Employees & business partners of ResCap (of San Rafael, CA, not the group in Minnesota!) got the, “I regret to inform you that effective today the mortgage banking division of Residential Mortgage Capital will no longer be accepting Wholesale loan submissions or loan locks…We will attempt, to the degree possible, to honor our locks and commitments for those loans currently in the pipeline. However, given the current position of our warehouse banks, it might be prudent to immediately place those loans elsewhere.” Rescap has lost significant retail production lately, and has also seen a drop in broker (wholesale) business.

Deutsche Bank, owner of MortgageIT, announced that, “the best course of action is to continue our commitment to a wholesale mortgage lending platform. We see significant opportunities, particularly in areas such as government loan origination. However, our cost structure and decentralized operating model are no longer sustainable…We expect to retain a handful of sales offices…we will be closing most of our production branch offices and migrating production fulfillment to our branch in Madison, Wisconsin.”

Some potentially good news? Possible loan limit changes are back inn the news as the National Association of Home Builders (NAHB) and Housing Policy Council (HPC) of The Financial Services Roundtable joined forces today in asking FNMA & FHLMC to support H.R. 1427, “while H.R. 1427 includes a provision calling for a permanent adjustment for high-cost loan areas based on the area median home sales price up to 150 percent of the national limit, NAHB and HPC believe that the increase should be temporary for two years. At the end of two years, the increase would be terminated if the jumbo market returns to a normal spread between conforming and non-conforming mortgage rates.” Check out the story at http://www.nahb.org/news_details.aspx?sectionID0&newsIDY59

In addition, the Treasury Department privately gave Fannie Mae and Freddie Mac a proposal Monday night that would establish new standards for how the government approves debt issued by both firms. The proposal would require semiannual (not quarterly) reporting of planned debt issues and wouldn't require Fannie's and Freddie's chief executives to sign off on the reports. The Office of Federal Housing Enterprise Oversight could lift its limits on the companies' combined $1.4 trillion mortgage portfolios by the end of next month if both companies file timely audited financial statements.

Prior to yesterday's economic releases, bond yields had fallen to their lowest level since 2004 on fears of an economic slowdown (read: recession). But then yesterday we had Industrial Production come in slightly stronger than expected. The Fed’s Beige Book survey showing economic activity increased at a slower pace in Nov and December, as expected. Lastly, homebuilder confidence remained weak. JP Morgan Chase and Wells Fargo reported better 4th quarter earnings than estimated as the companies were able to limit their losses from the mortgage market crisis.  JP's subprime write-down of $1.3 billion was smaller than predicted and Wells profits exceeded estimates.

This morning we had our usual weekly Jobless Claims, which unexpectedly dropped by 21k to 301k. To counter that strong economic news, Housing Starts were -14.2% and Building Permits were -8.1%. Although this is not good for builders, it could help our current over-supply of housing units, which could, in the longer term, help support prices. After the news mortgage prices, unfortunately, are slightly worse and the 10-yr yield stands at 3.74%.

The MBAA announced that mortgage application volume skyrocketed for the second consecutive week, rising over 28% last week. Refinancing applications were up 43% and purchase volume jumped 11%. Originators reported that refinance volume accounted for 63% of total application volume, compared with 57.7 percent the previous week.

Rob