Thursday, September 29, 2011

Market Snapshot 9/29/2011

Treasuries and mortgages prior to 8:30 were a little better but data at 8:30 turned rate markets slightly weaker. Weekly jobless claims were expected to decline 4K, as reported claims were down 37K to 391K the lowest claims since the beginning of April. Continuing claims at 3.729 mil frm 3.75 mil. Q2 final GDP was expected to increase to 1.2% frm 1.0% on the prelim report last month; as reported Q2 GDP grew 1.3%. Both reports pushed the rate markets down a little and added more gains in the stock indexes; at 9:00 the DJIA +149, the 10 yr note at 2.01% +2 bp and mortgage prices -4/32 (.12 bp).


On the European scene; some positive movement from Germany.  Germany’s lower house of parliament approved the expansion of a bailout fund for debt-stricken euro- area nations to help contain the sovereign-debt crisis. The lower house voted 523 in favor of legislation aimed at expanding the powers of the 440 billion- euro ($599B) European Financial Stability Facility, while 85 voted against the measures and three abstained. The legislation is set to be debated and put to a non-binding vote in the upper house tomorrow. Greece will run out of money on Oct 13th, which of course is the drop dead deadline for Europe's leaders to act or Europe's house of debt cards will come tumbling down.



While the German vote is a big step, the consensus from investors is still negative. Bloomberg ran a survey  recently, the results were overwhelming that at least one country in the EU would be dropped in the next year. About 93% of investors expect Greece to eventually default, according to the quarterly Global Poll of 1,031 Bloomberg subscribers. Forty percent see the currency bloc losing at least one member in the next year.



At 9:30 the DJIA opened +191, the 10 yr note -7/32 at 2.01% with mortgage prices -4/32 (.12 bp).



At 10:00 NAR's July pending home sales (contracts signed but not yet closed) were expected down 1.5%; sales were a little better down 1.2%; yr/yr sales up 7.7%. Not much reaction initially. The three data points today all better than expected. The 10 yr note at 10:00 at 2.02%.



At 1:00 this afternoon Treasury will auction $29B of 7 yr notes. The 2 yr and 5 yr auctions met solid demand. Today's 7 yr should also get solid bidding.



The 10 yr note continues to hang close to 2.00%, so far unable to climb over it on a close but equally the momentum to lower rates has stalled. As we noted in yesterday afternoon the 10 yr note yield is now higher than it was prior to the Fed announcement of "Operation Twist". US treasuries at the moment are losing the safe haven trade as Europe gets closer to feed Greece more money. Moves into and out of treasuries will not completely erode; the situation in Europe and with its banks is far from resolved and in turn volatility will continue.



Technically; the 10 yr note is testing and holding its 20 day moving average at 2.03%. The 10 yr yield hasn't traded above its 20 day average since early July, then it was over its 20 day for just five sessions---take those away and the 10 hasn't been above it since the first of April. It is the same with the 3.5 FNMA  coupon; its 20 day at 101.83 is just 22 basis points below the present price. The relative strength indexes for the 10 and FNMA 3.5 are also at pivotal levels. We still do not believe rates will increase much but based on price action it is becoming less bullish.

Tuesday, September 27, 2011

Market Snapshot 9/27/2011

Treasuries remain under pressure as equity markets around the globe rally following yesterday's CNBC report that European authorities were constructing the framework for a rescue plan. Greek leaders appealed for support at home and abroad to avert default before key legislative votes as the U.S. criticized European leaders for moving too slowly to stem the debt crisis. In recent remarks from Tim Geithner and the President the heat is building around the world for something to be done, and quickly. Geithner said Europe has “not very much time” to act. Geithner called on euro-area leaders to beef up their 440 billion-euro ($594 billion) bailout fund, warning that failure threatened “cascading default, bank runs and catastrophic risk.”

Global markets rallied overnight as optimism increased that finally---maybe--Europe's leaders have gotten the message that continued delays will send the US back into recession along with all of Europe and drag down other regions with them. “What I learned in Washington is that Europeans finally get it,” Mohamed El-Erian of PIMCO said in an interview this morning; “they are going back and will try to do something about it. This was a very important wake-up call for Europe.”  A European Commission spokesman told reporters in Brussels yesterday that euro-area ministers are unlikely to approve the payment at their Oct. 3 meeting as originally planned. Greece has said it needs the money next month.

