Super Conforming Prices Improve, Mortgage Banker Becomes Fugitive

Some mortgage bankers leave the business and start new companies. Others, such as this well known hedging expert from the 1980’s and ‘90’s, become fugitives. In addition, Auerbach has two boys in the mortgage banking biz.

Signs of super conforming price stability!? The Fannie Mae desk has been offering jumbo-conforming fixed rate whole loan pricing 1.50 points behind a comparable standard conforming, which is roughly .39%. Whether or not investors pass that along to their originators remains to be seen. In addition, Freddie Mac said that it will guarantee 90-day, forward-delivery pricing on “conforming jumbo” mortgages it buys from Wells Fargo & Co., Washington Mutual Inc., JPMorgan Chase & Co., and Citigroup Inc. Of course pricing has been uncertain, causing angst for borrowers and lenders, and Freddie’s guarantee should definitely help.

• Citigroup announced Friday that it lost over $5 billion during the first quarter of 2008 due to almost $14 billion in write-downs. $6 billion in write-downs were on collateralized debt obligations, $3 billion on leveraged loans, $1.6 billion on Alt-A mortgages, $1.5 billion on auction-rate securities, and another $1.5 billion on downgrades of monoline insurers.
• AmTrust announced that the following products will be discontinued: Portfolio Fixed Core Full Documentation, Conforming Fixed No Income Verification, Standard ARM No Income Verification, Jumbo Fixed No Income Verification, Portfolio Fixed No Income Verification, ate Swap Plus (Portfolio ARM No Income Verification)
• Downey Savings announced to brokers that it will no longer accept stated income verified asset or stated/stated files.
• On Friday Reuters reported that Thornburg Mortgage said “one of its units had failed to make a payment due on the final maturity date of $300 million in short-term notes, constituting a default under the unit’s commercial paper program. Thornburg, which earlier this month managed to avert a bankruptcy filing by raising $1.35 billion, said the unit was “bankruptcy remote” and that note holders had no contractual recourse to Thornburg for nonpayment of the notes.”

Mortgage prices are unchanged so far this morning, with the 10-yr yield hovering in the mid-3.70’s. There are no economic releases scheduled today, leaving some to pontificate on the market sentiment on further Fed cuts. The next meeting is April 29th, and a 25 basis point cut is fully expected at next week’s meeting. After that, however, analysts only give a 22% chance of further cuts over the summer and rates are expected to increase in late 2008 or early 2009!

Tomorrow we have the National Association of Realtors posting March’s Existing Homes Sales numbers, which are expected to show a drop from February. March’s Durable Goods Orders will be posted early Thursday morning, giving us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. (Current forecasts call for a small increase in orders.) Also Thursday is a 5-year Treasury Note auction. Lastly, the University of Michigan’s update to their Index of Consumer Sentiment for April comes out, with current forecasts calling for an upward revision to 64.2.