Friday, February 12, 2016

The Importance of Water in Lending and Home Ownership

How men and women record things in their diaries......

------ Wife's Diary:

Tonight, I thought my husband was acting weird. We had made plans to meet at a nice restaurant for dinner.

I was shopping with my friends all day long, so I thought he was upset at the fact that I was a bit late, but he made no comment on it. Conversation wasn't flowing, so I suggested that we go somewhere quiet so we could talk. He agreed, but he didn't say much.

I asked him what was wrong; He replied, "Nothing..." I asked him if it was my fault that he was upset. He said he wasn't upset, that it had nothing to do with me, and not to worry about it. On the way home, I told him that I loved him. He smiled slightly, and kept driving. I can't explain his behavior. I don't know why he didn't say, "I love you, too."

When we got home, I felt as if I had lost him completely, as if he wanted nothing to do with me anymore.

He just sat there quietly, and watched TV. He continued to seem distant and absent. Finally, with silence all around us, I decided to go to bed. About 15 minutes later, he came to bed. But I still felt that he was distracted, and his thoughts were somewhere else. He fell asleep; I cried. I don't know what to do.

I'm almost sure that his thoughts are with someone else. My life is a disaster.


-----Husband's Diary:

A two-foot putt..........who the hell misses a two-foot putt?


(Note: Monday is a federal holiday, and there will be no commentary.) Here's a note I received from the owner of an independent mortgage bank with a libertarian streak. "A long time ago, at a university far away, I was taught that the elixir for growth in any free economy was cheap energy and cheap money. We have both in spades, and yet, there is no growth. Could something be counteracting the elixir of growth? Like, perhaps, dare I say it? High taxes and high government regulation?" As I mentioned yesterday rates have some LOs licking their chops over refis whereas most investors are dreading having their MBS portfolio potentially prepay. We will be finding out if the "hassle cost" of obtaining a new loan outweighs the actual cost of doing so for many borrowers above 4%.

Morgan Stanley is $3.2 billion poorer - although the company had already set aside the money - to set up yet another huge mortgage-related settlement. "Morgan Stanley relied on a few subprime mortgage originators, especially New Century, to feed its bond pipeline...Morgan Stanley employees frequently tried to increase the 'pull-through rate' of New Century loans getting into securities, even when the loans were lower quality than expected...In thousands of cases, Morgan Stanley included loans that were worth more than the value of the underlying property - something it had told investors it would not do..."

 And what I am sure will be a long-running legal morass Flint, Michigan is providing a terrible case study in water, how important it is, and how fragile the system is. (Just think of the panic if Manhattan or Chicago's water supply went bad.) To no one's surprise mortgage lenders are "now demanding" that prospective home-buyers prove that a property is free of contamination in order to receive a loan, according to The Wall Street Journal. "The demand could further bring down home prices across the economically depressed city." Really? The mortgage industry is going to be blamed for this? Anyone who understands lending knows that lenders have always required that municipalities and properties don't have issues such as this.

 Jonathan Fox, president of Lenders Compliance Group, wrote a piece on how mortgage banking is and will be affected: Flint - Crisis in Mortgage Banking.

 The Law Offices of Peter N. Brewer highlight a recent case where HOA rules were upheld once again. A small group of property owners challenged regulations and fees adopted by the Oak Shores Community Association. These owners rent their homes to short-term vacation renters and challenged a revision that states the minimum rental period is seven days, with is an annual fee of $325 to those who rent their homes, along with other miscellaneous fees. The rule also limits the number of cars, boats and other watercraft that renters can bring to the community. The HOA argued that the rules were supported due to expert witness testimony describing the disadvantage to the HOA of having guests and the added costs sustained by the HOA due to these guests. The trial court ruled in favor of the HOA and they were awarded their attorney fees in excess of $1.1 million.

 According to recent data from CoreLogic, foreclosures fell 21.8 percent in the inventory for November 2015, compared to a year earlier when foreclosures fell by 18.8 percent. Florida, Michigan, Texas, California and Georgia had the highest rates of completed foreclosures compared to Washington DC, North Dakota, Wyoming, West Virginia and Hawaii, which all had the lowest rates of foreclosure. The National Association of Home Builders has supported the overturn of the EPA's "Waters of the US" rule, which would have resulted in a rise in project costs and fees. The Houston housing market ended 2015 on a near-record high, with single-family home sales and sales of all property types reaching the second highest level, trailing behind the levels seen in 2014. The Houston housing market may remain cool for an extended period of time due to the drop in oil prices and the slight slowdown in sales allowed for inventory to grow from a 2.5 month supply to 3.2 months.

