Oil At $130, Banco Popular Exits Broker Lending, Rates Up Slightly

What do oil prices and Clinton’s campaign bills have in common? They’re both increasing dramatically. According to the LA Times, Hilary Clinton’s campaign debt has now soared to nearly $31 million, including another $9.5 million in unpaid bills to vendors this past month alone. And oil rose above $130 a barrel for the first time and analysts expect them to keep rising. Goldman Sachs raised its forecast to $141 a barrel for the second half of the year, and T. Boone Pickens thinks $150 is likely. This news is hitting stocks particularly hard.

Ben Bernake’s right hand man, Vice Chairman of the Fed Donald Kohn, said that “monetary policy appears to be appropriately calibrated for now to promote both rising employment and moderating inflation over the medium term.” He is optimistic about growth, but does not expect it to be strong, with the wild card being the persistence of weakness in the housing industry and its financial fall-out. Interestingly, he expects commodity prices to decline later this year.

Banco Popular, based in Puerto Rico and E-LOAN’s parent, announced “the Banco Popular Wholesale Mortgage Division will suspend our current lending programs in California, Arizona, Florida, and several other states, effective May 20, 2008. With this decision, however, it is necessary for Banco Popular to cease Wholesale Mortgage lending programs in California and Arizona at this time. We appreciate your ongoing support and interest you have shown in our mortgage programs and we will continue to work with you to make dreams happen.”

Impac Mortgage Holdings, who frankly I thought was out of business already, said it lost $2.05 billion in 2007 and more losses “could threaten the struggling lender’s survival”. Impac, a real estate investment trust with headquarters in Irvine CA that specialized in “Alt-A” mortgages, said capital markets remain illiquid and effectively closed to it. About one in seven loans on its books were at least 60 days delinquent as of year’s end, Impac said.

Taylor Bean further aligned themselves with Freddie Mac by announcing that “effective immediately, any Conventional loan with a FICO score of less than 620 must be underwritten using LP. Loans underwritten using DU with FICO scores of less than 620 will not be eligible for purchase by TB&W…any lender who has a loan with a FICO of less than 620, but cannot run an LP on it, the loan can be sent to TB&W for manual underwriting.”

Chief Executive Peter Raskind of National City Corp said that it may sell “problem” assets or put some of them in separate entities after large mortgage losses drove Ohio’s largest bank to raise $7 billion of capital. He said the bank could review “various forms of good bank/bad bank structures” for troubled assets, including several billion dollars of lower-quality mortgages it kept when it sold its First Franklin Financial Corp subprime lending business to Merrill Lynch & Co in 2006.

He said it was still trying to sell over $5 billion of non-prime home loans as of March 31st, after selling only $400 million in the first quarter!

Yesterday, mortgages and treasuries improved with the stock market drop, and analysts continued to forecast more credit losses. With the record oil prices, and a weakening US dollar, things are not looking great. Last week mortgage company applications were -7.8%, with purchases -6.9% to the lowest level in five years and refinances -8.7%. The only news out today is the release the minutes of the April 29-30 FOMC meeting around 11AM PST. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy. The goal is to form a guess about what the Fed’s next move will be. Ahead of that, the 10-yr continues in the low 3.80’s and mortgage prices are roughly unchanged.

TODAY’S JOKE
It was entertainment night at the Senior Center.

Claude the hypnotist exclaimed: “I’m here to put you into a trance; I intend to hypnotize each and every member of the audience.”

The excitement was almost electric as Claude withdrew a beautiful antique pocket watch from his coat.

“I want you each to keep your eye on this antique watch – it’s a very special watch. It’s been in my family for six generations.”

He began to swing the watch gently back and forth while quietly chanting, “Watch the watch, watch the watch, watch the watch…”

The crowd became mesmerized as the watch swayed back and forth, light gleaming off its polished surface Hundreds of pairs of eyes followed the swaying watch when suddenly it slipped from the hypnotist’s fingers and fell to the floor, breaking into a hundred pieces.

“S—!” yelled the Hypnotist.

It took three days to clean up the Senior Center.