Darn it - I forgot to send the
leprechaun a card! Lucky Charms turned 50 years old - but with Atlanta shut
down due to snow, there will be plenty of time for a leisurely breakfast. Time
is fast - how is it that we're almost done with January? And just to think,
anyone turning 50 this year was not alive when Kennedy was assassinated, 40
years ago the Eagles "Already Gone" was at the top of the charts, and
30 years ago Ronald Reagan was running for his 2nd term. Time
flies...Certainly the job market is flying around, with various firms hiring
and others cutting back.
Michael
Simmons, SVP with Axis AMC writes,
regarding the Newday article, "Fascinating mess of an article - stuck in a
time warp and inaccurate on a number of levels. First, HVCC was never
'retracted' - it expired statutorily in, if memory serves, November of 2010 and
was replaced, essentially intact, by AIR (Appraiser Independence Requirements).
An even bigger distortion was the false assertion that HVCC mandated that
appraisers work for AMCs. What it did require was there is a buffer between the
appraiser and anyone in loan origination ordering an appraisal. The intent was
to remove the potential threat of direct coercion upon appraisers. That did
have a substantial effect on diminishing individual intimidation of appraisers
by loan officers - but, in the view of some, replaced that personal
intimidation with institutional pressure. In truth, the explosive growth in
AMCs was the result of many lenders seeking ways to reduce their own costs and
liabilities by outsourcing. What's most disheartening in the article is the
insinuation that all AMCs are evil and fail to use local appraisers or pay
reasonable and customary fees. Under the regulatory environment today, lenders
can ill afford to use an AMC that underpays appraisers or employs a bidding
process for assignments or brings out-of-area appraisers in to do reports.
While at times uncomfortable and inconvenient, and perhaps destined for some
change, regulation that mandates best practices and compels compliant behavior
will and should endure."
Turning to the actual markets,
rates are not doing much, which is fine for those in capital markets. The
big news might be the Treasury holding its first Floating Rate Note (FRN)
auction today of $15 billion. It raises many issues: why would any
secondary guy look at floaters? Should anyone be hedging with USTs and short
rising interest rates? What about the ARM market? EPDs risk? It's tough to say,
considering there's no consumer credit built into treasuries.
What happened last week?
MBS OVERVIEW
There are no major economic releases today and no major Treasury
auctions. Today is all about the FOMC interest rate decision and policy
statement.
ACROSS THE POND
After India announced a rate hike the prior day, Turkey announced
an even bigger rate hike last night designed to stem the outflow of capital out
of their country and to prop up their currency. Initially this worked in early
trading but now the market has shrugged it off and their currency is selling
off again. This is providing a lift for MBS pricing this morning.
THE FED - WILL THEY OR WONT THEY?
They started their meetings yesterday and will release their
policy statement today at 2:00EST. The bond market is rallying in early
trading as they are SPECULATING that what is going on with Turkey and other
emerging market countries will cause the Fed to pause here.
In my opinion, this will not impact their policy - they will
announce another reduction in the pace of their monthly purchases of Treasuries
and MBS. The only question is the amount of the taper. The economic data that
we have received (including the miss in the NFP) is not enough to alter their
own economic projections and their decision to taper further is more based on
their outlook and not on the past. Also, as we have discussed several times.
The bond market has actually improved since their December meeting which
clearly gives them permission to taper again since their concern is rising
rates...and rates didn't rise...they improved.
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