Happy New Years tonight! I will be in Manhattan (after visiting Philly and Delaware) tonight, but probably no where near Times Square when the ball drops – it is supposedly packed. Remember what was going through mortgage banker heads a year ago? It was probably something like, “I hope that I can push off client calls until after I get back from vacation” or “I am sure glad that the ‘experts’ think that we’re in the 7th inning of this crisis.” Well, this year probably neither is happening, and brokers everywhere are sticking around to field calls and are putting pressure on Ops staffs to fund those loans!

The Federal Reserve released implementation details on its previously announced program (dated November 25, 2008) to purchase mortgage-backed securities. This is a new step that the government has taken to demonstrate its resolution to keep mortgage rates low, help the housing market & distressed home owners. Only fixed-rate MBS securities guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae are eligible for purchase. Other products such as hybrid ARMs, jumbo loans, and structured bonds (CMOs, REMICs, Trust IO/POs, and other derivatives) are excluded. Purchases are expected to begin in early January 2009, and up to $500 billion will be bought, which is in addition to the Treasury’s agency MBS purchase program, which has been running at $20-25bn in recent months. The potential size of the Fed’s purchase program ($500bn) can take down most of the 2009 agency MBS net supply. Therefore, the program may drive conforming mortgage rates even lower, possibly solidly into the 4% range (compared with 5.25% which is about where they are now).

For economic news yesterday we had the Case-Shiller Index showing a decline of 19% in home prices in U.S. Metro Areas (with the worst being in the Sun Belt).  The indexes showed prices in 10 major metropolitan areas fell 19% in October from a year earlier and 3.6% from September. The drop marks the 10-city index's 13th straight monthly report of a record decline. Phoenix and Las Vegas were again the worst performers, with drops of 33% and 32%, respectively, from a year ago. San Francisco, Miami, Los Angeles and San Diego followed, with declines between 27% and 31%. Consumer Confidence hit a record low of 38, but the Institute of Supply Management index moved up slightly from 33.8 to 34.1.

This poor economic news failed to help our interest rate markets, as investors are worried about the supply that will be coming onto the market to finance the deficit. The government needs to finance a bailout of the banking system and an economic stimulus plan that members of President- elect Barack Obama’s transition team said may cost $850 billion. And speaking of borrowing, FHFA Director James Lockhart said that in spite of the government guaranteeing Fannie and Freddie debt (are they still two separate companies?), their borrowing costs will probably not go down.

A Republican in a wheelchair entered a restaurant one afternoon and asked the waitress for a cup of coffee.  The Republican looked across the restaurant and asked, "Is that Jesus sitting over there?"  The waitress nodded "yes," so the Republican requested that she give Jesus a cup of coffee, on him.
The next patron to come in was a Libertarian with a hunched back.  He shuffled over to a booth, painfully sat down, and asked the waitress for a cup of hot tea.  He also glanced across the restaurant and asked, "Is that Jesus over there?"  The waitress nodded, so the Libertarian asked her to give Jesus a cup of hot tea, "My treat."

The third patron to come into the restaurant was a Democrat on crutches.  He hobbled over to a booth, sat down and hollered, "Hey there, Honey! How's about getting' me a cold glass of Miller Light?"  He, too, looked across the restaurant and asked, "Is that God's boy over there?"  The waitress once more nodded, so the Democrat directed her to give Jesus a cold glass of beer. "On my bill," he said.
As Jesus got up to leave, he passed by the Republican, touched him and said, "For your kindness, you are healed."  The Republican felt the strength come back into his legs, got up, and danced a jig out the door.
Jesus also passed by the Libertarian, touched him and said, "For your kindness, you are healed."  The Libertarian felt his back straightening up, and he raised his hands, praised the Lord and did a series of back flips out the door.
Then Jesus walked towards the Democrat.  The Democrat jumped up and yelled, "Don't touch me ... I'm collecting disability."