“Most
of the stuff people worry about ain't never gonna happen anyway.” But
in this
case, I bet a change will be made. Everyone knows the drill: small
originators
sell loans to mid-tier investors such as AmTrust or Franklin American,
who in
turn sell their loans to companies like Wells, Chase, Bank of America,
or maybe
the agencies. (In fact, National Mortgage News reports that in the 2nd
quarter 44% of all mortgages passed through BofA and Wells!) And
the large
investors often sell their loans directly to Freddie or Fannie. Smaller
companies often believe that "if I could only sell directly to Fannie
or
Freddie, I can boost my profits by eliminating the fabled middleman!"
Sometimes this is true, sometimes not. Fannie’s current minimum net
worth to
sell to them is currently at $1.65 million (which goes to $2.5 million
in a few
months), and Freddie’s is, uh, $250,000. Understandably Freddie Mac
reportedly
is close to raising its net-worth requirement for mortgage banks to
become
official Freddie Mac seller/servicers. No one should be surprised
if they match
Fannie – in the “old days” they were the same.
On
the “very good news” front, Reuters reports that mortgage-backed
security issuance
here in the US jumped about 90% in the third quarter “as investors'
appetite
for risky instruments gained amid signs of stabilization in the housing
market.”
The third quarter of this year saw almost $75 billion, versus $39
billion in
the same period for 2008. Barclays Capital was the top underwriter,
Credit
Suisse was #2, and JPMorgan was #3.
Tomorrow
we will have some important data. Estimates for Nonfarm Payroll are
ranging
around a loss of 175-200k. Lately the news about the economy has
indicated that
not everything is rosy. Yesterday, after the GDP number, the Chicago
Purchasing
Manager’s survey unexpectedly dropped to 46.1 in September instead of
increasing, and reminding us that any number below 50 indicates a
contraction. And
a slow economy typically suggests lower rates, and in fact the
market is giving
only a 2% chance to the Fed raising overnight rates by the end of the
year. (Overnight
rates don’t determine mortgage rates, but they do grab the headlines.)
But
returning to today, we’ve already seen the weekly Jobless Claims
numbers, along
with Personal Income and Consumption (which seem to be called “Outlays”
these
days). At 7AM we have the Construction Spending numbers, ISM
Manufacturing
Index, and Pending Home Sales. Spending/Consumption/Outlays, whatever,
was up
1.3% in August, the 4th month in a row and its fastest pace
in
nearly 8 years, and Personal Income was +.2%. So the good news for the
economy
is that folks are spending, but the bad news is that the savings rate
declined
for the third straight month. But Jobless Claims were up to 551,000
from
534,000 the prior week. The four-week moving average of new claims fell
to
548,000, the lowest since January. Overall the numbers have pushed
rates lower:
the 10-yr is down to 3.28% and mortgage prices are better by .125-.250.
Don’t
forget! Starting today, HUD has mandated that all FHA-approved lenders
must use
state-certified appraisers for FHA-insured mortgages!
Today
at 3PM EST, as they have for the last several months in a move toward
transparency, the Fed will announce their MBS purchases for the last
week. Of
course, last week at the conclusion of the FOMC meeting they announced
an
eventual slowing down of the pace of buying $1.25 trillion of agency
product.
The weekly average has been $23-25 billion, and no one expects it to
drop off a
cliff, and anything above $20 billion should be “ok”. Origination
is roughly
$3-4 billion a day, so not only is the Fed, in effect, buying all new
loans but
also older ones as well.
Countrywide:
the gift that keeps on giving. The
latest story involves the discovery that they, or someone, destroyed
recorded
phone conversations with their VIP program prompting new congressional
calls
for more information about the program. On top of that, a story from
Bloomberg
(do they have restaurant critics?) states that Bank of America employee
can now
enjoy a $180 Krug champagne-paired tasting menu in the company
“cafeteria” at
the base of its new $1 billion Manhattan skyscraper. This group may
not include
Ken Lewis, who after almost 9 years of running the company is resigning
at the
end of the year. Bank of America has tripled in size during that
time, helped
by the questionable acquisitions of Merrill Lynch and Countrywide.
If
you have a banker friend coming up who has a birthday, here’s a gift
idea:
every banking and mortgage statistic that they could possible want: http://www.occ.treas.gov/ftp/release/2009-118a.pdf
As
my wife and I were approaching our birthdays, respectively, we
scheduled
our annual medical examination together so we could travel together.
After
my examination, the doctor said, 'You appear to be in good health. Do
you have any medical concerns that you would like to discuss with
me?”
“In
fact, I do,” I said. “After I make love with my wife the first time, I
am
usually hot and sweaty. And then, after I make love with my
wife the second time, I am usually cold and chilly.”
“This
is very interesting,” replied the doctor. “Let me do some research and
get
back to you.”
After
examining his wife, the doctor said, “Everything appears to be fine. Do
you have any medical concerns that you would like to discuss with me?”
She
replied that she had no questions or concerns.
The
doctor then asked, “Your husband had an unusual concern. He claims that
he
is usually hot and sweaty after having sex the first time with you and
cold and chilly after the second time, do you know why?”
“Oh,
that old geezer!” she replied. “That's because, the first time is
usually
in July and the second time is usually in December.”
Rob
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