Zelman
and Associates published its January Homebuilding Survey, indicating
that 2015 is off to a strong start. Order growth increased 32% year-over-year,
bumping 2015 first quarter order growth to 21%. The homebuilding survey
increased to 60.5 from 58.4 in December, reaching its highest level since June
of 2014. Traffic metrics have shown the strongest improvement in three years,
and improved YoY surpassing builder expectations. About 45% of respondents said
they reported better than expected traffic in January, and website traffic was
up 19% YoY. Prices have also increased 4% YoY and a 4.3% increase is expected
over the next year.
Banks
certainly know a thing or two about operations. And banks are beginning to
say "no mas" to the overload of regulations. "The federal bank regulatory agencies requested comment on a second set of
regulatory categories as part of their review to identify outdated or
unnecessary regulations applied to insured depository institutions. The
Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA)
requires the Federal Financial Institutions Examination Council, Office of the
Comptroller of the Currency, Federal Deposit Insurance Corporation, and Board
of Governors of the Federal Reserve System to review their regulations at least
every 10 years. The agencies also are required to categorize
and publish the regulations for comment,
and submit a report to Congress that summarizes any significant issues raised
by the comments and the relative merits of such issues. Comments will be
accepted until May 14."
But
regulations aren't only weighing down banks. From Jim in Pennsylvania comes
"Why would anyone want to come into this business when they keep lowering
the amount you can make. We now can barely pay are bills to make ends meet.
Licensing is a small fortune for each state. We have to also pay for the audits
the banking department sends down. 'The Man' was here for 3 days for 22 loans
and it cost $1,500 - a ridiculous for a small mom & pop shop business. I
had 5 loan officers now it is just me. No one has yet to address the small
businessman who has 800 scores but needs to write everything off, because that
is the way the tax system is set up, so he can't qualify for a mortgage. I had
to get audited financial just to get licensed in New Jersey that cost $3-5
thousand. Licensing at $1,300 plus $530 for an individual license (because you
need both), $1,000 for a bond although we don't handle money, finger printing
costs. It costs about $8k just to obtain a Jersey license so what young kid is
going to be able to do that? If you want to be a loan officer with a bank even
somebody with my experience they want to make you a subcontractor on commission
and expect you to bring in your own deals. Walmart is paying better; at least
it provides health benefits. Oh, and by the way, for 2 people 59 years old the
health insurance cost around $20k this year and the out of pocket is
$6,400."
Speaking
of the lifestyles of LOs, Hammerhouse released the results of itsFifth Annual Survey of
Originators' Opinions. The annual survey asked
originators for their opinions on critical issues facing the mortgage industry
and impacting their performance of their jobs. Of the significant sample of
more than 800 active mortgage loan originators that responded, 52% have annual
production between $9 million-$24 million. "This year's Survey
found that a majority of mortgage loan originators (56%) are finding their
career less rewarding than in the past and another 8% no longer find their
career sufficiently rewarding. However, the results illustrate that
originators are anticipating an improved future coming and are raising
expectations. 87% of originators expect 2015 origination volume to equal
or exceed 2014 levels, compared to last year when 56% of originators expected a
drop in origination volume, and 73% expect their personal volume to increase in
2015, versus 53% who held that opinion last year."
In
order to address the heart of the vacant and abandoned property dilemma, MBA
formed a working group in Fall 2014, which included representatives from
numerous large and independent lenders and servicers, along with leading
industry attorneys, property preservation/foreclosure experts, and state MBA
leaders. The working group produced a comprehensive resource for state
legislators around the country who seek to introduce vacant and abandoned
property legislation in the 2015 state legislative sessions. This resource
consists of a series of "Principles" that
- if implemented - would responsibly expedite the foreclosure process for
vacant and abandoned properties in both judicial and non-judicial foreclosure
settings.
Fannie
& Freddie announced earnings recently. Declines in the value of derivatives for
hedging interest rates led to lower fourth-quarter and 2014 profit at Freddie
Mac: it made $7.7 billion last year, down from $47.8 billion in 2013, according
to a regulatory filing. Freddie's lower profit
shows the vulnerabilities of F&F. In addition, capital reserve required by
its 2012 rescue plan is shrinking, narrowing the margin between profit and
loss.
And
Fannie Mae reported
net income of $1.3 billion for the fourth quarter. That's down sharply from
$6.5 billion a year earlier due largely to losses on investments used to hedge
against swings in interest rates. Still, it was the 12th straight profitable
quarter for Fannie - and what senator or Congressman wants to do away with
that? Especially when Fannie also said that it will pay a dividend of $1.9
billion to the U.S. Treasury next month. Fannie will have paid $136.4 billion
in dividends, exceeding the $116 billion it received from taxpayers during the
financial crisis. Freddie also said it will pay a dividend of $900 million to
the government in March.
