San Diego, California Mortgage Market Update

Market Happenings:

Yes, Bonds and Mortgage Backed’s are Open Today : The market has reluctantly shown up for work this morning as the holiday impacted week grinds on & trade looks to do the same. Globally most markets were closed ushering in a very slow start to the session. The Housing Bear keep rolling with the release of the Case Schiller data and this shouldn’t come as a huge surprise. Little else going on today. The stock market has been in sell mode since the bell on thin volumes which likely is impacting the pickup in bonds and MBS, albeit slight. Look for lender ratesheet pricing to be about flat from Monday.

Industry News:

Home Prices Drop 6.1% - Case-Shiller Says 11 of 20 Cities Show Record Low Growth Rates

Home prices in 20 major U.S. cities were down 6.1% on average in the past year as of October, according to the Case-Shiller price index released Wednesday by Standard & Poor's. Since October 2006, prices in 10 cities fell 6.7% -- a record drop. The prior largest decline was 6.3% in April 1991. "No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," said Robert Shiller, chief economist at MacroMarkets LLC and co-developer of the index. Eleven of the 20 metro areas posted a record low annual growth rate. Also, all 20 metro areas declined from the prior month as San Diego posted the largest decline -- 2.6%. Miami sustained the largest drop over the past year, with a decline of 12.4%. Next came: Tampa, with a drop of 11.8%, Detroit with a drop of 11.2%, and San Diego with a drop of 11.1%. Home prices are going to decline "considerably further" in coming quarters, likely reaching a double-digit pace on a year-over-year basis, according to Joshua Shapiro, chief economist for MFR Inc. "Given conditions relating to mortgage financing, and the number of unsold homes that is piling up, all regions are likely to continue on a negative trend in the months ahead, and those with the greatest oversupply (at the bottom of the pack at the moment) will continue to fall by the most," wrote Shapiro in a research note.

GSE Loan Purchases Up, Portfolios Down

Loan purchases by Fannie Mae and Freddie Mac rose in November but their retained portfolios continued to shed assets. Fannie Mae purchased $63.7 billion in mortgages during the month, a 28% rise from the level recorded a year earlier. Freddie's purchases rose a more modest 8%, to $41.4 billion. At the end of November Fannie held $722 billion in mortgages, a 1.4% decline from the level on Oct. 31. Freddie's holdings fell 0.3%, to $701.3 billion. In a research note, Credit Suisse said, "Freddie disclosed that wider spreads on mortgage products adversely affected the fair value of its common equity during November." Credit Suisse has an "underperform" rating on Freddie and a price target of $22, which is $8 below its current trading value.

Fitch Downgrades Subprime Securities

Over 260 classes of mortgage-backed securities from 22 issuers were downgraded by Fitch Ratings on Dec. 21 as a result of changes to its subprime loss forecasting assumptions. Fitch also affirmed the ratings on classes with outstanding balances of approximately $27 billion. Among the securities affected by the latest downgrades were: 42 classes of Structured Asset Investment Loans mortgage pass-through certificates; 35 classes of Ameriquest, Argent, and Park Place mortgage pass-throughs; 31 classes of Soundview Home Equity Loan Trust asset-backed certificates; 15 classes from three Bear Stearns Asset-Backed Securities issues; 13 classes of Fremont Home Loan Trust mortgage pass-throughs; 13 classes of NovaStar mortgage pass-throughs; 12 classes of WaMu asset-backed certificates; 12 classes of Citigroup Mortgage Loan Trust mortgage pass-throughs; 11 classes of Option One mortgage pass-throughs; and 11 classes of People's Choice Home Loan mortgage pass-throughs. The rating actions were attributed to changes in Fitch's subprime loss forecasting assumptions that "better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price weakness."

Misc:

-- On Today’s date in 1941, Winston Churchill became the first British prime minister to address a joint meeting of the U.S. Congress.

-- On Today’s date in 1996, 6-year-old beauty queen JonBenet Ramsey was found beaten and strangled in the basement of her family's home in Boulder, Colo. (To date, the slaying remains unsolved, despite a widely publicized "confession" by John Mark Karr.)

-- On Today’s date in 2004, more than 200,000 people, mostly in southern Asia, were killed by a tsunami triggered by the world's most powerful earthquake in 40 years beneath the Indian Ocean.

-- Today Baseball Hall of Fame catcher Carlton Fisk is 60.

-- Today Rock musician Lars Ulrich (Metallica) is 44.

Today's market update brought to you by:

Todd Albrigo

Account Executive

CMG Mortgage, Inc.