 Since we're talking about the importance of water, and water-related lending issues, there are plenty of fancy places on the water around the nation. As home prices have been on the rise, home value growth for luxury houses have declined the second half of 2015, while homes in entry-level and mid-market areas have continued to rise. The median home value in mid-market ZIP codes and entry-level ZIP codes increased 5 percent and 4.7 percent respectively, last year. Homes in luxury ZIP codes increased 3.3 percent, which is lower than the national home value growth. The decline in luxury home values can be attributed to a variety of reasons including a decline of foreign buyers due to strong U.S. dollar appreciation and financial turmoil overseas, normalization in home value growth, and continued pressure on entry-level home values due to high demand and low supply. Although, the perception of what luxury homes versus entry to mid-level market homes are depends on the market. For example, the median luxury home price in Orlando, Florida ranges from $277,200 to $388,000, while the range for luxury homes in Los Angeles, California is $1,055,900 to $4,224,600.

 Speaking of high-brow mortgage news, competition in the jumbo market is fierce, and the typical rate for a jumbo is now 15 basis points below a conforming mortgage. LOs know that jumbo rates have been less than conforming rates in many parts of the country for quite some time. 

 Turning to the capital markets, since activity there determines mortgage rates & prices, Fannie Mae announced that it selected the winning bidders in its latest sale of non-performing loans ($1.32 billion with unpaid principal balances of about 6,500 loans). The winning bidder for two of those pools, representing 2,068 loans that carry an unpaid principal balance of $418,414,683, was MTGLQ Investors, L.P., 99% of which is owned by Goldman Sachs.

 How did that sit with Democrats? Not so good. Senator Elizabeth Warren and Representative Mike Capuano have criticized the government's practice of selling non-performing loans to private investors. And other activists are saying that nonperforming loans should be sold to housing agencies and non-profit groups.

 Speaking at a conference, the CEO of BB&T said he sees no basis for all the "gloom and doom" and that while soft energy prices are a problem, nothing has really changed much in the past few months. He called his loan pipeline "good," said lending market price competition is "more reasonable," and indicated he does not see any "big change in the credit cycle is about to happen." Meanwhile, the CFO at Wells Fargo said at the same conference that they are not seeing any change in loan demand despite market turmoil and that the loan pipeline is "not much different from where it was back in Jan."

 The Federal Reserve's first interest-rate increase in nine years isn't the reason markets are volatile, says Janet Yellen, head of the central bank. The increase had little effect on markets because investors expected it, she told the Senate banking committee. Oil prices and the value of China's currency are driving the turmoil, Yellen said.

 Thursday bills, notes, bonds, and other fixed-income securities rallied sharply (rates dropped) in the early going and then sagged throughout the day. Treasuries have reached extremely overbought levels in the short run and it would come as a surprise to see some consolidation. Fed Chair Janet Yellen testified before the Senate Banking Committee, saying that the Fed had been surprised by the degree of the drop in energy prices and the U.S. dollar.

 In Japan 10-year bond yields are negative as a result of negative interest rates having been recently introduced in an effort to further weaken the yen. But it hasn't worked, and the yen is at a 16 month high versus the dollar. Investors Japan looks relatively safe compared to most other countries. And looking at this country, as ThomsonReuters put it, "The idea of negative short-term rates stimulating demand only seems to be creating a more challenging environment for banks which are supposed to be the medium through which the excess liquidity from the central bank is supposed to flow. Turns out, it might be crushing them."

 Today we've had a fair amount of scheduled news that could, in theory, move rates - but what is moving rates now are oil prices and global stock markets. We had the January Export Prices ex-ag. and Import Prices ex-oil (import -1.1%), and January Retail Sales and Retail Sales ex-auto (+.2%, higher than expected, +.6% also better than expected). Coming up are some inventory numbers as well as the February Michigan Sentiment number.

 Thursday the new 10-year note ended over .5 better in price and closed at 1.64%. Agency MBS prices finished about .125 better. Today we're at 1.69% and worse .125-.250. Don't forget that President's Day comes early this year - there will be no bond market (or commentary) Monday.

