If you want a job, should you go to The Great State of Texas? (Unofficial
motto:
"So what if it's a little hot?") Maybe: ButItsADryHeat
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1106951314728&s=8721&e=001IVrU5R
GiiwMnv4LsdHIQ9W6DnNvv54J3AqaGXyPooe86dkiiejkb8zrom_FbJODE9v3PNtPDbgEAj2P-6m
hK4N1KiFv9ACHW27QvFGy8qy-yIO50t8DVRqPUYxlGTHUWLYOtQyFzurvpNv6I-0l15Qfqf2nxaS
BXYEmH4ZWK_9Q=].
Think about it. The yield on the US 10-yr is 2.50%. Sometimes I have to be
reminded
that this means only earning 2.50% for the next ten years. So if a 70-yr old
retiree
saved up $1 million in her nest egg, and bought a 10-yr risk-free T-note,
she'd
earn $25,000 per year in income until she was 80 years old - a little over 2
grand
a month - after saving $1 million during her life.
Will PMI follow RMIC? PMI warned clients that it may be unable to continue
selling
new policies and could shut down. The stock is already a penny stock - the
company
has posted more than $3.5 billion in losses since 2007 as it paid out claims
on
foreclosed homes. Now, the company's main subsidiary, PMI Mortgage Insurance
Co.,
or MIC, doesn't have enough money on hand to meet the requirements of
regulations
in Arizona, where it is based. "The company said the state's insurance
department
may as a result move to stop it from selling new policies in all states and
move
to rehabilitate or liquidate the unit. PMI has known such action was a
possibility
for some time, and as a backup plan it set up another subsidiary, called PMI
Mortgage
Assurance Co., that could sell mortgage insurance in certain states.
However, the
company warned Thursday that the approval to sell policies on mortgages
backed by
Fannie Mae and Freddie Mac depends upon MIC continuing operations. For
details go
to WSJPMI
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1106951314728&s=8721&e=001IVrU5R
GiiwPlOwjWVwDqwJYjR-7t84UHCSm5mbrpYS69n9CrI65SW0_O0zbkA1sUdxdiKdQXiexx_A94cW
Ub7CaDku9fm4pljjE029GDCLBNGazVAtH2v2Rg34aQG27HMv03imPp3PXvk7X82g6FRu_b1qchV5
3a-uQQrv4vOxw0QQpP_6mj_UbAzr_5u1ZR].
What do mortgage investors think about these low rates? Many believe that
30-year
mortgage rates will need to drop below 4% and establish new record lows to
really
pump up the refi market for some of the lower coupon mortgages that were
originated
in 2010/2011. There are still underwriting and equity issues, and the
economic hurdles
that were introduced due to higher MI for FHA loans and higher LLPA for
agency loans
have to be crossed. It is also important to note that some of the higher
loan balance
loans will not have the economic incentive to refinance as GSE loan limits
are scheduled
to be lower effective Oct 1, 2011. Lastly, at this point higher LTV loans
originated
under HARP will not be eligible to participate in this potential refinancing
mini-wave.
And as the commentary mentioned yesterday, a move in Treasury or MBS prices
may
not directly translate into rate-sheet pricing for loan reps & borrowers -
it depends
on profit margins and hedging costs at the company level. But compared to
previous
big moves down, lower 10-year rates are translating into lower mortgage
rates in
this rally faster - perhaps companies are going after market share. As one
trader
put it, "the market feels very despondent right now, realizing that fiscal
policy
is now more restrictive, Fed QE policies have not flowed through to the
consumer,
confidence is dropping over European situation, and so on."
Pssst - wanna buy Saxon? Morgan Stanley has reportedly contacted potential
buyers
of Saxon Capital which it bought in 2006 for $706 million. Later, in the
fourth
quarter of 2008, Morgan Stanley took a $700 million write down in large part
due
to Saxon-related charges. Maybe MS is following Goldman Sach's lead when it
sold
Litton to Ocwen in June.