The current increase in belief that Europe will take care that Greece will not default, and plug the dike from bursting on Portugal and Ireland has taken much of the safe haven trade into US treasuries, the 10 yr note has increased from 1.67% the intraday low Friday to 1.98% at 9:00 this morning. The US equity markets this morning are following strong equity markets overnight, at 9:00 the DJIA futures was up 196 points after closing up 272 yesterday. At 9:30 the DJIA opened +226, the 10 yr -25/32 at 1.99% +9 bp and mortgage prices -14/32 (.44 bp) frm yesterday's closes.

Adding additional pressure in the bond and mortgage markets this morning; at 9:00 the July Case/Shiller home price index for the 20 cities reported home prices increased 0.9%, the fourth month that home prices have increased. Not huge increases, but enough to suggest that property values may be closing in on a bottom. On a yr/yr basis prices still down 4.1%.

At 10:00 the Sept consumer confidence index from the Conference Board, expected at 46.6 frm 44.5 in August (the lowest reading in the last 30 months). The index at 45.4 frm 45.2 revision in August. The present situation at 32.5 frm 34.3, expectations at 54.0 frm 52.4; jobs hard to get at 50.0 frm 48.5. Still weak data; there was no immediate reaction to the report in stocks or bonds.

Auction up at 1:00 this afternoon; Treasury will auction $35B of 2 yr notes.

The strong open in stock indexes this morning may be near the highs of the day, generally an open that strong isn't sustainable, however we expect the equity market will close higher at 4:00 this afternoon. The 10 yr note high so far today was 1.99%, testing critical technical levels. We still don't expect interest rates will explode higher but if Europe actually does get something done the low in yields may have already been achieved in the short run. US economic data, recently on the back burner, will take more of center stage IF Europe can set in place a plan that relieves concerns of sovereign defaults in the area.

September 27: LO comp lawsuit results; TBW accounting firm sued - what if they missed something? Investors gearing up for VA funding fee change

Some things you just can't make up. Arch West died last week of natural

causes at the age of 97, and when he is buried this weekend, Arch West will

have Doritos sprinkled over his urn. That is because Arch was the inventor

of Dorritos, a staple of road-trips and mortgage banker desk drawers all

over the nation. Doritos were first introduced in Southern California in

1964 and then launched nationally in 1967, and college  parties have been

better ever since.



Here's something that hasn't been on the front burner for mortgage bankers &

Realtors for a while: flood insurance. "The federal program that insures

homes against flood damage expires next Friday and is at risk of not being

renewed. Industry executives say that if the National Flood Insurance

Program lapses, it would become all but  impossible to get a mortgage in

flood zones across the country until the program is revived." Overnight,

Senate leaders moved some disaster money around and passed bare-bones

legislation to avert a government shutdown at week's end. That measure,

approved by the Senate on a 79-12 vote, would keep the government running

until mid-November. The House appears likely to endorse that measure next

week when it  returns from a weeklong recess. So not only can we think about

why they deserve  a week's vacation, but we get to do this all over again in

mid-November: RisingHotWater

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107855791361&s=8721&e=0013TLaXS

S0_FQAty6xvJsRlopJNklt6bKzKfnJFluq8VA28Ysa1QAFhlQIl66yQl8OC1g1P_GKGB_BJhxwon

ZtAdz5fPkwD5iC_vjxsKx0jj_nCzm0jsC4Cn9GtffOuU2kVJd4v1f_CcxuqkG81jiI01awPL6r_G

cv5pMYYW5ebq451LTPvvdBow==].



Top Dot - does the company have $9 million to pony up? I hope so - it may

owe just that due to a class action compensation judgment. A federal court

entered a $9 million judgment against Top Dot Mortgage for violations of the

Fair Labor Standards Act.

The class action suit was brought on behalf of 166 loan officers who were

not properly paid minimum wage or overtime by Top Dot Mortgage and its

individual owners. Under the FLSA, employees are entitled to wages for all

hours worked and time-and-a-half pay for all time worked over 40 hours

worked in a work week, unless they are exempt from the Act. Federal law also

requires employers to maintain accurate records of hours actually worked by

employees. "At trial, we proved that Top Dot willfully created a pay plan

which denied its loan officers minimum and overtime wages in violation of

federal law, while its individual owners wrongfully added millions of

dollars to their personal income" said lead trial attorney Ryan Stephan. The

jury specifically found that class members averaged 10 hours of unpaid

overtime each week. Based on the total verdict, each of the 166 class

members was awarded

 $54,000 on average - but let's not forget the attorney's cut!

