Secondary Insight

Market Color:  Choppy trading day is being reported with options expiring and a give back of our big rally yesterday for bonds. No economic releases to worry about today.  It is just Friday and senior traders going home early.  Which means you really need to be ready for next week and lock by Wednesday, because of early close on Thursday for Christmas Eve and Friday is of course Christmas Day.  Actually the next two weeks you will have a repeat of next week back to back as we slip into the New Year’s holiday as well.  Trading will be chaotic as companies try to dress up their balance sheets for year end. German business confidence is being reported at a 17-month high, causing European equities and US stock to rally; bonds are lower.  PIMCO’s Bill Gross has cut government debt holdings and increased his cash position to the most in a year, signaling that PIMCO may see rates on the long end of the curve starting to rise.  Right now, the futures market is pricing in an 86% chance that the Fed keeps rates somewhere between 0% and .25% through April 28th, 2010.  Currently, the Ten Year yield is at 3.51%(3.52% yesterday).  30 year fixed rate mortgages are worse by about .125% at the moment.

 

Market News:  Holiday cheer continues with the announcement that Fannie Mae and Freddie Mac both have agreed to suspend foreclosures and evictions for about two weeks for distressed borrowers during the holiday season. The reprieve runs Dec. 19-Jan. 3. The two firms declined to estimate how many homeowners would be affected by the grace period. Their decision to temporarily put off foreclosure activity comes on the heels of a similar move by Citigroup that could affect as many as 4,000 homeowners.

House Financial Services Committee Chairman Barney Frank, D-Mass., says many people mistakenly believe the general FHA loan ceiling is $729,750. In reality, the limit applies only to costly housing areas — where the national cap is far below median home prices — and accounts for only a tiny fraction of the agency’s outstanding loan portfolio. Frank says it is unfair to institute a single national standard, and he believes allowing the FHA to insure higher-priced loans makes its portfolio more geographically diverse. He also cites a recent audit showing that claims rates on higher-cost loans are less than on lower-cost loans.

Banking regulators have issued guidance for reverse mortgages that calls for a review of advertising and marketing materials as well as better disclosure of costs, terms, features and risks of the loans. The guidance requires lenders to provide qualified independent counseling to consumers, avoid potential conflicts of interest and improve third-party management of reverse mortgages. The mortgage industry has until Feb. 16 to comment.

SI has attached above the Department of the Corporations implementation plan for obtaining the SAFE licensing within California.  It is a how to for the licensing process.  The California Mortgage Bankers  Association has been following and has said that the pre-requisite for the licensee applicant is the individual must demonstrate financial responsibility, character and general fitness such as to command the confidence of the community and to warrant a determination that the mortgage loan originator will operate honestly, fairly and efficiently.”  The CMBA feels, with good reason, that this is pretty subjective. They will look at whether the applicant has been a defendant in a criminal or civil case, look at the status of their DRE license (if applicable), any bankruptcies, were they refused any bonds, and yes, run their credit.  But at this point they are feeling there way along on this subject, and this is not a pass/fail type of thing – it seems like they will look at all this stuff like a resume and make a judgment based on the whole picture, not just one particular piece of it.