Every year we receive a new definition, adjusted by the Consumer Price Index, for what constitutes a small or intermediate bank under CRA regulations.

"As a result of the 2.21 percent increase in the CPI index for the period ending in November 2010, the definitions of small and intermediate small institutions for CRA examinations will change as follows: "Small bank" or "small savings association" means an institution that, as of December 31 of either of the prior two calendar years, had assets of less than $1.122 billion. "Intermediate small bank" or "intermediate small savings association" means a small institution with assets of at least $280 million as of December 31 of both of the prior two calendar years, and less than $1.122 billion as of December 31 of either of the prior two calendar years. Who knew? READ MORE

Maybe Basel III will not be as onerous as many banks around the world had feared. HERE IS THE LATEST

In other servicing news, there is banter out there about establishing national servicing standards. A group of industry leaders and analysts cited an “urgent need” to develop national standards to fight servicing fraud, which they said is slowing the housing recovery.  There is nothing firm yet, but it's out there. FULL STORY

And in more servicing news, Fannie Mae adjusted its requirements regarding technology usage and electronic invoice submission charges to attorneys and trustees and foreclosure and bankruptcy referrals. CHECK OUT FANNIE'S ANNOUNCEMENT

Freddie Mac recently announced that beginning next month it will begin disclosing pool-level delinquency data on a monthly basis for all single-family Freddie Mac Participation Certificate (PC) and Giant PC securities. "Providing this delinquency disclosure data at the pool level will make our delinquency data disclosures consistent with an industry practice previously established by Ginnie Mae." Freddie told its servicers that if you hold or service Freddie Mac single-family PCs, "please be aware that when we implement the new pool-level delinquency disclosures, market participants may have the ability to associate delinquency rates with individual Seller/Servicers for single-family pools. While Freddie Mac currently discloses many credit and other variables used by market participants to model prepayment speeds accordingly, as a result of the new pool-level delinquency disclosures some PC pools may trade differently than they had previously. When implemented next month, the disclosure data will provide current information on delinquent loans in PC pools. We are not disclosing historical delinquency data."

Hovnanian Enterprises reported its fourth quarter income, which showed less of a loss than a year ago, but still worse than analysts had expected. Revenue has declined, hurt by a lack of consumer confidence and job creation, but on the positive side land acquisition prices (builders are still buying more land?) are good, and should provide good future returns.

This week, the FDIC closed sales of 40% equity interest in three limited liability companies it set up to hold commercial and residential assets of 26 failed banks. $620 million in unpaid principal on these portfolios was sold for roughly $198 million, less than one-third of the face amount. California-based investment firm Colony Capital, the New York-based private equity company The Cogsville Group, and Cache Valley Bank out of Utah were involved in the purchases.

U.S. Bank Home Mortgage Wholesale Division is making several product guideline revisions starting today. The full guidelines should be consulted, but they include increasing the minimum FICO for the Home Possible program to 660 (manual underwrites), instituting a minimum 7 year waiting period after a bankruptcy or foreclosure for the USBHM IO ARM product, etc.

Rates have not done much lately, providing a nice break from the volatility over the previous few weeks. Pundits continue to analyze QE2, and whether, given the pickup in economic news lately, QE2 was even needed. A month ago Ben Bernanke stated that the Fed's purchases of U.S. Treasuries "affect the economy primarily by lowering interest rates on securities of longer maturities," and that Treasury purchases, which is what is happening, "work by affecting the yields on the acquired securities" and forcing investors to buy higher-yielding, riskier assets. Certainly stocks have rallied, helped by the tax bill, and the credit spreads (the difference between the yields on risk-free Treasuries and other debt securities) have narrowed. As we all know, rates have moved higher - which many suggest will help our economy. Uh, right?

Rates have certainly kicked mortgage application activity in the teeth, as one would expect. Originators focused on refi's are bearing the brunt of it. The MBA reported that apps last week were down over 18%, hitting their lowest levels since January. Even the four-week moving average of mortgage app was down almost 10%. Refi applications were down almost 25%, back to April levels, and purchases were down 2.5%.

Yesterday fixed income security prices advanced, pushing the yield on the 10-year note toward a one-week low. Still, yields have increased about 1% from their 2010 low on speculation the U.S. extension of tax cuts will spur economic growth and widen the budget deficit. MBS improved price-wise and on firmer spreads to Treasury yields. 30-yr prices improved .250-.375, although some investors seemed hesitant to pass this along to originators.

GDP came out revised from +2.5% up to +2.6%. It was a bit under expectations, but these are old numbers which tend to have little impact on the markets - it was expected to move closer to +3%. Later this morning we'll have some housing data in the form of the FHFA housing index and Existing Home Sales. We find the 10-yr yield at 3.31% and MBS prices a shade better.

At a recent computer expo (COMDEX), Bill Gates reportedly compared the computer industry with the auto industry and stated, "If GM had kept up with technology like the computer industry has, we would all be driving $25.00 cars that got 1,000 miles to the gallon."

In response to Bill's comments, General Motors issued a press release stating, "If GM had developed technology like Microsoft, we would all be driving cars with the following characteristics:

  1. For no reason whatsoever, your car would crash twice a day.
  2. Every time they repainted the lines in the road, you would have to buy a new car.
  3. Occasionally your car would die on the freeway for no reason. You would have to pull to the side of the road, close all of the windows, shut off the car, restart it, and reopen the windows before you could continue.
  4. Occasionally, executing a maneuver such as a left turn would cause your car to shut down and refuse to restart, in which case you would have to reinstall the engine.
  5. Macintosh would make a car  that was powered by  the sun, was reliable, five times as fast and twice as  easy to drive - but would run on only five percent of the  roads.
  6. The oil, water temperature, and alternator warning lights would all be replaced by a single "This Car Has Performed an Illegal Operation" warning light.
  7. The airbag system would ask "Are you sure?" before deploying.
  8. Occasionally, for no reason whatsoever, your car would lock you out and refuse to let you in until you simultaneously lifted the door handle, turned the key and grabbed hold of the radio antenna.
  9. Every time a new car was introduced car buyers would have to learn how to drive all over again because none of the controls would operate in the same manner as the old car.
  10. You'd have to press the "Start" button to turn the engine off. "