Recently the commentary noted that Fannie is scaling back origination and
home price
appreciation estimates for 2011 and 2012, and received this note: "As you
pointed
out, Fannie expects that home prices are expected to decline further this
year and
next. Why would this be a surprise to anyone when the crushing regulatory
environment
and unforgiving underwriting standards make it difficult or impossible for
many
deserving folks to obtain financing? Every constriction of DTI and LTV will
cause
home prices to fall. And while nobody disputes that the standards were too
loose
during the housing bubble, many people who could afford the homes they
purchased
will be hurt if this inanity (or insanity, if you prefer) continues."
"In Congress, there is a room where legislators are meeting to try to come
up with
ways to get the housing market moving again. Down the hall, in another
room, other
legislators are meeting to try to find ways to make it even more difficult
to get
mortgage financing. Our government doesn't understand that, every time it
meddles
or manipulates one area of the economy, there are unintended consequences in
another
area."
The residential mortgage REIT sector of companies has made a renewed name
for itself
by being an active buyer of mortgages and paying good dividends (and,
according
to Bloomberg, raising more than $14 billion in secondary equity sales and
IPO's).
But lately REIT stock prices have been very volatile - mostly on the down
side.
The potential US default pushed values down dramatically, sometimes as much
as 10%
in one trading day. Another reason was when the cost of overnight repurchase
agreement,
or repo, financing for government-backed mortgage securities jumped. REIT's
such
as Invesco Mortgage, Hatteras Financial, and American Capital Agency got
hit since
repo rates were climbing, the gain was modest and so-called haircuts, or the
down
payments required for the loans, weren't changing. (In repo financing,
securities
such as Treasuries and mortgage bonds are sold to a lender with an agreement
by
the borrower to buy them back later. Haircuts protect lenders against price
declines
in the collateral, in the event the borrower defaults.)
Flagstar alerted its brokers that, "The American Reinvestment and Recovery
Act (ARRA)
was signed into law in February of 2009, temporarily increasing the maximum
conforming
loan limits. Mortgages with note dates on or after October 1, 2011, will no
longer
be eligible for these higher loan limits. Loans with a mortgage note date on
or
after October 1, 2011, will be subject to the permanent high-cost area loan
limits
determined according to the Housing and Economic Recovery Act of 2008
(HERA). Regardless
of the area median home price, the loan limit cannot, in general, exceed
$625,500
for a 1-unit property. All loans using the ARRA loan limits but be locked on
or
before Thursday, September 15, 2011. These loans must be closed and funded
no later
than Friday, September 23, 2011. There are no further delivery requirements.
Loans
not meeting the above requirements must use the HERA loan limits."
Starting today "Flag" will be changing the price adjustments on all
investment properties
for Agency products excluding the Fannie Mae DU Refi Plus, Freddie Mac
Relief Refi
and Freddie Mac Open Access products - making NOO prices worse by .5.
Lastly, its
delegated underwriting customers learned that it updated the requirements
for transactions
that require an appraisal from an AMC. "An appraisal from a
Flagstar-approved AMC
is no longer required for new construction purchase and construction to
permanent
transactions (including construction products) in the following states with
an LTV
of 70% or greater: Arizona, California, Florida, Georgia, Ohio, Michigan,
and Nevada."
Bank of America notified correspondent clients that it issued a disaster
declaration
for Montana due to the flooding.
When I was a kid, I would take care of neighbor's yards when they went on
vacation.
If you're doing that while servicing a Fannie Mae loan, you'd better make
sure you
follow the rules and allowable maintenance costs: CuttingLawnsPays
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1106951314728&s=8721&e=001IVrU5R
GiiwNEC7xhls_aQK_HF1eUzRJrZ592wOd-NFbpnMMOBeJp13dvuztVvXhSdb1KhQDwLhXWU8piPH
NBTjT2ps3xVOHrKUzx09usdjyk8kJYEM6aZ8aFsEw68QyjK-jJuYz0PdzYFIF2o5y1yW7H7TPtk5
lMkAMflr-Ar-C8AYkTBzoBDhCa7PLhfqsu].
