Yesterday, as I was standing in line at Franklin's BBQ in Austin, Texas, my head began to spin. Not because of the great smell, or from wondering why all these people weren't working at 11AM instead of standing in line, but from trying to keep track of all the continued government intervention in the housing market - not that it hasn't always been there. As I tell folks, nothing is going to happen to Freddie and Fannie until 2013, if at all, and the way Congress and the president keep using the agencies to try to accomplish policies they certainly are not going away.

The HARP 2.0 initiative aimed at helping agency homeowners to refinance. Then came HAMP 2.0 (this past Friday), aimed at helping to encourage more modifications. Yesterday Obama unveiled a separate refinancing program (discussed below) targeted at non-agency homeowners (making refinancing easier for mortgages not backed by Fannie or Freddie). Finally, in the coming days/weeks we could get a final foreclosure settlement as well as a plan to sell foreclosed homes in bulk.  In aggregate, all these policy moves could help at the margin but most believe they fall short of some grand Fannie/Freddie automatic refinance plan for which some investors had hoped. Maybe we're done with government initiatives for the year? Perhaps not - don't forget chatter out there about the foreclosed properties sitting on the agency's balance sheets, and large scale plans of selling them to investors. And we have some type of possible settlement between the state's AG's and large servicers...

Regarding President Obama's election year housing plan, which is probably going to require Congressional approval, and is therefore highly unlikely...there are fact sheets ranging from 7-10 pages. It certainly gave investors something to talk about yesterday, even if it will take many months, if at all, to roll out. There is too much to reproduce here, check out the original. Most believe that this plan will not pass through Congress, given the level of political polarization. And it is difficult to understand why the Administration thinks it can get this proposal through Congress when it cannot get the parts that do not need Congressional approval through the GSE's and FHFA (a federal agency). If rising pressure on the GSEs does lead to them to adopt the agency components of this plan, there will be an enormous effect on agency MBS.

One statement noted, "... believe these steps are within the existing authority of the FHFA. However, to date, the GSEs have not acted, so the Administration is calling on Congress..." Most of the proposals for the plan do not need Congressional approval but the Administration is implying that the main reason to send these proposals to Congress is that the Administration cannot get the GSEs (and presumably FHFA) to do what needs to be done "in the taxpayer's interest..." Consequently, this public proposal seems to be a way to put pressure on the GSEs and FHFA to do what the Administration wants. I guess this is how modern government functions...

So please dig into the fact sheet noted above - that is what the market knows. Originators should probably not become too enamored or bogged down in the plan, as it will take, if it happens at all, several months to sort out, digest, and implement. And who knows which agencies or investors will still be around to originate or buy those loans, which leads me to...

"Dear Broker Mortgage Lending Clients: Over the last four years, the Broker Lending community has shown great resilience during continued consolidation of this market segment.  We appreciate your partnership, your willingness and your ability to adapt to the ever-changing regulatory environment. After careful consideration, Citibank has decided to transition away from our Broker lending business and sharpen our focus on a customer-centric channel strategy...In an effort to effectively manage the Broker Mortgage Channel pipeline for you and your customers, we will manage the transition as follows: We will no longer accept new registrations from our Broker Mortgage Channel clients after the close of business on Wednesday, February 8, at 11:59 pm CST. All locked pipelines must be funded and closed by April 30."

And with that, Citi exits the wholesale business. Although Citi had scaled back from its broker channel some time ago, and tended to be more focused on certain geographic areas than others, it is yet another piece of bad news. Brokers have to be thinking about the old saying, "Death by a thousand cuts." Of the major, top 4 or 5 investors who had wholesale divisions a few years ago, or bought loans from correspondents who dealt with brokers, who is left? Uh, Wells Fargo. BofA is gone, Citi is now gone, GMAC/Ally has scaled back, Chase won't buy TPO business. SunTrust is going through a massive retooling. That being said, there are plenty of investors and lenders willing to step into this arena, and already have. I am not going to make a list of them here, but brokers do have many homes for their loans.

