Catholic Dog
Muldoon lived alone in the Irish
countryside with only a pet dog for company. One day the dog died, and Muldoon
went to the parish priest and asked, "Father, my dog is dead. Could ya' be
saying a mass for the poor creature?"
Father Patrick replied, "I'm afraid
not. We cannot have services for an animal in the church. But there are some
Baptists down the lane, and there's no tellin' what they believe. Maybe they'll
do something for the creature."
Muldoon said, "I'll go right away
Father. Do ya' think $5,000 is enough to donate to them for the service?"
Father Patrick exclaimed, "Sweet Mary,
Mother of Jesus! Why didn't ya tell me the dog was
Catholic?"
For brokers, "Great news to get your business kick started
in March. Carrington Mortgage Services, Wholesale Lending has
made the process easier and the experience better for its brokers with the
following changes: First, management is removing automatic appraisal review
for conventional loans, and eliminating automatic VOD requirements for purchase
and refi loans. All 4506T requirements are being revised based on
AUS. Finally, pre-closing VVOE on Streamline & VA IRRRL loans were
removed. These are just a few of the changes made recently in Carrington's
ongoing effort to become easier to use and with a commitment to their
'under-served' strategy!" Brokers new to Carrington should contact Matt Evans, VP
Sales West, (949-517-6033) or Sam Bjelac, VP Sales East, (410-603-8053).
For upcoming events and training...
If you need more high quality purchase leads then you need
to make sure you and your team attend the complimentary webinar titled 5
High Impact Purchase Business Generators this Thursday, March 9th at 2
p.m. EST. This success webinar, part of the National
Mortgage Professional Magazine Webinar Series, is presented by nmpU's President
and Head Coach, Ron Vaimberg and is sponsored by REMN Wholesale. Ron will teach
you simple highly effective strategies for generating purchase leads and
referral relationships without spending a dime on marketing. When you
attend, you will learn exactly how to leverage existing lead generation
opportunities right in front of you. He will also provide you with the exact
steps to implement lead generators that bring highly qualified
prospects. To register for this complimentary webinar please click here.
Wednesday March 15th, FHA's National Servicing
Center will provide a free online overview of FHA-Approved Servicer requirements
including: early delinquency activity, timelines, general loss mitigation, and
collection best practices.
Wednesday March 22nd, join FHA's free
online webinar on FHA's option priority waterfall
and the process steps to be followed when evaluating owner-occupant borrowers
for home retention options.
Wednesday March 29th, The Federal Housing
Administration's (FHA) National Servicing Center will provide guidance
on HUD's FHA-HAMP Loss Mitigation Home
Retention Option.
Valuation Management Group is pleased to announce a
co-hosted educational event. Fannie Mae is presenting a free webinar for residential real
estate appraisers on Wednesday, March 29 at 11 am EST. This
webinar will cover collateral policy, technology guidance for appraisers, and
the latest information on Fannie Mae's appraisal policies.
Are you looking for something more than the typical
mortgage conference to attend this year? I recommend checking out Todd Duncan's Sales Mastery Event. I attended Sales
Mastery last year and can tell you first hand that it is head and shoulders
above the typical conference experience. This year is the 25th anniversary of
this industry changing conference and will be in San Diego California October
3-6. I'll be there, how about you?
Capital markets
A Fed exit from buying $1-2 billion a day of agency MBS is
becoming increasingly priced into MBS prices, masked by tightening credit
spreads. The Fed outlook gives rise to distinct tail risks in MBS which we
detail as an alternative to the more cheerful market consensus.
Due to their duration, 30-year mortgage prices generally follow
5 or 7-year Treasury securities. If you knew, for sure, that rates were going
to go up, why would you buy a long-term fixed-income security, like a 30-year
T-bond? Certainly not to guarantee that the value of your asset would decline,
or lock in a lower rate of return than you could earn later in the year.
Investors in 30-year risk-free bond issues by the U.S. Treasury can look
forward to a steady income stream. The long-end of the Treasury market, like
securities backed by mortgages, has become a bit of a commodity and it's driven
by a scarcity and liquidity valuation.
What moves the supply is pretty simple: issuance by the
U.S. Treasury, determined by its need for funds, as well as sales by investors
and traders of existing securities. The demand side, however, is more
complicated. For example, a few years ago, signs of uneven economic growth and
escalating tensions between Russia and Ukraine pushed investors into the safety
of U.S. debt. Pension plans, which oversee $16.3 trillion, have shifted into
longer-term Treasuries to lock-in stock gains by matching assets with their
future liabilities as funding deficits narrow.
Pensions that have seen their financial positions improve
in recent years often put money into longer-dated Treasuries to reduce
volatility after a provision in the Budget Act of 2013 raised the amount
underfunded plans are required to pay in insurance premiums over the next two
years. It also imposed stiffer fees on those with shortfalls.
And don't forget the New York Fed. The central bank bought
nearly $5 billion a day in Treasuries and mortgage bonds during Quantitative
Easing (QE). It is now down considerably from that level, investing whatever
pays off in its asset holdings. But foreign investors and pension funds have
stepped in. Overseas investors own trillions of dollars of U.S. Treasury debt,
and foreigners (China & Japan come to mind) have increased holdings of
Treasuries every year since at least 2000.
Foreign central banks are choosing to park their currency
reserves in Treasuries because they offer higher returns relative to other
nations - especially if other countries offer negative returns.
So, what makes up long term rates, especially the 30-year
Treasury bond? It is made up of three components. The first is the real long
term interest rate, which is influenced by longer run forces such as
population, demographics, real force riskless, and demand. The second is
inflation expectations: where do you think inflation is heading? And the third
is cyclical risk premium. Investors require compensation for the risk of a
bond's price falling, which tends to happen if rates go up while the Fed fights
inflation. The last recession we had was induced by financial instability, not
inflation or lack of inflation, and investors demand a premium for this risk.
Looking at actual rates from last week, U.S. Treasuries
and agency MBS prices ended Friday's session little-changed as the FOMC
completed its mission to guide markets into pricing in a March 15 Fed rate
hike. Both Fed Chair Yellen and Fed Vice Chair Fischer came as close as they
ever do to explicitly supporting a rate hike at the next FOMC meeting, which
complemented various other Fed speakers last week saying similar things. (The
only piece of U.S. economic data Friday was the ISM Services Index, which beat
expectations and touched its best level in 16 months.) And thus we find the
Federal Reserve's officials generally supportive regarding a 25bp rate hike at
the upcoming March FOMC meeting.
This is already built into the market. Going in to Friday
a rate hike was already largely priced in with odds near 80% ahead of the
speeches for the March 15 meeting. Fed Chair Yellen's commented, "At our
meeting later this month, the Committee will evaluate whether employment and
inflation are continuing to evolve in line with our expectations, in which case
a further adjustment of the federal funds rate would likely be
appropriate."
We wrapped up the week with the 10-year at 2.49% - we've
been there before. Unlike last week, however, we have a lot of scheduled news.
Today at 10AM ET we have Factory Orders. Tomorrow are the January Trade
Balance. Wednesday is the usual MBA Mortgage Index for last week, February ADP
Employment Change, Q4 Productivity and Unit Labor Costs, and a $20 billion
10-year Treasury auction. Thursday things keep going with February's Export
Prices ex-ag and Import Prices ex-oil, Initial Jobless Claims, and a $10
billion 30-year Treasury auction. Friday we'll have the entire February employment
situation with hourly earnings, nonfarm payroll, and the unemployment rate. To
start the week rates this morning are a shade better with the 10-year yielding
2.47% and agency MBS prices better by a couple ticks.
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