What if an NL loan agent is trying to help a client decide between renting and buying in this environment? One tool that might help them organize their thoughts is http://www.cepr.net/documents/publications/ownrent_2008_04.pdf. As one would expect, in high value areas (the coasts) renting is often a favorable option, whereas in depressed areas such as Cleveland or Detroit, buying pencils out.

Are we done with the mortgage mess yet? Not quite… Countrywide Bank was just downgraded to a “D”, although this does not factor in the planned acquisition by Bank of America. Speaking of them, Bank of America said profit dropped for a third straight quarter as the company set aside $6.01 billion for bad loans. Results included $1.31 billion in trading losses and $2.72 billion in costs for uncollectible loans. National City, Ohio's biggest bank and subprime lender, plans to raise $7 billion from a group led by Corsair Capital LLC after posting its third consecutive quarterly loss. National City, who cut their dividend to 1 cent per share, will raise $6.37 billion selling convertible securities, the Cleveland-based company said today in a statement. The bank is also offering shares of common stock for $5 apiece, about 40 percent less than National City's closing price on April 18th. 

There is not much to report with the market this morning. The 10-yr sits in the mid-3.70’s again, and mortgage prices are roughly unchanged from late Monday afternoon. We will be seeing $57 billion in Treasury supply this week, including a 5-yr auction today, which can drive prices down and rates higher, especially when there is little other news to move the markets. The Fed governors are in their “black-out” period leading up to their meeting in week. Later this morning the National Association of Realtors will post March’s Existing Homes Sales, which are expected to show a drop from February. In a similar vein March’s New Home Sales will be released Thursday morning. The April Richmond Fed index is due to be released at 7AM PST and is expected to fall 5 points, reversing some of the 11 point gain seen in March.

Although I thought that they had already done this, Citi weighed in with limiting HELOC’s. Last week Citi Home Equity “has taken steps to limit new draw activity upon these loans. These actions limit new draw activity, and do not impact existing balances. Borrowers are expected to pay their current balances per the terms of their loan, and will receive a letter with the details on their specific line if it has been impacted.”

http://www.hussmanfunds.com/wmc/wmc080414.htm published the graph below, care of Bank of America. We are finishing the 2nd highest re-set month for ARM’s, and as long as “sub prime” borrowers continue to see their rates ratchet higher, and have improved their credit, it would appear that there is business to be had out there.

A 6 year-old and 4 year-old are upstairs in their bedroom. “You know what?” says the 6 year-old. “I think it's about time we started cussing.”

The 4 year-old nods his head in approval. The 6 year-old continues, “When we go downstairs for breakfast, I'm gonna say something with 'hell' and you say something with 'a$$’.”

The 4 year-old agrees with enthusiasm. When their mother walks into the kitchen and asks the 6 year-old what he wants for breakfast, he replies, “Aw hell Mom, I guess I'll have some Cheerios.”

Whack! He flies out of his chair, tumbles across the kitchen floor, gets up, and runs upstairs crying his eyes out with his mother in hot pursuit, slapping his rear with every step. She locks him in his room and shouts, “You can stay in there until I let you out.”

She then comes back downstairs, looks at the 4 year-old and asks with a stern voice, “And what do YOU want for breakfast, young man?”

“I don't know,” he blubbers, “but you can bet your a$$ it won't be Cheerios!”

Rob