The Wall Street Journal has a study, commissioned by UBS AG, showing that 3.5% of Option ARMs originated by Countrywide in 2006 and packaged into securities sold to investors are at least 60 days past due. (That compares with an average Option ARM delinquency rate of 2.5% for the industry.) Among Option ARMs held in its own portfolio, 5.7% were at least 30 days past due, up from 1.6% a year earlier. CW holds roughly $28 billion of Option ARM’s, accounting for about 41% of the loans held as investments by its savings bank.

Peter Pollini, senior managing director of consumer finance at PricewaterhouseCoopers, New York, said the independently-owned mortgage banker has advantages not necessarily attributable to larger companies, namely an ability to quickly adapt to change. He said that the local markets will likely be more beneficial for the independents as well as the “perception and reality” in local decision-making. He added that technology could prove advantageous in this arena as more functionality pushes out to point-of-sale. However, independent mortgage bankers will need to focus on particular aspects of their reputation and brand. “You can’t be all things to all people,” Pollini said. “Focus on what you do best.”

Nat City announced that they will be exiting the correspondent business channel, feeling that it is not their “core mortgage business”. This follows their previously announced adjustment to their wholesale and retail staffing levels, closing a number of branches, and shifting employees within the company.

Bay Bancorp, Diablo's wholesale division, was reportedly shut down earlier this week. Their retail division (Diablo Funding Group), which had nearly 40 branches a few years ago, will be closed today with many of the agents going to Indymac. Insiders suggest high overhead costs (leases), too-generous commissions, and possible buy-backs were to blame for their demise.

The yield on the 10-yr Treasury is down to 4.39% this morning ahead of today's Existing Home Sales report (expected to decline by 4.5% following a 4.3% decline in August), and a $20 billion 2-yr auction. Speaking of yields, the yield curve has continued to steepen, helping ARM prices relative to 30-yr fixed rate rates, and the spread between 2-yr and 10-yr securities is almost 60 basis points. With the downward move in rates, 30-yr A-paper mortgage prices have improved slightly.

An exasperated mother, whose son was always getting into mischief, finally asked him, “How do you expect to get into Heaven?” The boy thought it over and said, “Well, I’ll run in and out and in out and keep slamming the door until St. Peter says, “For Heaven’s sake, Dylan, come in or stay out!”