Looking at the markets, not a
whole heckuva lot happened Monday although rates improved somewhat as did
agency MBS prices. And frankly, aside from the usual volatility in Greece not
much happened overnight. But today Fed President Janet Yellen begins the first
of two days of testimony on monetary policy before Congress, beginning with the
Senate Banking Committee. We will also have some non-market moving
S&P/Case-Shiller house price numbers and February readings on Consumer
Confidence (102.9 prior), as well as Richmond Fed PMI (+6 last). For numbers
we had a 2.06% close on the 10-year and this morning we're back to 2.08% with
agency MBS prices a shade worse.
Executive Rate Market Report:
US markets opened quietly this morning, early trade had nothing
to focus on and markets waiting for Janet Yellen’s testimony that will begin
about 10:00. Yesterday treasuries and mortgages had a decent day, the 10 yield
dropped 6 bps to 2.06% and 30 yr MBS prices up 25 bps. Both markets trading in
tighter ranges over the last week.
At 9:00 the Dec Case/Shiller home price index was thought to be
up 4.2% from Nov, as reported the price from the 20 cities increased 4.5%
yr/yr. Home
prices edging higher in those 20 cities, some believe that increased prices are
pushing first time buyers out of the markets. Not too sure we buy that in its
entirety as why there are few first time buyers, other factors like too much
debt to qualify and millennials less interested in forming households also are
key elements. The S&P/Case-Shiller index is based on a three-month average,
which means the December figure also was influenced by transactions in October
and November. “The regional patters and the weakness in new construction and
new sales may reflect decreasing mobility -- fewer people moving to different
parts of the country or seeking jobs in different regions,” David Blitzer,
chairman of the S&P index committee, said in a statement.
Nothing new or market-moving out of Europe over the Greek debt
or the Ukraine situation. Both still there but investors are essentially ignoring them
presently. Greece will get a debt relief from the ECB and EU, just pushing the
problem down the road but not resolving the larger picture that Greece is broke
and likely to be that way for a very long time. Like a pain that won’t go away
so markets just getting used to it. Eurozone finance ministers approved a
four-month extension to the Greek bailout.
Yellen will be pushed for when the Fed will begin increasing
rates, however we doubt she will be forced to give a direct answer. Questions about the
lack of ability to increase the inflation rate with, as the Fed states, the
employment sector is much better and the economy is gaining momentum; so why is
inflation remaining a drag? Her opening statement is somewhat a waste in terms
of traders’ thinking; it is the Q&A where we will put or attention.
Probably the most disturbing issue in touting the growing economy is that there
is no pricing power in the US or around the world; Europe still teetering on
deflation.
At 9:30 the DJIA opened +13, NASDAQ -9, S&P -1. 10 yr at 9:30 2.08%
+2 bps and 30 yr MBS price -9 bp from yesterday’s close and -6 bps from 9:30
yesterday. About what we expected with Yellen’s testimony the main event today.
The only key data point today, the Feb consumer confidence index
from the Conference Board, the index was expected to have declined from the very strong
102.9 read in Jan to 99.1. As reported the index dropped more than expected to
96.4; Jan index revised from the original 102.9 to 103.08. Lower fuel costs
haven’t flowed to consumer confidence based on this report.
This afternoon Treasury will auction $26B of 2 yr notes.
Look for quiet this morning to start; as the Yellen testimony
unfolds, pending how she frames things, traders will react to anything that is
out of bounds from what she is expected to say. With Republicans now chairing
both committees she might have to dig deep to provide enough Fedspeak that says
a lot but means less. Technicals still bearish, our longer term outlook remains
that rates may have another run lower; if we are correct any rallies are not
likely to be strong. We continue to believe interest rates will edge higher but
we are not expecting much more increase. All that said, don’t look too far
ahead in your planning, presently we would be sellers of MBSs and treasuries.
PRICES @ 10:10 AM
10
yr note: -5/32 (15 bp) 2.08% +2 bp
5
yr note: -5/32 (15 bp) 1.58% +4 bp
2
Yr note: -1/32 (3 bp) 0.64% +2 bp
30
yr bond: -4/32 (12 bp) 2.67% +1 bp
Libor
Rates: 1 mo 0.171%; 3 mo 0.262%; 6 mo 0.385%; 1 yr 0.674%
30
yr FNMA 3.0 Mar: @9:30 101.33 -9 bp (-6 bp frm 9:30 yesterday)
15
yr FNMA 3.0 Mar: @9:30 104.32 -5 bp (-8 bp frm 9:30 yesterday)
30
yr GNMA 3.0 Mar: @9:30 102.08 -3 bp (-8 bp frm 9:30 yesterday)
Dollar/Yen:
119.55 +0.74 yen
Dollar/Euro:
$1.1327 +$0.0008
Gold:
$1195.60 -$5.20
Crude
Oil: $49.95 +$0.50 Trading remains close to the $50.00 pivot level
DJIA:
18,155.72 +38.88
NASDAQ:
4955.65 -5.32
S&P
500: 2110.51 +0.85
For many consumers, buying a home is the single largest investment they will make in their lifetime for Currency Derivatives.
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