TopDotOwesALot

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107855791361&s=8721&e=0013TLaXS

S0_FQuPEnyz95gtATRtts880aIiUsvtNBwL6ORr6qTkV4mXB2nXd_OpaIhbGP2WS3NzxXF6wYpw-

dhXjrQFPwMSlL6MXIrQs4UFnyBTJwocSgRrT6bF1nkbN-9coCt7o_zVT7w6JEd3CMBXG_RYHqiPf

rmJVrsfBIZ9ku5O4PZ_WZDATytO2UYdUuGOdS_w8E778gKPpCZQwY25MJl73_Axe0tWp7e00idQB

o=].



TBW - the gift that keeps on giving. Most, if not every, mortgage company

has an  accounting firm. In what could be a very closely watched case,

Deloitte Touche Tohmatsu, the world's largest accounting and consulting

firm, was accused on Monday of failing to detect fraud during its audits of

Taylor, Bean & Whitaker. Deloitte "certified TBW as a solvent, viable

company with accurate financial statements every year from 2001 to 2008,"

one of the complaints said. "Despite Deloitte's credentials and expertise as

one of the 'Big 4' accounting firms, those statements -- and the rosy

picture they depicted of TBW -- were completely false," it said.

WhereIsTheE&OContract?

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107855791361&s=8721&e=0013TLaXS

S0_FTB_73h3yJyU-dT9PlinIo6Cb9Y5G2FbYH1Sl3kK6PpzkvcLg9VFVAtHQkAgo5BQn9BPnuXJq

yBny0Hb8gbHNspjynSswZuzNnO60y0C_czemsDA217uTlPDzBjQQijKQHjfRZAgKc0t3TIdWzdlW

7MiA2oP8G_0X-qyYSBhciTFPfOeX_tFYwuGPNE2BdqHDc=]

Many have wondered how the rating agencies have escaped punishment in the

mortgage crisis. Well, that may be ending: the SEC is considering taking

civil action against Standard & Poor's for its rating of a 2007 mortgage

debt offering. We all know that the three major agencies (S&P, Moody's

Investors Service and Fitch Ratings) gave  high ratings to mortgage

investments that turned out to be worthless. If the SEC charges S&P with

violating securities laws, and it hasn't happened yet, it would  mark the

first time it's brought an enforcement action against a top rating agency.

S&P is owned by New York-based McGraw-Hill. Regardless of the outcome of the

S&P  case, the entire rating agency industry may be facing enforcement

actions related to the financial crisis.



The Fed's FAQs on its MBS purchases was released yesterday, with few

surprises.

Agency MBS purchases will likely be concentrated in newly-issued agency MBS

in the TBA market. Purchases will consist of fixed rate 30- and 15-year

agency MBS only  and that are guaranteed by FNMA, FHLMC and GNMA. The Fed's

FAQ said it would publish on or around the 8th business day of the month,

the tentative amount it expected  to purchase between the middle of the

current month to the middle of the following month. For the October 3 to 13

period, it expected to buy around $10 billion in agency MBS. Purchases would

be made "on a frequent basis" over the month. For more information, see

MBSPurchases

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107855791361&s=8721&e=0013TLaXS

S0_FQtCNITjx9_oWzcpwup76vRpyyHcyww6OoBQOdMAP4LtQyotM3ymt6wOsUE_AtADysWA2mLaM

3ODBxd_2nydi5b_KlIndJwrAAZP9h901HFzeZvXhFIVnbEzUQW-EYm5IGbPDaIHjEAvchyjf5nsR

07].



Firms controlled by Lew Ranieri and billionaire investor Wilbur Ross are

partnering to buy Deutsche Bank Berkshire Mortgage, a major lender to

investors in U.S. apartment buildings. Ranieri Real Estate Partners LP and

private-equity funds affiliated with WL Ross & Co. are paying an undisclosed

amount for the unit of Deutsche Bank AG,  which makes loans to

apartment-building owners and then sells them to Fannie Mae and Freddie Mac.

It did more than $4 billion a year in mortgage loans at the market's peak

and is the second-largest originator of Fannie Mae-backed multi-family

loans.

Given the increase in renters, this could be a very good play. So we can all

keep track of players, in May 2010, a group led by Orix Corp. bought Red

Capital Group, another Fannie Mae and Freddie Mac multifamily lender, from

PNC Bank. And in June 2010, Fortress Investment Group LLC bought CW

Financial Services, a broader commercial real estate firm that made loans

for Fannie and Freddie. The Berkshire Mortgage unit also services some $28

billion in multifamily loans.

