“…economic activity has picked up following its severe downturn…conditions in financial markets have improved further, and activity in the housing sector has increased…household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.  Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales.  Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability…inflation will remain subdued for some time.”

An important item to note is that “the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability.” This includes keeping overnight rates near 0% for an extended period, and purchasing a total of $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt. “The Committee will gradually slow the pace of these purchases in order to promote a smooth transition in markets and anticipates that they will be executed by the end of the first quarter of 2010.  As previously announced, the Federal Reserve’s purchases of $300 billion of Treasury securities will be completed by the end of October 2009.”

In recent weeks, the Fed has been buying mortgage-backed securities (remember, NOT whole loan deals backed by private-label or jumbo production) at a steady pace of $25 billion per week. This many slow, but only marginally so, in the immediate future.

No one told this to the buyers of the Treasury’s 5-yr note. The results of the 5-year note auction were not pretty, but not terrible, coming in at 2.47% versus the existing 5-yr at 2.44%. But the bid-to-cover ratio was in line with previous auctions, and indirect bidders took down .45% of the auction, which compares with an average of 50% for the prior four 5-year note auctions. This morning we’ve already had Jobless Claims, and will see Existing Home Sales at 7AM PST. We also have a $29 billion 7-Year Note auction. Claims for jobless benefits fell by 21,000 last week to 530,000 – better (for the employment picture) than expected. The four-week moving average of new claims dipped to 553,500, the lowest since late January. After the Jobless Claims news the new 5-yr is at 2.40%, the 10-yr is at 3.40%, and 30-yr mortgage security prices are up (better) slightly.

Regarding the new TILA requirements, Wells Fargo correspondent channel made clients aware that they “tweaked” their view on the timing of the initial TIL and disclosure. “Wells Fargo is expanding the options to accommodate alternative delivery methods to allow for a shorter post time if documented as follows: Fax: Initial and re-disclosed TILs delivered to the borrower(s) by fax will be considered “received” by the borrower(s) on the date they sign and date the TIL disclosure. Other methods of documenting receipt, such as time/date stamps in the fax header, or fax confirmation sheets, are not sufficient. Overnight delivery: Initial and re-disclosed TILs shipped overnight to the borrower(s), will be considered “received” by the borrower(s) on the date they sign and date the TIL disclosure. Other methods of documenting receipt, such as a signature on an overnight courier receipt, are not sufficient. E-mail/E-Sign: Because the Truth-in-Lending Act requires that delivery of disclosures electronically be done in compliance with the federal E-SIGN Act, initial and re-disclosed TILs may only be delivered to the borrower(s) electronically by Sellers who are approved by Wells Fargo for E-Disclosure, and who deliver the documents through their approved E-Sign Technology software.” It is a sticky subject, and clients of Wells should best consult the remainder of the bulletin for specifics.

CitiMortgage came out with their Reg. Z notice and “higher-priced mortgage loan” note. “Each loan that you sell to CitiMortgage comes with your representation and warranty as to compliance with these provisions and any other federal, state or local law or regulation governing the origination of consumer mortgages.” Citi goes on to mention HPML ineligible products, including FHA Fixed Rate and ARM loans, VA ARM loans, VA IRRRL, conventional ARM loans with an initial fixed rate period of less than 7 years, partial term buy downs, and loans with a DTI greater than 45%, or as limited by the process or program. Citi also has new fields for their web registration screen, so check those out.

Speaking of Citi, Citigroup, according to a story in the WSJ, plans to “cut down its U.S. branch network to six big metropolitan areas, and also plans to “limit its consumer lending business in the United States primarily to credit cards and "jumbo" mortgages, catering largely to affluent customers.” The story said that the bank would "focus on New York, Washington, Miami, Chicago, San Francisco and Los Angeles, but would pare its business in Boston, Philadelphia and Texas."  That's all  I know - check out the WSJ for more details.

A policeman is out on patrol along “Lover’s Lane” one night, and he sees a couple in a car, with the interior light brightly glowing. The cop carefully approaches the car to get a closer look. Then he sees a young man behind the wheel, reading a computer magazine.  He immediately notices a young woman in the rear seat, filing her fingernails.

Puzzled by this surprising situation, the cop walks to the car and gently raps on the driver's window.

The young man lowers his window. “Uh, yes officer?”

The cop says, “What are you doing?”

The young man says, “Well, officer, I'm reading a magazine.”

Pointing towards the young woman in the back seat the cop asks, “And her, what is she doing?”

The young man shrugs. “Sir, I believe she's filing her fingernails.”

Now, the cop is totally confused. A young couple, alone, in a car, at night on Lover’s Lane... and nothing obscene is happening!

The cop asks, “What's your age, young man?”

The young man says, “I'm 21, sir.”

The cop asks, “And her ... what's her age?”

The young man looks at his watch and replies, “She'll be 18 in eleven minutes.”

Rob

(For archived commentaries, check www.robchrisman.com, or to subscribe/unsubscibe write to rchrisman@robchrisman.com. The commentary is produced every business day, but at times there are vague e-mail “issues”, so if you don’t receive it, let me know.)