What is the Thursday before a Labor Day weekend like? Well, besides office staffs around the nation wondering if they’re going to be able to leave early Friday afternoon, locks are generally slow. Many agents don’t want to lose three days of underwriting/processing time on a short-term lock, so they decide to wait until the following week to lock.

In his farewell speech to Congress, General Douglas MacArthur quoted an old Army ballad and said, “Old soldiers never die; they just fade away.” (That was back when folks knew how to give speeches!) Old mortgage folks don’t die either – they tend to resurface. Greenwich Capital, owned by the Royal Bank of Scotland, has hired 16 people to join its mortgage-backed securities team, including 15 ex-employees of Bear Stearns. They picked up a co-head of asset-backed and mortgage trading, a derivatives trader, six former Bear traders, and eight former Bear salespeople.

Yesterday Fannie Mae grabbed the spotlight yesterday after they announced a management shake-up. The company's chief financial officer was replaced, and the chief business officer will take on an expanded role. A new chief risk officer was also named. (Daniel Mudd, CEO, will remain in place, and said, "This team will be responsible for meeting the dual objectives of conserving capital and controlling credit losses while Fannie Mae continues to provide crucial liquidity to the U.S. housing and mortgage markets. As we move through the bottom of this cycle, maintaining capital, managing credit and driving revenues are the priorities — and we have to organize and staff accordingly.") According to Citigroup, Lehman Brothers and Merrill Lynch, Fannie Mae's capital and reserves positions are better than market expectations, and they may not need any more externally raised capital. The stock of both Fannie & Freddie has reacted quite favorably to this new: Fannie’s has been up four days in a row, and lately Freddie’s has gained 21%. It wasn’t very long ago that U.S. Treasury Secretary Henry Paulson obtained the authority to pump an unlimited amount of credit or stock into the companies, which roiled the entire mortgage market.

During the last year, I have lost track of what “scratched & dented” exactly means, as well as “subprime”. Regardless, Citi announced that since the New York legislature recently enacted new legislation that defines subprime loans, and sets forth prohibited practices and penalties, and Freddie Mac and Fannie Mae have announced they will not purchase loans that meet the definition of a subprime home loan under New York State Law (S 8143-A/A 10817-A, the "NY Subprime Law"), that they (CitiMortgage) will not buy them either.

It should come as no surprise that in spite of the delinquency and foreclosure issues that FHA has seen with DAP loans, Nehemiah is fighting for them. Check out http://www.dpagroundswell.org/help/tell.cfm

As if we didn’t have enough to worry about, folks are becoming aware of, or being reminded of, U.S. and European banks loans coming due. Soon they will be expected to pay off hundreds of billions of dollars of debt coming due. Apparently in 2006, banks issued a large amount of floating-rate two-year notes to borrow money. A big chunk of those notes will come due over the next year or so, at a time when banks are struggling to raise fresh funds. It may force banks to sell assets, compete heavily for deposits and issue expensive new debt. Great.

This morning’s news was not interest-rate friendly. Is the economy showing some signs of life? Originators certainly don’t need higher rates. Initial jobless claims in the U.S. fell for a third straight week, possibly indicating a slowing in job cuts. Claims for unemployment benefits were -10,000 to 425,000 last week, from a revised 435,000 the prior week, although the number of people staying on rolls rose to 3.423 million, the highest since November 2003. We also had a 3.3% increase in Gross Domestic Product (GDP) from April through June, higher than forecast and is much higher than the advance estimate of 1.9% issued last month. (The economy grew at a 0.9 percent pace in the first quarter.) That about does it for economic news today, and tomorrow, ahead of an early close in the bond markets, at 8:30AM EST we have July’s Personal Income and Personal Spending, and then the Chicago Purchasing Manager’s survey (why didn’t the Buffalo or Seattle Purchasing Manager’s surveys never gained traction?). Yesterday’s 2-yr auction was not stellar, and today we have $22 billion of 5-yr’s to get through. Currently the 10-yr continues to hover around 3.80% and mortgage prices are unchanged from yesterday afternoon.

So, I was talking to this little girl Catherine, the daughter of some friends, and she said she wanted to be President some day.
Both of her parents, liberal Democrats, were standing there with us and I asked Catherine, "If you were President what would be the first thing you would do?"
Catherine replied - "I would give houses to all the homeless people."
"Wow! What a worthy goal you have there, Catherine."  I told her, "You don't have to wait until you're President to do that, you can come over to my house and clean up all the dog “stuff” in my back yard and I will pay you $5 dollars. Then we can go over to the grocery store where the homeless guy hangs out, and you can give him the $5 dollars to use for a new house."
Catherine (who was about 4) thought that over for a second, while her mom looked at me seething, and Catherine replied, "Why doesn't the homeless guy come over and clean up the dog “stuff” and you can just pay him the $5 dollars?"
I said, "Welcome to the Republican Party."

Rob