JPMorgan Chase Earnings; Nationwide Mortgage Licensing System Comments; GMAC Declining Markets Update

The FBI is investigating a possible cyber attack on Citigroup. This is a serious issue, because next time the hackers might target a bank that actually has money. (Just kidding!)

But seriously folks, JPMorgan Chase & Co., the second-largest U.S. bank by assets, announced this morning that its fourth-quarter profit more than quadrupled. Net income increased to $3.28 billion. JPMorgan was the #1 underwriter of stocks and bonds in the US last year, and income from that more than helped offset loan losses in consumer banking and credit cards. And we all know the impact that they've had on mortgage lending. Jamie Dimon told investors last month that the credit-card unit could lose about $1 billion a quarter in the first half of 2010, since defaults typically track unemployment.

But in yet another reason why I will never make money day-trading stocks, before the stock market opens JPM's price is down. "I don't think we can take away from these results that we are any further along in the (economic) recovery than we thought we were," said one analyst. JPMorgan is the first of the largest U.S. banks to report earnings. Goldman Sachs, Citigroup, Bank of America, and Wells Fargo all come out during next week, with various results expected.

Right now, the futures market is pricing in an 85% chance that the Fed keeps rates somewhere between 0% and .25% through the end of April. With all of the deficit spending going on, not to mention the flood of money that the Federal Reserve has put into the economy, why isn't inflation (and interest rates) out of control? The deficit spending money has primarily gone into counteracting the sharp decline in consumer and business activity. Our government is borrowing more, but folks like you and me, and businesses, are borrowing less. Besides, many banks are holding on to the money rather than releasing it into the economy in the form of loans. On top of that, productivity is high, wages are stagnant, and overall there is slack in the economy - so sky-high inflation and rates are a long way off. And, if you think about it, in almost the last 100 years here in the United States, inflation has only been a big issue in the 1970's.

As one would expect, the NMLS is ruffling feathers out there, and I received comments ranging from "It is a good thing and originators shouldn't be hiding anything" to "I can't believe that I live in such a policed state!" An executive from iFreedom Direct Mortgage wrote and said, "I can see the junk mail /e-mail coming now, and every advertising Joe with access to a computer will be downloading the NMLS  list and blasting us with the 'latest and greatest' mortgage money making tool that we simply can't live without. We will need a NMLS 'Don't Call' list!"

Another wrote and said, "Mortgage brokers did not exist 30 years ago - do we really need them now? Everyone in this business says it has become far less enjoyable and monetarily beneficial than it used to be, and all my co-workers are either leaving or going to work for big banks in their mortgage groups. I'll probably be right behind them. If I really want to keep helping my clients and fund loans, I don't mind making less with more restrictions even if it means being on the NMLS list."

GMAC Bank told correspondents that they have changed their Declining Market Policy for Jumbo loans. Are you ready to follow along?

"Currently, if the GMAC Market Portal tool delivers an A market designation, but the Appraiser notes in the appraisal report the subject property is located in a submarket which is declining, the A market classification must be downgraded to a D market reducing the LTV/CLTV from 80% to 65% LTV/CLTV. This guideline has been revised as follows:

If the GMAC Market Portal tool delivers an A market designation, but the Appraiser notes in the appraisal report the subject property is located in a submarket which is declining, the A market must be downgraded to a B market reducing the LTV/CLTV by 5%. In addition, if the GMAC Market Portal identifies the subject property is located in a B, C, or D market and the Appraiser indicates the subject property is located in a submarket which is declining, there is no further LTV/CLTV downgrade required."

GMAC goes on to say that the market upgrade policy of 5% LTV/CLTV is still permitted if the loan meets certain criteria (720 FICO, DTI 35%, etc.). Dealing with things like this, underwriters should demand more pay!

On the plus side of things, we have lower rates. Yesterday Retail Sales, Jobless Claims, and a good $13 billion 30-yr bond auction all contributed to an "up day" in bonds with prices going up and rates going down. Jobless Claims were up 11,000, although continuing claims were down 211,000, and Import Prices for December were unchanged, helping the inflation picture. We also learned that the Fed purchased $14 billion during their prior week, which brings the total purchased so far only about $115 billion short of their $1.25 trillion target.

This morning we had the Consumer Price Index. We headed in to it with estimates of it being +0.2%, and it came in at +0.1%, a shade less inflationary than expected. For those of us who don't eat or use energy, the core rate was up 0.1% in December after being flat the prior month. We will also see Industrial Production and Capacity Utilization, along with the University of Michigan's Consumer Sentiment Survey. With that in mind, currently the 10-yr yield is 3.68% and both the 5-yr Treasury and mortgage prices are better by about .125.

 One last one-liner before the weekend: ESPN has announced that they are launching a 3D sports network. Industry analysts say this will absolutely revolutionize the way Americans don't watch soccer.

Don't forget - Monday is a Federal holiday, with banks, post offices, and the lap top that writes this commentary all closed.

 An out-of-work Cajun oilfield hand answered a knock on the door one day, only to be confronted by a well-dressed young man carrying a vacuum cleaner.

"Good morning," said the young man. "If I could take a couple of minutes of your time, I would like to demonstrate the very latest in high-powered vacuum cleaners."

"Go away!" said the unemployed Cajun, "I'm broke and haven't got any money!" and he proceeded to close the door.

Quick as a flash, the young man wedged his foot in the door and pushed it wide open.

"Don't be too hasty!" he said. "Not until you have at least seen my demonstration."

And with that, he emptied a bucket of horse manure onto his hallway carpet. "If this vacuum cleaner does not remove all traces of this horse manure from your carpet, Sir, I will personally eat the remainder."

The unemployed Cajun stepped back and said, "Well let me get you a fork, 'cause they cut off my electricity this morning!"