What will happen to the jumbo market above $750k if the new loan limits go into effect? Many believe that pricing will get even worse! After all, the thinking goes, if I am an investor, why bother buying those "riskier" jumbo loans when there are plenty of full doc loans below $750 that are backed by FNMA, sponsored by the US government? It is a relatively small portion of most mortgage company’s businesses – for example, in 2007 only 7% of our total loans were for amounts greater than $750k. Also, please keep in mind that until the US government defines their policy on the new conforming loan limits (exact amounts, geographic area, and whether or not they will be “securitizeable” – which determines pricing), large investors won’t establish their policies, and until then smaller originators won’t be able to establish their guidelines!

My parents are in their mid-80’s, and the other day asked me about reverse mortgages. (Contrary to popular opinion, my parents don’t eat cat food for dinner, nor have to sell bone marrow to pay their utility bills!) Seniors are counseled on questions like, “Do you really need a reverse mortgage? Do you have less costly options? Can you afford a reverse mortgage? Can you afford to start using up your home equity now? Do you fully understand how these loans work? The older the homeowner and the greater the home value, the more cash that can be made available either as a lump sum, monthly payout or line of credit. When reverse-mortgage borrowers die, their heirs must repay the loan, plus interest and fees, typically by selling the property. They keep whatever equity is left. With the oldest of the nation's 76 million baby boomers turning 62 in 2008, such loans seem certain to proliferate in coming years.

For the past two decades, the vast majority of reverse mortgages have been offered under the federally insured Home Equity Conversion Mortgages program, which applies to people age 62 or older. But some lenders have begun offering private reverse mortgages for people as young as 60. Only about one older homeowner in 100 currently has a reverse mortgage, but that's rising. Critics say that the benefits can have a very high cost. Some say that seniors are being lured in "through direct mail, celebrity endorsements and free lunch seminars," and an AARP study found that a typical 74-year-old borrower in a $300,000 home would end up spending $30,000 in total fees over the life of the loan, not including interest charges. For more information go to www.aarp.org/money/revmort

Check out http://www.gpoaccess.gov/calendars/senate/browse.html. It is the Senate’s calendar, and shows “consideration” of the fiscal stimulus plan for later today.

Yesterday the service sector ISM index dropped to 41.9 in January, the lowest level since October 2001 and the largest drop in history. The news helped rates, but perhaps not as much as some would expect. The numbers certainly didn’t help the stock market! We’ve already seen the MBA Mortgage Application Index rising 3.0% last week, with the Purchase Index +12.0% but refinancing fell 1% from its 4-yr high last week. At 5:30AM we had some Non-farm productivity and unit labor costs (expected +.5% and +3.5% respectively). Later we have several Fed speakers, in addition to a $13 billion 10-yr Treasury note auction, and the possibility of a Senate vote on the fiscal stimulus package. Simply stated, the 10-yr is roughly 3.60% and mortgage prices are unchanged.

A woman came home, screeching her car into the driveway, and ran into the house. She slammed the door and shouted at the top of her lungs, 'Honey, pack your bags. I won the lottery!'
The husband said, 'Oh my God! What should I pack, beach stuff or mountain stuff?'
'Doesn't matter,' she said. 'Just get out.'

Rob