Obviously we can't see huge drops in rates every day, and besides, most in
the mortgage
industry would rather see gradual trends than large spikes. MBS volumes have
picked
up as rates have dropped, and yesterday we saw another: 10-year Treasury
prices
were better by another 1.25 (2.46%). Since last Friday, 10's have gained 3
points
and the yield has plunged roughly .375! As the DOW lost over 500 points
(more than
4%), MBS prices were better by .750 - not all of that being reflected on
rate sheets.
(Next week we have another FOMC meeting. In their last FOMC statement in
June, the
Committee said "Information received since the Federal Open Market Committee
met
in April indicates that the economic recovery is continuing at a moderate
pace,
though somewhat more slowly than the Committee had expected. Also, recent
labor
market indicators have been weaker than anticipated." In light of the
recent events,
it will be interesting to hear what is released Tuesday.)
This morning we learned that the employment numbers were slightly better
than expected.
Non-farm Payrolls were up 117k, slightly higher than expected, the
Unemployment
Rate came in at 9.1% (versus June's 9.2%). May & June's numbers were revised
by
56k. That does it for economic news of consequence for the week - and what a
week
it's been. No market moves in any direction forever, and we're seeing that
in the
early going today: stocks are showing a rally, the 10-yr yield is around
2.48%,
and MBS prices are all over the map - but mostly down/worse about .250.
(Parental discretion very much advised!)
Ben Bernanke gets drunk and tells all? This was too good to not share:
Jobs?WhatJobs?
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1106951314728&s=8721&e=001IVrU5R
GiiwPk0vlqqs0VQZbTCeNbXjd9F7E5mw5CwRolahRdVUG84FFsstF9SFkOl0vT5eqQ2NExLsGrOc
IF3ixmHqkSuaG21GLZMeHmGnPqc5PGguCdx9RkTMMpGKVzTOIRhq8fLL6fAa_7vV1U7xNfsjBjZl
w6FjhD90pQsE7OWZzJcU92m_87zo27mn0F51CmBryipeCD2kTLSJN2mQ==]
If you're interested, visit my twice-a-month blog at the STRATMOR Group web
site
located at www.stratmorgroup.com
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1106435366068&s=4179&e=001SVt-lj
bp53436QjxD9vbwURtIPPjV05jEcEKyBN3SjS2forXe0C_foO8RjEV-Uye0N7Z_Sh1il0SRXPx6P
jQauayNXQjni-Hc9Sseu-hhZcR1ujeZyAEpw==]
. The current blog takes a look at QRM, and doubts about its passage. If you
have
both the time and inclination, make a comment on what I have written, or on
other
comments so that folks can learn what's going on out there from the other
readers.
Rob (Check out
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=ijhbx6gab.0.epg7qedab.zy6u9cdab.8
721&ts=S0660&p=http%3A%2F%2Fwww.mortgagenewsdaily.com%2Fchannels%2Fpipelinep
ress%2Fdefault.aspx]
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=ijhbx6gab.0.v7uif6dab.zy6u9cdab.8
721&ts=S0660&p=http%3A%2F%2Fwww.thebasispoint.com%2Fcategory%2Fdaily-basis].
For archived commentaries, go to www.robchrisman.com
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=ijhbx6gab.0.fpg7qedab.zy6u9cdab.8
721&ts=S0660&p=http%3A%2F%2Fwww.robchrisman.com%2F].
Copyright 2011 Rob Chrisman. All rights reserved. Occasional paid notices
do appear.
This report or any portion hereof may not be reprinted, sold or
redistributed without
the written consent of Rob Chrisman.)
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