As expected, in a 9-1 vote the FOMC cut the federal funds and discount rates by 50 basis points yesterday. The statement largely echoed last week's 75 bp inter-meeting cut language, with only a few changes. "Financial markets remain under considerable stress," "a weakening of the economic outlook;" and in addition, the statement contained a new phrase indicating that "today's policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity." "Downside risks to growth remain," leaving the door open for further rate cuts, which is what analysts believe are ahead. Will the Fed cut another 50 basis points on March 18th followed by 25 basis point cuts at both the April and June meetings, taking overnight rates to 2.00%? Maybe. The statement made no allusion to the fiscal package wending its ways through Congress, but that must have been a factor.

What did rates do? They moved up, making mortgage pricing worse, and then right back down again, ending the day pretty close to where rates started the day! This morning rates are much improved: the 10-yr is back down into the 3.50 range, and 30-yr conventional prices are better by .250. Jobless Claims skyrocketed to 375k from 306k, Personal Income was +.5% and Personal Consumption was +.2, overall pointing to continued weakness in the economy. Tomorrow, of course, we have the Unemployment data at 5:30AM PST.

Mark Twain said, "If you don't read the newspaper, you are uninformed, if you do read the newspaper you are misinformed." Problems in the housing market and a slowing economy have pushed the homeownership rate down to 68%, the lowest rate since the first quarter of 2002. More than 2.2 million foreclosure filings were reported nationwide in 2007, up 75% from the level recorded in 2006, according to RealtyTrac. In addition, home prices in the US have declined by about 7% since September. Despite the rate cuts and stimulus package and many economists believe that there will be further declines of close to 12% in 2008, and a total of about 22% between now and the end of 2010. Hopefully things aren’t that bleak!

• HSBC announced that the maximum price paid for conforming ARM products will be increased from a 1 point rebate to a 1.5 point rebate. (Premium pricing has become very compressed as the chances of loans pre-paying have increased. Why pay 2 points for a loan that pays off in 4 months?) Joining Chase however, “Due to the influx of loan volume over the last week and its' affect on underwriting turn-times”, HSBC set their minimum lock period at 60 days, and won’t accept any 15-day or 30-day locks until further notice. Any loan mistakenly locked as a 15-day or 30-day will be converted to a 60-day lock by HSBC on the day of the lock. In a wise move, HSBC is instituting a “package delivery” requirement to be determined at the time of Underwriting that includes the standard documentation requirements for income, assets, credit, automated underwriting, and appraisal, as defined by the specific program and/or as defined by the LP/DU Findings. Loans submitted with incomplete documentation will delay the underwriting turn time.
• Flagstar introduced their renovated Jumbo Fixed and ARM Program. Available through NL Inc., it includes primary residences and second homes, Full Doc and Asset Based Stated Income documentation options, loan amounts available up to $3,000,000, credit scores as low as 620, Desktop Underwriter will be used for loan amounts up to $1,500,000 (Approve/Eligible or Approve/Ineligible response required); all loans over $1,500,000, and loans with a documentation type of Asset Based Stated Income, will be underwritten manually, maximum loan-to-value (LTV) ratio of 95% for one- and two-unit primary residence purchase and rate/term refinance transactions, maximum LTV ratio of 80% for one-unit primary residence cash-out refinance transactions, 10-year interest-only option available with some products.
• Chase Home Equity will be making some big changes soon for anyone still doing secondary financing. CLTVs are being reduced to 75% effective Monday, February 4th, with the last day for brokers to lock being tomorrow.

I have received many questions on the plan for 2-4 units in the new legislation. Thanks to Dan T., here is some text, suitable for attorneys. I believe that it calls for increasing the multi-unit amounts by the same percentage as single family properties: (1) in the case of a 1-family residence, 125 percent of the median 1-family house price in the area, as determined by the Secretary; and in the case of a 2-, 3-, or 4-family residence, the percentage of such median price that bears the same ratio to such median price as the dollar amount limitation determined for 2008 under section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)) for a 2-, 3-, or 4-family residence, respectively, bears to the dollar amount limitation determined for 2008 under such section for a 1-family residence.

The Photo on the Night Stand . . .
After a long night of passion, he notices a photo of another man on her nightstand by the bed.
He begins to worry.. "Is this your husband?" he nervously asks.
"No, silly," she replies, snuggling up to him.
"Your boyfriend, then?" he continues.
"No, not at all," she says, nibbling away at his ear.
"Is it your dad or your brother?" he inquires, hoping to be reassured.
"No, no, no! You are so cute when you're jealous!" she answers.
“Well, who in the heck is he, then?" he demands.
"That's me before the surgery."

Rob