One reader had this to say about foreclosure "issues"....

"Clearly, no one should be foreclosed on improperly - even if it's a technicality.  We should support the calls by some politicians for a national foreclosure moratorium by upping the ante and proposing a national "payment moratorium".  That's right - as long as some Americans are being given the enormous benefit of not having to make a housing payment - all Americans should share in that benefit. So, starting next month - no more housing payments.  It's time the entire country receive the "same treatment the banks got."  Enough is enough. To heck with the banks.  Or, maybe we can take it one more step - let's simply forgive all housing debt in America.  Fair is fair.  Rather than criticize the person who hasn't made a housing payment in two years while his neighbors dutifully pay each month - let's let those neighbors off the hook too...  Wait.  Better idea.  How about a national moratorium on tax payments?  Now we're cooking with gas.  I bet we can find some loopholes in the way the government administers taxes."

Yes, that is "tongue in cheek", but many in the business have frustrations to vent. A spokesman said that President Obama supports an investigation by state attorneys general into troubles with home foreclosures. However, the president is opposed to a nationwide suspension of foreclosures because of possible "unintended consequences" that could hurt the housing market. Senator Christopher Dodd said a nationwide moratorium would do harm to the economy.

GMAC Mortgage announced hiring "several leading legal and accounting firms to conduct independent reviews of its foreclosure procedures in each of the 50 states." "In addition to the nationwide measures, the review and remediation activity related to cases involving judicial affidavits in the 23 states continues and has been underway for approximately two months.  As each of those files is reviewed, and remediated when needed, the foreclosure process resumes.  GMAC Mortgage has found no evidence to date of any inappropriate foreclosures."

There are 40 state attorneys general out there who are as happy as Chilean miners. They will be announcing an investigation into the mortgage-servicing industry. Why should the Federal Government, and every servicing operation, have all the fun, especially with the elections coming up? Accusations are that servicers submitted fraudulent documents in thousands of foreclosure proceedings nationwide, whereas the servicing units say the document problems are technical-largely the result of papers approved by so-called robo-signers with little review-and don't reflect substantive problems with foreclosures.

Delaying the foreclosures, of course, leads to an entirely new set of problems. Having a buildup of properties hitting markets around the country at the same time will not be good. Delaying the process raises the chance for "deeper losses to bondholders as taxes and insurance payments are fronted" according to an article by Reuters. Investors such as pension funds, mutual funds, and insurance companies will be hit, and any servicers fronting the money obviously will suffer from that. But prices of mortgage securities have not been hit - for now.

Economics can be pretty interesting sometimes. Deutsche Bank reports that the corporate sector is in much better financial condition than us private citizens. "In point of fact, the level of cash as a proportion of total corporate assets is 3.7%, the highest reading since Q4 1968 (3.9%). This is up sharply from an all-time record low of 1.7% in Q4 2008. Recent history suggests this share should move lower, because it has never remained significantly above 3% for any length of time." But in the current cycle, the ratio has trended higher due to the extreme uncertainty about the economic outlook. When it moves up to these levels, it takes about one quarter to head back down. And how does it move lower?  Deutsche believes this situation will eventually correct itself as companies become more committed to increasing payrolls. When this happens, investors will in turn become more confident in the sustainability and durability of economic activity.

Speaking of activity, JPMorgan Chase (#3 residential volume lender in the first half of 2010) reported a 3^rd Quarter net income of $4.4 Billion on revenue of $24.3 billion. Critics quickly pointed out that a portion of this was caused by the adjusting reserve levels that had been set aside to cover bad loans. Of course the opposing thing happened when the reserves were initially set aside, and apparently Chase feels that the reserves are adequate. The mortgage division did well, earnings-wise. "Mortgage repurchase reserves increased $1.0 billion, and Card Services reduced loan loss reserves $1.5 billion. Corporate results included $1.3 billion pretax of additional litigation reserves, including those for mortgage-related matters."

U.S. Bank Home Mortgage Wholesale Division adjusted maximum LTV's downward a few ARM programs for loan amounts between $650,001 and $1,000,000. Depending on the whether or not the property is in a declining market, they moved down 5% for the specific programs.

PHH notified clients that beginning today, "the Conventional Underwriting Guidelines have been updated to reflect that Property Inspection Waivers (PIWs) will be permitted for all WCL business sources as determined by the DU or DO findings. Previously, property inspection waiver eligibility was restricted based on business source." Underwriters know that the PIW is a fieldwork recommendation whereby DU accepts the value submitted as the market value for the subject property. The loan is eligible for delivery to Fannie Mae without an appraisal or property inspection if the property inspection waiver is exercised by the lender. In addition, the lender is eligible for representation and warranty relief on the value, condition and marketability of the subject property when the property inspection waiver is exercised. PHH Mortgage does not accept property inspection waivers under certain situations, and clients are advised to read the bulletin for details.

Yesterday the fixed-income markets started off well enough. There was some concern in the Asian equity markets, which helped rates. But then we had the $32 billion 3-yr auction. In the past this auction has gone well, but yesterday's was viewed as "sloppy", and down we went. Soon afterward the minutes from the last FOMC meeting indicated that further accommodation may be appropriate sometime in the near future, hinging on future economic performance, which put more pressure on the markets. By the end of the day the 10-year note lost about .375 in price (2.42%), and MBS prices were mixed with 3.5s and 4s losing (worsening) about .250 and .125, respectively, while higher coupons improved by about .125. $2.9 billion in MBS's were put out into the market. Investors had intra-day price changes. Still, no one expects higher rates are in the cards. Excess cash continues to sit in safe-haven assets because of employment and housing problems that will last for many months, if not years.

The mortgage security market had some pretty big news yesterday though. In spite of the sell off and rates worsening, the Bank of America trading desk reported that Fannie 3's (3% pass through rate, consisting of 3.25% to 3.625% 30-yr mortgages) traded at a price of about 98.75. That is a 1.25 point discount to par, but if an investor were to add some servicing released premium onto the price, it comes darn close to par! Cantor Fitzgerald reports that September's $141 billion MBS issuance was the largest since mid-2009, and so far in October 30 year 4.0%'s account for 50% of all production and 30 year 3.5%'s are up to 9%.

This morning we learned that September import prices were down 0.3%, and export prices were +.6%. These numbers usually don't move markets, and today was no exception. Of more interest was the MBA's mortgage application index. Apps were up last week by almost 15%, and apps to refinance rose for the first time in six weeks, increasing 21%. Of course, lock desks everywhere knew this already, right? The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was up 3.0 percent. We still have a $21 billion 10-yr note auction at 1PM EST ahead of us, but that pretty much does it for scheduled news today. Currently the 10-yr yield is up to 2.45% and mortgage prices are a shade worse, depending on coupon.

Two Mexican detectives were investigating the murder of Juan Gonzalez.

"How was he killed?" asked one detective.

"With a golf gun," the other detective replied.

"A golf gun! What is a golf gun?"

"I don't know. But it sure made a hole in Juan."