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Q. Half of all Americans live within 50 miles of what? (Answer below)

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I don’t have the document, but I glanced at a report over the weekend that one analyst believed the reason why Countrywide’s stock has been hit so hard is that they were rumored to be on the forefront of buying 2nds behind Neg Am 1sts last year. And in some parts of the country, with property values declining, any company owning a second mortgage behind a negatively amortizing 1st might find themselves with large losses that may not be included in their loss provisions..

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On top of that, UNITE HERE, a national labor union representing 450,000 workers in apparel, hotel, restaurant, and retail industries, launched a campaign Monday against Countrywide calling on members and other consumers to boycott the mortgage lender’s banking subsidiary until it guarantees it won’t foreclose on borrowers who have fallen behind on adjustable rate loans. Union leadership has asked consumers not to make deposits at Countrywide Bank and to send e-mails to the company demanding assurances it won’t foreclose on borrowers with mortgages that reset last year and this year.

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Nat City sent a notice to their brokers saying, “Effectively immediately, no new registrations will be permitted under any Non-Conforming product due to negative Secondary Marketing.  We will provide more details as they become available.  Please contact your account executive if you have any questions.”

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H&R Block announced that the sale of Option One Mortgage to Cerberus Capital has been halted, and that Option One will cease their origination activities.

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Is anyone interested in an ARM loan? Some folks are, and it will be wise of them to look at two important yields that are out there. The last time the spread between LIBOR (1 month LIBOR is 5.25%) and Treasury Bills (3 month T-Bill is 3.02%) was this wide was reportedly just prior to the 1987 crash. LIBOR, remember, is what banks lend to each other, and the high yield suggests that they don’t want to loan any money out to other banks. Treasury yields are guaranteed by the US government, with no credit risk. The market has seen a flight to quality as we near year-end, and the high yields suggest that many are “hunkering down” and demanding a high risk premium for lending money to institutions that may have large mortgage-related losses on their books.

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We saw a nice improvement yesterday after the ISM Manufacturing index fell to 50.8, just above the boom/bust threshold of 50. There is no news today, but in the near-term we have the unemployment data on Friday, and the Fed’s meeting next week. The market is pricing in a 60% chance of another 25 basis point rate cut and a 54% chance of a 50 basis point cut. Another tool at their disposal is a reduction in the Discount Rate, as we saw some months ago. The bond and equity markets enjoyed a rally this past week as the prospects for these rate cuts increased. Both Chair and Vice Chair of the Fed conceded that events since the last FOMC meeting have signaled that the risks to economic growth and price stability are in fact not balanced and that they will have to act to help the ailing credit and housing markets. Unfortunately more economists and analysts are joining the ranks of those that think that we will experience a recession in the near future including us, and assistance may come in the form of lower short-term rates.

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Credit reporting agency Equifax Inc. unveiled its new ARM Predictor, which will let members of the banking and financial services industry know the likelihood that someone seeking credit might have a mortgage with an adjustable rather than fixed rate. Of course consumer advocates fear the new rating system will spook lenders and hurt borrowers. TransUnion does not have a scoring system that identifies borrowers who might have adjustable rate mortgages, although they are working on one.

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JOKE TIME

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Snow White received a camera as a gift. She happily took pictures of the Dwarfs and their surroundings.  When she finished her first batch she took the film to be developed.

After a week or so she went to get the finished photos. The clerk said the photos were not back from the processor.
Needless to say, she was disappointed and started to cry.
The clerk, trying to console her, said, “Don’t worry, someday your prints will come”.

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Rob Chrisman 

rchrisman@rpm-mortgage.com

925-295-9380