San Diego, California Mortgage Market Update

Market Happenings:

Now What : The market got clubbed even as, as noted by Merrill's Rosenberg yesterday, "once payrolls decline four months in a row, a string [added to today] the employment down-cycle does not typically bottom for at least another year...But the recession in the labor market, if not GDP, is here, and this is going to outlast the tax relief and very likely trigger sharp downward revisions to earnings expectations, precipitate further rounds of loan losses related to consumer credit, and impede the long awaited recovery in home sales and housing starts. The headwinds that a shrinking jobs market poses for aggregate demand will also probably shorten whatever vacation the Fed takes from the rate-cutting cycle." That is one train of thought however the data that came out today, while negative on an absolute scale, certainly beat trends with Non-Farm Payroll, The Unemployment Rate and Factory Orders much stronger than consensus estimates. The data will give investors pause on the implications for the Fed and the broader economy but, too be expected, bullish data sparks bond and MBS selling. Currently FNMA 5.00% MBS are off 10 ticks (-10/32). Expect lender ratesheet pricing to pull back up to 30 bps from yesterday’s closing marks.

Industry News:

House Panel Passes FHA 'Underwater' Bill

By a 46-21 vote, the House Financial Services Committee has approved a bill that provides the Federal Housing Administration with $300 billion in loan commitment authority to refinance "underwater" mortgages. The bill, crafted by the committee chairman, Rep. Barney Frank, D-Mass., provides mortgage investors/servicers with an option to refinance struggling borrowers into FHA-insured loans if they agree to write down the principal amount to 85% of the appraised value. The program is designed to be voluntary, and a new board composed of top government officials would oversee it. The Senate Banking Committee is slated to mark up a similar FHA refinancing bill on May 6.

Ross Closes on Option One Purchase

An affiliate of WL Ross & Co. has closed on its $1.3 billion purchase of Option One Mortgage Corp., Irvine, Calif., which services $55 billion in A-minus to D loans. With Option One under his belt, WL Ross chief executive Wilbur Ross said he is now in the hunt to buy savings and loan institutions. His financial backers include sovereign wealth funds. In a recent interview with National Mortgage News, Mr. Ross said he eventually wants to enter the loan production business. Last year, Mr. Ross's company bought the servicing platform of bankrupt American Home Mortgage, Melville, N.Y., a subprime and alternative-A servicer.

Lenders Urge Reversal on Appraisal Reforms

Mortgage lenders are urging the Office of Federal Housing Enterprise Oversight to withdraw its support for appraisal reforms that Fannie Mae and Freddie Mac agreed to implement as part of a settlement with New York Attorney General Andrew Cuomo. The agreement "permits the NYAG to unlawfully exercise authority that resides exclusively with the federal government," according to eight financial services trade groups. And they contend that OFHEO "violated its statutory directive" to be the sole regulator of the two government-sponsored enterprises when it entered into the agreement with the New York attorney general. "We urge OFHEO to withdraw its assent to the agreement, to not permit the GSEs to implement the agreement, and take steps to assure that this type of rulemaking by settlement does not occur in the future," the joint letter says. In comment letters on the appraisal reforms, the same groups strongly oppose the ban on the use of in-house appraisers and subsidiary appraisal firms.

Misc:

-- On Today’s date in 1908 the original version of the song "Take Me Out to the Ball Game," with music by Albert Von Tilzer and lyrics by Jack Norworth, was copyrighted by Von Tilzer's York Music Co.

-- On Today’s date in 1972, after serving 48 years as head of the FBI, J. Edgar Hoover died in Washington at age 77.

-- Wrestler-actor Dwayne Johnson (aka "The Rock") is 36.

Today's market update brought to you by:

Todd Albrigo

Account Executive

CMG Mortgage, Inc.