San Diego, California Mortgage Market Update

Good Morning!

Market Happenings:

ADP's estimate of private payrolls suggest a March gain of 8K. Add an assumption for government growth (3-month average is 32K) to leave a total payroll gain of 40K. However, be wary of the estimates. ADP has overestimated the monthly payroll growth over each of the last six months. The average miss over the last three months is a weighty 95K.The market will use anything and everything it can get its mind around in an attempt to get some legs under prices, but any support will be flimsy and trade twitchy in front of payrolls, especially in light of the upside surprise on ADP's guesstimate. The day will be dependent on Bernanke's Q&A and swings in stock land, but any moves are not likely to have much traction in front of the bigger items on the week's calendar. Factory orders cam e in off 1.3% for March, a full half a percentage point worse than economists expectations of a 0.8% drop. The effect has been muted as all eyes focus on payrolls on Friday for direction. Currently Agency MBS are trading off 6 ticks (-6/32) leaving investor ratesheet pricing today off about 15 or bps from yesterday’s close.

NatCity Up for Sale?

National City Corp., Cleveland, says it is exploring "strategic alternatives," a corporate euphemism for putting the company up for sale. NatCity, which has hired Goldman Sachs as the adviser for the review, said it would make no further statements until its board has approved a specific course of action. Even though NatCity sold the First Franklin subprime originations and servicing platforms to Merrill Lynch at the end of 2006, the company has still suffered in the current credit crisis. According to its 10-K filing, NatCity had $1.0 billion in loans at the end of last year that were not eligible for sale to Fannie Mae or Freddie Mac. "Declining real estate prices and higher interest rates have caused higher delinquencies and losses on certain mortgage loans, particularly second lien mortgages and home equity lines of credit and especially those that have been sourced from brokers that are outside National City's banking footprint," the 10-K says. "These trends could continue. These conditions have resulted in losses, write downs and impairment charges in the mortgage business, especially in the fourth quarter of 2007." NatCity finished 2007 as the nation's 10th-largest servicer, with a portfolio of $187.5 billion, and the 12th-largest originator, with volume of $46.4 billion for the year, according to the Quarterly Data Report.

Lehman Prices $4B Offering

Lehman Brothers has priced a $4.0 billion offering of convertible preferred shares that boosted its common stock price to levels above $40 Tuesday morning from a Monday close just over $37. The preferred shares are convertible at the option of the holder into a specified amount of common stock at an initial conversion price of about $49 per common share. Rumors about the effect of the U.S. mortgage-sparked credit crunch on certain Wall Street players have put downward pressure on Lehman's stock price in the wake of the Bear Stearns merger deal with JPMorgan Chase. Lehman has a policy of not commenting on market rumors.

Thornburg Obtains Key Capital Infusion

Thornburg Mortgage Inc., Santa Fe, N.M., says it has completed a key $1.35 billion private-placement capital raise from the sale of senior subordinated secured notes, warrants to purchase common stock, and a participation in certain mortgage-related assets. The company said it has received $1.15 billion of the proceeds from the offering and that the remaining $200 million is being held in escrow, to be delivered to the company upon the successful completion of a tender offer for its preferred stock. Thornburg had said it had to raise at least $948 million in capital within seven days to keep in place a key 364-day agreement with some counterparties involved in potentially "material" margin calls it has been facing. The company had to extend the deadline twice before the capital raise was completed.

Misc:

-- On Today’s date in 1513, Spanish explorer Juan Ponce de Leon landed in present-day Florida. The Golden Girls…..

-- On Today’s date in 1917, President Wilson asked Congress to declare war against Germany, saying, "The world must be made safe for democracy." (Congress declared war four days later.)

-- On Today’s date in 1982, several thousand troops from Argentina seized the disputed Falkland Islands, located in the south Atlantic, from Britain. (Britain took back the islands the following June.)

-- On Today’s date in 2005, Pope John Paul II, who'd led the Roman Catholic Church for 26 years, died in his Vatican apartment at age 84.

-- Today Actress Roselyn Sanchez is 35.

Today's market update brought to you by:

Todd Albrigo

Account Executive

CMG Mortgage, Inc.