Jul. 7, 2009: Citi back; HARP program comments; summer doldrums lead to a quiet market
Rob Chrisman

I remember in high school I "obtained" the combination to the ball locker, where they kept all the new basketballs, footballs, etc. Life doesn't get any better! I wonder if Sergey Aleynikov feels the same way. He is the ex-Goldman Sachs computer programmer who has been arrested after allegedly stealing Goldman's proprietary trading code and software. Does he really pose a risk to the markets? Good question: I heard one news reporter say, "Just because someone had the recipe for traveling to the moon doesn't mean that they can do it." This has no relationship to originating mortgages, but is one more reason for the markets to be spooked.

CitiMortgage is back locking loans. On June 23rd they cut off locks due to quality control issues, appraisal questions, and general documentation concerns. They have already begun accepting locks from qualified customers and previous lenders who were in good standing, and will bring other originators back eventually using the new procedures. A collective "whew" went up from their sales-bonused reps...

How is the Fed doing on their mortgage purchase program? Last week the Fed bought ("gross purchases") $36.15 billion from June 25th through July 1st. Of course, they are also engaged in other activities, like selling mortgages - that aspect doesn't receive quite the media attention. On a "net" basis the Fed bought $23.1 billion, or almost $5 billion per day. At the current origination levels, this is a solid amount.

How is Freddie doing on their HARP program? I cannot attest to this, but one respectable broker wrote and said, "Regarding the pricing adjustment the Freddie HARP program instituted 7/1/09 - the program had some weight and value until they decided to incorporate the same pricing adjustments that Fannie was using. In many cases, the program has now become useless as they only allow $2,500 in closing costs, and with adjustments up to 1.75 in points borrowers will have to come out of their pocket for thousands more than they had to before which will stop the program right there. Once again, let's develop a program that almost no one can utilize and tell everyone how much good we are doing. I thought this was supposed to be for those borrowers making their payments as a way of allowing them to reduce payments and almost saying "thank you", therefore helping stimulate the economy eventually by giving them more to spend every month, not just with some 1 time stimulus check. Instead it is another way for those borrowers paying their loans to pay for those who are not. Who is the government really looking out for when they have not only increased costs to the borrowers with all the excess regulations and the HVCC that is doing nothing but padding the pockets of some large appraisal companies, they are making the mortgage industry work as well as the government.”