Sep. 10, 2007: Industry news and some humor with the 10-yr down to 4.37%

It is generally agreed that Friday’s weak payroll report gives the Fed the motivation to lower their overnight Fed Funds’ rate. Remember that this expectation is already baked into mortgage prices and Treasury yields. The Fed’s objective to maintain economic growth is thought to outweigh any inflation concerns, and in fact the Fed now appears to be somewhat lagging as often happens in times of economic transition.  There is now a real danger of recession, and some analysts will worry that one is now unavoidable, or even that we are in one already.

Speaking of a slowdown in the economy, according to the MBAA the number of mortgage loans entering the foreclosure process in the second quarter set another record. A seasonally adjusted 0.65% of loans on one- to four-unit residential properties entered the foreclosure process during the period, the highest level in the survey’s 55-year history. In the first quarter, when the previous record was set, 0.58% of loans entered the process; a year ago, 0.43% entered the process. The delinquency survey covers more than 44 million mortgages so roughly 286,000 loans entered the foreclosure process during the quarter.  Driving the numbers were the states of California, Florida, Nevada and Arizona, said Doug Duncan, MBA’s chief economist and senior vice president of research and business development, in a news release.

First Collateral Services, the warehouse division of CitiGroup and ranked 5th in terms of commitments among warehouse banks, has decided to focus on existing customers rather than add new customers for warehouse lending. The move had been long anticipated, and their decisions were based on “our continued evaluation of the current and evolving market environment,” Citigroup said in an e-mailed statement.

Indymac plans to cut 10% of its workforce and lower its dividend, and may post a loss for the first time in at least eight years. Indymac expects to eliminate about 1,000 jobs over the next “several months” and slice its dividend in half to 25 cents a share, the Pasadena, California-based company said today in a statement. It also may report a third-quarter loss of as much as $36.8 million.

Countrywide made headlines with their possible 12,000 job cuts.

This week is relatively quiet for economic news, especially in light of last week’s Non-Farm Payroll number and next week’s Fed meeting. Tomorrow brings the July Trade Balance report, followed by weekly Unemployment Claims on Thursday and Retail Sales on Friday. The Trade Balance number is expected to show a deficit of approximately $59.0 billion, which would be an increase from June’s $58.1 billion. Also worth noting is the 10-year Treasury Note auction Thursday. It is fairly common to see some weakness in bonds before these sales as investors prepare for them. But, if the sales are met with a decent demand from investors, those losses are normally recovered after the results are announced. Friday brings us August’s Retail Sales (a measure of consumer spending, which is very important to the markets because consumer spending makes up two-thirds of the U.S. economy, and expected +0.5%), Industrial Production & Capacity Utilization (manufacturing sector strength by tracking output at U.S. factories, mines and utilities expected +0.3%), and the University of Michigan’s Consumer Sentiment Index. Let’s hope that it is better than their football team…

A young recently laid-off mortgage banker in Florida goes to a big “everything under one roof” department store looking for a job. The manager says, “Do you have any sales experience?” The kid says, “Yeah. I was sold a few mortgages.” Well, the boss liked the kid anyhow and gave him the job. “You start tomorrow.  I’ll come down after we close and see how you did.” His first day on the job was rough, but he got through it. After the store was locked up, the boss came to see him. “How many customers bought something from you today?” The kid says, “One.” The boss says “Just one? Our sales people average 20 to 30 customers a day. How much was the sale for?” The kid says, “$101, 237.65”. The boss says, “$101,237.65?  What the heck did you sell him?” The kid says, “First, I sold him a small fish hook.  Then I sold him a medium fishhook.  Then I sold him a larger fishhook.  Then I sold him a new fishing rod. Then I asked him where he was going fishing, and he said ‘down the coast,’ so I told him he was going to need a boat, so we went down to the boat department and I sold him a twin engine Chris Craft.  Then he said he didn’t think his Honda Civic would pull it, so I took him down to the automotive department and sold him that 4×4 Expedition.” The boss says, “A guy came in here to buy a fish hook and you sold him a BOAT and a TRUCK?  Is that right?” The kid answers, “No, the guy came in here to buy Advil for his visiting mother-in-law, and I said, ‘Well, your weekend’s shot; you should go fishin’.”