Jul. 24, 2009: Good Federal Reserve story; news from PNC, 5th 3rd, GMAC, Wells; huh, no more recession?

Jul. 24, 2009: Good Federal Reserve story; news from PNC, 5th 3rd, GMAC, Wells; huh, no more recession? Rob Chrisman

Since my son and I are soon driving south into Virginia and the Carolina’s on a trip, I have been paying attention to travel news. I see that Boeing unveiled its latest airplane, the 787 Dreamliner. Boeing says the Dreamliner is a lighter more durable airplane that will allow passengers to sit comfortably on the runway for hours and hours. On top of that, a United flight from Seattle to San Francisco made an emergency landing after a row of seats gave way and slid into the row behind it. United is taking immediate action and has added a twenty dollar surcharge for passengers who want non-collapsible seats. (No, I wasn’t clever enough to make those up by myself…)

What do employees of Federal Reserve Banks do all day? Sometimes they put out cool articles about mortgage banking that begin with, “On close inspection many of the most popular explanations for the subprime crisis turn out to be myths. Empirical research shows that the causes of the subprime mortgage crisis and its magnitude were more complicated than mortgage interest rate resets, declining underwriting standards, or declining home values.” http://www.clevelandfed.org/research/commentary/2009/0509.pdf

Have you heard the news? We’re out of the recession! (At least until the next time the market wants to focus on negative news.) Existing Home Sales rose for three months in a row, while foreclosure sales and the glut of homes on the market both declined. Interestingly, prices rose during that period in about half of those areas, but year over year prices are down about 15%. Foreclosures and short sales made up 31% of the sales in June.  Lastly, nationwide there is about a 9.4 month supply of inventory out there waiting to be sold.

How about the debt to be sold next week to fund the government? $42 billion in 2-yr notes, $39 billion in 5-yr notes, $28 billion in 7-yr notes, not to mention $96 billion in other instruments. Yowza! Where’s my checkbook? Anyway, the only news due out today is the University of Michigan Consumer Sentiment Survey. Rates have, overall, been pretty quiet all week. This morning, soon after the open, the 10-yr yield is 3.67% and mortgage security prices are slightly better than Thursday afternoon.

As far as investor news goes: 

Wells Fargo correspondent came out with their Reg Z/MDIA information, which takes effect on July 30th. Similar to everyone else’s, “The initial or early Truth-in-Lending (TIL) disclosure must now be provided to the borrower for all closed-end transactions, regardless of the loan purpose or lien position. This includes but is not limited to purchase money loans and refinances; first lien and subordinate lien loans; and principal dwellings as well as second homes…. Include the language ‘YOU ARE NOT REQUIRED TO COMPLETE THIS AGREEMENT MERELY BECAUSE YOU HAVE RECEIVED THESE DISCLOSURES OR SIGNED A LOAN APPLICATION.’, etc.

PNC Financial Services, which is where National City ended up late last year, will consolidate more than 90 National City mortgage processing operations into two (located in Pittsburgh and Chicago). They will retain their residential mortgage servicing operation in Miamisburg, Ohio. This is certainly good news for any unemployed mortgage folks in Pittsburgh and Chicago, but how about the 3,693 employees of National City’s mortgage processing operations?

Speaking of PNC, their residential mortgage banking channel earned $88 million in the second quarter 2009, down from $221 million in the first quarter. Why the drop? “Lower net mortgage servicing rights hedging gains” and “reduced loan sales revenue” were the culprits. They funded $6.4 billion, and their nonperforming assets as of June 30 increased to $4.5 billion, up $1 billion from the first quarter.

And while we’re talking earnings for the 2nd quarter, mortgage banking net revenue at Fifth Third Bancorp (in Cincinnati) was up 72% over the same quarter last year, $147 million vs. $86 million. They funded a record $6.9 billion, up from $4.9 billion for the first quarter 2009. As a result, Fifth Third had gains on mortgages sold of $161 million, and sold off some portfolio loans to make another $1 million. On the negative side, the MSR valuation adjustment, including mark-to-market of hedges, was a loss of $16 million, and they took a net charge off of $626 million for losses related to commercial and residential real estate loans in Michigan and Florida.

GMAC Bank Correspondent clients should know that after today, Correspondent Funding will no longer be accepting new submissions via Genworth’s AU Central portal.

A Catholic priest and a nun made plans to take the afternoon off and enjoy a round of golf. The priest stepped up to the first tee and took a mighty swing.

He missed the ball entirely and said, “Damn, I missed.”

The good Sister told him he needed to watch his language.

On his next swing, he missed again.  “Damn, I missed.”

“Father, I’m not going to play with you if you keep swearing,” the nun said tartly.

The priest promised to do better and the round continued.

On the 4th tee, he misses again. The usual comment followed.

Sister is really disgusted now and says, “Father John, God is going to strike you dead if you keep swearing like that!”

On the next tee, Father John swings and misses again.  “Damn, I missed.”

Suddenly a terrible rumble is heard and a gigantic bolt of lightning comes out of the sky and strikes Sister Marie dead in her tracks.

And from the sky comes a booming voice… “Damn, I missed!”

Rob

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