"Nothing is worse than that moment during an argument when you realize you're wrong." I wonder if Wayne D. Puff, who ran a huge Ponzi scheme from 1998 through 2005, ever felt that....

Last week in New Jersey he was sentenced to 18 years in federal prison and ordered to pay more than $100 million in restitution after his company (New Jersey Affordable Homes) accepted $123 million from investors who were attracted to 15-20% annual returns generated from his business of buying, renovating and reselling real estate, using the time-honored tradition of fudging applications, having appraisers pump up values, and flipping properties.

In more "great" news items is news like the kind that is issued by market researcher RealtyTrac, which stated that 2.8 million US properties had foreclosure filings in 2009 in spite of legislative and industry-related delays and loan modifications. The Federal Reserve is scheduled to wind down its MBS purchase program at the end of the first quarter, and tax incentives will expire at the end of April. Many markets still have too many houses for sale and too few buyers, and of course tight underwriting guidelines don't help the supply & demand issue as appraisers continue to struggle to confirm sales prices. That being said, many markets are seeing stable prices and continued solid interest, especially on the low end.

What do Federal Home Loan Banks do all day besides issue research? They also do a few workshops and many are free. For example, the San Francisco Bank is hosting 2010 WISH and IDEA workshops on the 25^th for loans for the first-time homebuyer matching grant programs. "Both programs can also complement or supplement a myriad of local, state, and federal programs and initiatives." E-mail communityinvestment@fhlbsf.com with questions, or register HERE

The Federal Deposit Insurance Corporation (FDIC) does more than insure deposits and close troubled banks. On January 29^th the FDIC will host a day-long symposium to discuss issues and strategies available to financial institutions for managing their exposures to interest rate risk (IRR). "With a historically steep yield curve and low short-term interest rates, it's vital for institutions to have robust processes for measuring and mitigating risks posed by potential changes in rates." Speaking will be Federal Reserve Board of Governors Vice Chairman Donald Kohn and PIMCO CEO Mohamed El-Erian. If you're around the FDIC's Arlington, Virginia facility that day, check it out. RSVP to Greg Hernandez in the FDIC Office of Public Affairs at GHernandez@fdic.gov or to request an invitation, please contact N. Michelle Rose at NRose@fdic.gov.

How about some common sense legal RESPA information? The Prieston Group is hosting a January 21^st teleconference that will cover RESPA from the point of view a regulatory law firm concentrating on laws and issues pertaining to mortgage brokers and their consumers. "If you have any questions about how to put the new rules into practice, what must be disclosed, or would like to walk through a particular scenario that you've encountered send your questions to clientservices@priestongroup.com and we will be sure to include them on the teleconference." Write to Mary Gamble if you're interested in the class: mgamble@priestongroup.com

In a move that caught many by surprise, for the next year HUD will have a policy starting 2/1 "that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties" - $2 billion worth. The policy applies primarily to communities where foreclosure activity is high, and will hopefully accelerate the sale of vacant properties. "This temporary waiver... will have very strict conditions and guidelines to assure that predatory practices are not allowed." Since acquiring, rehabilitating and reselling these properties to prospective homeowners often takes less than 90 days, now buyers can use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. "All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction. In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions. The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program." Go to HUD's website for more details and conditions.

Three more U.S. banks were shut down Friday, in Illinois, Minnesota, and Utah. The FDIC found buyers for two, but was unable to secure a buyer for a third failed bank in Utah and instead created a bridge bank to give customers time to transfer their money elsewhere. Gone are Town Community Bank and Trust (now under First American Bank), St. Stephen State Bank (now under First State Bank), and Kaysville-based Barnes Banking Company in Utah.

This morning First Horizon National, the parent of First Tennessee Bank, posted a widening fourth-quarter loss of over $70 million and saw revenue fall along with booking a large restructuring charge of $31 million. Recently they have cut back mortgage banking and gotten rid of branches outside its Tennessee home base. Loan-loss provisions were $135 million, down from a year-earlier $280 million and $185 million the prior quarter.

We also had Citigroup, parent of CitiMortgage, post a fourth-quarter loss of $7.6 billion, or 33 cents a share, compared to a loss of $17.24 billion, or $3.40 a share a year ago. The loss was about as expected (but apparently folks were hoping for less of a loss); on an adjusted basis, excluding the $6.2 billion after-tax loss associated with TARP repayment and exiting a loss-sharing agreement, the fourth quarter net loss was $1.4 billion, or 6 cents a share.

The investor changes just keep coming. BB&T CorrAdvantage updated to their guidelines which applies to their Non-Conforming product line(s).GMAC has posted an update to their guidelines which applies to their Jumbo product line(s). On Friday Fannie Mae announced trial balance reconciliation requirements for reverse mortgages. Starting April Fool's Day, servicers must complete and submit their reverse mortgages trial balances transaction files to Fannie Mae via eBoutique by the 6^th calendar day of the month. New reports have been created and must be used by servicers when submitting their loans. And effective immediately, all reverse mortgages with a loan balance discrepancy greater than $250 must be reconciled no later than the end of March.

Last week Bank of America followed Fannie's announcement regarding "FHA Approved Condominium Projects". After February 1, loan applications taken on FHA approved condominium projects are no longer eligible as a project approval type for conventional loans.

Bofa also told correspondents that starting a few weeks ago (1/1) the VA policy regarding acceptance of HUD/FHA approvals of condominium projects has been rescinded and VA project review will be required. Starting a few days ago the following minimum trade line requirements apply for non-conforming loan programs (a consecutive 12 month payment history for 3 open trade lines is required -currently no payment history is required) and all 3 trade lines must be open accounts (currently only one trade line must be open). Lastly, starting today, the maximum loan amount for BofA non-conforming loan programs will be $1,500,000 (previously eligible up to $3,000,000) - no extensions for the old non-conforming loan amount.

Flagstar, for all loans received in underwriting on or after January 25, or through the Delegated channel which must be funded and purchased by Feb 1, changed their guidelines for properties located in Florida or Arizona. Borrowers "are ineligible for financing if their credit reports contain 4 or more credit inquiries in the past 90 days preceding the date of the credit report. All inquiries from a FNMA or FHLMC credit reseller will be deemed to be mortgage inquiries. Other inquires that cannot be identified as being for purposes other than mortgage (auto, department store, etc) will be counted toward the limit. This change applies to purchase and refinance transactions."

We finished off last week with Industrial Production, which was up for the 6^th time in a row, Capacity Utilization, which hit its highest level in a year, and the University of Michigan Consumer Sentiment, which rose. It is no surprise that Federal Reserve officials are more confident the U.S. economy is moving toward self-sustaining growth, and therefore calling into question 0% overnight rates. Or buying fixed income securities, for that matter.

This week has only four business days, but there is a fair amount of economic news. We have zip today, but the Producer Price Index (PPI) on Wednesday, as well as Housing Starts & Building Permits. Thursday we have Jobless Claims, Leading Economic Indicators, and the Philly Fed Index, as well as yet again another auction announcement for the following week. Currently the yield on the 10-yr is at 3.69% and mortgage prices are worse by about .125.

Celibacy can be a choice in life, or a condition imposed by circumstances.

While attending a Marriage Weekend, Walter and his wife, Ann, listened to the instructor declare, "It is essential that husbands and wives know the things that are important to each other..."

He then addressed the men, "Can you name and describe your wife's favorite flower?"

Walter leaned over, touched Ann's arm gently, and whispered, "Gold Medal-All-Purpose, isn't it?"

And thus began Walter's life of celibacy...