Wells Fargo’s Wachovia Losses Estimated $60b, Home Prices & Mortgage Apps Down

The big news of the day, besides more bank earnings, is that a coach of a Texas high school got fired after beating another team in basketball 100-0. The coach would not apologize, since his girls played with honor and integrity (his words) in beating Dallas Academy, which has 8 girls on the team and only 20 in the entire school. The defeated school, by the way, specializes in teaching students with short attention spans. If you’ve already moved on to another paragraph, maybe you fall into this category…

Home Prices Down 18.2%
One of my goals in life is to have an index named after me that can impact the market, since I don’t have a real job. Trilly Lundberg does surveys of gasoline station prices. The University of Michigan has some kind of consumer sentiment survey. The S&P/Case-Shiller House Price Index came out yesterday, -18.2% year over year. This was about as expected, but certainly shows us that housing continues to be “in the tank”, and until that begins to turn around, no broker should look for looser guidelines or much investor interest in securities backed by mortgages.

Mortgage Apps Down 39%
Rate locks fell back to November levels. The Mortgage Bankers Association said its mortgage application activity dropped almost 39% in the week ended Jan. 23. Although lock desks everywhere are breathing a sigh of relief, mortgage company owners are left wondering if they should have outsourced underwriting and other operations work instead of staffing up.

Wells Fargo’s Wachovia Losses Estimated at $60b
Today the big news for mortgage companies might be in the release of Wells Fargo’s earnings. Their earnings were obviously impacted by Wachovia’s acquisition at $11.8 billion with no government support, and follow disappointing earnings from BofA, Chase, and Citi. But it gave Wells operations in 39 states, and created one heck of a large bank, and is expected to make money in the years to come. Since then, Wells has estimated the credit loss due to Wachovia’s loans at $60 billion! Wells made $2.8 billion for 2008, but lost $2.55 billion in the 4th quarter due to the merger. Interestingly, the market seems pleased with the steps that Wells took in meeting the Wachovia issues, is not planning on asking the government for additional money, and the stock is up this morning almost 20% in pre-market trading.

Market News For Today
Moving on, China remains on holiday through end of week, the House votes on the $816 billion stimulus package today, and the Fed meeting adjourns at 2:15 EST. Yesterday’s record $40 billion Treasury debt auction saw decent demand which boosted treasury and mortgage prices on the day, helping lead to some intra-day price changes. So far this morning the 10-yr is at 2.53% and mortgages are roughly unchanged from their improved price yesterday afternoon.

Daily Humor
After an exhaustive review of the research literature here is the final word on nutrition and health:

1. Those in Japan eat very little fat and suffer fewer heart attacks than us.

2. Those in Mexico eat a lot of fat and suffer fewer heart attacks than us.

3. Those in China drink very little red wine and suffer fewer heart attacks than us.

4. Those in Italy drink excessive amounts of red wine and suffer fewer heart attacks than us.

5. Those in Germany drink beer and eat lots of sausages and fats and suffer fewer heart attacks than us.

CONCLUSION: Eat and drink whatever the heck you like. Speaking English is apparently what kills you.