Investors are busy. SunTrust Mortgage is eliminating the Portfolio

Affordable Housing Mortgage Program. Bank of America, starting yesterday,

shifted the adjustment for Conforming 30 Year Fixed Rate High Balance loans

(now 125 basis points - 1.25%) and DU Refi Plus Conforming 30 Year Fixed

Rate High Balance loans (now also 1.25%).



Union Bank alerted brokers of several changes, including debt ratios,

credit, occupancy, EOM, and is allowing higher DTI's if credit score and

reserve profiles are met.

Bankruptcy papers will no longer be required "if the filing and discharge

dates are clearly shown on the credit report and there are no open debts

(collections,  charge-offs, etc.) showing on the credit report that the

borrower claims were included in the bankruptcy.  Regardless of age, a

letter of explanation will still be required when a bankruptcy shows on the

credit report." Clarification has been made for when certain minor

discrepancies on the borrower's date of birth do not need to be addressed.

And under UB's new policy, for properties that are new construction (where

the existing structure was torn down and rebuilt) or have had a major

remodel, UB will now give the borrower up to 60 days to occupy the subject

property after the close of the  loan, subject to certain requirements.



Lenders know that a funding fee is paid to the VA to defray the cost of

administering the VA home loan program. This fee changes on 10/1, and every

lender is notifying clients about it. US Bank's wholesale division got the

word out, and reminded broker clients that, "The funding fee for Interest

Rate Reduction Refinance Loans will remain the same at .50%." And although

earlier this month one of its forms changed, USB reminded folks, "Regardless

of the new funding fee status shown on the COE, lenders must still be sure

to read any and all statements appearing in the "CONDITIONS"

field, which appears near the middle portion of the COE."



GMAC Bank Correspondent Funding and its wholesale channel also reminded

clients of the change starting 10/1. "VA Loans approved with the prior

funding fee amounts that do not close by September 30, 2011 must be

resubmitted for underwriting approval with the new funding fee amounts

effective October 1, 2011."



Wells Fargo's wholesale channel alerted brokers of an update on its HUD

Builder Certificate for FHA new construction. It impacts FHA transactions

for properties  less than one-year old (new construction), and effective

with FHA Case Numbers assigned on or after yesterday, so brokers will send

the Appraisal Cover Sheet for Sales Contracts, the Builder Certificate (Form

HUD-92541) and the purchase contract to Web Support. (Continue to include a

copy of the Builder Certificate with the loan submission package.)



Yesterday MBS prices did pretty well, relative to fixed-income Treasury

prices, on lower-than-normal volume. Europe was the primary influence on the

markets with encouraging talk of another plan in the works. As a result,

investors were feeling less risk averse with the Dow up over 2% and

Treasuries selling off: 10-year notes were worse by almost 1 point and up to

a yield of 1.90%, and MBS prices were worse by about .250.



We learned that New-Home Sales Fell 2.3% in August, in Line With

Expectations: 

New Single family home sales fell to a 6-month low in August, but the supply

of homes available dropped to a record low.  The Commerce Department

reported that sales slid to a seasonally adjusted 295,000 unit annual rate.

This is the lowest since February.  Even as sales were weak in August, they

were still 6.1% above the same time last year, when new-home sales were at

an annual rate of 278,000.



Today for excitement we have a $35 billion 2-year note auction at 1PM EST.

We'll  also have some yet another set of S&P Case-Shiller Home Price

numbers, and also  Consumer Confidence at 7AM PST. Our 10-yr is sitting

around 1.97%, still range-bound, and MBS prices are worse by about .250.



Two Cajuns were waiting at the bus stop when a truck loaded with rolls of

turf went past.



Boudreaux said, "I'm gonna do dat when I win da lottery."



"What's dat?" asks Thibodeaux.



"Send da lawn off to be mowed!"



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 the recent news concerning REIT's, and

the possible tax implications. 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=bivtvyhab.0.epg7qedab.zy6u9cdab.8

721&ts=S0672&p=http%3A%2F%2Fwww.mortgagenewsdaily.com%2Fchannels%2Fpipelinep

ress%2Fdefault.aspx]


[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=bivtvyhab.0.v7uif6dab.zy6u9cdab.8

721&ts=S0672&p=http%3A%2F%2Fwww.thebasispoint.com%2Fcategory%2Fdaily-basis].

