The economy is getting worse. Home Depot announced that they're laying off 7,000 employees. This is interesting because I’ve been to Home Depot, and I didn’t even know they had employees!

Heck, I am not a loan agent, and even I have a floating pipeline! Just kidding, but every originator out there has the same ol’ stack of files on their desk, waiting for a move down in rates. Of course, no one wants too big of a move too quickly, otherwise all of the back office staff becomes swamped. Unfortunately mortgage rates have not even been creeping down, so at this point many brokers are hoping for any kind of move down since the clock is ticking on credit reports and appraisals. Floating pre-quals seems to be what everyone is doing, and then at the first sign of rates worsening lenders see a flood of locks.

Here is some good news. GMAC Financial Services (which is the financing arm for GM and for mortgage loans) swung to a fourth-quarter profit as proceeds from a debt swap more than offset billions of dollars in losses at its auto-financing and mortgage businesses. They also said that their financial condition has improved since the government approved its application to become a bank holding company last month. GMAC said it posted a profit of $7.5 billion in the fourth quarter, compared with a loss of $724 million in the same quarter last year. Total net revenue more than tripled to $11.42 billion from $3.29 billion.

GMAC Bank Correspondents should note that GMAC’s “High Balance products no longer require 6 months seasoning for Rate Term Refinances (Limited Cash Out) transactions, and this restriction has been removed from the product summary. Impacted codes include High-Balance 15 Y Fix Conforming, High- Balance 30-yr fixed conforming, High- Balance 30 Yr 5/1 Libor ARM, and High- Balance 5-1 LIBOR IO Conforming. GMAC also reminded us that Cash Out transactions continue to require a minimum of six months seasoning requirement.

Also in the good news category, last week mortgage applications rose across the country, mostly attributed to refinances. Apps were up 8.6% after being down almost 39% the previous week. (Talk about a staffing nightmare!) There was a 15.8% jump in refinance applications but an 11.2% decline in purchases.

Citigroup, rumored to have received some bail out money from the Fed, will be expanding the use of a government mortgage-relief program to meet regulators’ demands. Citigroup will use the FDIC’s “mod-in-a-box” loan-modification formula any time it makes long-term changes to a mortgage. So instead of focusing on borrowers being 60 days past due, the FDIC’s formula seeks to prevent foreclosures by reducing mortgage payments. Participating banks and mortgage investors must reduce borrowers’ payments to as little as 31% of their monthly income by reducing interest rates, extending the loan term or deferring principal.

(Additional foreclosure relief plans are being discussed. One group said that over a million foreclosures might be prevented this year in a program that would pay servicers $1,000 to modify a troubled loan by reducing the interest rate, forgiving a portion of the principal or extending the repayment plan, and having the government absorb 50% of any loss if the rewritten loan defaults again. Another plan would have the government provide an incentive for servicers to rewrite loans by sharing the cost of the modification, with the companies negotiating with borrowers to cut their monthly payment. No matter what, the government is involved!)

Yesterday was an ugly day for rates, which is unfortunate because it seems that the slightest positive news about the economy makes rates go higher, whereas currently they don’t seem to be heading down on any news. According to NAR, U.S. Pending Home Resales were up 6.3%, the first increase since August. However, rates worsened with all of the supply worries that exist – 10-yr and 30-yr Treasury securities headed down (rates went higher) after the U.S. Treasury said yesterday that it will borrow $493 billion this quarter, 34% more than it initially projected. The U.S. will announce plans today to sell and estimated $69 billion in notes and bonds at three auctions next week. With all of this in mind, the 10-yr is up to 2.88% and mortgage prices are worse by .125-.250.

Some other news of note came out, which can’t be sugar-coated. The first indicated that property owners lost over $3 trillion in value last year, and, according to Zillow,  almost one in six owners with mortgages owed more than their homes were worth. Also, the homeowner vacancy rate increases to 2.9% from 2.8%. This tick up keeps it in the range it has been in since late 2006 and shows no sign that reduced construction has started to work off the excess supply in the housing market. The rental vacancy rate also remains quite high, increasing to 10.1% from 9.9%. With homeowner vacancy rates remaining high, that is not good news for the housing market, and numerically equates to an excess supply of over a million homes. There is also excess supply in the rental market, where the vacancy rate also increased. The size of the rental market has increased, as some housing units have transitioned from the owner occupied to rentals. The homeownership rate decreased by 0.2 percentage points to 67.5% -- nearly 2 percentage points below its peak.

A man and a woman were asleep like two innocent babies. Suddenly, at 3 o'clock in the morning, a loud noise came from outside.
The woman, bewildered, jumped up from the bed and yelled at the man “Holy smokes! That must be my husband!”
So the man jumped out of the bed; scared and naked jumped out the window. He smashed himself on the ground, ran through a thorn bush and to his car as fast as he could go.
A few minutes later he returned and went up to the bedroom and screamed at the woman, '”I AM YOUR HUSBAND!”
The woman yelled back, “Yeah, then why were you running?”

And then the fight started.....

Rob

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