"Karma means that I can rest easy at night knowing
that all the people I treated badly had it coming." But there is also good
karma, and the MBA is creating plenty of it through its free (yes, there is
no cost) Mortgage Action Alliance. I receive plenty of comments asking how
the Realtors have a powerful lobby and lenders don't and I always encourage the
writer to at least sign up for the
MBA's MAA. The staff sends out news
and action items but don't clog your in-box. In fact, there is no downside
whatsoever: you receive news AND you are counted in the MBA's lobbying efforts.
The Community Mortgage Lenders of America today announced
that "its opposition had effectively defeated a proposed FHA
administrative fee - as high as 4 basis points - for all FHA
insured loans. The fee had been included in the Senate version of legislation
to fund the Federal Government for the balance of the fiscal year. Notably,
CMLA was the only association that actively opposed this fee. CMLA's effort was
aligned with our mission to exclusively represent small and mid-sized
independent and community based lenders. CMLA lobbied the Senate and House
Appropriations Committees to drop the fee, which would have been used to fund
technology upgrades and improvements to FHA's IT systems. CMLA fired off a
letter to the Committees arguing that while FHA's outdated IT systems are in
dire need of upgrades, any IT updates should be funded through HUD
appropriations - not by a new tax on FHA lenders which would be ultimately
passed onto borrowers."
Meanwhile, the Federal Housing Administration's (FHA)
Office of Single Family Housing announced that "the temporary waiver of FHA's regulation that prohibits the use of FHA financing to purchase
single family properties that are being resold within 90 days of the previous
acquisition, expires on December 31, 2014. The waiver applies to all sales contracts executed on or after
February 1, 2010, until 11:59 PM, December 31, 2014. FHA deems a sales contract
to be executed when all parties to the contract have signed the contract, and
the contract is enforceable under the law of the state the property is
located. Mortgages that are made on properties in which sales contracts
have been executed after 11:59 PM, December 31, 2014, are not eligible for a
waiver of the regulation prohibiting property flipping. FHA will not
extend the waiver beyond December 31, 2014." To read the original Federal
Register notice click here and page down once or twice.
Over at the Veteran's Administration there is more
potential news, and it is not good. Ken Bates wrote me saying, "The 2015 VA loan limits are out and there will be a new cap at $625,500
unless the law changes. As the circular states 'in the event' Public Law
110-389 expires on 12/31/14 (which it's set to do) then the rules for the
'Maximum Loan Guaranty' add this new cap. This means some higher costs
counties moved down drastically. For example, San Francisco will drop from
$1,050,000 down to $625,500 and New York County dropped from $978,750 to
$625,500. In the past 2 years the VA has done over 700 loans in excess of $1M
and who knows how many loans between $625k and $1M. If this stays as is,
those veterans will either need massively larger down payments or just won't'
be able to use the program. Considering VA's default rate and Funding Fee
cohort year performance, there is no benefit to the government to dropping this
limit, yet it hurts veteran home buyers. This particular part of the law
was originally set to expire in 2011 but was extended for 3 years to
2014. If you're in a high cost county, contact your
Senator or Representative to
petition to have this extended again to help our veterans."
And a leading West Coast lender writes, "There is big
news out of Washington on the VA Loan Guaranty front. Congress has not renewed
the 125% median home price no-down limit. What this means is that in 11
counties in California alone, Veterans will see a reduction in their loan
purchasing power by up to $424,500 - 66 counties nationwide. Quoting one of my
good associates in the industry and a strong VA supporter, 'These loans have
historically been the best performing loans in the industry. Furthermore,
reducing these benefits to our men and women in uniform and Veterans across the
country sends a discouraging message. These deserving individuals are being
negatively impacted, as are the mortgage and housing industries. VA has always
taken the position of supporting our Veterans first, and this is the first time
in recent memory that this mandate has been circumvented.' Write your Congressman."
There was no news of note yesterday aside from the equity
markets tumbling. Rates dropped slightly with the yield on the 10-year
commencing the day at 2.22% and ending at 2.17%. As usual, mortgage prices did
not keep up with the flight to quality rally in treasuries (due to slight prepayment
risk in mortgages) but still improved nearly .250. The markets are focused on
falling oil prices and continued concerns regarding Greece.
