Paying Points Pays, GOP Amendments To Stimulus, Rates Up On Jobs Report

Iraqi officials said that they have less money to spend on infrastructure because the falling price of oil has hit government revenues hard. They said they can’t spend money they don’t have. Have we taught them nothing in six years?

California’s First Ever Worker Furlough
They’re trying not to do that here in California. More than 200,000 state government employees will stay home or run errands today, without pay, as this state begins its first-ever furlough, a move intended to save money during an ongoing fiscal crisis. Among the offices to be closed today are those of the Department of Motor Vehicles and Department of Consumer Affairs.

Pays To Pay Points on Loans Right Now
I took a look at a wholesale rate sheet yesterday. They were offering, for a 30-yr fixed rate, 5.75% at one back, 5.00% at par, and 4.5% for a cost of 1.5. As I mentioned yesterday, if a borrower is going to be in the house for a while, the broker should have them pony up a point and a half and have 4.5% for 30 years. Is your borrower going to get a better return from their 1.5 points by investing it in the stock market?

Mortgage Stimulus From Industry Veteran
How about this idea, from a mortgage industry veteran?

“With the lending criteria becoming too strict, the stimulus program needs to include a conventional (FNMA/FHLMC) Rollover Program similar to what was done in the 1980’s for FHA. The only qualification is that the property be an owner-occupied primary residence, the payments are current, and the borrower has equity to cover closings costs and prepays. Peg the rate at the stimulus rate. Like the FHA programs, fees should be restricted and instead closing a whole new loan, maybe a modification or rollover agreement form could be recorded to keep the costs and loss of equity (what equity is left) down. Money can still be made and the customer is once again protected. A FNMA/FHLMC rollover plan could help those of us that are not delinquent, using our hard earned income and savings to keep making our mortgage payments. Yes, the “forgotten” group of us that deserves a break too!! Lower those rates through a Rollover Program so we can put that hard earned income or savings back into the economy.”

Citi Selling 185,000 Subprime Mortgages Worth $85b
Citigroup is selling the billing-and-collections rights on 185,000 mortgages (face value: $37 billion of mostly subprime and Alt-A) to Wilbur Ross’s American Home Mortgage Servicing for $1.5 billion. The deal lets Citigroup wind down Citi Residential Lending, formed from the remnants of ACC Capital Holdings/Ameriquest. As of last autumn, Citi Residential held servicing rights on about 247,000 loans, compared with about 6 million for Citigroup’s consumer-banking division. The deal will increase the number of loans American Home services by 45% to 575,000.

Fed Bond Program
The Federal Reserve Bank of New York released its “Agency Mortgage-Backed Securities Purchase Program” report for the period January 29th through February 4th. Purchases totaled about $22 billion with $10 billion in Freddie securities and $10.5 billion in Fannie’s. Approximately 60% of the Gold purchases were in 30yr 4.5’s (4.75-5.125% mortgages) while the Fannie purchases were more evenly distributed from 4.5% up to 6.5 securities.

Republican Amendments To Stimulus
Besides restoring the $729,750 loan limits in some areas, there is now a Republican amendment that would temporarily offer homebuyers a tax credit worth $15,000 or 10% of a home’s purchase price, whichever is less, with the option to utilize all in one year or spread out over two years. The credit does not have to be paid back. It would be available to all purchases of any home from date of enactment for one full year – no longer just a first time homebuyer credit, and borrowers would be able to claim the credit against the 2008 tax return. Other items: buyers must occupy the home for two years as their principle residence, it includes a two year recapture provision (if they leave the home in two years they lost the credit), purchases of homes by investors are ineligible, “sunsets” the previous $7,500 Housing Tax credit on the date of enactment, and the credit is not refundable. (The $7500 credit was refundable, but had to be paid back.) Please remember your high school Civics lessons. That the bill is still working its way through Congress, and the House of Representatives must still negotiate with the Senate since the House bill does not contain the credit.

Rates Up on -598k Jobs, 7.6% Unemployment, Bad Manufacturing
The market is currently digesting the Unemployment data, which (this should be no surprise) points to a grim economy. Nonfarm Payroll was down 598,000 in January, the deepest cut in payrolls in 34 years, and the Unemployment Rate hit 7.6%. These numbers are worse than expected, and in addition we saw some downward revisions to December and November. “January’s sharp drop in employment brings job losses to 3.6 million since the start of the recession in December 2007,” Commissioner of Labor Statistics Keith Hall said in a statement, and “about half the decline occurred in the last three months.”

Manufacturing was down 207,000, the worst since October 1982, construction industries were down 111,000 jobs, and retail businesses cut another 45,000. Normally, an economy as bad as this would push rates lower, but instead, due to the supply and demand concerns, we find the 10-yr back up 2.95% and 30-yr mortgages either unchanged or worse by .125.

Daily Beast
I was walking down the street when I was accosted by a particularly dirty and shabby-looking homeless woman who asked me for a couple of dollars for dinner.
I took out my wallet, got out ten dollars and asked, “If I give you this money, will you buy wine with it instead of dinner?”
“No, I had to stop drinking years ago”, the homeless woman told me.
“Will you use it to go shopping instead of buying food?” I asked.
“No, I don’t waste time shopping,” the homeless woman said. “I need to spend all my time trying to stay alive.”
“Will you spend this on a beauty salon instead of food?” I asked.
“Are you NUTS?” replied the homeless woman. “I haven’t had my hair done in 20 years!”
“Well, I said, “I’m not going to give you the money. Instead, I’m going to take you out for dinner with my husband and me tonight.”
The homeless woman was shocked. “Won’t your husband be furious with you for doing that? I know I’m dirty, and I probably smell pretty disgusting.”
I said, “That’s okay. It’s important for him to see what a woman looks like after she has given up shopping, hair appointments, and wine.”