If you think that you're confused with the mortgage application process, you're not alone.  SURVEY RESULTS: DUH!

Some confusion and conjecturing may end on Friday, when the plan for Freddie and Fannie are presented...

"U.S. Treasury Secretary Timothy F. Geithner will present Congress with three options for reducing the government's role in the nation's decades-old housing finance system." One can only imagine how much chatter, lobbying, rumoring, posturing, etc., there will be after the three plans are given to Congress, and it will certainly take years to do anything. Pundits suggest that the US will have an 8-10 year period to reduce GSE portfolio. Look for a reduction in the maximum loan amount in many areas to about $625,000, a gradual increase in the guarantee/guarantor fees to reduce the total mortgage volume insured by the agencies from 95% currently to something closer to 50%, plans to bring in private money, and for the FHA program to be used for low income borrowers only. FULL STORY

At some price someone will buy something, and at some yield it makes sense to invest in mortgages. Perhaps giving Redwood Trust a run for its money, a "Blackrock fund is set to approve 10 lenders in its effort to expand into the home loan market." The fund, set at $1 billion, will provide money for non-agency mortgage originations, with the goal being to package those loans into residential mortgage-backed securities.  NON-AGENCY LENDING

Don't resist the urge. From San Diego to Bangor, lenders are dusting off the ARM manuals. The latest application figures from the MBA show that ARM share increased to 5.9% from 5.5% of total applications from the previous week. It doesn't seem like much, but the number will only increase. Overall, apps last week dropped 5.5%, with refi's down almost 8% and purchases down about 1%. As a sign of the times, Optimal Blue released Flagstar's Correspondent Jumbo 5/1 LIBOR ARM, and Jumbo 10/1 LIBOR ARM product lines. 

Gee, is it "late breaking news" that the value of any company that has large portion of its revenue from mortgage production would suffer?  I guess so.

Some companies are contracting, but there continue to be jobs out there. Envoy Mortgage is hiring Branch Managers and MLO's throughout Colorado, Minnesota, Missouri, Kansas, Iowa and Illinois.  Envoy offers both retail A and B models and has a reputation for state of the art technology and execution, backed by a highly service oriented operations staff.  They are a 2 billion/year, completely digital mortgage banking platform with plans and staff in place to double in the next two years.  Interested applicants should contact Kent Montavon at kmontavon@envoymortgage.com or visit the website at www.envoymortgage.com.

One job that was not open for very long was Wells Fargo CFO's. Wells Fargo unexpectedly replaced Howard Atkins, its chief financial officer and who retired for "personal reasons" after 10 years with Wells, with Timothy Sloan, the chief administrative officer.

The California Public Employee's Retirement System (CALPERS), which is the nation's largest, has sued a group of former Lehman Brothers executives and underwriters, accusing them of misleading investors about the investment bank's condition as the financial system descended into crisis. In a story from The Financial Times, it is "seeking to recover losses it racked up on Lehman shares and bonds that it had bought between June 2007 and September 2008, when the securities firm filed for bankruptcy protection."  CALPERS has also claimed that Bank of America failed to disclose Merrill Lynch's financial condition before shareholders had voted on the companies' merger, and has also sued Moody's Investors Service for inaccurately assessing the risks of three structured products in which the fund had invested.

Why is it so hard for companies like Bank of America, or analysts and forecasters, to put a firm number on repurchase liabilities due to rep & warrant issues? Reps & warrants are of critical importance in any relationship, and should be adhered to, but on a global level there is indeed a huge uncertainty about the final base case loss number due to repurchases, mostly due to the lack of conviction on the many assumptions that go into calculating the putback-related loss numbers. Because you find a mouse in your house, does that mean it is the only one, or that there are dozens of nests of them in the basement? Overall, from a fundamental standpoint, rep and warranty repurchase losses are sizable and cannot be ignored. However, many analysts believe there are several reasons why rep & warrant issues should not pose significant risks from a systemic standpoint. One, the process to make many of these repurchases happen is very complex, and in most cases, it has either not begun or is in the early stages. This is especially true for non-agencies. Two, the time lag in getting access to loan files (even assuming that happens) and getting a successful repurchase claim is very long and can involve a lot of individual loan-specific back and forth between the parties involved. The lag is currently big and could worsen dramatically if claim volumes go up substantially. Three, even if losses are high, they are likely to happen over the next several years, as opposed to only 1-2 years, and that alone should lessen the systemic effect. One cannot ignore the possibility of faster negotiated settlements but would not expect originators to embrace them unless they offer a much better deal than the other option of "dragging it out." The real near term risk seems to be if significant negative headlines make their way into the markets.

