Feb. 24, 2012: MI companies watching for the FHA MIP increase; BofA & Fannie – does it matter? The CFPB needs board members Rob Chrisman
“First wash all the cars, then wax.” “Why do I have to…” “Remember deal. No questions.” “Yeah, but…” “Wax on right hand. Wax off left hand. Wax on, wax off. Breathe in through nose, out through mouth. Wax on, wax off. Don’t forget to breathe. Very important.”
Wax on, wax off, risk on, risk off. Fixed income traders here in the U.S. love to talk about the “risk on, risk off” trade. What does that mean? Traditionally, whenever there is risk, the majority of investors will put their money into a safe place. And for bond folks, this is usually the U.S. fixed-income markets. So when things are going awry overseas, money tends to come into the U.S debt markets, which includes mortgage-backed securities, pushing prices higher and rates lower.
That doesn’t necessarily mean every LO should be rooting for civil unrest and the collapse of Greece, however. But just look at some of the things that have happened out there: Chinese manufacturing contracted for the 4th straight month. Iran refused to let inspectors into certain nuclear sites, Euro manufacturing came in lower than expected, Fitch downgraded Greece, the Bank of England minutes came out more dovish than expected, oil prices are above $108 per barrel…the list goes on and on. Meanwhile, our rates and currency remain relatively stable, and our markets relatively liquid: a safe haven – and this is helping our mortgage rates.
There is plenty of blame to go around for the mess we’re in: borrowers, brokers, lenders, investors, appraisers, rating agencies, investment banks, and so on. The rating agencies have begun to come under more scrutiny, since their role ties together many of these parties. Credit rating agencies have been widely criticized in recent years for the poor performance of their ratings on mortgage-backed securities (MBS) and other structured-finance bonds. In response to the concerns of investors and other market participants, the 2010 Dodd-Frank Act incorporates a range of reforms likely to significantly reshape the rating industry. Too lengthy to mention in this commentary, more details can be found at
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