Oct. 12, 2007: Who is Hannie Mae? And who says that the economy is slowing?

Oct. 12, 2007: Who is Hannie Mae? And who says that the economy is slowing? Rob Chrisman

If you stare at the keyboard long enough, you realize that “typewriter” is the longest word that one can type from the top row of keys.

A few months ago, the Hispanic National Mortgage Association, a privately held San Diego company nicknamed “Hannie Mae,” began buying ITIN mortgages from lenders. (“ITIN mortgages” are loans with applicants who have an individual taxpayer identification number, the fixed-rate loans are designed for immigrants who can prove they are creditworthy and pay taxes even though they don’t have legal permanent residency. Few are done compared to the $2.8 trillion mortgage market, but for loans more than 90 days in arrears, ITIN mortgages have a delinquency rate of about 0.5% compared with 1% for prime mortgages and 9.3% for subprime mortgages extended to those with spotty credit histories.)

Once it has bought the loans, HNMA packages them into securities for investors. HNMA puts the ITIN mortgage market potential at $85 billion. But it estimates that the niche market has generated only $2 billion in loans overall because relatively few banks offer them. Banks in the Midwest have been the most aggressive in offering ITIN loans: currently, Illinois, Georgia, Indiana, Wisconsin and Texas are the top producers of ITIN mortgages, accounting for about 70% of the volume insured by MGIC. Despite the high-yield potential of ITIN mortgages, the majority of players in the ITIN-mortgage segment are small banks rather than large national institutions, since concern over the controversy that can erupt over serving the illegal-immigrant community is widely regarded as preventing big banks interested in the Hispanic market from joining the fray. Warehouse banks are also very cautious in this environment regarding these loans.

Downey Financial Corp., Newport Beach, Calif., citing a “continued weakening in the housing market,” says it will take a charge of $82 million in the third quarter to cover credit losses on its mortgage business.

Yesterday rates went up, and 10-year Treasury note prices fell, as Jobless Claims fell and stock markets around the world rallied. Unfortunately this is continuing today. Retail Sales were +.6%, ex-autos +.4%, the Producer Price Index was +1.1% (year-over-year up a whopping 4.4%), ex-food & energy it was +.1% (year-over-year +2.0%). Yesterday Treasury notes’ yield rose to a three-week high as the sense that the Fed is temporarily done easing rates increased. Yes, the housing market is bad, but so far its impact on the overall economy appears to be contained. And, from the average person’s point of view, given the crowded airports, crowded malls, and “help wanted” signs that seem to be everywhere, some parts of the economy are indeed doing very well. At 7AM PST August’s Business Inventories are expected +0.3% and the University of Michigan Consumer Sentiment Index is expected to have edged a little higher to 84.0 from 83.4.

Someone reported to the police that a boy had been beaten up.  After rescuing the boy and making sure he was okay, the police told him that they would take him to his mother.

The boy said, “Don’t take me there; she beats me.”

“Okay, then we’ll take you to your dad.”

“No.  He beats me, too.”

“Then, where would you like us to take you?”

The boy said, “Send me to the Miami Dolphins; they don’t beat anybody.”