Sep. 12, 2007: Some humor, the 10-yr at 4.35%, and what’s up with WAMU?

Sep. 12, 2007: Some humor, the 10-yr at 4.35%, and what’s up with WAMU? Rob Chrisman

A blonde teenager, wanting to earn some extra money for the summer, decided to hire herself out as a “handy-woman” and started canvassing a nearby well-to-do neighborhood. She went to the front door of the first house, and asked the owner if he had any odd jobs for her to do. “Well, I guess I could use somebody to paint my porch,” he said, “How much will you charge me?” Delighted, the girl quickly responded, “How about $50?” The man agreed and told her that the paint brushes and everything she would need was in the garage. The man’s wife, hearing the conversation said to her husband, “Does she realize that our porch goes ALL the way around the house?” He responded, “That’s a bit cynical, isn’t it?” The wife replied, “You’re right. I guess I’m starting to believe all those dumb blonde jokes we’ve been getting by e-mail lately.” Later that day, the blonde came to the door to collect her money. “You’re finished already?” the startled husband asked. “Yes, “the blonde replied, “and I even had paint left over, so I gave it two coats.” Impressed, the man reached into his pocket for the $50.00 and handed it to her along with a ten dollar tip. “And by the way, “the blonde added, “it’s not a Porch, it’s a Lexus.

(Thank you Kane S!)

Hitting the press yesterday was a story about Kerry Killinger, chief executive of Washington Mutual, warning that the company anticipates a continued rise in bad loans and will put aside billions of dollars, which will take a toll on WAMU’s earnings. Killinger said the Seattle-based thrift will set aside as much as $2.2 billion this year to cover potential loan losses, $500 million more than WAMU predicted in July. Washington Mutual’s share price has slipped recently, and fell further on his statement. On top of this, there have been rumors about large losses in the warehouse lending division that WAMU has suffered due to other lenders exiting the business, but these rumors are unconfirmed. WAMU has just begun to dips its toe recently into correspondent lending, but for the most part has been focusing on retail and wholesale (third party) business.

According to a study done by Campbell Communications, 57% of mortgage broker customers with ARM loans were unable to refinance last month into a new loan to avoid higher monthly payments. The poll of 1,744 brokers in the last week of August found that subprime borrowers had trouble refinancing mortgages because loan programs were no longer available, which should come as no surprise. A-paper borrowers were hindered by appraisal values creating high LTV’s. Broker customers with subprime, or weak, credit faced the most problems, with 64% unable to refinance their ARMs last month. Half of prime borrowers were turned away from ARM refinancing. The survey also found that 33% of home purchase closings were canceled in August. Loan closings were canceled for 56% of subprime borrowers in the month amid failed approvals, while closings for 21% of home buyers with good credit were blocked.

There is no relevant data scheduled for release today or tomorrow. Friday, however, brings us the release of three pieces of news that could affect mortgage rates. There is a 10-year Treasury Note auction tomorrow, and it is fairly common to see some weakness in bonds before these sales as investors prepare for them. But, if the sales are met with a decent demand from investors, those losses are normally recovered after the results are announced.