For archived commentaries, go to


[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=bivtvyhab.0.fpg7qedab.zy6u9cdab.8

721&ts=S0672&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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Monday, September 26, 2011

Market Snapshot 9/26/2011

Treasuries and mortgage markets opened weaker this morning with US stock indexes pointing to a better open at 9:30. Nothing happened in Europe over the weekend; lots of talk and speculation spinning around what may occur with the debt mess. Greece is at the epicenter as the clock ticks down to Oct when Greece has to have another dose of money to avoid default. Increasing conversations swirling around that Greece should actually default; the EU can't afford that to happen however. If Greece throws in the towel the fear that Portugal, Ireland and maybe Italy and Spain may take that path, that would be the end of a 12 year "experiment" in unification. But for all the concern about sovereign default in Europe, the euro remains above its average since being created almost 12 years ago, a sign that foreign-exchange traders see little chance of a collapse as officials step up efforts to keep the debt crisis from expanding.


By 9:00 this morning mortgage prices managed to hold a minor improvement from the hammering on Friday; +3/32 (.09 bp) on FNMA 30 yr mtgs. The 10 yr at 9:00 -2/32 at 1.84% generally unchanged. Treasuries have to contend with $99B of auctions this week beginning with $35B of 2 yr notes tomorrow, $35B of 5 yr notes Wednesday and $29B of 7 yr notes on Thursday.



With the Fed buying MBSs and swapping short maturities for long maturities, and saying the FF rate will stay at present lows through mid- 2013, interest rates will continue to remain low for a long time. Where the rubber meets the road though is what is the definition of low? At 1.67% the 10 yr note has backed up some, however the trend and technicals are still bullish. We continue to expect high levels of volatility such as we saw on Friday; big swings in both directions. The action in the equity markets still carries huge influence over the interest rate markets.



At 9:30 the DJIA opened +3, NASDAQ +10; 10 yr note -11/32 1.87%, mortgage prices -1/32 (.03 bp) on 30s, +3/32 (.09 bp) on 15s. By 9:50 the DJIA jumped to +100.



Next month at the ECB meeting there is increased speculation the bank will embark on lowering interest rates. The ECB had been increasing rates on concerns that inflation was increasing, that is out the window now. It should never been in the room in the first place; Europe and the US are back on the cliff edge of another recession (assuming one believes the economies actually came out of recession). Inflation is a pipe dream with very weak economic outlooks. Inflation is definitely the gorilla in the room for fixed rate investments, but these days worrying about it seems a waste of grey matter.



At 10:00 August new home sales were expected down 1.7% to 293K units (annualized); as released sales fell 2.3% but July was revised better to -0.3% frm -0.7%. 295K annualized units was about right on the number with the July upward revision. Based on sales levels there is a 6.6 moth supply, the median sales price at $209,100.00. No noticeable reaction in the bond or stock markets on the data---the only data point today.



This Weeks Economic Calendar:

       Monday;

         10:00 am August new home sales (-1.7%); as reported

      Tuesday;

         9:00 am Case/Shiller home price index for July (-4.5% annually)

         10:00 Sept consumer confidence index (46.6 frm 44.5)

         1:00 pm $35B 2 yr note auction

     Wednesday;

         7:00 am weekly MBA mortgage applications

         8:30 am August durable goods orders (+0.1%; ex transportation -0.2%)

         1:00 pm $35B 5 yr note auction

    Thursday;

         8:30 am weekly jobless claims (-4K to 419K; continuing claims 3.715 mil frm 3.727 mil)

                Q2 final GDP (+1.2% frm +1.0%)

         10:00 am  NAR pending home sales (-1.5%)

         1:00 pm $29B 7 yr note auction

   Friday;

         8:30 am August personal income and spending (income +0.1%; spending +0.2%)

         9:45 am Sept Chicago purchasing mgrs index (54.0 frm 56.5)

         9:55 am U. of Michigan consumer sentiment index (57.5 frm 57.8 two weeks ago)



Prior to the 9:30 open n the stock market the DJIA futures were trading +100 points but the open was soft, generally unchanged. The 10 yr being hit on treasury auctions this week taking mortgage prices a little lower. Last Wednesday and Thursday the bond and mortgage markets exploded on the FOMC policy statement, considering the price declines on Friday and a little weaker again this morning traders are re-thinking the magnitude of the rally and backing off. Technically we have the first support on the 10 yield at 1.87%, we hit it already this morning but so far it has held. Volatility in the bond and mortgage markets will continue this week; at these low levels markets will likely be touchy on any news as the bond market tests upside levels for rates after last week's rally.

