MBS MID-DAY: 2/15/2012

Home builder confidence in the market for new single-family homes increased for the fifth consecutive month in February, rising from 25 to 29 on the NAHB/Wells Fargo Housing Market Index (HMI) released today. It is the highest level the index has reached in more than four years.

“Builder confidence has doubled since September as measured by the HMI,” said NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla. “Given the recent improvements in new home starts and the increasing number of markets included in the NAHB/First American Improving Markets Index, this consistency suggests that the housing market is moving toward more sustainable growth.”

• RTRS- U.S. FEBRUARY NAHB HOUSING MARKET INDEX 29 (CONSENSUS 26) VERSUS 25 IN JANUARY
• RTRS- NAHB INDEX OF CURRENT SINGLE-FAMILY HOME SALES 30 VERSUS 25 IN JANUARY
• RTRS- NAHB INDEX OF PROSPECTIVE BUYERS 22 VERSUS 21 IN JANUARY
• RTRS- NAHB INDEX OF HOME SALES OVER NEXT SIX MONTHS 34 VERSUS 29 IN JANUARY
• RTRS- NAHB HOUSING INDEX AND SINGLE-FAMILY HOME SALES INDEX BOTH AT HIGHEST SINCE MAY 2007

To: All Approved Lenders

Subject: Closing a Loan in the Name of an FHA-Approved Mortgagee Acting as a Sponsored Third-Party Originator (TPO)

Purpose of Mortgagee Letter: This Mortgagee Letter clarifies the requirements for the origination, closing, and submission for FHA insurance endorsement of loans via the sponsored third-party origination process...

Industrial production was unchanged in January, as a gain of 0.7 percent in manufacturing was offset by declines in mining and utilities. Within manufacturing, the index for motor vehicles and parts jumped 6.8 percent and the index for other manufacturing industries increased 0.3 percent. The output of utilities fell 2.5 percent, as demand for heating was held down by temperatures that moved further above seasonal norms; the output of mines declined 1.8 percent. Total industrial production is now reported to have advanced 1.0 percent in December; the initial estimate had been an increase of 0.4 percent. This large upward revision reflected higher output for many manufacturing and mining industries. At 95.9 percent of its 2007 average, total industrial production in January was 3.4 percent above its level of a year earlier. The capacity utilization rate for total industry decreased to 78.5 percent, a rate 1.8 percentage points below its long-run (1972--2011) average.

• RTRS- JAN INDUSTRIAL OUTPUT 0.0 PCT (CONSENSUS +0.7 PCT) VS DEC +1.0 PCT (PREV +0.4 PCT)
• RTRS- DEC CAPACITY USE RATE 78.5 PCT (CONS 78.6 PCT) VS DEC 78.6 PCT (PREV 78.1 PCT)
• RTRS- JAN MANUFACTURING OUTPUT +0.7 PCT VS DEC +1.5 PCT, CAP USE 77.0 PCT VS DEC 76.5 PCT
• RTRS- JAN MINING OUTPUT -1.8 PCT (DEC +0.9 PCT), UTILITIES OUTPUT -2.5 PCT (DEC-2.4 PCT)
• RTRS- JAN INDUSTRIAL OUTPUT EX CARS/PARTS -0.3 PCT VS DEC +0.8 PCT
• RTRS- JAN MOTOR VEHICLE ASSEMBLY RATE ROSE TO 10.17 MLN UNITS/YR FROM DEC 9.40 MLN

As is the case for all the economic data this morning, this isn't a big market mover, even with the fairly large deviation from consensus.

WASHINGTON – The U.S. Department of the Treasury today released Treasury International Capital (TIC) data for December 2011. The next release, which will report on data for January 2012, is scheduled for March 15, 2012. Foreign residents decreased their holdings of long-term U.S. securities in December — net sales were $21.0 billion. Net sales by private foreign investors were $11.5 billion, and net sales by foreign official institutions were $9.5 billion.

