A new JPMorgan Chase report indicates that summer jobs for young adults have significantly declined. Less than half of young people (46%) who applied for summer employment were enrolled in 2014 and it's projected that tens of thousands of low-income youths looking for employment in the major 14 U.S. cities surveyed will come up short in the approaching summer months. In JP Morgan Chase's "Building Skills through Summer Jobs: Lessons from the Field" report, there has been a 40% decline in summer youth employment over the past year and only 26% of this age group held a paying job in 2011. This employment deficiency particularly impacts economically disadvantaged youth. In the summer of 2013, low-income teens (family income less than $20,000), were 20% less likely to be employed than high-income teens (family income greater than $60,000). As job opportunities for youth wane, it's imperative that they develop the necessary skills to be competitive in the job market.
Speaking of software, "While Mr. Obama and our elected representatives play political kickboxing over the 50 bp drop in the FHA insurance premium, the folks at LoanScoreCard want you know that they can save you up to 70% on your FHA AUS costs without 'an act of Congress,' so to speak - nice to be able to save that kind of percentage on anything in our business these days. And when the kickboxing match is over, and the broken ribs are counted in Obama's favor, we could see FHA volume tic up by 20%. LoanScoreCard says that their FHA AUS is a better, less expensive way to get FHA TOTAL Scorecard output than using DU or LP. In fact, Elva Johnson, Director of Production at Ontario-based, retail-wholesale lender First Mortgage Corporation signed up with LoanScoreCard, and is seeing annualized savings of 'around $90,000, in just their retail channel so far.' She says it is designed specifically for FHA TOTAL Scorecard findings "the way they were meant to be," rather than through an agency AUS engine actually designed for agency use. Elva says it is much more accurate and useful, and saves a significant amount of money on every loan. First Mortgage Corporation is now in the process of rolling out the use of LoanScoreCard with the broker channel to increase the savings and benefit. LoanScoreCard has built this cool model that you can tinker with, and download, to let you plug your own numbers in, to see how much value proposition LoanScoreCard can deliver for you on your FHA AUS. Nice. You get to sell yourself on the idea; no pressure, just bottom line numbers."
The MBA is asking its members to contact their Senators and Representative to ask them to contact the CFPB and ask them to remove the "rate checker" tool from its website AND meet with industry and other stakeholder representatives at the earliest date to ensure that this project benefits the consumers we all seek to serve. "The CFPB should take this misleading tool down and instead focus on providing a resource that encourages borrowers to shop more than one lender and makes certain they understand the base rate and all other costs and terms. Please click HERE below to go to the MAA homepage and click on the "Take Action" button to get started. Please contact MBA's Associate Director of Political Affairs, Annie Gawkowski, at 202-557-2816 if you need assistance."
Recently the Independent Community Bankers of America called on the FHFA to withdraw its proposal to restrict access to Federal Home Loan Banks. The ICBA wrote that "the agency's plan to require FHLB members to hold between one percent and 10 percent of their assets in home mortgage loans at all times contradicts Congress and will restrict access to mortgage credit." Community bankers view access to FHLB's as vital to the overall health of their banking community, and proposed "restrictions" would deter their serviceability in the surrounding communities. ICBA Senior Vice President of Mortgage Finance Policy Ron Haynie wrote. "Without ready access to the low-cost advances provided by the FHLBs to community banks, many of those banks would be forced to severely curtail home mortgage lending in the communities they serve." The exact sticking point with community lenders is the FHFA's proposal to implement an ongoing asset test to retain FHLB membership, which would force community banks to either hold more mortgage-backed securities in portfolio, or have some have suggested, possibly force banks to pass up opportunities to make other types of consumer, small-business or agriculture loans. How is the Federal Home Loan Bank system faring? Well, total outstanding debt climbed to $847.2B in 2014, from $766.8B in 2013, which constitutes the highest year-end total since 2009 when members began running off FHLB borrowing tapped during financial crisis.
The move in rates (and yes, mortgages are lagging considerably, but still...) has really given a shot in the arm to applications and locks, and residential lenders across the nation are licking their chops over February and March volumes. (Let's hope margins hold up!) In fact this morning the MBA gave us last week's application numbers echoing what everyone was thinking. Apps hit a 17-month high for a second straight week, up 14% with refis jumping 22% although purchases dropped 2.5%.
For more market news, the "benchmark" 10-year T-note closed Tuesday at 1.81% and is within 2.5 basis points of its lowest close since May 2013. And we may just hit it this week, given all the problems overseas. In this country we did have the Housing Starts and Building Permits duo: Starts were +4.4%, hitting its highest level in over six years, but Permits were -1.9% (single family +4.5% but multi-family was -11.9%). In the early going the 10-yr is at 1.78% and agency MBS prices are roughly unchanged.