Thursday, February 11, 2016

Good & Bad News About Rates

Valentine's Day is Sunday, and in the world of romance, one single rule applies: make the woman happy. Do something she likes and you get points. Do something she dislikes and points are subtracted. You don't get any points for doing something she expects. Sorry, that's the way the game is played. Here is the last part of a guide to the points system:


When she wants to talk about a problem:

You listen, displaying a concerned expression...... 0

You listen, for over 30 minutes....................+5

You listen for more than 30 minutes without looking at the TV..................................+100

She realizes this is because you have fallen asleep....-200



You develop a noticeable pot belly.............-15

You develop a noticeable pot belly & exercise to get rid of it...............................+10

You develop a noticeable pot belly and resort to loose jeans and baggy Hawaiian shirts.......-30

You say, "It doesn't matter, you have one too."......-800


What's this? Fifty five thousand residents in one mile-high building? Doesn't Tokyo have earthquakes? Let's hope not everyone wants hot water at the same time!

Everyone makes mistakes, right? The issue is admitting them. The CFPB who caught some folks' attention yesterday with this announcement: "Today we published a notice in the Federal Register to correct a typo regarding tolerances for property taxes and certain other property-related costs that was found in the "Supplementary Information" to the TILA-RESPA Integrated Disclosure rule. Learn more at:"

 Turning to banking news, the Financial Stability Board (FSB) is based in Basel and its global regulators quietly set the tone for the biggest banks in the world. It has been toiling away on new guidelines on how to prevent banks from becoming "too big to fail." Each designated country generates its own implementation process, but the result looks a lot like what the gatekeepers in Basel had recommended. FSB regulators still want the largest banks to raise $1.19 trillion by 2022 in debt instruments. These banks should maintain sizable cushions able to absorb losses when a financial crisis is looming on the horizon. Regulators remember too vividly what happened in 2008, when taxpayers were obliged by their government to bail out banks. In the future, the cost of the banks' failure would be supported by its investors, not the general public.

 Eight U.S. banks are affected by the new guidelines: JPMorgan, Wells Fargo, Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, BNY Mellon, and State Street. These banks will all have to issue debt that could be used to defray losses in times of crisis. These debt instruments will cover losses when a bank's equity is wiped out and regulators will avoid a potential panic caused by a domino effect. So-called Total Loss Absorbing Capital (TLAC) of the banks will need to equal 16% of their assets in 2019 and 18% by 2022. The FSB recommendations are designed to make the banking industry safer.

 But will it affect the dynamics of lending for every institution? Sure it will. New types of debts will command higher interest rates - let's hope those don't include agency MBS. Banks will find them more expensive, so they will be inclined to lend less. Anyone working in a bank knows that banks today have better cushions in reserve and more commercial loans outstanding than they had before the financial crisis. Consider that the avalanche of debt coming from the big 8 may reduce the money available for community banks who are also trying to raise capital. This could create high transaction costs although the new standards are designed to make sure the largest banks have enough capital to absorb losses if the bank fails in order to protect against further contagion in the broader financial system.

 Banks continue to merge and/or acquire other banks - they want to be big for regulatory and efficiency reasons, but not so big they fall under the purview of the CFPB or are thought of as "too big to fail." Just in the last week it was announced that Horizon Bank ($2.6B, IN) will acquire Farmers State Bank ($148mm, IN) for about $22.5mm in cash and stock. In the Volunteer State Commercial Bank ($839mm) will acquire the bankrupt holding company of National Bank of Tennessee for $5.1mm. And South Dakota's TCF National Bank ($20.7B) will close 33 branches inside Jewel-Osco stores in and around Chicago and replace those offices with enhanced ATMs.

 The FDIC released its "Bank Data Guide" - a quick reference tool for many of the structural, financial and economic products that are available on the FDIC's web site.

 Banks know plenty about the OCC. Are you uncertain about how much due diligence you should be doing as a part of vendor management?  Worried you're not doing enough, or perhaps too much? A few years ago the OCC issued guidelines on exactly that: OCC Bulletin 2013-29 Third-Party Relationships.  Even if you're not a bank, there's some good stuff in there.

 Speaking of vendors, let us take a random stroll through what some of them have been up to lately.

 A while back we learned that all Calyx Point users can now access products and pricing sheets for Mid America programs, regardless of whether they have registered to broker loans with Mid America. Calyx said that its subsidiary, LoanScoreCard, provided the product and pricing engine that enabled the integration and the new search capabilities. "This integration is a win/win for Calyx customers and Mid America," said Dennis Boggs, VP of Business Development. "It gives our customers access to Mid America's expansive and highly competitive loan programs while at the same time exposing Mid America's products and pricing to Calyx's extensive user base."

