San Diego, California Mortgage Market Update

Mortgage Market Happenings:

The market is getting a boost out of the open but given yesterday's excessive sell-off that isn't unexpected. Not much has changed since the Fed announced its latest liquidity initiative and the euphoria carried over somewhat to the global stage dragging on treasuries overnight. Expectations for an aggressive rate cut next week have backed off a bit, which may take a bite out of the pop in equities providing support for bonds in an otherwise event-free day. We have seen a nice pick up Agency MBS since the opening bell with a slow but steady rally as buyers now have more appetite at these levels and spreads over Treasuries. We currently sit up 15 ticks (+15/32) on FNMA 5.50% with April settle. Expect improved lender ratesheet pricing by up to 40 bps.

Industry News:

Fed Takes Added Liquidity Measures

The Federal Reserve, in conjunction with several other central banks, has announced new measures to promote liquidity in financial markets. Under the new Term Securities Lending Facility, the Fed will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days (rather than overnight, as in the existing program) by a pledge of other securities, including federal agency debt, agency residential-mortgage-backed securities, and nonagency triple-A rated private-label residential MBS. Securities will be sold via weekly auctions, beginning March 27. In addition, the Federal Open Market Committee has authorized increases in its temporary reciprocal currency arrangements, or swap lines, with the European Central Bank and the Swiss National Bank. The latest actions supplement measures announced March 7 to boost the size of the Fed's Term Auction Facility to $100 billion, among other things. Sen. Christopher J. Dodd, D-Conn., chairman of the Senate Banking Committee, termed the Fed move "a significant step" to address the "liquidity lock-down" in U.S. credit markets, but he called for further steps to address "the foreclosure crisis." He said he is preparing legislation to do so.

Paulson Pooh-Poohs Principal Reductions

Treasury Secretary Henry Paulson continues to dismiss calls for helping borrowers with "underwater" mortgages through principal reductions that are being advocated by some federal banking regulators. It's not the "government's job" to help borrowers who would walk away from their homes because the properties' values have dropped and they don't want to pay the mortgage, Secretary Paulson told the American Bankers Association. The Treasury secretary played an important role in getting mortgage servicers to join the Hope Now alliance, which is focused on helping struggling homeowners who want to stay in their homes but can't afford their mortgage payment because of a change in their ability to pay or the reset of an adjustable-rate mortgage. He stressed that it is important for the Hope Now servicers to publicly disclose the results of their workout efforts so that everyone can see whether the servicers are following through on the commitments. "I won't look kindly on free riders," Mr. Paulson said. Last week, Federal Reserve Board Chairman Ben S. Bernanke called on lenders to make permanent reductions in the principal amount of a mortgage to help troubled borrowers stay in their homes or refinance into a Federal Housing Administration-insured mortgage.

Morgan Sees Weak Spring Homebuying Season

If mortgage lenders thought a stronger-than-expected spring homebuying season would help reverse their fortunes, they should think again, according to a new report issued by Morgan Stanley. The report says the housing market is weak in most key markets, including California and Florida. After polling 1,000 Realtors, Morgan is predicting a 19% decline in sales this homebuying season. Morgan analyst Ken Posner writes that his group is "defensively positioned, preferring to avoid or short stocks with mortgage-related credit exposure." He adds that, "Zeroing in on the issue of obtaining mortgages, our Realtors report that down payments are now the biggest stumbling block" to buying a home.

Misc:

-- On Today’s date in 1933, President Franklin D. Roosevelt delivered the first of his radio "fireside chats," telling Americans what was being done to deal with the nation's economic crisis. George, get some fire wood.

-- On Today’s date in 1947, President Truman established what became known as the Truman Doctrine to help Greece and Turkey resist Communism.

-- Today Actress-singer Liza Minnelli is 62.

-- Today Former Massachusetts Governor Mitt Romney is 61.

-- Today Former baseball player Darryl Strawberry is 46.

The mortgage market update is brought to you by:

Todd Albrigo

Account Executive

CMG Mortgage, Inc.