Sometimes, at 4AM PST, my cat disdainfully watches CNBC while I work on the finishing touches in the daily commentary. Cats spend an inordinate amount of time being disdainful, but my cat has the perfect outlook while watching, which is to remember that much of the show is slanted toward entertaining, which can be enjoyable but much of which detracts from the substantive economic news. (For one thing, they're always talking about "economic uncertainty" - heck, there is always uncertainty - it's the future!) Paul Jacob with Banc of Manhattan put out a good piece late last week talking about the markets which is not so uncertain and sums things up. "This is one of those periods where the bond market feels a lot more volatile than it really is. The range since November 1 has been 1.80-2.09% on the 10-year Treasury. The push-pull hasn't changed: on the Bear side, momentum in the economy (modest but noticeable); uptrade in stocks.  On the Bull side, Euro-anxiety; global fiscal headwinds; the Fed's Twist bid.  We get the sense that the bond market isn't in a hurry to break the stalemate. But with the S&P at 1350 we also get the sense that stocks and bonds can't both be right; somebody's going home crying.  We admit that we don't have special insight into Greece et al, other than to observe that Europe has a long track record of successfully dragging out problems well beyond the market's attention span."

Nonetheless, no one is complaining about rates, and companies are continuing to expand. I have been retained by a well-capitalized National Bank seeking a senior sales manager (SVP position) to lead its retail lending expansion. This well-known bank offers conventional and government lending through bank branch, traditional retail loan centers and call center channels. The ideal candidate should have P&L and strong recruiting experience. The name of the bank is to remain confidential, but it is well within the top 20 originators/investors in both conventional and government loan programs in the United States. If you are interested in this retail opportunity, or know someone who is, please send resumes confidentially to rchrisman@robchrisman.com.

For company news, EverBank Financial said it will buy MetLife Bank's warehouse finance business. Expected to close in the first half of this year, it is a very short story.

Lots of folks in the mortgage industry claim to be very busy. Obviously some firms have fewer employees, and it takes more resources to close a given loan (for example, underwriters going through 2-3 loans a day rather than 6-8). Sure the record low mortgage rates are helping, but 2011 was actually the slowest 365 days in mortgage lending since the year 2000, according to figures released by Inside Mortgage Finance. (That's why many companies are going after the market share vacated by BofA.) Residential home loan origination volume totaled an estimated $1.35 trillion last year, which was down about 17% from 2010. The company attributed the weakness to a soft second quarter, when just $280 billion in new mortgages were extended to homeowners. That was actually the weakest quarter since the end of 2008, when companies were tumbling and interest rates on 30-year fixed loans were close to 5%, which is more than a point above where they stand now. Interestingly enough, many mortgage lenders have complained about having too much business in recent years, so it's unclear if they actually wanted more volume. It wasn't long ago that Chase supposedly inflated its refinance rates to temper demand, partially because of reduced staff and more manpower directed toward things like loan modifications. And back in 2009, Wells Fargo complained about the quality of the loan applications it was underwriting, hinting that it may have been hurting them more than it was helping.

For those keeping track, Wells Fargo was the top residential mortgage lender in the 4th quarter with $120 billion. (Using my HP 12C, this is an average of about $2 billion per day.) Its market share increased from 27% to 30%. It was followed by JP Morgan Chase, which brought in $42 billion, Citibank with $23 billion, and Bank of America, which fell to fourth on $22.4 billion in loan volume.

The FDIC was busy Friday, closing two banks and transferring assets. Wintrust Financial's subsidiary Barrington Bank & Trust Co. assumed the banking operations, including all the deposits, of Charter National Bank and Trust, and Muncie, Indiana-based First Merchants Bank, N.A., assumed from the FDIC all of the deposits of SCB Bank (Indiana). This brings the 2012 count to 9 (92 in 2011 and 157 in 2010).

