San Diego, California Mortgage Market Update

Market Happenings:

A slew of early data had the Institute for Supply Management reporting that nonmanufacturing sectors of the U.S. economy contracted at a slower pace during February, while the Commerce Department reported a 2.5% January decline in factory orders. Also, the nation's private sector shed 23,000 jobs in February, according to an employment report based on ADP payrolls data. Adding in some 25,000 jobs typically created by government, the ADP report suggests nonfarm payrolls grew by about 2,000, compared to the 20,000 forecast by economists. Meanwhile, data tracking productivity in U.S. nonfarm businesses and unit labor costs -- a key inflation gauge -- were revised slightly higher in the fourth quarter from prior estimates. Stocks are rallying nicely since the bell rang this morning with the Dow up 90 points. Treasuries and Agency Bonds are taking the brunt with investors pulling out of these investments in favor of equities. FNMA 5.50% coupons are trading down 9 ticks (-9/32) so far. Expect lender ratesheet pricing to be off 25 – 30 bps from post re-price marks of yesterday.

Industry News:

NAMB Mulls Challenge to Appraisal Settlement

The National Association of Mortgage Brokers is considering legal action to stop implementation of appraisal standards by Fannie Mae and Freddie Mac that would take the selection of appraisers out of the hands of brokers. The new appraisal standards the mortgage giants worked out as part of a settlement with New York Attorney General Andrew Cuomo amount to "de facto regulatory action" that avoids the proper regulatory process, NAMB executive vice president Roy DeLoach said. It will "create a severe disadvantage to small-business mortgage brokers, and prevent them from engaging competitively in the mortgage marketplace," Mr. DeLoach said. Under the settlement, Fannie and Freddie can't purchase mortgages if the broker selected the appraiser. Wholesalers will have to pick the appraisers, which gives the lender more control of the transaction and makes it difficult for brokers to sell the loan to another investor.

Builders Urge Quick Passage of Tax Credit

The National Association of Home Builders is urging the Senate to quickly pass a temporary $10,000 tax credit for homebuyers to encourage sales and reduce the huge inventory of unsold homes overhanging the market. "We are encouraging policy makers to take a hard look at stimulating the housing sector," NAHB chief executive Jerry Howard said, to prevent the economy from spiraling into recession. Mr. Howard told reporters that the homebuilders support several provisions in a Senate foreclosure prevention bill that Republican senators blocked because of a controversial provision that allows bankruptcy judges to restructure mortgages. The NAHB CEO said the Senate Democrats should strip the bankruptcy provision from the bill and consider an amendment by Sens. Johnny Isakson, R-Ga., and Debbie Stabenow, D-Mich., to provide a homebuyer tax credit. Senate Majority Leader Harry Reid, D-Nev., has indicated that he would let Sen. Isakson offer his amendment when the foreclosure bill comes up again for a vote and that he might support a $4,000 tax credit.

Bair Voices Concerns About Repayment Plans

FDIC Chairman Sheila Bair says she expects loan modifications to increase, but she is still concerned that servicers continue to rely too heavily on repayment plans. Repayment plans may be "unsustainable for borrowers and lead to delinquencies down the road and ongoing borrower distress," the Federal Deposit Insurance Corp. chairman told the Senate Banking Committee. Hope Now servicers reported that they modified 45,320 subprime loans in January and placed 48,155 subprime borrowers in repayment plans. The FDIC chairman testified that additional approaches may be needed to reduce foreclosures, including writedowns of the principal amount of the "underwater" mortgages. Meanwhile, Federal Reserve Board Chairman Ben S. Bernanke spoke favorably about an Office of Thrift Supervision proposal that would encourage writedowns by giving investors a share in future appreciation. "A writedown that is sufficient to make borrowers eligible for a new loan would remove downsize risk to investors of additional writedowns or a re-default," the Fed chairman told the annual convention of the Independent Community Bankers of America.

Misc:

On Today’s date in 1963, country music performers Patsy Cline, "Cowboy" Copas and "Hawkshaw" Hawkins died in a plane crash near Camden, Tenn., that also claimed the life of pilot Randy Hughes (Cline's manager).

On Today’s date in 1982, comedian John Belushi was found dead of a drug overdose in a rented bungalow in Hollywood; he was 33.

On Today’s date in 1998, NASA scientists said enough water was frozen in the loose soil of the moon to support a lunar base and perhaps, one day, a human colony.

Today Singer Eddy Grant is 60.

Today Niki Taylor is 33.

Today's market update brought to you by:

Todd Albrigo

Account Executive

CMG Mortgage, Inc.