Overheard recently: "I love Christmas lights - they remind me of some co-workers. They all hang together, half of them don't work, and the ones that do aren't that bright." But there lots of very bright people in the mortgage business, and some wonder about the general common sense level of those in Washington. Take HR 2055 for example. The While house signed HR 2055 which gives $1 trillion to extend the National Flood Insurance Program through May 31, 2012, which should give Congress enough time to put a permanent law in place. That is good news. But can they really put something in place prior to May 31 that helps the program? Or will the American public, which includes those to whom flood insurance is very important, witness another last minute compromise, see an approval tied to a totally unrelated bill, or see "the can kicked down the road" yet again? Let's hope it is the first.

Bank of America's problems are well documented. I did not have the time or inclination to go back and check famous CEO quotes from Countrywide, WAMU, Lehman, Taylor Bean, and so on, but "We're prepared for turbulent times" seems to ring a bell. Marty Mosby, managing director at Guggenheim Securities, said Bank of America might have to raise $45 billion over the next several years to de-risk its balance sheet. "The real risk really comes from the overhang we get from Countrywide," Mosby said, noting that mortgage putbacks and home-equity products could be among the biggest risks for the lender. "Those are products that are still here domestically, the ones that have the most potential stress if we were to dip into another recession," he said.

Long-time industry vet A.B. writes, "Conduit margins are high right now, leaving sellers with the choice of either investing in the servicing assets they create or selling them cheaply, at least by the standards of the last ten years or so.  I believe the primary reason that conduit margins have widened to the extent that they have stems from BAC's decision to exit the correspondent and wholesale channels.  However, to my thinking the corollary statement is that by exiting these channels and allowing Wells, Chase and others to book extra-normal profits, it may well be that the net effect of BAC's decision to exit will be to set-up yet another situation in which it will appear to materially under-perform its competitors. The competitive dynamic has changed, with BAC in the conduit space margins were normal and no one competitor got rich; without BAC the remaining competitors get to juice up their profit margins by paying less for purchased assets and by becoming more selective about the assets that they will purchase.  By exiting, BAC made the strategic misstep of ceding higher margin business to its competitors because it apparently didn't expect that margins would expand upon its exit or, if it had such expectation, it underestimated the magnitude and persistency of such margin expansion.  In the dead pool that I am in, I have Brian Moynihan being ousted one day prior to BAC's next quarterly earnings report."

"MetLife & GE, sittin' in a tree..." General Electric Co.'s finance arm agreed to buy the U.S. retail-deposit business of insurer MetLife, in a deal that matches the life insurer's desire to get out from under federal regulation with GE's pursuit of a more-reliable funding source. The acquisition will bring GE Capital $7.5 billion in deposits as well as MetLife's online-banking platform. The deal, expected to close in mid-2012, will speed GE's new effort to attract more individual savers and further reduce its reliance on potentially volatile financial markets for funds. As we know, MetLife put its banking operations on the block in July in hopes of getting out from under the regulation of the Fed. GE considers its current lending channel to be a core business. The deal with MetLife will boost GE Capital's existing U.S. deposit base of $23 billion by about a third and help support its commercial lending business. GE Capital paid less than $100 million for the MetLife operation, at the low end of the usual range for such deals, which typically command a price equal to 1% to 3% of deposits. Here is the scoop on the banking deal, although I don't know any specifics on the mortgage operation.

How are mortgage folks and Realtors supposed to reconcile headline stories like, "Sales of newly built, single-family homes edged up 1.6% to a seasonally adjusted annual rate of 315,000 units in November - the third consecutive monthly gain in new-home sales and the fastest pace of such activity since April" and "The Office of the Comptroller of the Currency (OCC) reported that the number of new foreclosures increased by 21.1% during Q3, as servicers lifted voluntary moratoria implemented in late 2010 and exhausted alternatives to foreclosure for the large inventory of seriously delinquent mortgages working through the loss mitigation process. The increase in new foreclosures and the increase in average time required to complete foreclosures sales has resulted in the number of foreclosures in process increasing to 4.1% of the overall portfolio, or 1,327,077 loans, at the end of the third quarter of 2011"?

Comerica Bank takes a stab at it. "Residential real estate markets are looking a little better as both construction of new homes and sales of existing homes ticked up in November.  Improving consumer confidence and gradually tightening labor markets look like they are helping to build a foundation under housing. Of course the firmest support to the foundation would be improving sales prices and that has not happened yet.  Prices still look soft for most market areas, sagging under the weight of bloated inventories of distressed homes for sale."