 Ellie Mae launched its Ellie Mae Pro consulting partner program designed to accelerate the adoption of Ellie Mae's Encompass all-in-one mortgage management solution. The Ellie Mae Pro Consulting Partners program offers consulting firms the opportunity to provide a broad range of high-quality services by partnering with Ellie Mae and their customers on Encompass implementations. Through Ellie Mae Pro, with 3 levels to choose from, consulting partners will be offered training and certification opportunities, along with deeper access to Ellie Mae resources, all designed to ensure customers receive exceptional consulting services.

 Private Eyes Inc., provider of income verifications for lenders and background checks for employers worldwide, formed a strategic partnership with FormFree Holdings Corporation, the leading provider of automated asset verifications in the mortgage industry. Private Eyes will be a reseller of FormFree's AccountChek automated asset verification solution, the first and only patented verification of deposits and assets (VODA) solution accepted by the government-sponsored enterprises (GSEs). When borrowers apply for loans, AccountChek verifies the borrower's financial statements electronically with the borrower's banks, without anyone having to produce paper copies of bank statements.

 Provider of a one-stop, bundled, home equity and mortgage-settlement solution to credit unions in the U.S., MemberClose, in conjunction with LoanLogics, have created an automated portfolio review service designed to meet the needs of credit unions. "The aim of this partnership is to ensure that credit unions have the technology they need to serve their members and comply with regulations. In addition, it means that credit unions of any size have access to the same technology as the largest mortgage lenders which levels the playing field," said Brian K. Fitzpatrick, president and CEO of LoanLogics. "Increasingly, credit unions are recognizing that they need to proactively monitor their mortgage loan portfolios." 

 Turning to capital markets news, owners and CEOs of successful lenders know that capital markets' staffs don't take undue risks. Last week the FDIC issued FIL-10-2016 announcing the release of updated videos on interest rate risk. The new videos are intended to provide directors, management, and staff of financial institutions with a better understanding of interest rate risk and how to manage it. The FDIC previously released an interest rate video made specifically for directors, and a series of more technical videos tailored to management and staff responsible for interest rate risk management. The FDIC's updated videos (i) reflect recent industry data and expand on relevant topics; (ii) emphasize the FDIC's expectation that institutions prudently manage interest rate risk; and (iii) address industry trends, board and management responsibilities, types of interest rate risk, various risk measurement systems, key modeling assumptions, internal controls, and independent review.

 Turning to the bond market, since some LOs are licking their chops over refis whereas most investors are dreading having their MBS portfolio potentially prepay, the long end of the yield curve, which includes 30- and 15-year mortgages, rallied a little on Wednesday. In fact the 30-year Treasury bond yield touched a fresh nine-month low of 2.52%. Capital market's staffs are dealing with margin calls due to the huge rally in MBS and on the flip side holding their pipelines while originators trying to renegotiate loans. Yes, at some point recent borrowers overcome the hassle cost of refinancing and investors see an increase in early pay-offs.

 The big news, although it wasn't, was Fed Chair Janet Yellen's testimony before the House Financial Services Committee. She said that "financial conditions in the United States have recently become less supportive of growth, with declines in broad measures of equity prices, higher borrowing rates for riskier borrowers, and a further appreciation of the dollar. These developments, if they prove persistent, could weigh on the outlook for economic activity and the labor market, although declines in longer-term interest rates and oil prices provide some offset."

 This morning the drama continues. We have negative central bank rates and bad bank headlines coming into this morning as the Riksbank dropped its rate further into negative territory and SocGen put up bad earnings/guidance. The combination of those two events, coupled w/very fragile sentiment, extreme risk aversion, and Yellen's testimony (which, as noted above, wasn't sufficiently dovish or concerned about financial market volatility) are weighing very hard on equities today and helping fixed-income securities.

 Today we are through last year's low in 10-yr yields and at this clip it won't be long before we break the 2012 low. We've already had Initial Jobless Claims for the week ending 2/6 (-16k to 269k) - and that's about it for scheduled news - not that it matters in this environment. We do have a $15 billion 30-year auction coming up later. We closed the 10-year Wednesday at 1.70% and we're down to this morning at 1.60%, or lower, with agency MBS prices better by .250-.375.


