San Diego, California Mortgage Market Update

Market Happenings:

January producer prices rose a far stronger than expected 1.0% (7.4% yoy) : as the core component rose 0.4% (2.3% yoy). Foods jumped 1.7% (8% yoy) as energy prices rose 1.5% to leave a 23% gain from a year ago. The annual rise in PPI is the strongest in 26 years and comes from just a 2.3% annual lift in August before energy prices reaccelerated. The 2.3% annual core growth isn't all that concerning given the small amount flowing to consumers where core commodity prices are nearly flat from a year ago. Expect the quarter century high PPI to grab plenty of headlines and discussion in tomorrow's Q&A session of the Fed Chairman's testimony on monetary policy and the economy. The Case-Shiller home price index for 20 cities fell -2.1% in December to leave a -9.1% decline from a year ago : The largest December declines came from San Francisco, San Diego and Phoenix as the annual growth leaders on the downside are Phoenix, Las Vegas and Miami. Three cities show gains over the last year -- Seattle, Portland and Charlotte but the overall trend and the month to month trend for all metro areas appears negative. The market is holding in pretty well, considering the data and extenuating circumstances (supply, auctions). FNMA 5.50% coupons are off only 2 ticks (-2/32) so far. Expect lender ratesheet pricing to be flat to slightly worse than yesterday.

Industry News:

Cuomo Nixing Broker Appraisals?

Fannie Mae and Freddie Mac may stop accepting appraisals ordered by mortgage brokers by Sept. 1 as part of a settlement the two secondary-market agencies are negotiating with New York Attorney General Andrew Cuomo. In selling loans to Fannie and Freddie, lenders would have to certify in representations and warranties that they did not rely on appraisals provided by the brokers. "This could, in effect, require lenders to always secure their own appraisal of any property purchased through a broker," according to an outline of the "talking points" obtained. The talking points also show that the AG wants mortgage lenders to curtail their use of in-house appraisers or subsidiary appraisal firms. The settlement talks stem from the New York AG's lawsuit against First American's appraisal unit, which allegedly provided inflated appraisals to one of Fannie's and Freddie's large customers.

RealtyTrac: New Foreclosures Increase

RealtyTrac, an online foreclosure marketplace based in Irvine, Calif., has reported that new foreclosure filings rose 8% in January and were 57% higher than the level recorded a year earlier. The company's U.S. Foreclosure Market Report indicates that 233,001 new foreclosure properties were added to the rolls in January. "January's foreclosure numbers demonstrate that foreclosure activity is continuing on its upward trend, substantially increasing from a year ago in many states," said James J. Saccacio, RealtyTrac's chief executive officer. "However, the 8% monthly increase in January is not as precipitous as the 19% spike the previous month." The company said Nevada, California, and Florida recorded the highest foreclosure rates in January.

Fitch: MI Financial Strength Ratings at Risk

A number of major players in the mortgage insurance industry, especially the stand-alone companies, need to raise substantial amounts of capital or risk downgrades of their insurer financial strength ratings, according to Fitch Ratings. Only two mortgage insurers, Genworth Mortgage Insurance Co. and United Guaranty Residential Insurance Co. (part of American International Group), had their IFS ratings affirmed (at AA and AA-plus, respectively) and their rating outlook held at stable. Fitch placed the IFS and long-term issuer ratings of MGIC Investment Corp., the PMI Group, and Radian Group Inc. on Rating Watch Negative. Unless they raise capital, MGIC and Radian could have their IFS ratings cut by one notch and PMI by two notches, the rating agency said. The fourth stand-alone MI, Triad Guaranty Insurance Co., is already on Rating Watch Negative. Triad has an IFS rating of AA-minus, and Fitch said it believes the company's capital is well below the level needed to maintain it. Unless more capital is raised, Fitch may lower Triad's ratings below the A level, the rating agency said. Fitch took no action on Republic Mortgage Insurance Corp.'s AA IFS rating and negative rating outlook. RMIC benefits from being a subsidiary of Old Republic International Corp., Fitch said.

Misc:

-- Singer Michael Bolton is 55. http://www.orbitcast.com/archives/michael-office_space.jpg

Today's market update brought to you by:

Todd Albrigo
Account Executive
CMG Mortgage, Inc.