Industrial Production and Housing Starts, USDA Not-Quite-Grade-A Loans,

Life of an Ex-Mortgage Banker
What do ex-Secondary mortgage guys do? One wrote to me last week and said, “Last night I placed an incendiary device in a bucket of water, in our living room. I wrapped it good and tight with electrical cords, plugged it in, then hung tin and wood figurines from it…………..for the next thirty days I’ll stand around and watch as the warm air from the heater basically turns this object into a ticking time bomb. If I had done this in May people would think I’m nuts.”

Wells Fargo Mortgage Updates
In a move that appeals to most places besides California and New York, Wells wholesale has begun accepting early originations for the 2009 loan limits for conventional conforming and FHA transactions. Effective yesterday, they automated the “High Balance” programs with the 2009 loan limits. “Pipeline loans with the temporary loan limit code must be converted to the High Balance Loan program code, and the loan must be re-priced and re-decisioned.” (When did “decision” become a verb?)

CitiMortgage Loan Updates
Never one to lag, CitiMortgage introduced two new Agency Jumbo Loan Documentation processes to accommodate the higher loan amounts now available to borrowers who live in high value areas: Full Documentation for Agency Jumbo, and DU for Agency Jumbo. Loan amounts up to $625,500 ($721,050 in Hawaii) are available in designated counties and are available for loans processed through DU or are manually underwritten. (Citi is not yet accepting LP for the new program.) However, CitiMortgage is accepting new registrations and locks for the 2009 FHA mortgage limits, which must be closed in 2009. The new loan limits may be found here.

Economic Stats Update
Yesterday we saw that Industrial Production decreased 0.6% in November and Capacity Utilization decreased to 75.4% in November. For perspective, the 1972-2007 average is 81.0% for CU. We also saw that the New York Empire Manufacturing Survey number was -25.76, its fourth month of decline and lowest level ever. Today, we have already seen the November Consumer Price Index information: -1.7% after being -1.0% in October, which are record back-to-back drops since the Labor Department started keeping track in 1947. Energy prices were down 17% last month. On a year-over-year basis, consumer prices were up 1.1%. The Commerce Department reported that Housing Starts were -18.9%, much lower than expected, and Building Permits were -15.6%, also below expectations. Goldman Sachs Group, who has been a public company for nine years, reported its first quarterly loss: $2.12 billion. Now we turn our attention to the results of the Fed meeting, which are announced at 11:15AM PST, 2:15PM EST. Most are expecting a cut to the overnight rate of 50 basis points, and this is priced into the markets.

Market Update
Fortunately for our markets, in spite of the spending that the US government is expected to carry out in the near future and the current deficit, rates have continued down (i.e., demand is strong) as investors sell other assets around the world and put their cash into U.S. securities. As noted last week, some of the short term instruments are paying near 0%, and therefore investors are only receiving back their capital. This morning finds the 10-yr yield at 2.53% and 30-yr mortgage prices worse by roughly .125.

USDA Choice Grade-A (Or Maybe Not Quite A) Loans
If you have a chance, take a look at the Wall Street Journal article on USDA-backed loans, where volumes have doubled. This government department insured $7 billion in loans during the 2008 fiscal year, which ended Sept. 30, compared to the FHA’s $102 billion. Interest in the USDA’s development lending program is “growing rapidly in response to the nation’s credit crunch and as most private lenders have stopped offering loans with no money down.” According to the article, to be eligible for a USDA-backed loan “a borrower can’t have income that exceeds 115% of the median county income, and the loans are restricted to areas with lower population density — generally towns of no more than 25,000 residents.” The loans are made through private lenders, and seem to be favored by builders. This program offers only fixed loans and requires income verification. Interestingly, the USDA programs rely on a fixed appropriation from Congress, and new loans can’t be made once that allocation is exhausted. Talk of more funding is on the way, but you may not want to be the last in line!

Daily Humor
Thank you Erin H:
Last year at Thanksgiving, my mom went to my sister’s house for the traditional feast. Knowing how gullible my sister is, my mom decided to play a trick. She told my sister that she needed something from the store.
When my sister left, my mom took the turkey out of the oven, removed the stuffing, stuffed a Cornish hen, and inserted it into the turkey, and re-stuffed the turkey. She then placed the bird(s) back in the oven.
When it was time for dinner, my sister pulled the turkey out of the oven and proceeded to remove the stuffing. When her serving spoon hit something, she reached in and pulled out the little bird.
With a look of total shock on her face, my mother exclaimed, “Patricia, you’ve cooked a pregnant bird!”
At the reality of this horrifying news, my sister started to cry. It took the family two hours to convince her that turkeys lay eggs!