Huh? Maybe Freddie and Fannie are not going to evaporate, which many in the industry were not looking forward to anyway: MSNBCAgencies

One servicing manager from a large institution wrote to me and said, "If you look at the delinquencies at the agencies versus the market, Freddie & Fannie are a much smaller percentage. If FNMA and Freddie 'own' half the mortgages, but their delinquencies are much lower than other institutions during that time period who were buying loans, what does that say?"

A security, backed by mortgages, is not a bad thing, and, if properly constructed, is a very good thing. Many will argue that the market was working well until 2002, when the residential mortgage backed security market (RMBS) began to experiment with non-traditional structures, AND non-traditional mortgages. CDO's (collateralized debt obligations) and synthetic CDO's were rolled out, taking pieces of higher-risk RMBS tranches and securitizing them... but we digress. The plans that the Treasury presented, focusing on the phasing out of Fannie and Freddie, may not fully consider the implications to our housing market. Lew Ranieri recently spoke out on the issue. "...why we created the mortgage security in the first place, 'cause it can't fund housing on a balance sheet because it requires too much equity-you can do some, but you can't do most...The government has to make a decision that all be it we want to transition to a more public market, a non-government market...In the meantime if you have the only source of current credit being the government, tight, like this, you just keep the overhang going, prices go down, more people become under water-it becomes a vicious circle...the core problems are still there, despite all the good new regulations and rules...Until the people in the chain have responsibility and will be held to those responsibilities, just like we are when we sell stocks, you won't fix this."

"MLOs employed by federally regulated institutions have until July 29 to become actively registered on NMLS. Even though the individual MLO is responsible to register, the employing institution must also complete a number of steps in order for the MLO to become actively registered. These steps include creating the institution's account, submitting the Form MU1R, and confirming each MLOs' employment within NMLS." But is your company required to go through NMLS training? Here's a site to find out: NMLS

All I can do is shake my head and stare out the window. A new bill written up by a California Assembly member calls for a $20,000 fee to be charged to banks for every foreclosure they carry out in the state, with the aim being reducing foreclosures. (One would think that the goal is to make lending less attractive for lenders in California, but I'll hold my comments.) Assembly Bill (AB) 935 would fine mortgage lenders or loan servicers $20,000 per foreclosure in the form of a "foreclosure mitigation charge," creating incentives to offer loan modifications or refinance alternatives. The bill would supposedly generate up to $16 billion over the next two years, as nearly 800,000 foreclosures are expected in the Golden State. Someone had better tell Assemblyman Blumenfield about how changes in servicing released premiums factor into pricing for mortgages for potential new homeowners.

More reader input. "As an appraiser, I read with great interest your notes from Friday, saying, 'One of the more troubling Realtor strategies is to threaten the business relationship with a LO if a loan does not go through, or is not on time, regardless of whether or not the loan makes sense for the buyer. (If I couldn't do the loan) they would find another lender who would do it and they would make sure that no other Realtors used my company in the future.' I would like to point out that up until recently, appraisers heard the same thing from LO's everywhere: 'If you can't bring this in near value, we'll find someone who can.' Have LO's forgotten that phrase?"

"Those thinking QRM underwriting rules are similar to GSE underwriting guidelines, need to reconsider. 'Guidelines 'are flexible to some extent & penalties for mistakes (buybacks) can be expensive, but rarely are. 'Rules' are enforced rigidly by regulators with expensive penalties, license actions, felonies, and private action. People in the industry should realize that a whole new world of mortgage credit tightening is coming."

As most Lock Desk folks know, there was little to cheer about last week. The MBA reported that its application index dropped 5.6%, with refi's dipping slightly, and "The seasonally adjusted Purchase Index decreased 13.6 percent to its lowest level since February 25, 2011, driven by a 26.6 percent decrease in government purchase applications." SEE CHARTS

ING reminded brokers that, "For all Purchase Transactions, your Good Faith Estimate MUST include an estimated cost for Owner's Title Insurance in Block 5. An amount must be provided regardless of who is selecting or paying for it.  If your GFE Block 5 is not complete, your application will not be accepted regardless of your ability to cure this charge at closing.  You may re-submit the application with a corrected GFE after 60 days."

To the surprise of no one, the S&P Case-Shiller HPI (Home Price Index) declined 3.3% in February from a year ago on the 20-city composite, and the 10-city composite was down 2.6% YOY. From a year ago, only Washington DC reported appreciation at 2.7%, while Phoenix and Minneapolis experienced the largest declines at over 8%. 10 of the 20 cities recorded new lows. Economists believe that with already weak home values declining further, refinancing activity will remain limited and keep prepayment speeds relatively slow - a positive with much of the market trading at a premium. At the same time, while affordability holds near record highs, homebuyers may be hesitant to purchase just yet with prices still sliding lower. FULL STORY

Looking at the markets, things aren't too bad, and Tuesday both stocks and bonds did well. This surprised some, given that we're still grappling with rising oil, gold, and commodity prices, a raging deficit, and problems overseas. The 10-yr Treasury closed at 3.32%. On the mortgage side, agency MBS prices improved by about .125 - .250 and one trader commented, "High price and low yield levels have relegated REITs and banks mostly to the sidelines, while other investors were mixed. In general, hedge funds and structured desks were buying..."

This morning we learned that March Durable Goods were up 2.5% versus +.7% in February. The markets seem to believe that the highlight of Wednesday's session will be the first ever post-FOMC press conference beginning at 2:15 EST with Chairman Bernanke discussing the Committee's "current economic projections and to provide additional context for the FOMC's policy decisions," as stated in the press release. We also have a $35 billion 5-yr auction. Across the Atlantic, things don't look so good in Greece as their 2-yr note yield climbed to 25%. Investing in that is not for the timid. And after 3 consecutive up days Treasuries are down this morning due to some profit taking: the 10-yr is at 3.35% and MBS prices are worse a smidge.

(A "joke" to think about...)

Five guys are stranded on an island.

One guy gets the daily firewood, one guy bakes the daily bread, one guy climbs to the top of the mountain to get fresh water, one guy fishes all day to bring home dinner, and one guy does nothing but consume the firewood, the bread, the water, and the fish.

One day the workers ask the fifth guy why he doesn't get the items himself, and he replies, "Without me, none of you would be employed."