Tuesday, February 9, 2016

Ops VP Weighs In On TRID

Valentine's Day is fast approaching, and in the world of romance, one single rule applies: Make the woman happy. Do something she likes and you get points. Do something she dislikes and points are subtracted. You don't get any points for doing something she expects. Sorry, that's the way the game is played. Here is part 2 (of 4) of a guide to the points system:



You take her out to dinner................ 0

You take her out to dinner and it's not a sports bar....+1

Okay, it is a sports bar..........-2

And it's all-you-can-eat night....-3

It's a sports bar, it's all-you-can-eat night, and your face is painted the colors of your favorite team......-10



Go with a pal.........................+5

The pal is happily married............+4

Or frighteningly single...............-7

And he drives a Lamborghini...............-10

With a personalized license plate (GR8 NBED)........-15


"Have you heard the latest statistics joke?  Probably." CNN reports the latest data from the IRS finds the top 10% of Americans make $128,000 in minimum adjusted gross income versus $429,000 for the top 1.0% and $1.9mm for the top 0.10%. To reach the top 0.01% you would need $9.5 million.

You may already know that the largest generation in history is sitting on $4 trillion in equity. On Thursday, February 11 at 2PM EST, National Mortgage Professional Magazine hosts the "Moving Forward with Reverse" complimentary webinar presented by American Advisors Group. They'll introduce you to the NEW reverse mortgage and highlight why it's time to empower this generation by "Moving Forward with Reverse!" Attendees will discover how easy it is to get started. The Home Equity Conversion Mortgage reverse mortgage is more similar to a traditional forward loan than ever! Did we mention that broker commissions range from $4K to $12K?

Sierra Pacific Mortgage continues their focus of featuring industry experts on their Market Power webinar, hosted by Kelli Brookman.  Who is the "expert" this month?  Well, it's yours truly - Rob Chrisman.  If you are trying to determine why rates are doing what they are doing and if that is going to change, how to read the CFPB and their enforcement actions, and what lender CEOs are concerned about, then join in on the fun February 18th from 11:00  - 12:00 PST (2-3 EST). Sierra Pacific Mortgage believes the key to success is sharing expert knowledge, so the webinar is open to all.

Arch MI is gearing up for spring home buying with a variety of webinars, click a link to register:

Understanding the Aspects of a Loan File Tuesday, February 9th, 2016 - 10am Pacific, Mortgage Fraud:Everything Old is New Again Wednesday, February 10th, 2016 - 12pm Pacific, Navigating and Evaluating Personal Tax Returns Thursday, February 11th, 2016 - 10am Pacific, Processing:Using the 1003 as a Roadmap Tuesday, February 16th, 2016 - 12pm Pacific, and Creating Separation Between You and Your Competitors Wednesday, February 17th, 2016 - 12pm Pacific.

 The Washington Mortgage Bankers is having economist Elliot Eisenberg speak at its upcoming meeting on February 23rd.  

 Join BakerHosteler, co-sponsored with the Ohio Bankers League, for its Financial Services Risk Summit, on Wednesday, March 3 at The Ritz-Carlton in Cleveland. This daylong seminar will include high-profile government speakers including Calvin R. Hagins, Deputy Assistant Director for Originations at the Consumer Financial Protection Bureau, and Steve Dettelbach, United States Attorney for the Northern District of Ohio, in addition to other leaders from the financial services industry. The event will feature discussion on a full spectrum of risks faced by banks, mortgage lenders, credit unions, loan servicers, and other credit issuers aiming to stay ahead of high-stakes litigation and rapidly changing regulatory and compliance issues.

 The Colorado Mortgage Lender Association knows how to have a good time, and in this case its Fort Collins Brewery Tour is coming up in March. Register now for the 2016 Northern Chapter Tour and bring 1 Realtor Guest for free.

 The MBS Boot Camp is back on March 3rd and 4th with the CFA Society of Los Angeles.This 2-day program is designed to introduce participants to the broad variety of mortgage and MBS products, explain technical aspects of MBS performance, and demonstrate why and how different types of MBS structures are created. Run by industry vet Bill Berliner of Kinecta Federal Credit Union, participants will explore a wide variety of concepts while gaining experience in modeling cash flows, market execution and risks.

 And the CFPB is coming out with a "Know Before You Owe Mortgage Disclosure Rule - Construction Lending Outlook Live Webinar" on Tuesday 3/1 at 2PM EST (11AM PST). "Please join us for a webinar on the Know Before You Owe mortgage disclosure rule. This webinar will address questions that the Consumer Financial Protection Bureau (CFPB) has received relating to the rule in the context of construction lending. Additional information and resources related to the Know Before You Owe mortgage disclosure rule may be accessed at the CFPB's website at:"

 Speaking of TRID and the CFPB, the impact of the CFPB's "Know Before You Owe," its 3 day period, and its workarounds continue to present issues and problems, and there is no doubt that these are impacting the consumer in ways unforeseen by the CFPB.

