Ok… April Fools – at least for two of them! There haven’t been any press releases that John Stumpf & Wells Fargo have been asked to participate in a Fed-assisted bail out of any particular large lender. But who knows? There have been rumors of Wachovia, WaMu, and SunTrust – but they are only that: rumors. Stumpf was recently quoted in a San Francisco newspaper as saying, “I would not be averse to a Fed-assisted transaction.”

Thornburg Mortgage raised $1.35 billion from a sale of debt and warrants to buy common stock, receiving $1.15 billion of the proceeds, and that the other $200 million will be held in escrow until the completion of a tender offer for preferred stock. The new subordinated secured notes carry an initial interest rate of 18% - is that the risk premium on an A-paper lender? Existing shareholders will see their interests significantly diluted: common shareholders will hold about only 5.5% of its common stock. But their choice appeared to be this or if it failed to complete a large capital raising, it would be forced to sell its mortgages at depressed prices, which could have led to a bankruptcy filing.

Two weeks ago, the spread between 30-year fixed rate mortgages and the 10-year note was at 309 basis points. As of last week, the spread narrowed to about 2.5 points. We still have a way to go as the historical average of 100-150 basis points, but spreads have improved! Although this morning the 10-yr is back up into the high 3.40’s, and mortgage prices have more than given up their improvement from yesterday.

And under the category of “I wish that these were April Fools’ stories, but aren’t”:

• UBS, the largest Swiss bank, said that it would write down another $19 billion and that its chairman would step down. UBS said the write-down would result in a first-quarter loss of about $12 billion, and that it would seek new capital of about $15 billion, in the second time it has announced plans to raise new funds since the credit crisis began.
• Deutsche Bank, the biggest German lender and owner of MortgageIT, said that it expected a first-quarter loss of about $3.9 billion on write-downs.
• Global banks have now written down more than $200 billion.
• Congress returns to work today and they are no doubt thinking about more forms of intervention in the mortgage market.
• For Wells Wholesale, effective April 7, a complete IRS Form 4506-T will be required for all loan submissions. In addition, Wells Wholesale and Correspondent announced a new price adjuster for conventional conforming for loans with LTV’s greater than 97%. They also rolled out new pricing for self-insured loans (are they and others down the path of doing away with them altogether?) and non-conforming adjusters based on FICO and LTV.
• Chase eliminated their Flex 100 Product – Market Type 668, Freddie 100 Product – Market Type 568, DU SISA Feature – Retired from all Agency Market Types. Chase also made changes to their DreaMaker Opportunity, MyCommunity Mortgage™, and Home Possible programs, effective tomorrow.
• Housing and Urban Development (HUD) Secretary Alphonso Jackson resigned Monday. He is under criminal investigation, fending off allegations of cronyism and favoritism involving HUD contractors for the past two years. The FBI has been examining the ties between Jackson and a friend who was paid $392,000 by Jackson ’s department as a construction manager in New Orleans after Hurricane Katrina. When the existence of the criminal probe was revealed in October, the White House said President Bush supports Jackson and that Jackson “expects that the investigation will clearly establish that he did nothing improper or unethical.” Last week senators said that Jackson ’s problems represented a “worsening distraction” at HUD.

The Commanding Officer of a Regiment in the U. S. Marine Corps was about to start the morning briefing to his Staff and Battalion and Company Commanders. While waiting for the coffee machine to finish its brewing, he decided to pose a question to all assembled. He explained that his wife had been a bit frisky the night before and he failed to get his usual amount of sound sleep. He posed the question of just how much of s- was “work” and how much of it was “pleasure”?

The X.O. chimed in with 75-25% in favor of work.

A Captain said it was 50-50%.

The Colonel’s Aide, a Lt., responded with 25-75% in favor of pleasure, depending on his state of inebriation at the time.

There being no consensus, the Colonel turned to the Private First Class who was in charge of making the coffee. What was HIS opinion?

Without hesitation, the young Private First Class responded, “Sir, it absolutely has to be 100% pleasure.” The Colonel was surprised and, as you might guess, asked why?

“Well, sir”, began the Private First Class, “if there was any work involved, the officers would have me doing it for them.”

Rob Chrisman 

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