September 26: New reasons for slow refi's; regulators lacking manpower; MISMO back to MBA; lenders/investors dealing with August locks

Have you ever heard of the Federal Financial Institutions Examination
Council? I

 must admit that I hadn't, until it released its latest report which

includes statistics

on the number of active, licensed mortgage lenders. To no one's surprise the

number

is down for the fourth year in a row. In 2006 there are nearly 9,000, and

now there

are less than 8,000 - and now folks are saying, "Less competition rarely, if

ever,

benefits the consumer." You can read the entire report here:

GutFeelingVerefied

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107836367595&s=8721&e=001w6Imkc

WyJ1wbsCExp7WkaB7NLM0uw7-P1o744RLClUeUsiJF9bMyd2SYR4JVGQBA_NUjpcxZfpQO4DAupf

Z9y7j_Cwis47tqmiWXQLprh2-1KgGmJRYxjNU1hQuIE6xL-XoGrfRqtK8=].



Sometimes banks grow weary of being sued by the U.S. Government, and decide

to sue

back. In this morning's case, BB&T, Wells, and a few others are suing the

government

over tax credits. I knew that I should have been a lawyer: BigMoney

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107836367595&s=8721&e=001w6Imkc

WyJ1yXQQQjBHsXT24YEDzPah9UW9MIOc9Pa_jsUtG5hMAknfME-vKXN8UTy0XiZnttID03FgFMgK

EDsgP6dvuFnqMX8iHgYTX_xuP03OFs7uPX40uHKyTqY7aGOCufb3_6LzrN1gJYlVmZAioFoiTRTm

7kZoGA4ujrmyc6csp6MhL2A-FbBVchmTRb].



KB Home announced earnings for the 3rd quarter: a loss of almost $10 million

versus

a loss of $1.4 million a year earlier. These results, for its quarter that

ended

 in August, include $1.2 million in charges for inventory impairments and

land option

contract abandonments, revenue down 27%, and a drop of over 30% in home

deliveries

(although the average sales price was up 6%).



Fortress Investment Group owns Nationstar, and it seems it is the front

runner for

acquiring Bank of America's correspondent channel. Critics are asking,

"Given what

makes up a 'correspondent channel,' what will Fortress be buying, exactly,

since

 it seems that many in that unit have either left or are actively seeking

employment

elsewhere?" The latest

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107836367595&s=8721&e=001w6Imkc

WyJ1wEg7jParnZNtNtAGQ_slM7A9KJBZIqx_Ij0jn68DxeCT9LNTgiUB80B10r6zsU1MnJkLbMpW

T2OwMK7bSxiD8sIhLdlhpJcVDQFqtYEDQK_pkWmtJRneifHKzooDnQVxLbk0j1nF80_FhjWw8QP4

ABZjkbceINc8pPRL2Urbvs5JY6OzyK-iMMlmhjhRlfi9wXWgM3FMZdQ9_CIX5OmA_P].



As it continues to shed assets and manpower, BofA has reached an agreement

to sell

approximately $880 million of commercial mortgages at a discount of 20% to

25% off

the face value. The buyer is a joint venture of Square Mile Capital

Management LLC,

Invesco Ltd. and a fund managed by Canyon Capital Realty Advisors LLC. The

deal,

 which includes a mix of performing and nonperforming loans tied to 32

properties,

ranks among the biggest commercial mortgage portfolio sales this year.



Bank closings picked up on Friday, with the Bank of the Commonwealth (VA)

going

to Southern Bank and Trust Company (here in the Carolinas), and out in

California

Citizens Bank of Northern California going to Tri Counties Bank. These are

government-sponsored

closures, but we've all heard of "too big to fail," but what about "too big

to merge?"

The Independent Community Bankers of America asked federal regulators to

launch

a moratorium on bank mergers and acquisitions involving financial firms with

$100

billion or more in assets. (This would put a crimp into the Capital One-ING

Direct

USA deal temporarily.) Community bankers believe that new mergers and

acquisitions

are adding risk to an already shaky financial system while concentrating

power in

larger institutions that effectively cut into the market share and

opportunities

 for smaller institutions - basically that Dodd-Frank is not having its

intended

 consequences. Imagine that.



Huh? What's this? Regulating agencies don't have the manpower to regulate

Fannie

 & Freddie? RegulatorStaffing

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107836367595&s=8721&e=001w6Imkc

WyJ1xEWBtGVMeNumzNVhFw_GteklqW10ioiJyftuMmJRG9A5sZeNSvJY_m2pqudVjDdMDr6tb-_7

iHUHknt6gXVX0KCI-GGmJ3wbOlXyCi8PMF120tPZU7p5LuY2N3-x_F689WlrVV4XFyWPefT90dnQ

HT0As4EdD7lDMUik7NyON6X3XS8TmLx-vEMNIJSGqUd7M7yDceFHE_GQq2EOZXsM_tgWB3Z9BWkK

kXuslF5-GxDA==].