Speaking of the markets, fixed-income securities got kicked in the teeth (for lack of a better term) Tuesday, and it seemed half my e-mails were rates changes for the worse. The trend in interest rates is higher and that despite the Fed's efforts at keeping rates low, the bond market seems to be adjusting to that concept. The two biggest reasons for the rise in rates are stronger economic data and the US's borrowing needs to fund our enormous deficit. As I mentioned, with no data to trade off of, we are following Friday's markets.

It didn't help rates when the Fed's Lacker was quoted saying that there has been a marked improvement in the economic outlook since the U.S. central bank launched its $600 billion bond buying program in November, and saying the Fed should "quite seriously" evaluate the pace and size of the program. He is stating the obvious, and is not a voting member of the FOMC, but his words do carry some weight. Analysts believe that an increase in 10-year yields to 3.75% could spark a wave of mortgage-related selling, contributing to even higher rates. (As interest rates rise, the duration - average maturity - of a mortgage portfolio lengthens, and to offset this increase mortgage investors typically sell Treasury securities from their portfolios to return to their desired duration, creating a cycle of higher rates.)

Supply is certainly an issue. Yesterday's 3-yr auction was viewed as "sloppy" with low direct and indirect bidder participation. We have a $24 billion 10-yr auction to get through today, and some feel that it might take a 3.75% yield to attract good demand. (Let's not forget the $16 billion in 30-yr bonds to be sold tomorrow.) With no economic news, "Fed Speak" takes on more of an emphasis, and we have two items today: Fed President Bernanke testifying before the House Budget Committee at 10AM EST, and Atlanta Fed President Lockhart (non-voter) speaks on the U.S. Economy this evening. 10's hit a high yield of 3.77% overnight before returning to Tuesday's closing levels. READ MORE

Little Carol came into the kitchen where her mother was making dinner.  Her birthday was coming up and she thought this was a good time to tell her mother what she wanted.

"Mom, I want a bike for my birthday."

Now, Little Carol was a bit of a troublemaker. She had gotten into trouble at school and at home. Carol's mother asked her if she thought she deserved to get a bike for her birthday. Little Carol, of course, thought she did.

Carol's mother, being a Christian woman, wanted her to reflect on her behavior over the last year, and write a letter to God and tell him why she deserved a bike for her birthday. Little Carol stomped up the steps to her room and sat down to write God a letter.


Dear God,

I have been a very good girl this year and I would like a bike for my birthday. I want a red one.

Your friend,


Carol knew this wasn't true. She had not been a very good girl this year, so she tore up the letter and started over.


Dear God,

This is your friend Carol. I have been a pretty good girl this year, and I would like a red bike for my birthday.

Thank you,


Carol knew this wasn't true either. She tore up the letter and started again.


Dear God,

I know I haven't been a good girl this year. I am very sorry. I will be a good girl if you just send me a red bike for my birthday.

Thank you,


Carol knew, even if it was true, this letter was not going to get her a bike. By now, she was very upset. She went downstairs and told her mother she wanted to go to church. Carol's mother thought her plan had worked because Carol looked very sad.
Carol walked down the street to the church and up to the altar. She looked around to see if anyone was there. She picked up a statue of the Virgin Mary, slipped it under her jacket and ran out of the church, down the street, into her house and up to her room. She shut the door and sat down and wrote her letter to God.