The analysis of Fannie & Freddie’s plan for forestalling foreclosures continues. As one astute loan agent quipped, “All I have to do is stop making mortgage payments and I can get a 3% rate?? Sweet! Who needs a mortgage broker!” Speaking of Freddie, they announced a 3^rd quarter loss of $25.3 billion, and the company is seeking $13.8 billion in funds from the US Treasury.

Whoever is hoping for loser (uh, looser?) underwriting guidelines will be disappointed. Wells Fargo wholesale followed their correspondent group and eliminated reduced doc loans. “Effective with new registrations on and after Nov. 17, 2008, Wells Fargo Wholesale Lending will only accept LP/DU conforming loans with full income/asset documentation, regardless of the automated underwriting system (AUS) response.” Today is the last day to lock loans with LP Accept Plus and/or DU Verbal VOE documentation.

Flagstar Bank’s stock, which was trading above $9 per share this year, is now down to 61 cents. Their 10-Q was filed Monday, and things are not pretty. They are rumored to have suffered from hedging losses, the nationalization of Fannie and the demise of Lehman, the Michigan economy, and the agencies putting back large numbers of loans to them for repurchase. But Flagstar still generates operational income, is supposedly well capitalized, and has kept their deposit base. Obviously another investor leaving the mortgage banking arena would not be a good thing for those remaining. Citigroup’s stock, by comparison, has fallen 68% this year, and a report in the Wall Street Journal indicates that Citi will be laying off another 10,000 employees. This is in addition to the 23,000 during the last 12 months.

HUD came out with their loan amount guidance for 2009. “This Mortgagee Letter provides notice of the 2009 comprehensive update to the Federal Housing Administration’s (FHA) single-family mortgage limits as a result of the enactment of the Housing and Economic Recovery Act of 2008 (HERA).  The mortgage limits described in this Mortgagee Letter are effective for those loans which have credit approval on or after January 1, 2009… To read this mortgagee letter(s) and any attachments in their entirety, please visit: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/ view the 2008 letters and click on the letter of your choice. Mortgagee Letters from previous years can be found on the same page.”

The 10-yr seems content at 3.75% this morning, and mortgage prices are better by a shade. Falling for a fourth straight month, U.S. Retail Sales plunged a worse-than-expected 2.8% in October due to declines in autos and gasoline. Excluding the 5.5% drop in auto purchases, retail sales fell a record 2.2%. We still have the University of Michigan survey ahead of us, but here is some good news! The October Treasury Statement, released yesterday, shows the Treasury bought $21 billion of Agency MBS’s versus only $5 billion in September. This helps mortgage prices, since it is confirmation that there is a backstop bid for agency MBS’s, which will help narrow the spreads between mortgage and Treasury yields.

The CEO of Thornburg Mortgage, in his conference call earlier this week, stated that Thornburg is still dealing with “going concern” warnings that ratings agencies have placed upon it. The company wrote down its mortgage-backed securities portfolio by $655 million this quarter, and is planning a preferred/common share swap. Net interest income is up, but Thornburg’s delinquencies are rising in their CMD and pay option ARM portfolios. Net interest income for the quarter was $80 million, and net interest income was $53 million due to an increase in yield on their portfolios and a drop in LIBOR helping their cost of funds. At this point there is no word on when they will settle the stock swaps in process, or begin taking in new business.

A pastor concluded that his church was getting into very serious financial troubles, but upon checking the church storeroom he discovered several cartons of new bibles that had never been opened and distributed. So at his Sunday sermon, he asked for three volunteers from the congregation who would be willing to sell the bibles door-to-door for $10 each to raise the desperately needed money for the church.
Jack, Paul and Louie, all salesmen, all raised their hands to volunteer for the task.

But he had serious doubts about Louie, who was a local farmer and had always kept to himself because he was embarrassed by his speech impediment. Poor Louis stuttered badly. But, not wanting to discourage Louis, the minister decided to let him try anyway.
He sent the three of them away with the back seat of their cars stacked with bibles and to meet with him and report the results of their door-to-door selling efforts the following Sunday.
Next Sunday he was anxious to find out how successful they were, and the minister immediately asked Jack, “Well, Jack, how did you make out selling our bibles last week?”
Proudly handing the reverend an envelope, Jack replied, “Using my sales prowess, I was able to sell 20 bibles, and here's the $200 I collected on behalf of the church.”
“Fine job, Jack!” The minister said, vigorously shaking his hand. 'You are indeed a fine salesman and the Church is indebted to you.'
Turning to Paul, “And Paul, how many bibles did you sell for the Church last week?”
Paul, smiling and sticking out his chest, confidently replied, “I sold 28 bibles on behalf of the church, and here's $280 I collected.”
The minister responded, “That's absolutely splendid, Paul. You are truly a professional salesman and the church is indebted to you.”

Apprehensively, the minister turned to Louie and said, “And Louie, did you manage to sell any bibles last week?”

Louie silently offered the minister a large envelope. The minister opened it and counted the contents. “What is this?” the minister exclaimed. “Louie, there's $3200 in here! Are you suggesting that you sold 320 bibles for the church, door to door, in just one week?”
Louie just nodded. “That's impossible!” both Jack and Paul said in unison. “We are professional salesmen, yet you claim to have sold 10 times as many bibles as we could.”
Louie shrugged. “I-I-I re-re-really do-do-don't kn-kn-know f-f-f-for sh-sh-sh-sure,” he stammered.
Impatiently, Peter interrupted. “For crying out loud, Louie, just tell us what you said to them when they answered the door!”
“A-a-a-all I-I-I s-s-said wa-wa-was, ‘W-w-w-w-would y-y-y-you l-l-l-l-l-like t-t-to b-b-b-buy th-th-th-this b-b-b-b-bible F -f-for t-t-ten b-b-b-bucks ---o-o-o-or--- wo-wo-would yo-you j-j-j-just l-like m-m-me t-t-to st-st-stand h-h-here and r-r-r-r-r-read it t-to y-y-you??’”