Over at Wells Fargo, according to the National Association of Homebuilders/Wells Fargo Housing Market Index (HMI), builder confidence continued to show gains in December, the third consecutive monthly increase and the highest level since May 2010. Starts and permits have also perked up, with single-family starts up 4.6 percent on a year-ago basis in November and permits up 3.6 percent over the same period. "The increases mirror improvement in construction outlays and sales, which have also seen gains in the past few months. While the increases are promising, we do not believe a 'genuine' recovery in housing activity has begun. Indeed, the major obstacles that have troubled the housing market over the past few years still remain intact, including the oversupply of single-family homes and mounting distressed transactions.  We expect home prices to come under additional pressure this winter, as more foreclosures come on the market during the seasonally slow sales period. Appraisals are likely to remain conservative for at least the next year, or until the mountain of foreclosures hanging over the market finally clears."

By the way, anyone looking for the MBA application index today will be disappointed: the MBA offices are closed all week and next Monday, so the survey results will next be released on 1/4/2012 and cover two weeks.

Yes, PHH was downgraded by S&P, and has seen its stock price falter. But the company has capital and financing in place, as noted in its SEC 8K filing yesterday. Excerpts include, "PHH has $9.8 billion of financing arrangements in addition to revolving credit facility as of December 21, 2011...PHH projects sufficient liquidity to retire its debt obligations maturing in 2012 and support its ongoing business operations...With the exception of the Fannie Mae early funding committed facility, none of the Company's committed financing facilities are subject to termination, acceleration, modification,  collateral posting or adverse price changes solely as a result of a downgrade of the Company's unsecured debt ratings below investment grade."

The 8k goes on. "The mortgage operation has $6.5 billion of financing facilities and currently maintains 13 separate mortgage-related financing facilities.  The Company primarily uses warehouse and gestation facilities to fund closed loans that have been pre-sold on a committed basis to, or sold pursuant to programs sponsored by, Fannie Mae, Freddie Mac and Ginnie Mae. Mortgage warehouse facilities are generally structured as 364-day repurchase agreements and are essentially collateralized borrowings with loans originated by the Company serving as the underlying collateral.  As secured financings, the advance rate and financing cost under such facilities are primarily based on the historical quality and performance of the Company's loan originations rather than the Company's unsecured debt ratings...Due to the recent Standard and Poor's ratings action, Fannie Mae may terminate or modify its $1 billion committed early funding facility or waive its termination rights and continue to provide such funding on a committed or an uncommitted basis."

Have you ever heard of Wallick & Volk? I must admit that I had not, although the mortgage company has been around a long time, and is expanding in the western U.S. Although it has a fair amount of fluff, here is the PR piece.

Above the commentary discussed the expected continued rocky housing market, and this was supported yesterday by the S&P/Case-Shiller 10-City Composite falling 1.1% in October, and dropping in 19 of 20 cities tracked for another index. Optimists suggest that at least the downward trend may be slowing, if only by a bit.

The markets were pretty much dead in the water yesterday, although there is continued concern about Europe, which will be with us for months if not years. There was "solid" origination from mortgage banks which was easily absorbed through Fed buying and insurance company, REIT, and money manager buying. With no news today it could be pretty quiet.  MBS have moved up in morning trading.

If you were going to be hiking in Bear Country up in the mountains what size pistol would you carry? What is the smallest caliber you trust to protect yourself?
My personal favorite bear defense gun has always been a little Beretta Jetfire in .22 short!
I've found over the years when hiking in bear country I never leave without it in my pocket.
Now you might think you need some huge cartridge gun like a .357 magnum. Nope - a little .22 will work just fine.
I remember one time hiking with my brother-in-law in northern Montana.
Of course we all know the first rule when hiking in the wilderness is to use the "Buddy System".
For those of you who may be unfamiliar with this it means you NEVER hike alone, you bring a friend or companion, even an in-law, that way if something happens there is someone to go get help.
Out of nowhere came this huge brown bear and man was she MAD! We must have been near one of her cubs.
Any way if I had not had my little Jetfire I'd sure not be here today.
That's right, one shot to my brother-in-law's knee cap and I was able to escape by just walking at a brisk pace.
That's one of the best pistols in my safe!

If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog discusses the time frames for borrowers returning to A-paper status after a short sale or foreclosure. If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what's going on out there from the other readers.