THE BASIS POINT

Union Trust Mortgage Closes, Mark To Market Accounting Primer, GDP Lower

Scrambling for costume ideas? Short on cash for that VOA, up to $250,000,000? No problem – here’s a company that will throw “rented money” into your bank account, for a “performance fee” of 4-10%! Is this a new business line for unemployed mortgage folks? Incredible – although it won’t help with the costume choice. (I didn’t have any luck clicking on the tabs for more information.)

Union Trust Mortgage Closes
“Since 1975, Pacific Union GMAC Real Estate, through Union Trust Mortgage, has thoughtfully matched generations of buyers and sellers throughout the entire Bay Area. Pacific Union GMAC focuses on delivering outstanding quality and unparalleled service to a full spectrum of discerning clients.” Before you call them for a loan, know that Union Trust will stop taking loans tomorrow and is closings its doors as of December 31 in the SF Bay Area.

Mark To Market Accounting Primer
I am glad that my mortgage holder, and credit card company, doesn’t demand that I provide them with a balance sheet on a regular basis. (Valuing my dog would be problematic.) Mark-to-market accounting has its proponents and opponents, with the latter group feeling that companies being required to mark esoteric and rarely traded securities to market has caused a good portion of our problems. Here’s an article for anyone interested, or if you know an accountant who might want to read about it. (Thanks Rick G.!)

Kudos for Dennis M. who forwarded this video with some intelligent investment advice.

Mortgage Bailout Plan Coming
Well, since things still seem to be slow in the credit markets, how about if the government directly helps borrowers. (Over and above owning Freddie, Fannie, and Ginnie, of course.) A plan is being worked out between the FDIC and the Treasury which could cover as many as 3 million homeowners in danger of foreclosure and cost $40 billion to $50 billion. Federal officials could announce a new program, this week or next, to cover as much as $600 billion in mortgage loans.

Conforming Loan Limit Deadlines
Chase sent out a flyer clarifying “The Economic Stimulus Act implemented in February 2008 provided an increase in FHA loans limits for high cost areas. However, this increase in loan limits was a temporary increase. As a result, Chase is applying delivery cutoff dates of December 31 to FHA Jumbo loans originated under the Economic Stimulus Act FHA Jumbo limits.” Chase also reminded lenders that the new 2009 loans limits made available through the Housing Recovery Act will be announced in a future bulletin.

Mortgage Insurance Underwriting Adjustments
RMIC is making adjustments to their underwriting guidelines related to declining markets and total debt to income ratio (DTI) requirements, with the changes taking affect in late November. RMIC states they are “adjusting our Declining Markets Policy in order to make it more consistent with the risks we perceive in various markets. Our goal is both to simplify the policy and to maintain its widely accepted independent third party evaluation and transparency offered by using the OFHEO Index.” They go on to define Declining Markets, putting more emphasis on the OFHEO Index and Metropolitan Statistical Areas, set forth minimum FICO scores for Declining Markets, and lastly detail which loan characteristics are ineligible in all declining markets (Second homes, Nontraditional credit, Construction-to-permanent, Seller concession greater than 3%, a DTI greater than 45%, and Florida attached properties, including condominiums, cooperatives & attached PUDs. Their announcement also details their changes in DTI levels.

Market Update—Fed Meeting and 3Q GDP
The bond and stock markets got some help yesterday from the Fed, right? Well, both worsened after the announcement that the Federal Open Market Committee lowered its target for the federal funds rate 50 basis points to 1 percent, reminding us that there is little positive correlation between Fed Funds and mortgage rates. “Business equipment spending and industrial production have weakened in recent months, and slowing economic activity in many foreign economies is damping the prospects for U.S. exports. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit.” That sums it up.

Here this morning rates are even higher after GDP (our economy shrank at a 0.3 percent annual rate in the third quarter, its sharpest contraction since 2001, but not quite as bad as the -0.5 percent rate that was expected) and Jobless Claims was unchanged at 479,000. Currently the 10-yr yield is up to 3.93% and 30-yr mortgage prices are worse by about .125 in price from Wednesday afternoon.

Daily Humor
Doctors’ Opinion of Financial Bail Out Package:
The Allergists voted to scratch it, and the Dermatologists advised not to make any rash moves.

The Gastroenterologists had sort of a gut feeling about it, but the Neurologists thought the Administration had a lot of nerve, and the Obstetricians felt they were all laboring under a misconception.

The Ophthalmologists considered the idea shortsighted. The Pathologists yelled; ‘Over my dead body!’ while the Pediatricians said, ‘Oh, Grow up!’

The Psychiatrists thought the whole idea was madness, the Radiologists could see right through it, and the Surgeons decided to wash their hands of the whole thing.

The Internists thought it was a bitter pill to swallow, and the Plastic Surgeons said, “This puts a whole new face on the matter.”

The Podiatrists thought it was a step forward, but the Urologists felt the scheme wouldn’t hold water.

The Anesthesiologists thought the whole idea was a gas, and the Cardiologists didn’t have the heart to say no.

In the end, the Proctologists left the decision up to the “folks” in Washington.