Douglas Adams, author of The Hitchhiker’s Guide to the Galaxy, wrote, “Human beings, who are almost unique in having the ability to learn from the experience of others, are also remarkable for their apparent disinclination to do so.” Mortgage banking needs to prove him wrong, but for right now, everyone is practicing their “stop, drop, and roll move.” The news yesterday was a tough pill to swallow, and in fact was one of the tougher days in a tough week in a tough year.

Freddie Mac announced yesterday that it is looking to raise cash itself after a larger-than-expected loss cut its capital close to the bone, and certainly making any increase in loan amounts in California and New York doubtful. The stock price was down 30% during the day, and is down 62% so far this year! (How many Freddie employees are wandering around the halls, suddenly realizing that retirement in not quite “just around the corner”?) Freddie’s capital surplus is only $600 million above a mandatory target set under a consent decree with regulators, and they’ve hired Goldman and Lehman to help them with capital raising alternatives. Freddie Mac said it may consider other measures such as limiting its growth, reducing the size of its mortgage investment holdings, or issuing new stock.

Shares of Countrywide fell 6% into the $9 range, the lowest in over 5 years. Countrywide originated $22 billion in mortgages in October, a 48% decline from the $42.3 billion originated during the same month a year ago. As most in the business know, Countrywide shifted its origination focus to almost wholly offer loans that fit Fannie Mae and Freddie Mac lending guidelines, anticipating it would be able to sell those loans easily. (As Peter Djuric quipped, “Yet throughout these hard times, the balance sheet has suffered, the stock has suffered, everyone and everything has suffered except Angelo's tan.... I love that guy!”) Countrywide declared it has ample capital, access to cash and is well-positioned to benefit from the financial turmoil rocking the mortgage sector. "Countrywide Bank ... has sufficient liquidity available to meet its projected operating and growth needs and has accumulated significant contingent liquidity in response to evolving market conditions."

Other company news:

Webster Bank has ended national wholesale operations. “Regrettably, due to current market conditions, effective November 30, 2007 Webster Bank will no longer accept new loan submissions in the Regional Wholesale Offices outside of the bank footprint in the New England area.”

The C-BASS-owned Fieldstone Mortgage of Maryland - which ceased funding loans in late July - has closed its doors and is no longer taking any applications, according to a posting on its website.

Is there any good news out there? Somewhat – the yield on the 10-yr is down to 4.0%. With the yield on the 2-yr down to 3.05%, that makes the spread 95 basis points: a steep curve and helpful for ARM prices relative to 30-yr prices. Today’s weekly unemployment claims report showed claims -11k to 330k, roughly as expected. Surprisingly, employment remains relatively healthy. Later on we’ll see the final November University of Michigan US consumer confidence index (expected to remain unchanged) and October’s Leading Economic Indicators (expected down slightly). Yesterday’s release of the FOMC minutes from the Oct 31 meeting seemed overshadowed by the Freddie news, but the minutes indicated that downside and upside growth was relatively balanced, although they scaled back their expectations of growth. (In the future we won’t have to wait three weeks to see the FOMC minutes, as from here on the minutes would be released immediately after each meeting.)

One thing to keep in mind: financial markets have been consumed with sub prime and CDO losses, not knowing the extent of the damage. By the end of the year

(only six weeks away) most financial institutions and banks will have to step up and reveal what they have in subprimes and the estimated losses they will take. Removing the uncertainty will give markets and the economy a shot in the arm. The one thing markets abhor is uncertainty, so the news won’t keep the economy from weakening but may instead lead to a more optimistic view

"Ya ever been married, Dixie?"
"Yeah, twice."
"Children?"
"No, silly, GROWN MEN!"

Two robins were sitting in a tree.

"I'm really hungry," said the first one.

"Me, too" said the second.

"Let's fly down and find some lunch."  They flew to the ground and found a nice plot of freshly plowed ground full of worms. They ate and ate and ate and ate until they couldn't eat anymore.

"I'm so full I don't think I can fly back up to the tree," said the first one.

"Me either. Let's just lay here and bask in the warm sun," said the second.

"O.K." said the first. They plopped down, basking in the sun.

No sooner than they had fallen asleep, when a big, fat tom cat snuck up and gobbled them up.  As he sat washing his face after his meal, he thought....

Ready..................
 

You're gonna love this one..............
 

"I just love baskin' robins."