Jul. 17, 2008: Rates continue to worsen on signs of strength in the economy, and introducing our new 90% NINA product!

Jul. 17, 2008: Rates continue to worsen on signs of strength in the economy, and introducing our new 90% NINA product! Rob Chrisman

Just kidding about the NINA – sorry. It sure has a catchy ring, and harkens back to “the good old days”. Most folks still in the business feel that many of the “bad apples” have left the industry, whether they are companies or individuals. (Unfortunately, of course, many “good apples” are no longer in the mortgage industry either.) And agents will admit that the products are more sensible now. “I couldn’t believe that investors were buying that stuff” is a common refrain that I have heard, along with “That product was way too aggressive”. But I bet that if an investor actually re-introduced something out like that, every agent, and their brother, would jump at it again.

I have my life savings over at Frank’s Thrift and Loan. How do I know that Frank’s isn’t on the FDIC Watch List for threatened savings institutions? I don’t. (Granted, my $1,239.08 balance doesn’t come anywhere near the $100k FDIC insured amount.) The closest one can get is http://www.fdic.gov/bank/individual/bank/index.html

Wells Fargo’s stock skyrocketed yesterday, up over 30% in one day, after their earnings announcement. Will JPMorgan Chase’s do the same? Their earnings plunged in the second quarter, which include $1.1 billion in write-downs, but were still better than expected! Chase reported net income of $2 billion in the second quarter, a 53% drop from $4.2 billion in the second quarter of 2007, but without the $540 million net loss stemming from the acquisition of Bear Stearns in May, net income would have been $2.5 billion.

In underwriting news, Downey now longer allows more than 5 financed properties and DTI can’t exceed 40%.

The economic news yesterday and today points to a stronger economy. The Labor Department said that Jobless Claims rose by a less-than-expected 18,000 last week to 366,000. The four-week average of new jobless claims, which decreases the volatility somewhat, fell to 376,500 from 381,000 the week before, the second consecutive weekly drop. Are things improving in the jobs sector? Are the unemployed merely taking lower paying jobs just to have one? It was the 12th straight week that these continued claims were above 3 million, a sign the slow U.S. economy has made it harder for workers to find jobs. We also had Housing Starts increase 9.1%, partially blamed on a New York housing law about to take effect, but nonetheless the Commerce Department said housing starts set an annual pace of 1.066 million units in June, the highest since February. Building permits climbed to 1.091 million, higher than the 960,000 expected. We still have the Philadelphia Fed index ahead of us. Yesterday we got hit with a rallying stock market, a high Industrial Production number, a high Capacity Utilization number, and a CPI that came in at a lofty 5%. Suddenly the 10-yr is back up to 3.97% and mortgage prices are worse by another .75 in price versus yesterday, 1 point worse than Tuesday afternoon!

Fed Chairman Bernanke wrapped up his testimony yesterday, saying that there are “significant downside risks to the outlook for growth,” and “upside risks to the inflation outlook have intensified.” He said that stabilizing financial markets remains “a top priority” – a good thing! Did the news cause anyone to re-think their opinion about GDP, or the odds of a Fed overnight rate hike? Yes: Barclays revised their GDP growth and federal funds rate outlook, increasing their 2nd quarter estimate, but lowering it for the 2nd half of 2008. In addition, they are pushing back their guess of the first Fed rate hike to March 2009. The market believes that the odds are 93% that the Fed Funds rate will remain at 2% in August.

After retiring, I went to the Social Security office to apply for Social Security. The woman behind the counter asked me for my driver’s license to verify my age. I looked in my pockets and realized I had left my wallet at home. I told the woman that I was very sorry, but I would have to go home and come back later.

The woman said, “Unbutton your shirt.” So I opened my shirt revealing my curly silver hair.

She said, “That silver hair on your chest is proof enough for me,” and she processed my Social Security application.

When I got home, I excitedly told my wife about my experience at the Social Security office.

She said, “You should have dropped your pants. You might have gotten disability, too.”

And then the fight started…

Rob