(Ally's results came out this morning. The bank suffered a loss of $250 million for the 4th quarter, and the mortgage Origination and Servicing segment reported a fourth quarter 2011 pre-tax loss from continuing operations of $237 million. "The fourth quarter 2011 pre-tax loss from continuing operations included $125 million of pre-tax income from originations, an $81 million pre-tax loss from servicing and a $270 million charge recorded during the quarter for penalties expected to be imposed by certain regulators and other governmental agencies in connection with foreclosure-related matters.  In addition to the foreclosure-related charge, fourth quarter 2011 Origination and Servicing results declined on a year-over-year basis due to a lower net gain on the sale of mortgage loans, lower net financing revenue due to a decline in production and higher noninterest expense." Refinancing was 80% of volume.)

There is discussion about, "will the U.S. become a nation of renters?" A decent chunk of private equity is certainly moving that way, buying up inventory to rent out.

This leads into whether or not the U.S. is much different from other nations when it comes to housing and interest rates. Just how does the U.S. stack up? Part II of a write up on international housing comparisons can be found at

There are many questions about how 2nd mortgages fit into refinancing plans, and how institutions should handle the potential losses on the write-downs. This week the Board of Governors of the Fed, the FDIC, the National Credit Union Administration, and the OCC "issued supervisory guidance" on allowance for loan and lease losses (ALLL) estimation practices associated with loans and lines of credit secured by junior liens on one- to four-family residential properties. This serves as a message to institutions to keep a careful eye on credit quality indicators relevant to credit portfolios, including junior liens (i.e. second mortgages, home equity lines of credit).  To view the full release, visit:

And many mortgage insurance companies know about losses. Standard & Poor's downgraded the credit ratings of several U.S. mortgage insurers, and said the outlook is negative. On Monday Fitch Ratings dropped its ratings on Old Republic International Corp. (ORI) by three notches, sending the ratings into junk territory. S&P downgraded MGIC Investment Corp. and its mortgage unit a notch to B, Radian Group and three of its units, and Genworth Mortgage Insurance Corp. and Genworth Residential Mortgage Insurance Corp. of North Carolina by two notches to B.

For market activity, traders reported that mortgages did exceptionally well despite making new record highs on lower coupons (Fannie 3.5's, containing 3.75-4.125% mortgages are at a four point premium!) and the constant chatter about government sponsored refi programs. MBS "spreads" (their yields versus Treasury yields) closed tighter, which is good for mortgage prices in spite of higher-than-normal selling volumes by originators. Normally the refi plan news would shock higher coupons (they're going to refinance!) but the market believes it to be primarily a re-election ploy since the makeup of Congress would make it difficult to get legislation passed. For the lower, rate-sheet production, we saw strong buying from money managers, banks, hedge funds, and the usual Fed. In terms of numbers, MBS prices Wednesday were basically unchanged but the 10-yr T-note was worse by about .375, closing at a yield of 1.85%.

Tomorrow is the big unemployment number, but we have today first. We have some testimony from Ben Bernanke before the House Budget Committee on "The Economic Outlook and the Federal Budget Situation." (I think we all know the story.) We've had Initial Jobless Claims for last week (-12k to 367k), along with the preliminary Q4 reading on Productivity and Unit Labor Costs (+.7% and +1.2%). This is hardly market moving news, the 10-yr is at 1.82% and mortgage prices are roughly unchanged so far.


Black humor still abounds on trade desks, and the Italian cruise ship disaster is no exception:

How do they serve alcoholic drinks on Italian cruise ships? On the rocks.

What vegetables do you get with dinner on Italian cruise ships? Leeks.

What's the fastest way to get off an Italian cruise ship? Follow the captain.

When the captain of the ill-fated Costa Concordia was asked if he knew where he was going he replied "off course." 

The captain says he is not guilty of manslaughter. He has witnesses to prove he was nowhere near the passengers who died.

What's the difference between the Italian economy and the stricken cruise liner Costa Concordia? Nothing - the bottoms dropped out of both.

If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at . The current blog discusses residential lending and mortgage programs around the world, part 2. If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what's going on out there from the other readers.