Marc's Mortgage Matter's

British Intelligence is warning that terrorist groups could fit women terrorists with exploding breast implants. They knew it was only a matter of time before al Qaeda started setting booby traps...

How much wood can a woodchuck chuck if a woodchuck could chuck wood? They'd better do more now, since timber is booming. Some in the industry follow U.S. lumber production. Through November this totaled 21.2 billion board feet, down 23.0% from the January-November 2008 figure, according to the Western Wood Products Association. Nationwide, November 2009 production totaled 1.620 billion feet, down 16.6% from the November 2008 total and off 18.9% from October 2009. Recently, however, lumber futures hit 29 month highs last week ahead of an anticipated strong Spring building season. Mills are cranking up again, demanding wood they haven't been buying in a year, lumber distributors have been forced to restock supplies, and visitors to Home Depot are coming away scratching their heads.

Why wouldn't investors want to gobble up securities made up of jumbo loans? Well, how about delinquencies? In a story out of Business Week, "US prime jumbo mortgages at least 60 days late backing securities reached 9.6% in January from 9.2% in December, the 32nd straight increase for "serious delinquencies," according to Fitch Ratings." This is almost 3x the rate in 2008. Folks in the business know that non-agency securities don't have the guarantees/insurance of Freddie, Fannie or Ginnie Mae. So where do these beasts trade? According to the article, last March they hit a low of .63 (so a loss of almost 40 cents on the dollar versus the original principal balance) but are now up into the low 80's.


This raises the question "Why would an investor buy a pool of mortgages?" In the past, banks, who were, and still are, making fees on originating the loans, didn't have to hold on to them, but instead could pool them and make them attractive to buyers. The buyers did not hold the individual mortgages, but parts of huge packages of them. Kind of like thinking about how delicious the Orange Chicken is at Panda Express and not having to think about how it got there. On top of that, the rating agencies told investors that the pools were safe, especially so in light of recent appreciation trends. Unfortunately now the rating agencies can't quite say that, and are having difficulty trying to figure out how to rate any pool of mortgages.

Weather issues and overseas financial troubles got much of the market's focus this week, while mortgage rates remained quite stable. In fact, the last four weeks of averages for 30-year conforming rates all were within just a few basis points of each other, a remarkable bit of stability in a market which still faces many challenges. The overall average for 30-year fixed-rate mortgages tracked declined by six basis points (.06%), ending a snowy northeast week at 5.36%.

Looking forward to next week, there is the President's Day market holiday on Monday, so we've a short week to contend with. Treasury yields moved up some this week, amidst another sizable auction of Treasury Debt, and enough to suggest that rates will be moving somewhat higher as we roll into next week. That's where we'll start on Tuesday, and that leaves out the effects of new reports on housing starts, producer and consumer price indices, industrial production and the minutes of the last Fed meeting. Based on where we are ending this week relative to last week, we think there will probably be perhaps an increase in the overall 30-year FRM (Fixed Rate Mortgage) average by week's end.


One winter morning a husband and wife in northern Michigan were listening to the radio during breakfast. They heard the announcer say, "We are going to have 8 to 10 inches of snow today. You must park your car on the even-numbered side of the street, so the snow plows can get through."
So the good wife went out and moved her car.
A week later while they are eating breakfast again, the radio announcer said, "We are expecting 10 to 12 inches of snow today. You must park your car on the odd-numbered side of the street, so the snow plows can get through."
The good wife went out and moved her car again.
The next week they are again having breakfast, when the radio announcer says, "We are expecting 12 to 14 inches of snow today. You must park...." Then the electric power went out.
The good wife was very upset, and with a worried look on her face she said, "Honey, I don't know what to do. Which side of the street do I need to park on so the snow plows can get through?"
With the love and understanding in his voice that all men who are married to blondes exhibit, the husband replied, "Why don't you just leave it in the garage this time?"