Merrill Lynch/BofA's analysts took a look at HARP, and whether or not it should be extended. The FHFA has a number of choices regarding HARP. "We see the following four broad choices for FHFA regarding HARP: Let the program expire, extend the program as is until the HAMP expiration date (December, 2012) with some minor operational adjustments, extend the program for a short period (6 months) and require lenders to demonstrate that they have taken action to improve the effectiveness of the program before they extend it for longer (another 1 year), or extend and expand the program as recommended by MBA." Merrill evaluated each of the options and looked at the key drivers for each of these choices. "We think that the simple extension is the most likely scenario but from the policy perspective, we think that FHFA should use this opportunity to push for increased focus by lenders to improve effectiveness."

That is the HARP - what about the FHA Short Refi program? The government is looking to reduce its role as 90% provider of residential mortgage credit to US households, while possibly remaining punitive to potential private providers of credit. Kate Berry, with American Banker, points out the discrepancy between big banks and Washington D.C. Wells Fargo and Ally Financial (GMAC) are poised to roll out pilots that would let underwater borrowers refinance into FHA loans and would write down the value of the credits, but House Republicans want to eliminate the FHA Short Refi program that the pilots would rely on. As the world turns... Today a House Financial Services Subcommittee has another hearing on "Legislative Proposals to End Taxpayer Funding for Ineffective Foreclosure Mitigation Programs." The four bills that Republicans on the Committee would like to terminate are the Home Affordable Modification Program (HAMP), the FHA Refinance Program, the Neighborhood Stabilization Program, and the Emergency Homeowner Relief Fund.

If you're a broker looking for a reverse mortgage program, don't call Wells Fargo. One month after Bank of America withdrew from this type of loan, "After a detailed review and evaluation, Wells Fargo Wholesale Lending only will discontinue offering Home Equity Conversion Mortgages (HECM), or Reverse, mortgages. We will accept Reverse mortgage applications through close of business on Friday, March 18, and the Wholesale Reverse pipeline must fund by Saturday, April 30, 2011." More business will be focused on fewer lenders - which can be good or bad for those remaining in the business.

HUD offers the lending program that allows senior citizens to extract a portion of the equity that has built up in their homes, and in recent years reverse mortgages comprised a growing percentage of overall GNMA pool issuance. Yearly total originations are about $10 billion a year industry-wide and make sense for seniors. But many in the industry, off the record, question the $10-15k fees, bad foreclosure press (for failing to keep up with property taxes), scams in the news, and potential lawsuit material. Who wants the Gray Panthers demonstrating outside your headquarters?

Ocwen Financial (an abbreviation for New Company spelled backward, for those playing at home) announced plans to sell a part of its mortgage servicing rights to a newly formed company, in a move aimed at cutting expenses. To whom is Ocwen selling the servicing? To Home Loan Servicing Solutions Ltd (HLSS),  founded by Ocwen's Chairman William Erbey.

Does this mean that every servicer is now going to set up its very own separate servicing company due to the possible treatment of mortgage servicing in this country and with Basel a few years down the road? Who knows, but HLSS filed for a $316 million IPO. Ocwen is going to use the money it receives from selling the servicing (to the company being set up by its chairman) to pay down debt, repurchase stock or purchase additional MSRs. To obtain funds for the purchase, HLSS plans to raise up to $316.3 million through an initial public offering. Ocwen also reported a quarterly profit of $9.9 million, below Wall Street expectations due to higher expenses.

London's HSBC Holdings has suspended its foreclosure proceedings in the U.S. after a regulatory letter noted "certain deficiencies" in its processes. "Investigations by the Federal Reserve and the Office of the Comptroller of the Currency into foreclosure practices will likely result in fines and costly changes to the way it runs its mortgage business" - problems in its processing, preparation and signing of affidavits and other documents supporting foreclosures. Banks such as BofA and Chase imposed foreclosure moratoriums but have restarted the majority of their foreclosures after implementing new procedures and said they don't believe the problems are legally material but the specter of hefty fines hangs over the entire servicing and mortgage business.

Over in the jumbo markets, PIMCO has received commitments of up to $1 billion to invest in jumbo mortgages as part of a conduit project which carries the working name of 'Project Bravo.' Expectations are high that "conforming" loan limits will fall to $625,500 soon after Labor Day, and any signs that non-government firms, private equity, and investment banking firms are looking to enter the space is viewed as positive news. Over the last year or so only two jumbo bonds have been brought to market, both by California's Redwood Trust.