Investors in mortgage-backed securities are keenly interested in the

prepayment

speeds of new and old securities - why would someone pay a 3 point premium

for a

 loan that is going to pay off in 4 months? Analysts expect that prepayment

speeds

across the various non-agency sectors should increase as mortgage rates

continue

 to go lower. In particular, fixed-rate and longer resetting prime mortgages

should

be the most responsive to the lower rate environment as a relatively higher

percentage

of borrowers are "refinance-eligible" in those sectors. In addition, some

jumbo

prime borrowers will have a significant refinance incentive for the first

time as

the mortgage rate reached historically low levels, and these borrowers

should be

 most responsive to lower mortgage rates. Some borrowers have tried to fund

high-balance

loans prior to the 10/1 loan limit date, and others are attracted to the

overall

 level of jumbo rates with a 4% handle, low 3's for a 5/1 ARM. Since closing

costs

have increased, most now assume that a borrower currently needs at least a

75 basis

point rate incentive to refinance - this population has more than doubled

since

the first quarter. Approximately 10% of outstanding prime fixed and

longer-reset

 hybrid borrowers have become newly refinanceable from a rate perspective,

and are

refi-eligible according to CLTV and payment history criteria. One should

expect

that these borrowers should be most responsive to the lower rate

environment, even

with tighter underwriting (especially on 5/1 products).



The latest move by the Fed - to reinvest mortgage payoffs back into

mortgages -

has analysts racing back to their calculators. (I still have my 25-yr old

12-C!)

 In recent years the Fed has mostly been interested in owning conventional

securities

(Fannie & Freddie) and thus investors see less demand for Ginnie Mae

production

backed by FHA & VA loans. But a good percentage of GNMA's come from new home

sales,

which show few signs of gearing up. So if the supply is poor, and demand

holds steady,

the prices should do just fine. And overall, even though the 10-yr yield has

really

dropped, and mortgage rates have as well, the MBA refinancing index has

consistently

surprised to the downside - folks just aren't rushing in to refi.



Barclays notes that, "While the main reasons for this benign refinancing

activity

have been well documented, notably, rep and warranty risk, tight

underwriting standards,

declining HPA, friction in the HARP program, and the absence of alternative

credit

in the non-agency market, two new factors have emerged, which we believe

play an

 integral role in explaining the reduced refinancing activity. First,

borrowers

refinancing their home seem to be getting a higher mortgage rate than those

purchasing

a home. This behavior has been observed for most originators and is the most

pronounced

for the largest originators including Bank of America, JPMorgan Chase, and

Wells

 Fargo. Second, even though primary-secondary spreads seem tighter this

time, originator

margins are at their widest, suggesting that originator capacity is still

limited,

and that borrowers are not obtaining as low a mortgage rate as they would if

capacity

were not an issue."

For the first time in seven quarters the level of outstanding

commercial/multifamily

mortgage debt grew in the U.S according to information released by the MBA.

The

 Association said that total debt rose $3.5 billion (0.1%) in the second

quarter

 of 2011 to a total of $2.4 trillion.  The last time total debt increased

was in

 the third quarter of 2009. Anyone who loves big numbers should check it out

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107836367595&s=8721&e=001w6Imkc

WyJ1zTzE5OIA5lNRRt2JPjZfOiYHCf8D0P8IEEVy4ZXjr-EF2cmdM3UA2rf2OThUMVB9ZHuo8Fig

dRs93_kGCC9GWL6wRyoDxi4jI2nDjBp6wI6Qjl28YqeVvkLpPqn94i9SHc8ZGzm9biRxzbmZTimz

0l].



While we're on the MBA, it and MERSCORP (parent of MERS) announced that

management

of the Mortgage Industry Standards Maintenance Organization (MISMO) will

transfer

to MBA on December 1. Folks I spoke with believe that it is for the best at

this

 point, and the rationale makes sense: RockOnMISMO

[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107836367595&s=8721&e=001w6Imkc

WyJ1xHGN6eKl4DvO0Ckj2hJzMC5cbBufupaTrdCHNnKAPnk_d-4cevVZhlNufG831DybzftkcFd2

QQJPg8L6q3C8BHXW609qKrJErE6F8oYfc4dd7hB-up7Qnx-nrdB7eXEJI0gt17O_uniKbK8zfBXF

6k].



Franklin American spread the word to clients that, "Mandatory Trades for

USDA products

are now available...USDA loans cannot be comingled with other loan products

in a

 trade, but aside from that all other mandatory delivery rules and policies

apply."



