San Diego, California Mortgage Market Update

Market Happenings:

Mortgages and Bonds are stalled out at better levels, ticking around in tight ranges on slowed size. Traders see a slightly (tiny) higher chance of the Fed doing nothing on rates today (22% for a pause here at 2.25% with the balance holding on for the 25 basis point trim). Players note that the day's data was "old" (Q1 GDP +0.6% vs. expectations of +0.5% growth with Employment Costs and Chicago PMI coming in very near expectations) and subject to revisions, while the details (employment, spending) ran negative (bond positive) but not enough to get things cooking ahead of the Fed statement. The statement will be the major issue, with the dissention as well as the degree of emphasis on inflation being important components. Mortgages will likely be range bound until the Fed announcement at 11:15 AM PDT. Again the bias of their statement will likely move the market with more force than the actual cut (assuming it is within a 0 – 25 bps range). Currently FNMA 5.50% MBS are trading up 3 ticks (+3/32). Expect flat lender ratesheet pricing from late yesterday’s marks.

Industry News:

Countrywide Takes $3B in 1Q Charges

Countrywide Financial Corp., Calabasas, Calif., has reported a net loss of $893 million ($1.60 per share) in the first quarter, citing $3 billion of credit-related charges that weighed down results. The credit costs hit both Countrywide's mortgage banking unit, which lost $552 million in the quarter, and its bank, which lost $960 million. Countrywide posted small profits from its capital market and insurance units. The company produced $73 billion of loans in the first quarter, down from $117 billion in the first quarter of 2007. It serviced $1.484 trillion of home loans as of March 31, up from $1.352 trillion a year earlier. The $3 billion of credit-related charges included a $456 million provision for representation and warranty claims, a more than tenfold increase from the reps-and-warranties provision during the first quarter of 2007.

Frank Foresees Housing Package by July 4th

House Financial Services Committee Chairman Barney Frank, D-Mass., says it is "entirely possible" that Congress will send President Bush a legislative package by the Fourth of July that is responsive to the current housing crisis, reduces foreclosures, and increases confidence in the secondary-market agencies. The package would include two Federal Housing Administration bills and a GSE bill to strengthen regulation of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, the chairman told a Washington conference sponsored by the Independent Community Bankers of America. On Wednesday, Rep Frank expects to complete a committee mark-up of his FHA bill to refinance struggling homeowners with "underwater" mortgages. (The Senate Banking Committee is scheduled to mark up a government-sponsored enterprise bill on May 6.) The House has already passed a GSE regulatory reform bill. In addition, the House and Senate are close to an agreement on an FHA modernization bill that will make the FHA a safer alternative to subprime loans. "The crisis has generated some pressure" to act, Rep Frank told reporters. "We should have it done in June."

Index: Home Prices Down 12.7% Over Year

Prices of existing single-family homes continued their descent in February, falling to a level that was down 12.7% over the previous 12 months, according to a Standard & Poor's/Case-Shiller housing price index that tracks resales in 20 metropolitan statistical areas. Since its peak in July 2006, the 20-city HPI has fallen 14.8%. "There is no sign of a bottom in the numbers," said S&P economist David Blitzer. The Charlotte, N.C., market is the only MSA in the index still registering an annual increase (1.5%) in house prices. "The monthly data show that every one of the MSAs has now declined every month since September 2007, marking six consecutive months," Mr. Blitzer said. Separately, the Office of Federal Housing Enterprise Oversight reported that house prices are down 3.1% on a seasonally adjusted basis for the 12 months ended in February. However, prices rose 0.6% from January to February. OFHEO collects sales price data from Fannie Mae and Freddie Mac purchase mortgages.

Misc:

-- On Today’s date in 1789, George Washington took office in New York as the first president of the United States.

-- On Today’s date in 1803, the United States purchased the Louisiana Territory from France for 60 million francs, the equivalent of about $15 million. The deal took 6 months in underwriting before an approval was issued.

-- On Today’s date in 1812, Louisiana became the 18th state of the Union.

-- On Today’s date in 1945, as Russian troops approached his Berlin bunker, Adolf Hitler committed suicide along with his wife of one day, Eva Braun.

-- Today Singer Willie Nelson is 75.

Today's market update brought to you by:

Todd Albrigo

Account Executive

CMG Mortgage, Inc.