Economy Update

To try and build support for the new budget bill, the Secretary of the Treasury will meet with small businesses. Like General Electric, AIG and General Motors.

How ‘bout this market? Yesterday rates moved higher, and prices lower, after Factory Orders increased 1.8% in February, following a downwardly revised 3.5% drop in January, and six consecutive monthly decreases. So why wouldn’t rates come down? US stock markets continued their rally, and in fact most overseas stock markets improved. (Japan’s was helped by Toyota’s stock rallying after a bank agreed to help finance US car sales.) And it would appear that there is a change in mood about the economy: in spite of the continued bad news, investors appear to feel that the worst is behind us. Just tell that to some Detroit or Sacramento home owner! Maybe investors are just tired of sitting on piles of cash…

This morning the unemployment data came out pretty close to expected: U.S. employers cut 663,000 jobs in March, and the unemployment rate hit 8.5%, the highest since 1983 when Reagan was in office. And although February’s numbers were unrevised, January’s were changed to a loss of 741,000, the biggest decline since October 1949. Since December 2007, the U.S. economy has dropped 5.1 million jobs, with about two thirds of the losses occurring in the last five months. After the news, bond prices are down slightly, with the 10-yr yield currently sitting around 2.69% and mortgage prices a shade worse than yesterday afternoon. (Interestingly, with the high profit margins now built into mortgage pricing, in spite of the MBS market worsening yesterday, many originators decided to absorb the price hit instead of passing it along on their rate sheets in order to potentially help locks.)

Chase Correspondent announced their ability to purchase loans under the new Fannie Mae program DU Refi Plus™. This program is designed to assist borrowers that have demonstrated good pay histories on their mortgages but have been unable to refinance due to a decline in home values.

Franklin American is going along with the pack. “VA Appraisal Requirements for the Market Conditions Addendum - Effective with all appraisals dated on or after April 1, 2009, VA requires appraisers to include Fannie Mae’s Market Conditions Addendum, Form 1004MC, in all VA appraisal reports. Information and instructions on completing the addendum are available online at: https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0830.pdf” And “in conjunction with Circular 26-09-3 dated March 27, 2009 VA has determined that a copy of the sales contract be provided to the fee appraiser immediately upon assignment or within 1 business day after the appraisal request. If the agreement of sale is amended during the process, the requester must provide the updated contract to the appraiser.”

As mentioned several times in recent weeks by me (not that I am any great prognosticator – procrastinator is more the case) Wells Fargo is keeping Wachovia’s warehouse business that will provide funding to independent mortgage bankers. Are they going to open it up to any Tom, Dick, and Harry? That is highly doubtful, and will probably focus on their best clients with proven production, high net worth, and a solid track record in selling loans to Wells. It is rumored that it will not be a captive line – meaning that unlike competitor’s lines, originators are not forced to sell a percentage of their production to Wells.