Waiting to lock until this morning? I hope not! Mortgage prices are worse by .250 in price and the 10-yr is back up to 4.08% after U.S. Personal Spending jumped a much bigger-than-expected 1.1% in November, the sharpest rise in more than two years, while prices rose. The personal consumption expenditure price index, a key measure of inflation, rose 0.6%, the biggest gain since September 2005. The year-on-year core PCE, a favorite inflation gauge of the Federal Reserve, climbed to 2.2%. The overall PCE index rose 3.6% from a year earlier. Real spending, which adjusts for inflation, rose 0.5% in November, the highest since last year, and inflation flaring above the 2% rate is at the top of the Fed’s “ideal” range. One analyst quipped “Once again it appears the demise of the US consumer has been exaggerated.”

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What does $11 trillion mean to you? According to the Federal Reserve, mortgage debt on single-family housing hit $11.03 trillion in September. No originator would be hard pressed if asked what the fastest growing segment is: conforming conventional and government (FHA/VA). And are borrowers paying on this mortgage debt? Countrywide, with $1.46 trillion, has a 6.79% delinquency rate. Wells, with $1.41 trillion, has a 4.97% rate. Among the top 20 servicers Ocwen “leads” the pack with a 33.3% delinquency rate.

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· HSBC announced to their brokers that “Given current market conditions and the short-term outlook, we will temporarily suspend origination of home equity products in the wholesale channel effective January 2, 2008. Please note that the last day to register Home Equity loans and lines is January 2, 2008.” HSBC states that their “current underwriting is 7-8 days and 2 days for conditions and docs”.

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· For brokers, WAMU yesterday announced that for their Option ARM and Jumbo fixed & ARM product lines, “Low Doc” product, it must have a minimum FICO of 720 and a maximum LTV of 50%. This is effective immediately.

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· PNC Bank announced its decision to discontinue its wholesale home equity broker origination channel. “The decision to exit this channel was based on the current market conditions and the projected impact of higher operating costs associated with wholesale home equity lending. Loan applications will not be accepted after Thursday December 20, 2007. All approved loans must be closed by Friday February 29, 2008.”

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· Remember NovaStar Financial, one of the last of the remaining subprime shops? Its co-founder, chief executive, and chairman Scott Hartman is resigning, along with their senior vice president and chief financial officer. Founded in 1996, the publicly traded real estate investment trust recently sold its $15 billion servicing portfolio to Morgan Stanley for $175 million in cash. NovaStar is no longer funding subprime loans and, like many nonconforming funders, has laid off most of its production staff.

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WAMU’s woes continue, as they find themselves the defendant in a complaint that charges WaMu (and officers & directors) with violations of the Securities Exchange Act of 1934. The Complaint alleges that the failed to disclose material adverse facts about the Company’s financial well-being, business relationships, and prospects. “(1) that the Company had failed to adequately disclose the extent of its exposure to anticipated losses and defaults in its lending portfolio; (2) that contrary to earlier representations, the Company had failed to adequately reserve for losses as conditions in the credit and housing markets deteriorated; (3) that the defendants had engaged in a conspiracy with First American and EA to artificially inflate the appraised value of homes for certain mortgages to artificially inflate the Company’s reported loan-to-value ratios; (4) that the Company’s lending portfolio and the mortgages that it issued were substantially riskier than they were represented to investors to be; (5) that as a result, the Company’s investment portfolio was impaired; etc.

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The maker of the popular FICO credit score used by most lenders is coming up with a new model, named FICO 08. Fair Isaac says their new scoring model will do a better job predicting the likelihood of a borrower defaulting on a loan. For one thing, the new model, dubbed FICO 08, will be more forgiving of occasional slips by consumers, but will take a harder line on repeat offenders. Fair Isaac predicts its new system will help lenders reduce default rates on their consumer credit by between 5% and 15%. Consumers could start seeing the new FICO scores by the spring, though some lenders may take additional time to test the system to see how it works with their business and loan portfolios. Fair Isaac, who last revamped its scoring model earlier this decade, says it is accelerating its FICO 08 rollout, partly in response to lenders’ demand for better risk-management tools. The latest version of the FICO score will largely look and feel the same to consumers and lenders. Scores will still range from 300 to 850 — the higher the better — and the model will continue to look at the same factors, including consumers’ level of credit indebtedness and payment histories, length of credit histories, number of recent credit openings and inquiries, and the type of credit used, to determine scores.

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Yesterday I was buying a large bag of Purina dog chow for my dog at Wal-Mart and was about to check out. A woman behind me asked if I had a dog.  What did she think I had, an elephant?  So, since I cannot ever pass such an opportunity up, I told her that no, I didn’t have a dog, and that I was starting the Purina Diet again, although I probably shouldn’t, because I’d ended up in the hospital last time, but that I’d lost 50 pounds before I awakened in ICU with tubes coming out of most of my orifices and IVs in both arms. .

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I told her that it was essentially a perfect diet and that the way that it works is to load your pants pockets with Purina nuggets and simply eat one or two every time you feel hungry and that the food is nutritionally complete so I was going to try it again.

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Horrified, she asked if I ended up in ICU because the dog food poisoned me.  I told her no, I stepped off a curb to sniff an Irish Setter and a car hit us both. 

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Rob Chrisman 925-295-9380 rchrisman@rpm-mortgage.com