The economic downturn has more Americans shifting to smaller homes. For example, Bernie Madoff just traded a 3,500 square foot penthouse for a 9 x 10 windowless studio in lower Manhattan. And for anyone needing financing on larger homes, it appears that Bank of America is truly “ruling the roost” when it comes to jumbo rates – few, if any, can compete, and agents and brokers are once again hoping that their clients don’t wander into a BofA branch any time soon.

When did a “hard money lender” become a “private money lender”? This business is certainly prospering, although the industry is highly segmented and typically local. And there is downward pressure on rates, similar to what happened with the subprime business as more companies and capital began pushing rates down to be competitive.

It is a light week for scheduled economic news. Today we have Existing Home Sales, nothing tomorrow, Wednesday we have Durable Goods Orders and New Home Sales, Thursday Jobless Claims and 4th Quarter Gross Domestic Product (considered old news), and lastly on Friday we have Personal Income and Consumption along with the University of Michigan Sentiment number. Existing Home Sales gives us a measurement of housing sector strength and mortgage credit demand, but rarely impacts rates. Speaking of which, this morning our friend the 10-yr is at 2.64% and mortgage prices are worse than Friday afternoon by about .125. Last week, given the new from the Fed, many originators were selling 4 and 4.5% mortgage securities (generally containing 4.25-5.125% mortgages), which, interestingly, pushed their prices down more than higher coupon securities. Dealers reported about $5 billion in sales on Friday, a very large day, and with only the Fed truly buying (there are other buyers, but “begrudgingly”), that was bound to push prices down and rates higher.

MGIC announced that their maximum loan amount for 1 Unit Properties is $417,000 or “Up to the Fannie Mae and Freddie Mac conforming loan limits in areas where the maximum exceeds $417,000. Guidelines for loans greater than $417,000 remain unchanged: Non-Restricted Markets – Maximum LTV 90% / Minimum FICO 700, Restricted Markets – Maximum LTV 85% / Minimum FICO 700, Restricted States – Maximum LTV 85% / Minimum FICO 720. Also unchanged, are the premium rate adjustments for loans greater than $417,000: Monthlies/ZOMP!, Splits and Annuals –  +.25%, Singles –  + 1.25%.”

GMAC told their correspondents that GMACB is revising their guidelines for Jumbo: 85% Maximum LTV, Primary Residences Only, Full Income Documentation type only, Properties listed for sale in the past 6 months are ineligible for refinance. FICO Score: 680 Loan amounts<=$650,000; 700 for loan amounts > $650,000, 720 for loans amounts > $1,500,000. GMAC also stated their declining market, DTI, and LTV restrictions.

I have never been a pure salesman, but, as I understand it, the compensation of sales people and top managers is largely based on performance and loyalty. In more news about bonuses, retention bonuses for senior executives at Fannie Mae and Freddie Mac should be canceled or recouped according to House Financial Services Committee Chairman Barney Frank. He feels that large bonuses to executives at companies receiving government aid must stop. FHFA, the federal regulator that authorized the payments, is refusing to comply. Congress proposed legislation last week that would severely tax these payments and others to any company that has received taxpayer assistance. Are we having fun yet? The White House has toned down its initial favorable response to the House vote last week, and now senators are reportedly cool on the House’s 90% income tax on bonuses paid this year. But they also say some action has to be taken to prevent financial firms from gouging taxpayers.

One winter morning a husband and wife in Denver were listening to the radio during breakfast. They heard the announcer say, "We are going to have 8 to 10 inches of snow today. You must park your car on the even-numbered side of the street, so the snowplows can get through."

So the good wife went out and moved her car.

A week later while they are eating breakfast again, the radio announcer said, "We are expecting 10 to 12 inches of snow today. You must park your car on the odd-numbered side of the street, so the snowplows can get through."

The good wife went out and moved her car again.

The next week they are again having breakfast, when the radio announcer says, "We are expecting 12 to 14 inches of snow today. You must park...." Then the electric power went out. The good wife was very upset, and with a worried look on her face she said, "Honey, I don't know what to do. Which side of the street do I need to park on so the snowplows can get through?"

With the love and understanding in his voice that all men who are married to blondes exhibit, the husband replied, "Why don't you just leave it in the garage this time?"

Rob

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