With the low rates come renewed updates on renegotiation policies. Stearns

notes,

"Float downs must lower the interest rate to the Borrower and Compensation

cannot

be increased regardless of whether the Broker is keeping it or passing it

along

to the Borrower. Loans may be relocked for a one-time maximum of 14 days.

Loans

must be ready to have docs drawn. Pricing will be renegotiated based on the

original

lock term and will use the pricing for that lock term with the following

adjustments

(to lower the rate .125% to .25% the charge will be the original lock term

pricing

minus .50 pt., to lower the rate .375% the charge will be the original lock

term

 pricing minus .625 pt., to lower the rate .500% the charge will be the

original

 lock term pricing minus .875 pt.). Any requests beyond a rate reduction cap

will

be handled on a case-by-case basis. Float downs are not allowed on FHA

Streamlines,

Jumbo, ARM or Specialty Product programs." And so on - check its bulletin

for exact

details and info on extensions.



Interbank's VP of Operations sent out this note to brokers on Friday: "We

are incredibly

behind in all team inboxes, as well as with condition uploads; Therefore, I

have

 decided it is much more important to get the conditions uploaded as fast as

possible

so they can be cleared over the weekend. We have pulled the LCs off the

mailboxes,

and are having them help with condition uploads. The mailboxes will continue

to

be behind. I'm going to put a message on the portal that we are behind in

our responses,

if their problem is of a CRITICAL nature (i.e. is a Temporary High Balance

Loan,

 or is a purchase with a lock expiring) that cannot wait until Monday (when

we expect

to be caught up), then they must contact their AE for assistance."



ClearPoint Funding introduced its, "45 for 30 for New Locked Purchase

Transactions

- receive a free 15 day extension on your 30 day pricing after the loan is

locked.

 The Fine Print: Applies to new locks only!!! Excludes all arm loans and

fixed Jumbo

loans.  Promotion valid through the end of October."

Citi released their periodic (every 3 or 4 weeks) four pages of DU, LP, FHA,

and

 VA overlays. "In order to reduce the risk of the loans we purchase, Citi

has credit

overlays in our policy in addition to agency guidelines. The attached Credit

Overlays

listing provides a summary of these overlays to help you better understand

them.

 For complete product guidelines, please refer to the Correspondent Manual."



Later this morning we'll have new home sales numbers that are expected to

remain

 anemic in August at around 295,000 units on an annualized basis (despite

record-low

30-yr mortgage rates!). New home sales have been slowing since April, but

remain

 slightly above the August 2010 low of 278,000 units. New home sales have

never

really recovered from the hangover of the first-time homebuyers' tax credit.



Looking ahead for the week, as originators along the coasts rush to close

high balance

loans, we have some Case-Shiller numbers tomorrow along with Consumer

Confidence,

Durable Good on Wednesday, Jobless Claims, GDP (the 3rd look at the 2nd

quarter),

and Pending Home Sales Thursday, and then Personal Income, Consumption, and

the

Chicago PMI on Friday. In the very early going, rates are up slightly (10-yr

at

1.85% versus the 1.81% at Friday's close) and MBS prices appear to be

slightly worse.



When our lawn mower broke and wouldn't run, my wife kept hinting to me that

I should

get it fixed.  But, somehow I always had something else to take care of

first, the

shed, the boat, making beer... always something more important to me.

Finally she

thought of a clever way to make her point.

When I arrived home one day, I found her seated in the tall grass, busily

snipping

away with a tiny pair of sewing scissors. I watched silently for a short

time and

then went into the house. I was gone only a minute, and when I came out

again I

handed her a toothbrush. I said, "When you finish cutting the grass, you

might as

well sweep the driveway."

The doctors say I will walk again, but I will always have a limp.



If you're interested, visit my twice-a-month blog at the STRATMOR Group web

site


[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 the recent news concerning REIT's, and

the possible

tax implications. 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=lx7cdyhab.0.epg7qedab.zy6u9cdab.8

721&ts=S0672&p=http%3A%2F%2Fwww.mortgagenewsdaily.com%2Fchannels%2Fpipelinep

ress%2Fdefault.aspx]

or


[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=lx7cdyhab.0.v7uif6dab.zy6u9cdab.8

721&ts=S0672&p=http%3A%2F%2Fwww.thebasispoint.com%2Fcategory%2Fdaily-basis]

. For archived commentaries, go to


[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=lx7cdyhab.0.fpg7qedab.zy6u9cdab.8

721&ts=S0672&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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