San Diego, California Mortgage Market Update

Market Happenings:

Trade has been boosted on talk that the Fed will keep working "creativity" into the markets, while the fall-off in equities adds some punch. Trade has been working its way better all session, but they'll have some trouble busting a move higher without a big assist form the guys over in stock land. The market is tentatively bid on leftover bad vibes off the FOMC minutes which helped goose expectations of 50 basis point rate cut at the end of the month. Citigroup is off-loading $12B of loans to private equity and the Fed is making contingency plans (WSJ) should their existing measures to pump gas to the credit markets fail. Lastly, Wholesale Inventories for March came in at 1.1%, far higher than the consensus estimate of 0.6%. Yet another beacon of recession is flashing. Agency MBS markets reacting well to what amounts to only market simmer right now taking most of their cue from stocks as the FNMA 5.50% coupon is trading up 13 ticks (+13/32). Look for investor ratesheet pricing to be better today by around 30 bps.

Industry News:

AFSA Spotlights YSP-Linked Liability Issue

The American Financial Services Association says it could support the Federal Reserve Board's HOEPA proposal for dealing with yield-spread premiums if lenders are not held responsible for a mortgage broker's actions. The Home Ownership and Equity Protection Act proposal requires brokers to negotiate their fee in a dollar amount with the borrower upfront before an application fee is charged and to provide the lender with a signed document. Lenders are expected to rely on this document in paying the YSP to the broker. However, AFSA points out that the lender would not know when it was signed and could be liable if it is not signed and dated contemporaneously. "AFSA asks that the Board clearly and unambiguously remove liability from the lender for things that the broker controls," AFSA executive vice president Bill Himpler says in a comment letter. The Consumer Federation of America is asking the Fed to prohibit YSPs on subprime mortgages. "Negotiating fees up front is good, but it still leaves opportunities for abuse," CFA housing and credit policy director Allen Fishbein indicated

Rangel Proposes Homebuyer Tax Credit

House Ways and Means Committee Chairman Charles B. Rangel, D-N.Y., has proposed a housing tax bill that includes a $7,500 tax credit to stimulate purchases of foreclosed properties and to assist first-time homebuyers. However, the House bill does not include a net-operating-loss carry-back provision for homebuilders and other companies suffering losses in 2008 and 2009 that is contained in a Senate foreclosure prevention bill. "We need to provide relief to the buyers and families themselves, not just the banks and builders," Rep. Rangel said. Like the Senate bill, the Rangel bill allows homeowners who take a standard deduction to deduct property taxes. The House and Senate bills also include a temporary increase in the issuance of revenue bonds to refinance subprime loans. Many Democrats and consumer groups are highly critical of the Senate bill, arguing that it hands homebuilders and mortgage companies tax rebates while providing very little relief for homeowners at risk of foreclosure. Sen. Arlen Specter, R-Pa., complained that the Senate bill only provides a "crumb" to Americans who are losing their homes. The senator is being blocked from offering an amendment that allows bankruptcy judges to roll back interest rate increases on adjustable-rate mortgages.

CRL: Brokers Costlier Than Lenders for B&C

In its latest study, the Center for Responsible Lending maintains that subprime borrowers pay significantly more for getting a loan from a mortgage broker than from a retail lender. The study, "Steered Wrong: Brokers, Borrowers and Subprime Loans," looked at more than 1.7 million mortgages originated from 2004 to 2006. The data included credit scores and borrower's equity, but only back-end fees. It did not include upfront fees paid by a consumer to a lender. At a news conference to discuss the study, co-author Brian Ernst said the typical subprime borrower pays $5,222 more in the first four years of a $166,000 mortgage than a similar borrower who received a loan directly from a lender. The CRL attributes the disparity to yield-spread premiums and prepayment penalties. In the prime world, Mr. Ernst said, there is more competitive pricing between loans originated by mortgage brokers and those originated in the retail channel. One of the reasons for the difference, he said, is that in the subprime arena, brokers can give a higher price to a less knowledgeable borrower.

Misc:

-- On Today’s date in 1682, French explorer Robert de La Salle claimed the Mississippi River Basin for France. The Golden Girls were only missed him as they were in Miami at the time.

-- On Today’s date in 1965, the newly built Astrodome in Houston featured its first baseball game, an exhibition between the Astros and the New York Yankees. (The Astros won, 2-1, in 12 innings.)

-- On Today’s date in 2005, Britain's Prince Charles married longtime love Camilla Parker Bowles, who took the title Duchess of Cornwall.

-- Today Playboy magazine founder Hugh Hefner is 82.

-- Today Actress Keshia Knight Pulliam, better known as Rudy Huxtable in the Cosby Show, is 29.

Today's market update brought to you by:

Todd Albrigo

Account Executive

CMG Mortgage, Inc.