Today the economic calendar included Retail Sales and
Initial Jobless Claims along with a Treasury auction of $13 billion in 30-year
bonds today. Retail Sales were +.7%, higher than expected, and Jobless Claims
were -3k to 294k. Soon after the news the 10-yr and agency MBS prices are
unchanged from Wednesday's close.
Executive Rate Market Report:
Interest rate markets at 8:35 am were essentially unchanged while
the stock indexes were looking better after the strong selling yesterday. At
8:30 October retail sales were better than expected, up 0.7% against +0.4%
forecasts, ex auto and truck sales +0.5% against estimates of +0.1%. September
retail sales were revised higher, to +0.5% from +0.3% originally reported. The
increase is the most in 8 months. Weekly jobless claims at 8:30 down 3K to 294K
about what was expected. Prior to the data at 8:30 US stock indexes were flat,
the better reports pushed index prices higher. Treasury rates after the data
were higher at the middle of the curve but the 10 and 30 held essentially
unchanged.
In China leaders are adding $65B into the banking system in
another effort to help banks lend money to revive the softening economy. The
Premier said China faces significant downward pressure and must adjust to
slower growth. The leadership trying to hold up the economy without
over-loading the system with excessive debt. The take away; China’s economy is
struggling, the 14% growth no longer, down to 7% growth. Looks nice, 7% growth,
but not so much when you look at it as a 50% decline in growth. In the US it is
becoming increasingly difficult for investors to continue to ignore the
weakness in the global economy.
November import prices were down 1.5% against forecasts of
-1.7%. Compared to one year earlier, prices were down 2.3%, the
biggest year-over year drop since the spring of 2013. The report said petroleum
import prices fell 6.9% in November from the previous month and were down 12.3%
on the year. Excluding petroleum, import prices declined 0.3% from the previous
month and are up 0.1% from a year earlier. The lower cost of overseas goods is
putting downward pressure on inflation, and keeping the door open for the Fed
to keep rates low longer; although the overall expectations are for the Fed to
begin increasing rates mid-2015. In October, the price index for personal
consumption expenditures, the Fed’s preferred inflation gauge, was up only 1.4%
from a year earlier.
The DJIA opened +76 after falling 268 yesterday, NASDAQ+35 after
declining 82 yesterday, and the S&P up 14 after dropping 34 yesterday. The
10 yr at 2.18% +2 bps; 30 yr MBSs.
At 10:00 October business inventories, expected
up 0.3%, increased 0.2%; no reaction to the report.
At 1:00 this afternoon Treasury will sell $13B of 30 yr bonds,
re-opening the 30 issued last month. Yesterday the 10 yr auction met with good
demand, we expect the 30 will also see strong bidding.
We have talked about the increase in market volatility in the
last few days; we can’t over-state it; market volatility is on the increase and
will get even more so between now and the end of the year. With stock indexes
at record levels and interest rates at record lows, and crude oil in a freefall
so far; those markets are ripe for wide swings but we believe the wider trends
in those markets won’t change much. The America stock market is about the only
place in the world that offers hope for profits, crude oil likely to fall more
in an extremely volatile trade that we expect to begin any day now with a huge
short-covering move (it is way over-sold), interest rates should remain low and
possibly move lower. Like the US stock market, the US debt market is the best
place to go for safety and higher rates than other G-7 countries.
PRICES @ 10:00 AM
- 10 yr note: -6/32 (18 bp) 2.19% +2 bp
- 5 yr note: -5/32 (15 bp) 1.60% +4 bp
- 2 Yr note: -2/32 (6 bp) 0.60% +2 bp
- 30 yr bond: -11/32 (34 bp) 2.85% +2 bp
- Libor Rates: 1 mo 0.158%; 3 mo 0.238%; 6 mo 0.337%; 1 yr 0.598%
- 30 yr FNMA 3.5 Jan: @9:30 103.95 -11 bp (+25 bps from 9:30 yesterday)
- 15 yr FNMA 3.0 Jan: @9:30 103.82 -15 bp (-2 bps from 9:30 yesterday)
- 30 yr GNMA 3.5 Jan: @9:30 104.73 -11 bp (+3 bps from 9:30 yesterday)
- Dollar/Yen: 119.19 +1.37 yen
- Dollar/Euro: $1.2388 -$0.0060
- Gold: $1219.20 -$10.20
- Crude Oil: $60.50 -$0.44
- DJIA: 17,696.17 +163.02
- NASDAQ: 4737.00 +52.98
- S&P 500: 2047.05 +20.91
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