Countrywide’s Fate, FNMA Alt-A Exposure, Rates As Low As They’ll Get

In another blow to brokers, it was announced last week that Countrywide closed 16 wholesale loan centers. This, of course, re-ignited the discussion of what Bank of America will do with Countrywide’s three business channels: retail, wholesale, and correspondent. Generally speaking, retail is viewed as “the surest thing”, but there are definitely reasons for BofA to keep the other two channels in one form or another.

FNMA/Fannie/Fannie Mae’s 1st quarter results showed a loss of $2.2 billion, considerably worse than consensus estimates. Where did the loss come from? Many think that Fannie Mae only is involved in prime mortgages, but 43.0%, or $946 million, of the $2.2 billion in losses incurred during the first quarter involved Alt-A loans. They also said that the company’s “Alt-A book will continue to drive an outsize portion of our overall credit losses.” Fannie also reported $344.6 billion current Alt-A exposure and a limited strategy for stemming future losses.

Are mortgage and housing problems hitting state budgets? You bet! In a story in Bloomberg, California’s budget deficit could hit $20 billion by July because of a slumping economy and required spending. Composite home-price indices often show California among the hardest-hit states.

HSBC is now restricting a minimum lock of 60 days for FHA loans! Loans that were mistakenly locked for 15, 30 or 45 day will be converted to 60 day lock by HSBC on the day of the lock.

The 10-yr has shot up to 3.92%, and mortgage prices are slightly worse than yesterday afternoon. It is a very light news week, and in a “thinly traded” market (without much volume) it is easy for volatility to increase and for rates to drift up or down. Unfortunately rates have gone up, with analysts reminding everyone that it appears that the Fed is done lowering rates, and indeed inflation is a concern.