San Diego, California Mortgage Market Update

Market Happenings:

More Bad Data : Industrial production fell -0.5% worse than expected, while capacity utilization stumbled to 80.9, an over 2-yr low. The measures for Feb offer further concern over recession, with the market leaning more toward the "we're there" camp versus the "are we there yet" crew. The market is well aware of the deteriorating situation in manufacturing, further bolstered by the awful NY report earlier, and within the current environment, only big, serious numbers getting much play. With the Bear Sterns debacle over the weekend, investor capital is seeking safety with Treasuries as well as Agency paper heavy on the bid side. FNMA 5.50% are up 20 ticks (+20/32) so far in choppy but positive trade. Expect lender ratesheet pricing to rebound by up to 60 bps today.

Industry News:

JPMorgan Chase to Buy Bear Stearns

JPMorgan Chase has made plans to acquire the Bear Stearns Cos. Inc. - and has gotten up to $30 billion in special financing from the Federal Reserve to do it - in the wake of severe liquidity woes at Bear. The deal is a stock-for-stock exchange in which the former company will exchange 0.05473 of its common shares per one share of Bear Stearns' stock based on a March 15 closing price of about $2 per share. The Fed said it would fund up to $30 billion of Bear's less liquid assets in the transaction.

HUD Issues Bold RESPA Proposal

The Department of Housing and Urban Development has issued its long-awaited RESPA reform proposal, and it is more ambitious than the industry expected or wants to implement during the current market turmoil. Most observers expected HUD to issue a Real Estate Settlement Procedures Act proposal narrowly focused on providing consumers with concise and understandable disclosures of loan terms and settlement costs. However, HUD has "cast a wider net," according to RESPA attorney Phillip Schulman, who says the RESPA proposal is "complicated," "confusing," and "controversial." The RESPA proposal mandates the use of a standardized four-page good faith estimate that discloses loan terms and settlement costs, including the mortgage broker's compensation. HUD also wants the closing agent to read a closing scripting that summarizes important loan terms and highlights differences between the GFE and the HUD-1 settlement sheet. HUD Assistant Secretary Brian Montgomery expects industry opposition, but he told reporters it is "no longer acceptable" for industry to stand in the way of giving consumers clear disclosures. HUD has issued the proposal for a 60-day comment period. Seven major financial services trade groups, including the American Bankers Association and the Mortgage Bankers Association, have asked HUD to extend the comment period to 120 days.

Freddie Seeks Appraisal Comments

Freddie Mac is seeking public comments until April 30 on the appraisal policies it agreed to implement as part of a settlement with New York Attorney General Andrew Cuomo. Freddie Mac and Fannie Mae are slated to implement the new appraisal code by Jan. 1 under the March 3 settlement with Mr. Cuomo. "To implement the Code with minimum disruption to the market and, as required under the agreement, Freddie Mac is requesting comments on operational and implementation issues, as well as unintended consequences or risks you identify in connection with the requirements of the Code," Freddie said. The agreement bars Freddie and Fannie from purchasing mortgages from lenders that use in-house appraisers or subsidiary appraisal firms. On brokered loans, lenders must certify that the mortgage broker did not select the appraiser.

This Week's Calendar:

Misc:

Date	ET	Release	For	Actual	Briefing.com	Consensus	Prior	Revised From
Mar 17	08:30	NY Empire State Index	Mar	-22.2	-8.0	-7.4	-11.7
Mar 17	09:00	Net Foreign Purchases	Jan	$62.0B	NA	$60.0B	$56.5B
Mar 17	09:15	Industrial Production	Feb	-0.5%	-0.1%	-0.1%	0.1%
Mar 17	09:15	Capacity Utilization	Feb	80.9%	81.2%	81.3%	81.5%
Mar 18	08:30	Housing Starts	Feb		980K	995K	1012K
Mar 18	08:30	Building Permits	Feb		1010K	1020K	1061K
Mar 18	08:30	PPI	Feb		0.1%	0.3%	1.0%
Mar 18	08:30	Core PPI	Feb		0.2%	0.2%	0.4%
Mar 18	14:15	FOMC Policy Statement
Mar 19	10:30	Crude Inventories	03/15		NA	NA	6177K
Mar 20	08:30	Initial Claims	03/15		355K	360K	353K
Mar 20	10:00	Leading Indicators	Feb		-0.2%	-0.3%	-0.1%
Mar 20	10:00	Philadelphia Fed	Mar		-20.0	-18.0	-24.0

-- On Today’s date in A.D. 461 (or A.D. 493, according to other authorities), St. Patrick, the patron saint of Ireland, died in Saul.

-- On Today’s date in 1966, a U.S. midget submarine located a missing hydrogen bomb which had fallen from an American bomber into the Mediterranean off Spain.

-- Today Singer-songwriter John Sebastian (The Lovin' Spoonful) is 64. The Lovin Spoonful

Thanks for your business!

Todd Albrigo

Account Executive

CMG Mortgage, Inc.