THE BASIS POINT

Durable Goods & Jobless Claims Down, Chase Exits Warehouse, Tracking TARP Money

OK, I am a sucker for the etrade baby ads, along the right side of the site.

Tracking TARP Money
Where does your favorite bank stand in receiving TARP money? Well, here you go.

Chase Exits Warehouse Business
Having only 8 clients left, Chase bailed on their warehouse business.

“After consideration and review, the Correspondent Lending Business at Chase has decided to no longer offer warehouse financing after providing it for less than a year. This product does not fit within the long-term strategy of our firm. While we realize this decision affects your company, we have taken this action in the best interest of our organization. You can expect your Relationship Manager to contact you shortly and review specific terms of this announcement. We appreciate your understanding and your business. We hope that we can continue to support your lending needs through our Correspondent business.”

News On Other Warehouse Banks
As investors and Ops departments are backed up, stand-alone mortgage banks with inadequate warehouse lines are strained (to say the least). There are reports out Guarantee Bank has cut back on their lending, but that US Bank is offering warehouse lines. BONY is part of a consortium of lenders that offer lines. I know that Pulte is also part of some consortium as well. Rumor has it that Wachovia, now owned by Wells, will be staying in the warehouse game to some extent – but that is only a rumor. And Countrywide is offering lines, if you give them an increased market share of your business. As one industry expert from MERS opined, “These are treacherous times for non-depository mortgage bankers. There are hundreds of non-banks still originating loans (mostly Fannie Mae, Freddie Mac and FHA product) but if these firms cannot get financing it could spell the death knell for what was once a thriving part of the residential finance industry. Meanwhile, the Treasury and the Federal Reserve have yet to weigh in on the warehouse issue — at least not publicly.”

Loan Prepayment Stats
In addition to paying attention to early payment defaults, investors tend to watch prepayments closely. After all, if their higher-coupons loans are paying off (the ones that they paid 102 or 103 for), that is not a good thing. Last month’s prepay report clearly showed higher coupon homeowners have serious credit and LTV issues, and many are not refinanceable. This caused an improvement in their price relative to lower coupon mortgages, something that hasn’t been seen in a while, despite some help that appears to be on the way for 90-105% LTV homeowners. So although the Fed continues to buy low-coupon MBS’s, the higher coupons did well as investors come to believe that they may be on their books longer than expected.

How would you like to own billions in HELOC’s that push borrower’s CLTV’s up over 100%? Many institutions find themselves in that position. For example, JPMorgan Chase, now known for scaling back on wholesale lending AND eliminating their warehouse lines, says that in their home equity portfolio, 35-39 percent will be over 100% CLTV at end of 2009, with that figure growing by the end of 2010.

Citi offered up some good news for mandatory sellers, giving them “GNMA I Pricing now available for FHA Jumbo.” Citi said, “You are now allowed to co-mingle GNMA I FHA Jumbo’s in GNMA I AOT and Direct Trades. You are no longer restricted to putting all of your FHA Jumbo’s in GNMA II trades, regardless of note rate. We will be publishing one adjuster for both products. So, the charge is the same whether the loan is a GNMA I or II.” Nice!

Durable Goods & Jobless Claims Down
This morning we have already seen Durable Goods. They fell for a sixth consecutive month to a six-year low in January, and dropped 5.2%. This is their lowest level since December 2002. Jobless Claims hit their highest level since 1982, hitting 667,000, up from 631,000 the week before. Continuing Claims hit a new record, and the four-week average of new jobless claims, a better gauge of underlying labor trends because it irons out week-to-week volatility, increased to 639,000 from 620,000 the week before. Later this morning we’ll see New Home Sales, expected to drop .6% after yesterday’s Existing Home Sales fell 5.3%. We also have $22 billion of 7-yr notes to sell, and given that the market has not seen new 7-yrs since 1993, this might be causing some problems. The 10-yr is back to touching 3% and mortgages are roughly unchanged.

Daily Humor
Two guys are walking their dogs on a very hot day. Feeling the effects of the heat, one man notices a bar across the street with a sign saying “Ice Cold Beer”. He suggests to the other that this would be an excellent relief from the heat and the second man agrees.

As they near the door, they notice a sign “No dogs allowed”. Being creative, the first man says he has an idea. He pulls out a pair of sunglasses and enters the bar with his dog.

Upon seeing the man and the dog, the bartender yells “didn’t you see the sign? Dogs aren’t allowed in this bar”.

The man replies “I’m vision impaired, this is my guide dog”.

The bartender grumbles but serves him an ice cold beer. Seeing the success, the second man waits an appropriate time, then dons his sunglasses and enters the bar.

The bartender explodes “there are no dogs allowed in this bar, get that dog out of here”.

The man responds, “I’m vision impaired, this is my guide dog”.

The bartender responds “that’s not a guide dog, that’s a Chihuahua”.

Thinking quickly, the guy responds “they gave me a Chihuahua”!?!