San Diego, California Mortgage Market Update

Market Happenings:

Bond, Mortgage Bounce, Look for More Fed: The market has shifted a back to pump up expectations for a 50 basis point cut at the Mar meeting, up to 88% from 65% late yesterday. The bonds went running following the huge bump higher in jobless claims, against assorted, touch higher than expected, data. The market will consider this number against tomorrow's big-dog jobs report, while also balancing against yesterday's much improved faux-jobs predictor that was ADP. Trade will be buffeted by some clean-up ahead of the jobs report, but to some extent will also be dictated by the squirming in stocks. The market took little off the Chicago PMI report which showed a big jump in prices paid & further fall off in the employment component. A 51.5 reading was reported after consecutive months with readings into the 60’s. For context, a 50 reading is considered growth neutral. Trade is backing off the highs but will likely fall into that hypnotic daze that comes from watching stocks. With the stock market off over 100 points so far, Treasuries and Mortgages are the benefactors as FNMA 5.50% coupons have rallied 8 ticks (+8/32). Expect lender ratesheet pricing to improve 20 -30 bps from yesterdays quotes.

Industry News:

FBI: '08 Could Be Record Year for SARs

Financial institutions filed a record 15,000 suspicious activity reports (including instances of mortgage fraud) with the Federal Bureau of Investigation in the first fiscal quarter of this year. If the pace keeps up, more than 60,000 SARs will be filed, outstripping 2007, when 46,717 reports hit the system. In a briefing on Jan. 29, FBI officials said the agency has 14 major "corporate fraud" investigations under way involving mortgage or related companies. The focus, officials said, was on subprime firms, their accounting and lending practices, and insider trading. The agency did not specify any cases, but it is well known that the collapse of New Century Financial Corp. of Irvine, Calif., is the subject of a major probe. As previously reported, the Securities and Exchange Commission is investigating the failure of several subprime firms, focusing on -- among other things -- their investment bankers, including Bear Stearns, Merrill Lynch, and Morgan Stanley.

S&P Downgrades 3,787 Subprime Classes

Standard & Poor's Ratings Services has downgraded 3,787 classes from U.S. residential mortgage-backed securities that are collateralized by first-lien subprime mortgage loans rated between January 2006 and June 2007. S&P also announced that 2,602 classes of comparable subprime RMBS have been placed on CreditWatch with negative implications. The rating agency also placed 1,953 classes from 572 global collateralized debt obligations of asset-backed securities and CDO of CDO transactions on CreditWatch negative.

Servicers Picking Up Loan-Mod Pace?

Mortgage servicers have picked up the pace of modifying subprime loans to assist borrowers who are in trouble, according to the Hope Now Alliance. "Servicers were modifying loans during the fourth quarter at triple the rate of the third quarter," Hope Now executive director Faith Schwartz told a congressional panel. The first loan workout report compiled by the Mortgage Bankers Association showed that servicers modified only 12,740 subprime adjustable-rate mortgages in the third quarter by reducing the interest rate or principal amount of the mortgages. These results were disappointing, and regulators urged the subprime servicers to pick up the pace on loan modifications. The Hope Now alliance is collecting the workout data for future reports, which will measure trends in delinquencies and resolution outcomes, Ms. Schwartz testified. "We want to provide consistent and informative data reports based on common definitions and to provide information that provides insights into the nature and extent of the current subprime mortgage crisis and helps in the development of workable solutions that avoids foreclosures whenever possible."

Misc:

-- On Today’s date in 1958, the United States entered the Space Age with its first successful launch of a satellite into orbit, Explorer I.

-- On Today’s date in 2007, Nine blinking electronic devices planted around Boston threw a scare into the city in what turned out to be a marketing campaign for a late-night cable cartoon.

-- Today Baseball Hall-of-Famer Nolan Ryan is 61.

-- Today Actress Minnie Driver is 38.

-- Today Singer Justin Timberlake is 27.

Today's market update brought to you by: 

Todd Albrigo

Account Executive

CMG Mortgage, Inc.