately due to lower profits and declining values of corporate debt & and mortgage-backed securities. Their 4th quarter net income dropped 98% to $800,000 from $42.4 million a year earlier, and their book value per share, a measure of a company’s assets minus liabilities, was down more than 60 percent in three months. Principal is cutting jobs after halving its dividend and suspending share repurchases to conserve capital amid plunging values for investments backing policies.

The National Mortgage News has published an editorial story speculating on whether or not Fannie & Freddie should be allowed to offer warehouse facilities. (The article asks the question, “What's next? Allowing the GSEs to originate loans directly to the consumer?” At this point their charter does not allow it.) They point out that there are only about 10 banks who still offer warehousing and that the MBA is suggesting to Congress (do they even know what a warehouse bank does? Come to think about it, does the typical broker know what a warehouse bank does?) that the government “provide short-term government guarantees on warehouse lines of credit” and allow Freddie & Fannie to buy participations in warehouse lines of credit. Meanwhile, many mortgage banks are once again depending on their investors and warehouse banks to fund loans in a rapid fashion in order to continue funding loans for their borrowers.

After getting all of Pope Benedict's luggage loaded into the limo, (and he doesn't travel light), the driver notices the Pope is still standing on the curb.
“Excuse me, Your Holiness,' says the driver, 'Would you please take your seat so we can leave?'

“Well, to tell you the truth,' says the Pope, 'they never let me drive at the Vatican when I was a cardinal, and I'd really like to drive today here in the US.'
“I'm sorry, Your Holiness, but I cannot let you do that. I'd lose my job! What if something should happen?' protests the driver.
'Who's going to tell?' says the Pope with a smile.
Reluctantly, the driver gets in the back as the Pope climbs in behind the wheel. The driver quickly regrets his decision when, after exiting the airport, the Pontiff floors it, accelerating the limo to 100 mph. (Remember, the Pope is German.)
“Please slow down, Your Holiness!' pleads the worried driver, but the Pope keeps the pedal to the metal until they hear sirens.
“Oh, dear God, I'm going to lose my license – and my job!' moans the driver.
The Pope pulls over and rolls down the window as the cop approaches, but the cop takes one look at him, goes back to his motorcycle, and gets on the radio.
“I need to talk to the Chief,' he says to the dispatcher.
The Chief gets on the radio and the cop tells him that he's stopped a limo going 100 mph.
“So bust him,' says the Chief.
“I don't think we want to do that, he's really important,' said the cop.
The Chief exclaimed,' All the more reason!'
“No, I mean really important,' said the cop with a bit of persistence.
The Chief then asked, 'Who do you have there, the mayor?'
Cop: 'Bigger.'
Chief: ' A senator?'
Cop: 'Bigger.'
Chief: 'A cabinet member?'
Cop: 'Bigger.'
“Well,' said the Chief, 'who is it?'
Cop: 'I think it's God!'
The Chief is even more puzzled and curious, 'What makes you think it's God?'
Cop: 'His chauffeur is the Pope!'

Rob