Executive Rate Market Report:
Last night the President did his State of the Union message; you can read all about it in other commentaries and in the print media but as far as markets are concerned there was nothing of importance for the immediate consumption. Treasuries and MBSs opened abut unchanged this morning, early trade in stock indexes were slightly lower from yesterday’s generally unchanged levels.
At 8:30 the lone data point today; Dec housing starts and permits. Starts were expected up 1.25%, as reported starts increased 4.5% to 1.089 mil units. Nov starts were revised higher, from 1.028 mil to 1.043 mil making the increase in Dec even better. Dec building permits were thought to be up 2.4%, permits declined 1.9% to 1.060. As with starts Nov permits were revised better, from 1.035 mil to 1.052 mil. Dec. strength was in the single-family component. Housing starts rebounded 4.4% after declining 4.5% in November. Expectations were for a 1.041 million pace for November. The 1.089 million unit pace was up 5.3% on a year-ago basis. Single-family permits rose 4.5% while multifamily permits fell 11.8%.
MBA said mortgage applications increased again; applications increased 14.2% from one week earlier. The Refinance Index increased 22% from the previous week. The seasonally adjusted Purchase Index decreased 3% from one week earlier. Conventional refinance applications increased 21% relative to the previous week, while government refinances increased 29%. The increase in government refinances was driven by a 57% surge in applications for FHA loans, which also boosted the FHA share of refinance applications to 5.2% from 4.1% the prior week. The refinance share of mortgage activity increased to 74% of total applications, the highest level since May 2013, from 71% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.4% of total applications. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.80%, the lowest level since May 2013, from 3.89%, with points increasing to 0.29 from 0.23 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 3.86%, the lowest level since May 2013, from 3.88%, with points remaining unchanged at 0.23 (including the origination fee) for 80% LTV loans.
Tomorrow will be a watershed day for the European Central Bank, as it decides whether to launch large-scale government bond purchases, known as quantitative easing. Will the ECB sets an explicit target amount for QE, or leaves it vague? So far since the financial collapse in 2008 the ECB has disappointed each time there was a stimulus of any kind presented to markets. With each attempt to fight the debt problems using stringent austerity policies it wasn’t enough and southern Europe’s economies continued to falter. In the last three years global markets have been disappointed on every ECB decision. The WSJ just said the discussion going on is for $700B of purchases debt over the next year at $58B a month.
Greek elections three days after the ECB meets that could determine the country’s future within the Eurozone. The ECB probably wouldn’t want to buy Greek debt under these uncertainties. The bank could get around this by setting a minimum, investment-grade threshold that would leave Greece and Cyprus out for now. If the current Greek ruling party loses there is a fear that Greece may leave the EU. Greece can’t handle the austerity put on it by the ECB, its debt is choking the country; non-performing loans (90 days), $89.4B The economy has shrunk 25% since its peak in mid-2008.
The DJIA opened -96, NASDAQ -16, S&P -7. The 10 at 9:30 -1 bp to 1.79%; 30 yr MBS price -3 bp.
The session is starting with high volatility, no driving news today so far. The technical picture still looks good but a corrective move back to 1.90% for the 10 yr (1.78% currently) cannot be ruled out. Not happening today but tomorrow and again next Monday on the Greek elections may pose high hurdles to overcome. The 10 and MBSs are both overbought in the near term. We have support on the 10 yr at 1.90% and 102.00 for Feb FNMA coupon -60 bp from the present price.
PRICES @ 10:10 AM
- 10 yr note: +4/32 (12 bp) 1.78% -1 bp
- 5 yr note: +1/32 (3 bp) 1.1,28% unch
- 2 Yr note: unch 0.50% unch.
- 30 yr bond: +17/32 (53 bp) 2.36% -2 bp
- Libor Rates: 1 mo 0.168%; 3 mo 0.256%; 6 mo 0.355%; 1 yr 0.611%
- 30 yr FNMA 3.0 Feb: @9:30 102.61 -3 bp (-8 bp from 9:30 yesterday)
- 15 yr FNMA 3.0 Feb: @9:30 104.62 +3 bp (-7 bp from 9:30 yesterday)
- 30 yr GNMA 3.0 Feb: @9:30 102.90 -5 bp (-33 bp from 9:30 yesterday)
- Dollar/Yen: 117.48 -1.34 yen
- Dollar/Euro: $1.1602 +$0.0052
- Gold: $1301.70 +$7.50
- Crude Oil: $47.54 +$1.11
- DJIA: 17,456.73 -58.50
- NASDAQ: 4652.77 -2.08
- S&P 500: 2022.08 -0.47