Scientists have found an increase in the number of fish that have both male and female sex organs. Unfortunately, the scientists didn't discover this until they'd lured the fish back to their apartment.

Everyone makes mistakes, and estimates are only that: estimates. The MBAA, who is pretty good at estimates, believes that mortgage originations will hit $1.5 trillion in 2010. This follows Wells Fargo and JPMorgan's estimates (or at least the last one that I had heard) of volumes of about $1 trillion. Either way, it seems that mortgage origination volume estimates indicate that 2010 will be about half of 2009's volumes. They expect purchase originations for 2009 to be $718 billion, about two percent below the 2008 level of $731 billion. "Purchase originations should rise about 12 percent in 2010, as existing home sales recover and home prices stabilize. Refinance originations will end 2009 at $1.245 trillion, up about 60 percent from $777 billion in 2008. Refinance activity will likely decrease in 2010 to about $745 billion as mortgage rates increase."

The MBAA believes that our economy will grow through the rest of this year, and then slow in the first half of 2010. (How did it get to be almost "2010" already?) "While the lack of inflation, high unemployment and excess capacity in the economy should hold interest rates down, there is a lot of uncertainty regarding rates immediately following the termination of the Federal Reserve's purchase of mortgage-backed securities. No doubt the Fed will do its best to minimize adverse effects, but the elimination of these purchases will put upward pressure on all long-term rates as well as the spread between mortgage rates and Treasuries."

In spite of credit and equity issues still being more of a concern than interest rates for most, economists are divided on where interest rates are going. On the "they're going higher" side, smart folks point to the Treasury's financing need of an additional $2 trillion and their stated objective to lengthen the average maturity of their debt. In addition, if the economy really does start to pick up steam, and investors increase their risk appetite, this will also put upward pressure on yields. On the "they're going to stay low" side, economists point to the continued high unemployment, soon to be in the double digits, low consumer spending, and rough housing market in many parts of the states. Perhaps the Fed remains on hold until 2011 and then only gradually raises rates, eventually bringing the Fed funds target up to 1.00% by year end. And maybe, in spite of gold continuing to set records and oil high, inflation remains low.

Like JPMorgan yesterday, Goldman Sachs' earnings exceeded estimates for the 3rd quarter. Net income more than doubled to over $3 billion, based on advising, trading, and investment income. As you may recall, they converted to a bank in 2009, and had paid back the $10 billion that the company had received from the US Treasury (plus dividends).

Freddie Mac came out with a new tool, called Imminent Default Indicator, which will help servicers determine if a borrower with a Freddie Mac-owned or guaranteed mortgage is at risk for imminent default. The logic says that if the borrower's last name begins with any letters between A and Z, then... OK, just kidding. The tool will be accessible from the HAMP secure web page, and "will replace a portion of the current imminent default evaluation for a modification under HAMP and will be required when conducting this evaluation." Servicers should be aware, however, that the ultimate determination lies with them. Clients are advised to make sure that their servicing systems are updated, and that they have access to Workout Prospector.

Is the $8,000 tax credit a big part of your business? No one knows for sure what will happen with it, and many feel that an extension is called for, but some investors are taking not taking any chances. The American Recovery and Reinvestment Act's credit for qualified first-time homebuyers comes to an end December 1st, and groups such as Wells Fargo's wholesale channel are putting out deadlines. For them, a complete credit package must be received by November 9, conditions must be received by the 18th, it must be "clear to close" by the 23rd, and close by November 30th. In escrow states borrowers must sign the funding package by 11/25, and in non-escrow states borrowers must sign the funding package by 11/30.

HAMP...Any loan considered under HAMP must be owner occupied. And far be it for any borrower to mislead anyone about occupancy, right? Well, maybe many of them lived there for a while, and then turned the house into a rental. A recent analysis shows that liens on non-owner occupied properties have a much lower cure rate from states of severe delinquency, and also move through the foreclosure process much more quickly. The result, as one would expect, is that investors in pools of mortgages will pay special attention to the percentage of non-owner occupied properties, but with the thinking that they look attractive for investors concerned with modifications and extension risk!

With all the changes being bantered around the halls at HUD and FHA, any company focused on doing FHA loans is understandably much attuned to the proposals. Keep in mind that it is not in the FHA's best interest to loosen any lender or program guidelines at this point - additional reforms to further strengthen its credit and counterparty risk controls are involved. For example, after the end of this year appraisers may not be selected, retained or compensated by anyone who is compensated based on successful completion of the loan. Additionally, no one who is compensated for successful completion of the loan may have any substantive communication with the appraiser that impacts or relates to the property value: HVCC all the way! Also, appraisals will only be valid for 120 days. As compliance officers know, currently FHA-approved lenders and mortgagees can't have any officer, partner, etc. who is suspended or debarred, under indictment, convicted of a real estate-related felony, etc. And after 1/1/2010, annual audited financial statements must be uploaded to FHA's Lender Assessment Sub System (LASS) in FHA Connection within 90 days of the lender's fiscal year-end.

With the stock markets receiving all the attention right now, the bond market still held in well Wednesday. Supposedly banks were in doing some buying in low coupon mortgage-backed securities - which helps their prices relative to higher-coupon mortgages. This morning's CPI report, which most had expected to remain tame, did not disappoint: the CPI was only +0.2% last month. Food prices fell for the sixth time in the last eight months. And compared to the same period last year, consumer prices dropped 1.3%. We also had new Jobless Claims unexpectedly fall last week to their lowest level since January, -10k to 514k. New jobless claims have declined for five of the last six weeks, and the four-week moving average for new claims dipped 9,000 to 531,500 last week, declining for a sixth straight week. Tomorrow we have September's Industrial Production report, which is expected to be up only +0.1% from +0.8% in August: once the consumer comes back, so too will capacity and production. After the numbers this morning showing low inflation and an "ok" job market we find the yield on the 10-yr at 3.46% and both the 5-yr Treasury and mortgage prices worse by between .125 and .250.

(Here's a joke for the blondes who did not get the blonde joke yesterday.)

A blonde was driving home after a game and got caught in a really bad hailstorm. Her car was covered with dents, so the next day she took it to a repair shop. The shop owner saw that she was a blonde, so he decided to have some fun. He told her to go home and blow into the tail pipe really hard, and all the dents would pop out.

So, the blonde went home, got down on her hands and knees and started blowing into her tailpipe. Nothing happened... So she blew a little harder, and still nothing happened.

Her blonde roommate saw her and asked, "What are you doing?"

The first blonde told her how the repairman had instructed her to blow into the tail pipe in order to get all the dents to pop out.

The roommate rolled her eyes and said, "Uh, like hello! You need to roll up the windows first."