General Motors and Chrysler said Tuesday they could need an additional $21.6 billion in federal loans because of “worsening” demand for their cars and trucks. Huh? Because consumers refuse to buy a GM or Chrysler vehicle, the tax payer should invest more money in these companies? If anyone else finds this is to be a ridiculous statement, please feel free to agree.

In other news, Obama is unveiling his mortgage foreclosure prevention plan today. The program is seeking to help some 9 million borrowers through a combination of principle relief and interest rate reductions. Unlike previous initiatives, this one compensates mortgage servicers for both the initial modification, and further compensates them if the newly modified loan remains in good standing. Furthermore, for the first time, lenders are being incentivized to proactively modify mortgages before they go into default. Rocket Science!

Ryan Ogata
Senior Mortgage Consultant

From: Rob Chrisman Subject: Feb. 18, 2009: EquiFirst calls it a day; locks skyrocket everywhere & brokers are maxing out locks, MI companies in the news.

CitiMortgage now requires the following minimum FICO scores on all FHA and VA loans, including FHA Streamline and VA IRRRL. For loans ≤ $417,000, it is 620, above $417 borrowers need a 660.

EquiFirst, a 20-year veteran retailer and wholesaler headquartered in Charlotte and owned by Barclays, yesterday announced, “Effective immediately, EquiFirst Corporation is ceasing its lending operations and will no longer accept mortgage loan applications for any type of mortgage loan product. EquiFirst will continue to process any completed mortgage loan application upon completion of underwriting and processing.”

For the markets, yesterday was another day of “stocks down, bond prices up” although as we know that is not always the case. It depends on the reasons, but with every country’s economy doing poorly, they can’t support higher rates. Along with Japan’s dismal data, manufacturing in the New York area contracted at the fastest pace on record, spurring concern the government’s stimulus package won’t be enough to curb the recession, which some think will lead to a depression. Today is Housing Starts (expected -3.6% but was down almost 17 %!), Building Permits (expected -4% but down almost 5%), Industrial Production (expected -1.5% but down1.8%), and Capacity Utilization. Later on we will have a flurry of Fed speakers, along with the release of the Fed minutes from the January 28th meeting. After this we find mortgage prices roughly unchanged from yesterday afternoon, and the 10-yr around 2.63%.

The MBAA announced that last week’s mortgage applications were up 46% due to refinancing being up 64%! Purchases were up over 9%, which was a welcome sign that at some point, and some interest rate level, purchases are starting to pick up. Originators who are still locking on a loan-by-loan basis are regularly hitting the daily caps set by large investors for them, whereas it appears that companies that are hedging their locked pipelines using securities or bulk forwards are avoiding this problem.

Rob Chrisman