Jul. 10, 2009: Little in the way of news, rates somewhat quiet; the mortgage industry simplified

Jul. 10, 2009: Little in the way of news, rates somewhat quiet; the mortgage industry simplified Rob Chrisman

Women and cats will do as they please, and men and dogs should relax and get used to the idea. Many believe that Fannie and Freddie will do as they please, and everyone else had better relax and get used to the idea. What did I learn at the Western Secondary conference here in San Francisco? Well, F&F set the guidelines, but besides them there are five primary investors, in alphabetical order: Bank of America, Chase, CitiMortgage, GMAC, and Wells Fargo. (GNMA, of course, doesn’t buy loans, but insures them – see note below.) And, aside from a few exceptions, other lenders ranging from Taylor Bean, Flagstar, AmTrust, Franklin American, etc., down to small brokers, sell to them or directly to Freddie & Fannie, using the Fannie/Freddie guidelines. That about sums it up!

In an effort to save some trees, and maybe make some money, next week Flagstar “for all eligible refinance loans that close…will begin charging a $50 Paper Handling Fee to help offset some of the cost associated to traditional closings.”

According to the MBAA, the government-insured (FHA and VA loans) share of mortgage applications was nearly 36% last month, the highest level since November 1990, and accounted for almost 40% of purchase applications. Could it be because these loans require a lower down payment? Of course – and it is easy to see why many are hoping that they aren’t the next subprime nightmare: http://www.mbaa.org/NewsandMedia/PressCenter/69541.htm

The Fed purchased $17.05bn net in agency MBS over the past week, bringing its total net purchase to $638.6bn. “What happens when they run out of money?” my 86-year old Dad asked me yesterday. (He grew up during the Depression, and visits his savings in the safe deposit box every few weeks.) I replied, “Dad, you obviously don’t know anything about high level finance. They’ll just print more!”

This, no doubt accounted for the strong performance recently of mortgage securities, relative to Treasury prices. Wall Street traders say that buyers from Asia, money managers, and the Fed have all been in buying MBS’s – even the higher coupon mortgage product. And yesterday was another light news day, with initial Jobless Claims being much lower than expected at 565K, but continuing Jobless Claims were much higher than expected at 683K. The 30-yr auction of $11 billion was pretty good (4.30% yield, 50.2% indirect bids), for lack of a better term, but the market is glad to have the auctions behind it. Ahead of the open the stock market appears to be heading for negative territory. We will have some trade data this morning, but for now the yield on the 10-yr is 3.34% and mortgages are roughly unchanged – again. It has been a quiet week.

A lonely widow, age 70, decided that it was time to get married again. She put an ad in the local paper that read:   HUSBAND WANTED: MUST BE IN MY AGE GROUP (70’s), MUST NOT BEAT ME, MUST NOT RUN AROUND ON ME? MUST STILL BE GOOD IN BED!!!!! ALL APPLICANTS PLEASE APPLY IN PERSON. On the second day, she heard the doorbell. Much to her dismay, she opened the door to see a grey-haired gentleman sitting in a wheelchair. He had no arms or legs.

The old woman said, ‘You’re not really asking me to consider you, are you? Just look at you…you have no legs!” The old man smiled, “Therefore, I cannot run around on you!” She snorted. “You don’t have any arms either!” Again, the old man smiled, “Therefore, I can never beat you!” She raised an eyebrow and asked intently, “Are you still good in bed?” The old man leaned back, beamed a big smile and said, “Rang the doorbell didn’t I?”

Rob

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