Greetings from San Diego, where, coincidentally, there is a national mortgage banking conference. Although I didn't see any chains of mortgage banker types forming conga lines in any hotel lobbies, the mood here has improved since the last few conferences, and most are cautiously optimistic. There is still the "Hey, congratulations, we're still in the business" mood, but no one seems to believe that it will be smooth sailing from here on out. If I had to sum things up, I would say that a) there are a number of "displaced" mortgage bankers starting up some new ventures with good potential, b) "new" loan programs are practically nonexistent, c) vendors are introducing a few new products and new twists on dealing with the current "agency-only" environment, and d) regulatory and compliance changes have become constant.
Regardless, the mood is definitely better than one would probably find in the Chicago Cub's front office, given that they have declared bankruptcy. At those ticket prices!

Speaking of that, San Diego also happens to be in California, where, as it turns out, the governor just signed seven mortgage-related laws. Not that other states always follow what happens in California, but it is important to know what the laws are. Generally, the laws provide a range of consumer protections to borrowers and home-mortgage holders. For example, starting January 1, mortgage brokers will not only have new licensing requirements but also face tighter restrictions so they cannot steer borrowers to riskier, higher-interest loans when they qualify for less-expensive ones. "Neg Am" loans are banned, so no more option of monthly payments so low that the loan amounts can actually grow over time. Prepayment penalties are limited to 2% of loan balances. But don't take it from me. READ MORE

There are a fair number of "muckity-mucks" here at the conference. It reminds us that ten years ago, in 1999, Martin Luther King III wrote that minorities were being left out of the housing boom. Not wanting to appear unjust, Andrew Cuomo, who is responsible for the HVCC issue, and who was then Secretary of HUD, increased the mandated lending by Fannie and Freddie to "underserved communities". Credit standards declined, and documentation standards declined. Of course, the fact that home prices can, and do, decline didn't matter. No one views that as the sole reason that we find ourselves in this credit situation, but it hasn't helped...

How are various companies' loan modifications going? Well, at least one seems to be going well. Ocwen Financial ("New Company" spelled backwards, by the way), who was a leading subprime lender and servicer, reports that they are converting almost 14% of its customers' trial modifications, compared to about 1-2% industry-wide. Its customers, of course, are subprime borrowers - whatever subprime means these days, but apparently the servicing portfolio is fertile ground. Ocwen said it completed almost 45% of all of the permanent mortgage modifications done by the industry under the Treasury Department's Home Affordable Modification Program (HAMP). And as we all know, HAMP reduces monthly mortgage payments to help borrowers who are facing foreclosure keep their homes and pays cash incentives to mortgage servicers to reduce monthly payments.

Well, with the fixed income markets closed yesterday, and many major players here in San Diego mired down in meetings, there is not much going on in the mortgage markets. We are reminded, as lenders and investors re-open today, that rates moved quite dramatically at the end of last week, but today we are, so far, seeing a little improvement. With no news, the yield on the 10-yr is down to 3.33% and 30-yr mortgage security prices are about .125-.250 better than they were at the close of business on Friday.

A Mafia Godfather finds out that his bookkeeper has cheated him out of ten million bucks. His bookkeeper is deaf. (That was the reason he got the job in the first place - it was assumed that a deaf bookkeeper would not hear anything that he might have to testify about in court!)

When the Godfather goes to confront the bookkeeper about his missing $10 million, he brings along his attorney, who knows sign language. The Godfather tells the lawyer, "Ask him where the 10 million bucks he embezzled from me is." The attorney, using sign language, asks the book keeper where the money is.

The bookkeeper signs back: "I don't know what you are talking about."

The attorney tells the Godfather: "He says he doesn't know what you're talking about."

The Godfather pulls out a pistol, puts it to the bookkeeper's temple and says, "Ask him again!"

The attorney signs to the bookkeeper: "He'll kill you if you don't tell him!"

The bookkeeper signs back: "OK! You win! The money is in a brown briefcase, buried behind the shed in my cousin Enzo's backyard in Queens!"

The Godfather asks the attorney: "Well, what'd he say?"

The attorney replies: "He says you don't have the guts to pull the trigger."