Today is “Bike to Work Day”. This is often difficult when one works from home, or doesn't have a job. Perhaps many people you see riding today are out for a bike ride just for appearances.

It is not often that one is able to watch a financial newscaster pass out while on the job: THIS GUY DID THOUGH. And don't ask me what relevancy a keyboard-playing cat has with any of it, but it's funny.

Well, let’s not beat around the bush. According to the popular press, the Federal Reserve scored a victory and mortgage bankers suffered a defeat yesterday when the Senate approved an amendment by a 90-9 vote to preserve Fed supervision of hundreds of smaller banks, instead of transferring them to other regulators.

More importantly the mortgage professionals, the Senate voted 63 to 36 to approve the Merkley amendment and end mortgage kickbacks and "liar loans".

Sometimes one wonders if politicians know basic economic principals – bond math economics dictate that an investor will pay more for a higher yielding instrument, other things being equal. Regardless of my opinion, yield spread premiums are believed to have encouraged brokers to steer consumers into risky, high-interest loans even if they qualified for cheaper loans. And liar loans let consumers qualify for loans they could not possibly repay if they opted to simply state their income or other assets, rather than waiting for verification.

As a result of the Merkley amendment, mortgage lenders and loan originators would be banned from accepting payments based on the interest rate and other terms of the loan, which effectively wipes out loan steering, and as I mentioned kills off the yield spread premium – often a key part of broker’s compensation. NAMB says, "This amendment takes consumer choice away by requiring the consumer to pick whether they pay closing costs including a mortgage originator’s fee ALL in cash at the closing table or ALL compensation in the rate of the loan". The Final Merkley amendment can be found HERE

The Senate also voted to keep a measure in the bill, opposed by the mortgage industry, which would require lenders who securitize to retain at least a 5 percent stake in their products. Not even the large lenders can do that if the law applies to conforming product. Democrats on Tuesday defeated a Republican amendment that would have ended government control of the Fannie & Freddie, arguing that the issue should be dealt with separately next year.

Final approval of the Senate bill could come next week. These amendments and the law are not final, and remember that the House bill does not have this language so even if they pass the Senate, there will still need to be reconciliation with the House. There are more than 200 amendments filed on the Senate bill. Any legislation that clears the Senate must be reconciled with a reform bill that passed the House of Representatives in December before Obama can sign it into law. (The Senate unanimously adopted a measure that clarifies that small businesses like jewelers and orthodontists that extend credit to customers would be exempt.) Trade organizations are recommending that members pick up the phone and call their elected officials: CONTACT INFO HERE

In a story that I saw here on Mortgage News Daily, “2010 is looking to be an even more onerous year than 2009 for mortgage lenders that sold loans to the GSEs. Nonbank financial institutions in particular, could be at significant financial risk by the contingent liabilities associated with the representations and warranties made to the GSEs for the quality, eligibility, and integrity of loans they originated and sold; and, which are now seriously delinquent or in default.”

Fannie, just like any investor, expects sellers to live up to their contractual obligations. “We conduct reviews of delinquent loans and, when we discover loans that do not meet our underwriting and eligibility requirements, we make demands for lenders to repurchase these loans or compensate us for losses sustained on the loans, as well as requests for repurchase or compensation for loans for which the mortgage insurer rescinds coverage.” During the first quarter of 2010, lenders repurchased approximately $1.8 billion in loans from Fannie due to contractual issues – which doesn’t even count mortgage servicers being “obligated to repurchase loans or foreclosed properties, or reimburse us for losses if the foreclosed property has been sold, if it is determined that the mortgage loan did not meet our underwriting or eligibility requirements or if mortgage insurers rescind coverage.” HERE IS THE FULL STORY

But with the new loans coming through the door in the first quarter, Fannie Mae took on slightly more risk. Critics say that the $116 billion of single-family mortgages purchased by Fannie had a higher than average LTV and a lower average FICO score than last year's crop of loans. The group of new loans also showed an uptick in IO product, ARM’s, and NOO versus 2009’s stats. Analysts say that Fannie paid lenders less for this type of production. Almost 12% of the new loans were made under the government's Home Affordable Refinancing Program, which allows for loan-to-value ratios as high as 125%. 78.5% of the loans Fannie added to its book last quarter were refinancings, which are generally considered a safer bet than home purchase loans, since an existing homeowner already has a track record of making payments – much better than the 48% refi share in 2006. Unfortunately for Fannie and the US taxpayer, Fannie has asked the Treasury Department for another $8.4 billion of funding after losing $13 billion in the first quarter – the 11th straight quarterly loss.

Counselors working with HAMP Modification applications have a shiny new tool to use: the HOPE LoanPort, a new web portal tool. Launched by the HOPE NOW Alliance, along with HUD, this new web portal will allow counselors to collect the necessary documents from homeowners, upload the completed package, submit the completed package directly to servicers, and track the status of a borrower’s application. Designers hope it will stop lost documents, enforce complete HAMP applications, and improve efficiency and transparency. But don’t take their word for it – check it out HERE

Anyone who still has a job in the crazy business should know that according to the Bureau of Labor Statistics the mortgage banker and broker sector eliminated 1,500 full-time jobs in March as loan production continued to slow, after adding 4,400 full-time employees in February. An estimated 252,500 full-time workers were employed by the mortgage industry in March, down from 254,000 the prior month. However, employment was down only 6.7 percent from March 2009, compared to a 21.6 percent decline over the previous 12-month period

Due to several gold teeth, my 87-year old Dad's mouth is becoming more valuable with each passing week. Gold prices continue to move higher on both global economic uncertainty and inflation fears, hitting yet another high of over $1,230 an ounce. (Why are people always so much more concerned with inflation instead of deflation?) Overall, yesterday the stage belonged to stocks, which are back to pre-Greece crisis levels. Mortgages did OK, however, and improved slightly. For those tracking yield spreads, current coupon MBS yielded about 140 basis points more than a blend of 5- and 10-year Treasuries, versus 150-160 basis points prior to the Fed's 15-month $1.25 trillion MBS purchase campaign. And according to a report from Barclays, the Fed owns 32% of the outstanding 30-year fixed rate mortgages, most in the form of 4 & 4.5 percent bonds!

Where do red-headed babies come from?

After their baby was born, the panicked father went to see the Obstetrician.

“Doctor,” the man said, “I don't mind telling you, but I'm a little upset because my daughter has red hair. She can't possibly be mine!”

“Nonsense,” the doctor said. “Even though you and your wife both have black hair, one of your ancestors may have contributed red hair to the gene pool.”

“It isn't possible,” the man insisted. “This can't be, our families on both sides had jet-black hair for generations.”

“Well,” said the doctor, “let me ask you this. How often are you ‘intimate’?”

The man seemed a bit ashamed. “I've been working very hard for the past year. We only made love once or twice every few months.”

“Well, there you have it!” the doctor said confidently. “It's rust.”