Fifth Third Mortgage announced a new service a few weeks back whereby it "developed a GFE worksheet that is formulated to accurately feed fees to the correct GFE boxes" and gave clients a process to utilize this tool. Fifth Third told clients that it "is unable to allow a borrower to change his or her compensation option from the Borrower Paid compensation option to the Lender Paid compensation option. Fifth Third will allow a borrower to change from the Lender Paid compensation option to the Borrower Paid compensation option during the processing of the loan. Changing compensation models is an allowable changed circumstance under RESPA, but it is not permissible to increase Block 1 (Origination charge). Therefore, the Borrower Paid compensation option cannot be greater than the amount disclosed under the Lender Paid Compensation option."

Freddie Mac's employees may want a margarita tonight after reporting a $676 million quarterly profit, and indicated it would not seek additional funds from the US Treasury this quarter for the first time since it was taken over by the government nearly three years ago. But Freddie said that over the long term it was unlikely to earn more than the dividends owed to the Treasury on preferred stock issued as part of its bail-out and therefore expected to request additional funds in future periods. The CEO said, "Continued improvements on the employment front and in early-stage delinquencies were positive signs during the quarter, but we believe large inventories of unsold homes and a high number of distressed sales will continue to put downward pressure on home prices in many neighborhoods." (Does he mean Nevada down 59%, Arizona down 50% and Florida down 49% from 2006 highs?) Importantly for the industry, Freddie Mac also said that its requests to banks to repurchase faulty loans declined to $3.4 billion at the end of the first quarter, compared with $3.8bn at the end of the fourth quarter of 2010. More than 40% of loans owned by Freddie Mac were originated after 2009 and those loans have far higher equity and lower delinquency rates than those issued in 2006 and 2007.

Both the 10yr TSY and most of the MBS stack had moved back to opening levels just before the stock markets opened. Since then, stocks opened lower and are showing few signs of rallying. MBS and TSYs have been able to hold supportively at their opening levels. 10yr yields got their bounce just under 3.20 and are down to 3.186. FNCL 4.5 MBS moved from 103-05 to 103-08. At this point, gains are likely to be limited by this morning's best levels in TSYs.

Following the release of a worse-than-expected Jobless Claims report, TSYs and MBS rallied further from their already improved levels this morning. After going out around 3.22 yesterday, 10yr notes began the day around 3.19 and rallied to epic long term technical target: 3.17. Big bounce there and we're back at 3.19. But even if bonds merely hold pre-data levels, it's still quite an aggressive improvement in the context of the recent rally and constitutes a healthy front-running bet for general economic malaise notwithstanding any particular reading on tomorrow's NFP. These are VERY dangerous "snap back" sort of levels, so caution is highly urged. We'd look at NFP as a catalyst that can suggest movement in either direction, but ultimately the guidance required to sustain that directional move is "bigger" than NFP. MBS have gained less aggressively than TSYs this AM with FNCL 4.5's up 2 ticks at 102-05 vs 10yr notes up 7 ticks, dropping the yield to 3.1956. Rate sheets should be improved, but may be delayed as we've lost 5 ticks since 835am highs at 103-10.

HELSINKI, May 5 (Reuters) - European Central Bank President Jean-Claude Trichet did not deploy the phrase "strong vigilance" in his opening remarks at a news conference on Thursday, suggesting a rate rise is not likely next month but may come in July. In the past, the ECB regularly used the phrase to signal a hike was only a month away [nLDE71R1TG] and Trichet did so in March, a month before the central bank raised rates for the first time in two year. "We will continue to monitor very closely all developments," with respect to price stability, Trichet told a news conference after the bank kept interest rates at 1.25 percent EUECBR=ECI. Ahead of the meeting, analysts said a repeat of the language Trichet used in April, when he said the ECB would "monitor very closely" upside risks to price stability, would signal a July move. Euro zone inflation accelerated to 2.8 percent last month, moving further above the ECB's target of just below 2 percent. A Reuters poll last Thursday showed a majority of 76 economists expected the next hike in July although some are tipping June. [nSLASFE7TD] (Reporting by Sakari Suoninen, editing by Mike Peacock)

* U.S. Q1 NON-FARM PRODUCTIVITY +1.6 PCT (CONS +1.0 PCT) VS Q4 +2.9 PCT (PREV +2.6 PCT) * U.S. Q1 NON-FARM UNIT LABOR COSTS +1.0 PCT (CONS +0.8 PCT) VS Q4 -1.0 PCT (PREV -0.6 PCT)

* US JOBLESS CLAIMS ROSE TO 474,000 APRIL 30 WEEK (CONSENSUS 410,000) FROM 431,000 PRIOR WEEK (PREVIOUS 429,000) * LABOR OFFICIAL SAYS JOBLESS CLAIMS BOOSTED BY ABOUT 25,000 BY NEW YORK'S SPRING BREAK BEING OUTSIDE OF SEASONAL ADJUSTMENT * US JOBLESS CLAIMS ALSO BOOSTED BY AUTO INDUSTRY LAYOFFS NOT ACCOUNTED FOR IN SEASONAL ADJUSTMENTS-LABOR OFFICIAL * US JOBLESS CLAIMS 4-WK AVG ROSE TO 431,250 APRIL 30 WEEK FROM 409,000 PRIOR WEEK (PREVIOUS 408,500) * US CONTINUED CLAIMS ROSE TO 3.733 MLN (CON. 3.650 MLN) APRIL 23 WEEK FROM 3.659 MLN PRIOR WEEK (PREV 3.641 MLN) * US INSURED UNEMPLOYMENT RATE ROSE TO 3.0 PCT APRIL 23 WEEK FROM 2.9 PCT PRIOR WEEK (PREV 2.9 PCT) * US JOBLESS CLAIMS LARGEST SINCE MID AUGUST 2010