 Marc Silvera and David Lee Toste from U.S. Mortgage Corporation sent along this note on another industry, but the policy could impact mortgage banking. "This article was from Sunday's NY Post. I thought I'd share with you as it's a pretty damning column from Paul Sperry on how the CFPB went about with their 2013 actions against lenders in the auto-lending industry. If true, scary stuff indeed."

 Penny Nelson, SVP of Ops with outsource provider Altavera, sent me a note titled "TRID in the Trenches." "Rob, having been an industry participant since before APR became an inexplicable fact of life and in my role as an ops manager for the last 25+ years, I have acquired quite the historical perspective of compliance regulations and implementation of same. I currently manage operations for an outsource provider where we are shoulder to shoulder with our clients in the trenches.

  "Early feedback from our processing and closing staff, recent confirmed closing delays related to TRID along with documented evidence of high TRID compliance fail rates in closed loans, has compelled me to share some observations and insights. Our staff is working with companies who are totally buttoned up but did initially struggle with the changes required of TRID. A variety of problems were seen at the time the files arrived in closing, but three factors were common, individually or in combination: Errors and omissions on the initial LE or subsequent LEs, changes made to LEs without a valid Change of Circumstance, and initial CDs were sent out before the file was properly reviewed and reconciled in order to start the three day clock.  In some cases, the initial CD was sent before the file was clear-to-close.

 "As joint efforts were made to remediate the early challenges, lessons were learned which I would like to share with others who still find they are struggling. First, any staff member touching an LE or CD needs to thoroughly understand the details of TRID regulation and access must be strictly controlled. TRID has brought a level of complexity that makes the very best software and flows, although absolutely necessary, secondary to the human intelligence needed to properly analyze, manage and input the data. Expecting templates and software to do the heavy lifting was found to be inadequate in itself.

   "Extreme diligence and care must be taken with the Initial LE. The level of detail must equal that of the final CD. Sales teams must get on board with this necessity, and expect to provide terms and fees accordingly. Shortcuts at this stage can be costly in every way imaginable.

 "Detailed policies and procedures must be put in place to drive TRID compliance throughout the entire operation with hard stops which are actually enforced when necessary, even when it hurts. Our industry can do this!" Thank you Penny.

 It's been 4 months since TRID requirements went into effect. And, to find out whether all the lender apprehensions and dire predictions are coming true, STRATMOR has just launched "STRATMOR Spotlight" survey entitled "4-Months of TRID - Impact and Experience." This important survey addresses such questions as: How well did the LOS vendors meet TRID requirements? What's been the overall experience thus far? What process changes have lenders implemented? What's worked well? What hasn't? What's TRID cost and how have these costs been absorbed? STRATMOR Spotlight is the new name STRATMOR's given to what was formerly known as the STRATMOR PeerViews Program. The survey is free and lenders pay a modest fee only if and when they choose to view and download survey results, which are expected to be available by mid-March. This approach allows you to know how large the survey response has been before purchasing the survey.

 Welcome to "Fat Tuesday" - Mardi gras. Once again lenders are brushing off their renegotiation policies as the 10-year T-note closed at 1.74% yesterday - its lowest level in over year a year. Agency mortgage-backed security prices, of course, are lagging due to early pay-off fears - although those in the business believe that recent mortgage originations are much more "sticky" due to the hassle cost of refinancing. Do consumers really want to go through the process again to save $90 a month?

 Yes, the Treasury market rallied sharply Monday in a curve-flattening trade today as investors scrambled for safe-haven assets from gold to Bunds amidst worries about major international banks. Interestingly gold touched its highest level since June 2015. Global equities sold off as worries about the effects of negative policy rates about lenders' interest rate margins in the Eurozone and a flattening yield curve in the U.S. led stock markets to break technical support levels. And lenders everywhere are facing margin calls from investment bank's MBS trading desks given the rally.

 With China closed for the week (New Year's holiday) and no news of importance coming out of the U.S. today, there isn't much to stem a) the stock markets selling off, and b) the continued flight into bonds. Too much of a good thing isn't good, however. We have a $24 billion 3-year note auction later today. In the very early going we're pretty much unchanged from Monday's closing price levels.