The closing of banks is a reminder that although things have been looking up lately, the housing market is still very clearly depressed. Prices could continue declining, there's an oversupply of foreclosed homes, and many borrowers are still unable to qualify for loans. Enter the economists.  Federal Reserve economists were behind the refinancing program comments in the State of the Union speech on January 24th, urging the White House take further action to ameliorate the housing crisis.  Economists across the country have thrown out a few more ideas as well. Many believe that investors could play a greater role in local recovery, citing mom-and-pop investors that have bought up excess housing stock and rented it out. Encouraging that trend would help clear the "shadow supply" of foreclosures, but financing remains an issue. Increasing the number of loans that any one borrower can obtain from the GSEs is one suggestion, as is the elimination of capital-gains taxes on properties bought expressly as long-term investments with the intent to convert them to rentals. It has also been proposed that the market would benefit from policy makers finalizing a clutch of pending regulations that would restore clarity to lending. Establishing greater certainty around lending rules might make banks more generous with credit and increase consumer confidence. Another suggestion put forth by economists is that mortgage investors and banks reduce debt for the most troubled homeowners.  It could be a risky move that might encourage more borrowers to default, but at this point negative equity is unlikely to cure itself.  The idea here would be that borrowers would receive relief only if they stayed current on their loans, which would act as a check on a scenario of widespread defaulting.

Along those lines, in an effort to move troubled mortgages off their books, banks have begun offering more than $35,000 in cash to delinquent homeowners so that they can sell their properties for less than they owe. No lender likes short sales, but banks have decided that they're both quicker and less expensive than foreclosing. In addition to offering cash incentives, banks have been pre-approving details, streamlining the process of closing and forgoing their right to pursue unpaid debt in the hope of getting through some of the backlog. At this point, more than 14 million homes are in foreclosure, and the pending repossessions that have accumulated are standing in the way of the housing market's recovery and economic improvement.  Often borrowers opt for load modification, which reduces the monthly payment and principal such that they can avoid foreclosure but as we know sometimes homeowners facing foreclosures are able to live rent-free for years before the home is actually foreclosed.  Banks, then, have to offer a substantial cash benefit to sell short, and $35,000-plus appears to be the going rate to get someone out of their home. A number of banks in Arizona, California, Florida, New York and Washington are now offering cash incentives.  The largest incentives are extended by JPMorgan Chase, who approve about 5000 short sales monthly, many of whom have include settlements of $10,000-$35,000 each. On average, short sale transactions, from listing to sale, take from 123 days - much less time than a foreclosure.


It is quite a week for economic news. There is zip today aside from the continued Greek tragedy that will be with us for years, in spite of a supposed "agreement" last week. (As expected, last night the Greek parliament approved an austerity package - but it will only permit the country to re-commence negotiations w/"troika" officials over the terms of a new EU130B bailout.) Tomorrow we have Retail Sales and Import & Export Prices. Wednesday is Empire Manufacturing, Industrial Production & Capacity Utilization, the NAHB Housing Index, and the release of the FOMC minutes. Thursday is Jobless Claims, Housing Starts & Building Permits, the Producer Price Index, and the Philly Fed. Phew! Friday is the Consumer Price Index and Leading Economic Indicators. Friday we closed out the 10-yr at 1.98%, and this morning we find it at 2.01% and MBS prices even to slightly better.

(Parental discretion advised.)
Ed wanted desperately to make love to this really cute, really hot girl in his office. But she was dating someone else.
One day Ed got so frustrated that he went to her and said, "I'll give you $100 if you let me have my way with you."
The girl looked at him, and then said, "NO!"
Ed said, "I'll be real fast. I'll throw the money on the floor, you bend down and I'll finish by the time you've picked it up."
She thought for a moment and said that she would consult with her boyfriend. So she called him and explained the situation.
Her boyfriend said, "Ask him for $200, and pick up the money really fast. He won't even be able to get his pants down." She agreed and accepts the proposal.
Over half an hour goes by and the boyfriend is still waiting for his girlfriend's call. Finally, after 45 minutes the boyfriend calls and asks, "What happened?"

Still breathing hard, she managed to reply, "The jerk had all dimes!"
Management lesson: Always consider a business proposition in its entirety before agreeing to it and being taken advantage of.

If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog discusses residential lending and mortgage programs around the world, part 2. If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what's going on out there from the other readers.