As I was in the supermarket check-out line last night, staring absent-mindedly at the cover of the April issue of GQ magazine, I was brought back to reality by the clerk giving me my total bill. “Holy smokes!” When did food become so expensive? As it turns out, higher oil prices, bad weather, growing consumer demand, and lower food reserves are all combining to drive up prices. Food prices here in the US were up 4% last year, and are expected to match that in 2008. The CPI and PPI numbers have “core” rates that factor out food and energy, but which is always a source of controversy since people need to eat and often commute. And the thinking goes, if the average person is spending more on food & energy, they will spend less on “optional” purchases such as new stereos, new clothes, or new furniture.

• Wells Fargo wholesale brought out the note on the mortgage broker fee disclosure, effective after April 1. “If you choose to pay your mortgage broker fees through a higher interest rate and your loan has been locked, your mortgage broker will tell you the amount of the mortgage broker fee that the lender is paying to the mortgage broker. The amount of the mortgage broker fee paid by the lender may vary depending on the loan product and terms, as well as the lender with whom your mortgage broker places your loan. Be sure that you understand and are satisfied with the product and terms that have been offered to you….”
• OFHEO is issuing a final Guidance that provides that the conforming loan limit would not decrease from its current level of $417,000 in 2009 and subsequent years. However, the conforming loan limit will not increase until cumulative increases in house prices exceed cumulative decreases since the $417,000 limit was first reached. “This revised Guidance responds to the comments that we received and OFHEO’s belief that stability in the mortgage market is very important,” said OFHEO Director James B. Lockhart.
• CitiMortgage announced the immediate availability of Phase II of the new FHA Economic Stimulus Mortgage Limits. Citi stated that “the changes in loan limits are applicable to all FHA-insured mortgage loans endorsed with HUD’s publication of the increased loan limits, effective for loans registered or bids submitted March 17 through December 31, 2008.” Citi also came out with adjusted FHA pricing hits.
• GMAC Bank Correspondent Funding announced that GMAC Bank is discontinuing its GoFast Processing Style for the following Conforming products:
• The California State Senate has approved a bill which would end a requirement that homeowners report that part of the loan that was forgiven as income on their tax returns. The bill only applies to owner-occupied homes in which the debt is forgiven this year or last. It now heads to the Assembly.

Why did the market get worse yesterday? New Home Sales fell by 1.8%, in line with expectations, but upward revisions to the December and January numbers make the overall report mildly positive as the level of sales now looks better. Still, there is almost a 10 month supply of homes, indicating that there are still many more homes than buyers. However, prices drifted worse gradually throughout the day. Today’s 4Q GDP was unchanged at 0.6%, but that was “old” news - economists expect the 1Q GDP numbers to turn slightly negative showing we are already in the midst of a recession. Initial Jobless Claims came in near expectations at 366k, but many will be watching the Fed’s first TSLF auction - the TSLF facility was put in place by the Fed to help finance mortgage-backed securities. After all of this we find the 10-yr back in the mid 3.50’s and mortgage prices “a tad” worse than yesterday afternoon’s levels.

Tomorrow we have February’s Personal Income & Consumption report, a measure of consumers' ability to spend and their current spending habits. If a consumer's income is rising, they are more likely to make additional purchases, of course, which raise inflation concerns and has a negative affect on the bond market and mortgage rates. Forecasts are calling for a 0.3% rise in income and a 0.1% rise in spending. We also will see the University of Michigan’s Consumer Sentiment index, which will give us an indication of consumer confidence and is expected to show a small decline from the previous reading of 70.5.

Sean was chatting with his friend Seamus. “Seamus, you know, even for an Irish family, you having 17 brothers and sisters is an amazing thing’”.

“Well,” he replies, “It was because me mother was hard of hearing.”

“How’s that?” asked Sean.

“At night when me Dad was feeling frisky, he’d roll over and ask me mother, ‘So, you want to go to sleep, or what?’”

Rob