Many guys only know that Valentine's Day is nearing because their radio stations are playing jewelry store ads. Here's your warning: it's Monday! And here's your number for the day: 1,317. That is the number of U.S. manufacturing establishments that produced chocolate and cocoa products in 2008, employing 38,369 people. California led the nation in the number of these facilities, with 146, followed by Pennsylvania, with 115. For this, and other exciting business patterns, go HERE.

Word had certainly leaked out about the proposals for Freddie and Fannie that have come out this morning. Reuters broke out a set of options yesterday for the plans that were presented today. No one is expecting Congress to have something substantial to act on in the near future. One includes an option to create an insurance fund for mortgage-backed securities that is similar to the FDIC. But in general the paper lays out three legislative options for making long-term changes to the U.S. housing finance system, while also taking near-term steps to gradually lessen the government's role in the mortgage market by making agency loans more expensive. Specific details were released today, and after that Congress, who also produced the Dodd Frank legislation, will be tasked with determining the final plan. Watch out for the battle of special interest groups for many months to come.

The buzzwords on Freddie & Fannie reform seems to be "gradual," "private sector," and "no one wants to spook the fragile housing market." Something tells me that we'll all be sick of those terms by the time Congress ends up with a plan perhaps this year. Here is the latest synopsis on the issue:  Reduced Loan Limits, Larger Down Payments, Higher FHA MIP Fees

And who can forget TILA Reg. Z compensation regulations? This week's focus has been centered on Section 226.36(d)(2) regarding compensation received directly from the consumer. There appears to be some question about the difference between commissions that might be paid on a transaction versus a base salary or hourly wage for a loan officer. Stay tuned - it certainly is a work in progress!

Kinecta Federal Credit Union weighed in with its compensation guidelines, which are a work in progress. "At this time, Kinecta is drafting guidelines around the following: Kinecta will permit Broker compensation to be either Borrower paid or Lender paid. Not both. For Lender-paid Broker compensation, Brokers will be permitted to determine their own levels of compensation. If a Broker's Lender-paid compensation will vary by loan type (e.g. FHA vs. Conventional), Kinecta will require the Broker to confirm that the varying compensation levels comply with the Final Rule (i.e. the different levels of compensation are not based on terms and conditions of the loan or constitute a proxy for terms and conditions of the loan). In order to receive Lender-paid Broker compensation, Brokers will be required to provide Kinecta with a schedule of the Brokers' fees. We will provide a sample schedule of fees for Brokers' use. The Brokers' scheduled of fees may not be changed more frequently than quarterly."

Kinecta goes on. For "Borrower-Paid Broker Compensation," the "Amount of compensation is negotiated between you and your borrowers. Borrowers may use credits from the interest rate chosen to pay for third party fees, but such credits may not be used to cover any amount of the Borrower-paid Broker compensation. Brokers can lower compensation, pay for tolerance violations or offer credits towards third party costs. Borrower may pay discount points to reduce their interest rate." For "Lender Paid Compensation," 100% of the Broker's compensation must be paid by Kinecta. For purposes of the Final Rule, Yield Spread Premiums will always be considered Lender paid. Compensation must match exactly to Broker's schedule of fees on file with Kinecta. Borrowers may also use credits from the interest rate chosen to pay for third party fees. Borrowers may pay discount points to reduce the interest rate. Broker may not reduce commission to pay for tolerance violations, credit third party fees or offer other concessions."

Kevin Warsh, the youngest-ever governor of the US Federal Reserve and one of chairman Ben Bernanke's "buds," is to leave the Fed at the end of March. His leaving will remove a "hawkish" voice from the FOMC although he always supported Bernanke. Apparently he is anxious to return to the private sector. Mr. Warsh's departure may change the balance of the FOMC in favor of keeping monetary policy looser for longer.

MetLife Inc., the parent company of MetLife Bank, reported its 4^th quarter numbers. Profits fell 82%, in part due to derivative losses totaling $1.54 billion. MetLife Bank, which is the mortgage arm, saw its 4^th quarter total operating revenue fall 6% to $355 million as it experienced a decline in mortgage servicing revenue. For all of 2010, however, MetLife pulled in a profit of $2.7 billion versus 2009's loss of $2.4 billion.

And while we're talking billions, the California Housing Finance Agency (CalHFA) is now up and going with its "Keep Your Home California" initiative using roughly $2 billion from the U.S. Treasury's Hardest Hit Fund. Under "Keep Your Home California" are three programs that offer several forms of mortgage assistance and one program that provides transition assistance to borrowers in the process of a short sale of deed-in-lieu transaction: the Unemployment Mortgage Assistance Program, the Mortgage Reinstatement Assistance Program (for homeowners who have defaulted on their mortgage payment due to a temporary change in household circumstance), and the Principal Reduction Program (for houses that have seen a large drop in value). There is also the Transition Assistance Program. I am glad that the money is coming from the Fed, as California is not exactly plush with cash.

"Dolphins are so smart that within a few weeks of captivity, they can train people to stand at the edge of a pool and throw fish." Remember Bowie Bonds? Bowie Bonds were asset-backed securities of current and future revenues of the 25 albums (287 songs) that David Bowie recorded before 1990. Issued in 1997, the bonds were bought for US$55 million by the Prudential Insurance Company with a yield of 7.9% and an average life of ten years. Royalties from the 25 albums generated the cash flow that secured the bonds' interest payments. By forfeiting ten years' worth of royalties, David Bowie was able to receive a payment of US$55 million up front and use the money to buy songs owned by his former manager.

Along those lines, we now have Wireless tower securitizations which are backed by a wireless tower operator's interest in tower sites and the improvements thereon, tenant leases, and associated rents and revenues, through either a mortgage lien or an ownership interest in a special purpose entity. There are currently six issuers. As one might expect the risks center around decreasing tenant lease renewals, industry consolidation, and the inability to fund the "soft bullet" maturity at the anticipated repayment date (i.e., refinancing risk).

Investor changes continue on. BB&T updated its FHA, VA & non-conforming product lines. Chase Correspondent tweaked its conventional high balance product lines, and also followed BofA, Wells, and others by suspending temporary buydowns.

Looking at the MBS markets, "mortgages opened up unchanged vs. the swaps curve but have failed to keep pace with the rallying treasury market as the flight to quality trade picked up momentum thanks to increased tensions in the Middle East" according to one trader yesterday. Once the 30-year Treasury auction results came out, however, everything pretty much sank. The sale of the $16 billion did not go as well as Wednesday's 10-yr auction, although it was still mo' better than the 3-yr auction Tuesday. The bid-to-cover ratio, a measure of demand, was 2.51-to-1 versus 2.67 at the prior auction and an average of 2.55 at the prior four. By the end of the trading day the new 10-year notes closed off/down about .375 with a yield of 3.71%. Mortgage-backed securities, made up of mortgages on current rate sheets, were worse by between .250-.375.

This morning, however, we're starting off with a bit of a bounce. 10-yr T-notes are down to 3.65%, and agency MBS prices are better by roughly .250. Over in Egypt, Mubarak has officially stepped down. T

I went to the doctor for my yearly physical. The nurse started with certain basics.

"How much do you weigh?" she asked.

"135," I said.

The nurse put me on the scale. It turns out my weight is 180.

The nurse asked, "Your height?"

"5 foot 4," I said.

The nurse checked and saw that I only measure 5' 2"

She then took my blood pressure and told me that it is very high.

"Of course it's high!" I screamed, "When I came in here I was tall and slender! Now I'm short and fat!"

She put me on Prozac.

What a b&^%$.