On Friday mortgages “tightened” to Treasury yields, but prior to that Treasury yields were dropping and mortgage rates weren’t doing much. Why? The credit-market slump is again increasing mortgage rates, raising costs for home buyers and refinancers and undercutting efforts by Congress and the Fed. The difference between yields on 10-year Treasuries and Fannie Mae's current-coupon 30-year mortgage-backed securities rose toward the 22-year high set in March, when Bear Stearns collapsed. Reduced buying from Asian investors in recent weeks and rising supply of mortgages have not helped. Interestingly, the price action has impacted both Fannie/Freddie product as well as Ginnie Mae prices (FHA & VA), which suggests that it is not a credit issue but rather it's about balance sheets of financial firms and investors.

Speaking of which, here is an online source for the Jumbo-Conforming Spread graph: http://www.banx.com/ See the “BanxQuote Jumbo-Conforming Spread 30-Yr Fixed Rate Mortgage Index” box and “then click on the chart link. You won’t be able to save the chart, but if you hold down the “Ctrl” “Alt” keys and hit the “Print Scrn” button it will save a screen shot. You just need to go to an email or word doc and hit :”Ctrl” “V” to paste.”

Freddie is increasing the Market Condition delivery fee rate from 25 to 50 basis points. They are also updating the Indicator Score/Loan-to-Value (LTV) table by: Adding a new Indicator Score range of greater than or equal to 740, providing additional delivery fee credits for mortgages with certain Indicator Score and LTV ratio combinations, decreasing delivery fee rates for mortgages with certain Indicator Score and LTV ratio combinations, increasing delivery fee rates for mortgages with certain Indicator Score and LTV ratio combinations, and increasing cash-out refinance Indicator Score/LTV ratio delivery fee rates for cash-out refinance mortgages with certain Indicator Scores and higher LTV ratio combinations. Freddie is also modifying several other delivery fees for Alt-A, A-minus products to equate their pricing with the risk in those products. Freddie is also revising their guide to enable them to change post settlement delivery fees upon prior written notice to Sellers.

Franklin American is updating conventional loan level price adjustments effective with locks beginning today. Franklin American is also following Fannie and their increase to its adverse market fee. The original fee was implemented earlier this year at 25 basis points, and is increasing to 50 basis points so Franklin American will incorporate Fannie’s fee into their base pricing. (It will not be reflected as a loan level adjustment for them.)

Wachovia apparently was not content with cutting their lending only in Illinois. They announced that they will stop making mortgage loans through its own branch offices in 19 states: Illinois, Kansas, Mississippi, Idaho, Indiana, Iowa, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, Ohio, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Washington and Wisconsin. They will still offer mortgages nationwide through Internet, telephone and direct-mail service. Hats off to the owners of Golden West (World), who apparently sold their company at the highs for $24 billion. Wachovia has $122 billion of remaining Golden West mortgages, two-thirds are in California and Florida, markets that they estimate will fall 14% and 19% respectively. Wachovia expects its losses on the Golden West mortgages to reach $14 billion, although Deutsche Bank estimated that the loss will be closer to $24 billion.

A division of ResCap, the embattled mortgage-finance arm of GMAC Financial Services, has filed more than a dozen federal lawsuits in Minnesota against mortgage companies, claiming that they failed to do adequate due diligence on borrowers and provided inaccurate information about the financial wherewithal of loan applicants. ResCap, through its Residential Funding Co. unit, is seeking millions of dollars for nonperforming loans that it financed from mortgage brokers around the nation.

Back to the current market: There are no economic indicators scheduled for today. Tomorrow we have the 5:30AM June Trade Balance number, and on Wednesday we’ll see July’s Import Prices, Retail Sales, and Business Inventories. Thursday is the usual Jobless Claims, but also the CPI (which last month was +1.1%), and then we finish with Friday’s Industrial Production and Capacity Utilization and the NY Fed Manufacturing Index. Treasury yields are stable, with the 10-yr at 3.94%, and mortgage prices roughly unchanged from Friday afternoon.

Supervisors in mortgage banking often struggle with how to phrase that letter of recommendation for that fired employee. Here are a few clever suggested phrases:

For the chronically absent: "A man like him is hard to find." Or "It seemed her career was just taking off."

For the office drunk: "I feel his real talent is wasted here." Or "We generally found him loaded with work to do." "Every hour with him was a happy hour."

For an employee with no ambition: "He could not care less about the number of hours he had to put in." "You would indeed be fortunate to get this person to work for you."

For an employee who is so unproductive that the job is better left unfilled: "I can assure you that no person would be better for the job."

For an employee who is not worth further consideration as a job candidate: "I would urge you to waste no time in making this candidate an offer of employment." Or "All in all, I cannot say enough good things about this candidate or recommend him too highly."

For a stupid employee: "There is nothing you can teach a man like him." Or "I most enthusiastically recommend this candidate with no qualifications whatsoever."

For a dishonest employee: "Her true ability was deceiving." Or "He's an unbelievable worker."

Rob