Over in the commercial markets, JPMorgan Chase sold a $1.5 billion commercial-mortgage bond backed by skyscraper, shopping mall and hotel loans. It is yielding 1.95% more than Treasuries. Banks have arranged about $6.5 billion in commercial mortgage-backed securities this year, compared with $11.5 billion in all of 2010, according to data compiled by Bloomberg.

Values are going up! Well, at least farmland values - they have doubled, on average, in the last 10 years! Let's talk about it - and why not, given all the thousands of banks that lend on farm land. The FDIC will host a half-day symposium to discuss farmland value issues, titled "Don't Bet the Farm: Assessing the Boom in U.S. Farmland Prices," on March 10th in Virginia. The worry is, of course, about a farmland bubble. The symposium, including a speech by Sheila Bair, is free: BuytheFarm? 

While we're chatting about the FDIC, commercial banks and savings institutions insured by it reported an aggregate profit of $21.7 billion in the fourth quarter of 2010, a $23.5 billion improvement from the $1.8 billion net loss the industry reported in the fourth quarter of 2009. It is the sixth consecutive quarter that earnings registered a year-over-year increase, and had four straight quarters of positive earnings." Apparently 62% of all institutions reported improvements in their quarterly net income from a year ago. Note that as has been the case in each of the past five quarters, reductions in provisions for loan losses were responsible for most of the year-over-year improvement in earnings. You can see the numbers for yourself at FDICShiningStars 

Here is a list you don't want to be on: the FDIC's orders of administrative enforcement actions taken against banks and individuals in January. The FDIC processed a total of 61 matters in January, with 24 consent orders, 4 removal and prohibition orders, 20 civil money penalties, 2 prompt corrective actions, 8 orders terminating consent orders and orders to cease and desist, and 3 orders terminating supervisory prompt corrective action directive. Visit the FDIC's Web page at InTroublewiththeFDIC 

Whether it is too much hassle to obtain a loan, or no one likes rates, buying with cash on the courthouse steps, or the expected rate of return on real estate is better than the 0% at the bank, about 31% of California home sales were paid for with cash in January. DataQuick points out that it beats December's number of 28.9% and 27.8% share a year ago. That helps liquidity, but doesn't directly help those in the mortgage biz.


What is "normal?" Whatever it is, yesterday Ben Bernanke said that he doesn't see unemployment return to "normal" for years. He also sees "temporary inflation gain from commodity prices," and that the "housing sector remains exceptionally weak." "Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established." His comments did not shake up the markets too much, nor did the economic news that came out. Construction Spending dropped .7%, and the ISM Manufacturing number came out at "61.4%" which was as expected and up for 19 months in a row. But unrest is still very real - gold is up near record highs, and oil prices continue upward - and that sent stocks down while fixed-income prices moved back to unchanged during the day. The 10-yr closed out at 3.41% and MBS prices finished Tuesday at Monday's levels.

This morning we had the MBA index show a decrease of 6.5% , with refi's down 6.5% and purchases down 6.1%. The refinance share of mortgage activity stands at about 65%, and the ARM share of apps sits at 5.5%. FULL STORY AND CHARTS

This morning I received a phone call from a gorgeous ex-girlfriend who called out-of-the-blue to see if I was still around. We lost track of time, chatting about the wild, romantic times we used to enjoy together.

I couldn't believe it when she asked if I'd be interested in meeting up and rekindling a little of that "old magic".

I was flabbergasted. "I don't know if I could keep pace with you now", I said. "I'm a bit older and a bit grayer and losing speed every day since you last saw me.  Plus, I don't really have the energy I used to have."

She just giggled and said she was sure I would "rise to the challenge."

"Yeah," I said. "Just so long as you don't mind a man with a waistline that's a few inches wider these days!  Not to mention my lack of muscle tone, stuff sagging, my teeth not as white, and jowls like a Great Dane!"

She laughed and told me to stop being so silly. She teased me saying that tubby gray-haired older men were cute, and she was sure I would still be a great lover.

"Anyway," she giggled, "I've put on a few pounds myself!"

So I hung up on her.