• RTRS- U.S. DECEMBER NET OVERALL CAPITAL INFLOW $87.1 BLN VS REVISED $42.9 BLN INFLOW IN NOVEMBER
• RTRS- U.S. DECEMBER NET LONG-TERM INFLOW (EX-SWAPS/OTHER) $17.9 BLN VS REV $61.3 BLN INFLOW IN NOVEMBER
• RTRS- U.S. DECEMBER NET LONG-TERM INFLOW (INCL. SWAPS/OTHER) $1.6 BLN VS REV $45.8 BLN INFLOW IN NOVEMBER
• RTRS- DECEMBER NET FOREIGN SALES OF US TREASURY BONDS, NOTES $16.6 BLN VS $54.0 BLN PURCHASES IN NOVEMBER
• RTRS- U.S. DECEMBER NET OFFICIAL CAPITAL OUTFLOW $25.9 BILLION VS $20.4 BLN INFLOW IN NOVEMBER
• RTRS- U.S. DECEMBER NET PRIVATE CAPITAL INFLOW $113 BLN VS REV $22.5 BLN INFLOW IN NOVEMBER
• RTRS- CHINA U.S. TREASURY SECURITIES HOLDINGS $1.1007 TRLN IN DECEMBER VS $1.1326 TRLN IN NOVEMBER
• RTRS- JAPAN U.S. TREASURY HOLDINGS $1.0424 TRLN IN DECEMBER VS $1.0389 TRLN IN NOVEMBER

While it's a decent-enough conversation starter, this data is not a market mover and is very backward-looking. China remains over $1.1 Trillion.

(Reuters) - Euro zone finance officials are examining ways of delaying parts or even all of the second bailout programme for Greece while still avoiding a disorderly default, several EU sources said on Wednesday.

Delays could possibly last until after the country holds elections expected in April, they said

While most of the elements of the package, which will total 130 billion euros, are in place, euro zone finance ministers are not satisfied that Greece's political leaders are sufficiently committed to the deal, which requires Athens to make further spending cuts and introduce deeply unpopular labour reforms.

It is also not clear that Greece's debt-to-GDP ratio, which currently stands at around 160 percent, will be cut to 120 percent by 2020 via the agreement, as demanded by the 'troika' of the European Commission, IMF and European Central Bank.

"There are proposals to delay the Greek package or to split it, so that an immediate default is avoided, but not everything is committed to," one official briefed on preparations for a euro zone finance ministers call later in the day told Reuters.

"They'll discuss the options," he said, adding: "There is pressure from several countries to hold off until there is a concrete commitment from Greece, which may not come until after they've held elections."

Germany, Finland and the Netherlands are the countries pushing to delay the package, two other officials said, with Germany the most adamant and suggesting that final approval should only be granted after new elections are held.

The February Empire State Manufacturing Survey indicates that manufacturing activity in New York State expanded for a third consecutive month. The general business conditions index rose six points to 19.5, its highest level in more than a year. The new orders index, at 9.7, was positive but down slightly, and the shipments index was little changed at 22.8. The prices paid index held steady at 25.9, while the prices received index fell eight points to 15.3, suggesting that selling prices rose at a slower pace. Employment indexes were positive and close to last month’s levels, indicating that employment levels and the average workweek continued to rise at a modest pace. Indexes for the six-month outlook, while somewhat lower than last month, remained at fairly high levels, signaling considerable optimism about the future.

• RTRS- INDEX 19.53 IN FEBRUARY (CONSENSUS 15) VS 13.48 IN JANUARY
• RTRS- EMPLOYMENT INDEX AT 11.76 IN FEBRUARY VS 12.09 IN JANUARY
• RTRS- NEW ORDERS INDEX 9.73 IN FEBRUARY VS 13.70 IN JANUARY
• RTRS- PRICES PAID INDEX 25.88 IN FEBRUARY VS 26.37 IN JANUARY
• RTRS- SIX-MONTH BUSINESS CONDITIONS INDEX 50.38 IN FEBRUARY VS 54.87 IN JANUARY
• RTRS- BUSINESS CONDITIONS INDEX AT HIGHEST SINCE JUNE 2010

Market reaction has been limited, both in terms of volume and movement owing to headlines concerning the possible delay of the Greek bailout that hit shortly before the NY Fed report.