During a recent password audit, it was found that a blonde was using the following password: MickeyMinniePlutoHueyLouieDeweyDonaldGoofy. When asked why such a big password, she said that it had to be at least eight characters long.

The use of passwords and computers has certainly become an integral part of the mortgage business, and the flow of information. Lenders are especially following the 1/1 RESPA changes which include the Good Faith Estimate, the HUD-1 and the HUD 1-A. Many Ops employees are going directly to HUD for information and you don't even need to create a new password:

RESPA Rulehttp://www.hud.gov/offices/hsg/ramh/res/finalrule.pdf

RESPA FAQs: http://www.hud.gov/offices/hsg/ramh/res/resparulefaqs.pdf

Sample GFE: http://www.hud.gov/offices/hsg/ramh/res/gfestimate.pdf

Sample HUD-1: http://www.hud.gov/offices/hsg/ramh/res/hud1.pdf


Lend America, after being fined by HUD and asked to stop doing government loans, closed their doors yesterday. The FHA accused them of submitting false documents and making loans that did not meet requirements, among other things. Kids, don't try this at home!

One look at their website says it all...


And those folks watching the AmTrust saga are pretty much watching "business as usual" with AmTrust Mortgage. The mortgage company is owned by the bank, and although AmTrust Financial has filed, neither the bank nor the mortgage company have. That being said, there is a feeling among brokers and clients that if they have other options in placing a loan, they will do so given their fiduciary responsibility to the borrower to fund their loan.

We're in December, and the Fed program to buy residential mortgages comes to an end in March. It has already been extended once, and some feel that they will extend it again. Others would rather they bring things to a close, and let the free market determine mortgage rates. And still others believe that just as the US government winds down its $1.25 trillion agency MBS program, it will be forced to create another program to address the refinancing need in the commercial real estate market. As anyone who has driven through a downtown area in the US in the last six months knows, the number of "for sale", "for lease", "for rent", and just plain vacant office and storefronts is not declining.

Whatever happens in the commercial arena, the Federal Reserve plans to sell back small amounts of mortgage securities to the market in coming weeks via reverse repurchase transactions  as an exercise in operational preparedness and did not signal a tightening of monetary policy or an effort to begin raising interest rates. The Fed recently announced that they will slowly begin taking over these operations beginning yesterday and that it will gradually slow the $1.25 trillion program. Up to now the Fed had been using only external investment managers, but from here on will use internal staff on some days.

Between the stock market and some decent economic news yesterday, interest rates moved slightly higher yesterday. Wall Street traders noticed a pickup in selling as prices dropped, as one would expect. A few hours after the market opened we found out that Construction Spending for October was unchanged after declining for the last five months. (There are exceptions, of course, but what builder wants to build, given the residential foreclosure issues and the commercial real estate vacancies?) Pending Home Sales were up almost 4% in October, ahead of the Existing Home sales figures because tight credit conditions and tougher rules on appraisals are killing some deals before they close. The ISM Manufacturing Index dropped more than expected after hitting a 3-yr high last month. And lastly, as the market adjusts to the Dubai situation, our fixed income securities become less of a "flight to safety", and the demand drops.

It doesn't help that U.S. banks are hoarding all the reserves the Fed creates when it buys securities outright or lends to various banks and institutions. Currently it is believed that the banks are sitting on $1 trillion of excess reserves for a variety of reasons, not the least of which is more cushion against potential issues down the road. Along the same lines, as we saw with the Treasury auctions last week, US and foreign demand is still solid. Which in turn, once again, leads in to a discussion about how the dollar's continued weakness has contributed to the impressive Treasury results. With the Fed keeping rates low, this contributes to the weakness in the US dollar and helps us finance our debt. And with the issues in Dubai, the same goes for foreign banks as well - there is little reason to raise rates if there are more potential problems in the emerging markets. Stay tuned for Friday's November employment data to potentially move markets: the unemployment rate is expected to hold at 10.2% and could put further pressure on the markets if the rate jumps more than is expected.

The only news out today is the ADP and the Beige Book (2PM EST). The correlation between the ADP job numbers and the unemployment data that comes out on Friday has always been a little sketchy, especially with large numbers of government hiring or firing. Regardless, U.S. private employers shed 169.000 jobs in November, fewer than the 195,000 jobs lost in October. Currently the 10-yr is at 3.29% and mortgage prices are worse by between .125 and .250 from yesterday afternoon

Lawrence, Kansas, December 12, 2008

A Kansas farm wife called the local phone company to report her telephone failed to ring when her friends called - and that on the few occasions, when it did ring, her dog always moaned right before the phone rang.

The telephone repairman proceeded to the scene, curious to see this psychic dog or senile lady. He climbed a telephone pole, hooked in his test set, and dialed the subscriber's house. The phone didn't ring right away, but then the dog moaned and the telephone began to ring.

Climbing down from the pole, the telephone repairman found:

1. The dog was tied to the telephone system's ground wire with a steel chain and collar.
2. The wire connection to the ground rod was loose.
3. The dog was receiving 90 volts of signaling electrical current when the number was called.
4. After a couple of jolts, the dog would start moaning and then urinate.
5. The wet ground would complete the circuit, thus causing the phone to ring.

This demonstrates that some problems CAN be fixed by pissing and moaning.