If you are interested in seeing HUD's "Final Rule" on increasing the required net worth of FHA-approved mortgagees, eliminating FHA approval of loan correspondents, etc, go HERE .
Through FHFA, both Fannie Mae and Freddie Mac have had their stocks delisted by the NYSE. Both stocks have traded below $1 per share on average for the last 30 days, so the news was expected. Still, the news does not help anyone who still holds the stock. Both stocks will trade on the Over-the-Counter's "Bulletin Board".
Freddie also sent out a bulletin that is bound to influence large investors, and in turn, all originators. Freddie adjusts it Planned Unit Development program (rescinding plans for project review, and going back to its PUD project review requirements previously in place), its Freddie Mac Relief Refinance and Relief Refinance Open Access Mortgages, interested party contributions, and it removed the restriction that requires Sellers to obtain Freddie Mac approval to sell Texas Equity Section 50(a)(6) Mortgages. HERE IS THE BULLETIN
Moody's cut Greece's credit ratings to junk status (Ba1). Greece has been downgraded to non-investment grade and Spain cannot seem to find any funding to rescue its savings banks. Of course, the rate on any fixed income security tied to Europe has gone up to compensate investors for the risk, and prices have dropped. The risk of owning Europe's corporate bonds is the highest on record relative to U.S. company debt. The 12-month bill, which paid an average yield of 2.303 percent after 1.59 percent in the same auction in May, and the 18-month, which gave 2.837 percent, up from 1.951 percent, were seen as litmus tests for a more important 10- and 30-year bond auction tomorrow. Even France raised its retirement age from 60 to 62, sparking protests - although it won't happen until 2018.
Fortunately US recessionary "double-dips" are exceptionally rare. There have been only three episodes in US business cycle history when the economy lapsed back into recession within a year of the previous recession ending: 1913, 1920, and 1981. (Since 1854 there have been 33 recessions and only three instances when the economy lapsed back into recession within 12 months of exiting the previous downturn.) So this, combined with the fact that US exports to the Euro Zone only account for about 1% of our GDP, lead smarter minds than mine to believe that any chance of a double dip are minimal.
US Bank's National Wholesale Sales Division, obviously being alert to Freddie's LP no longer accepting IO loans last weekend, told clients that certain USB IO programs would require a manual underwrite. For these 3/1, 5/1, and 7/1 IO ARM programs, standard documentation is required for manual underwrites, and LP and DU are not allowed. "AUS decisioned documentation on these loans is no longer eligible for funding or purchase unless final underwriting approval has been issued and the loan does not require resubmission to LP or DU."
We continue to see signs of improvement in the jumbo market. Luxury Mortgage is offering IO jumbo loans up to $4 million with cash out, for 2nd homes, for condos for borrowers with a minimum FICO of 700. Wells Fargo's wholesale channel is giving a .250 interest rate deduction on non-conforming loans "for borrowers who enroll in the Preferred Payment Plan" where their mortgage payment is automatically deducted from the Wells Fargo bank account. Bank of Internet, staffed heavily by ex-Thornburg Mortgage vets, just announced a Jumbo and Super Jumbo portfolio loan program in California. (The goal being a high level of service.) BofI plans to portfolio the jumbo home mortgage loans that it originates through this new program, so apparently will be accepting pledged assets, will vest in entities, and "freedom to make common sense underwriting decisions." Thornburg II?
Radian announced that the performance of its mortgage insurance operations has begun to stabilize. Its CFO said that, "While we believe the recovery to a more normal economic environment will be slow, there are many signs that the worst is behind us." In the first quarter, Radian set aside $529.1 million to cover losses from mortgage insurance, a rise of 64 percent from the previous year, and in May said it would sell $550 million in stock to fund capital needs.
In its 20th year for the survey, yesterday the National Association of Home Builders released the monthly Housing Market Index. Anything above 50 indicates that that more builders view conditions as good than poor - and it came in yesterday at "17". After recording month over month improvements in April and May, home builder confidence fell. At this point, which ties into today's news, some economists warn that not enough U.S. homes are being constructed to keep up with potential demand. It takes several months to build a house. Once the job market rebounds, the concern is that pent-up demand could overwhelm unprepared markets and result in shortages and rising prices. At least, that is what home builders are claiming, and may go to the government for some type of funding. Still, builders are hoping for an improving economy, rising employment, low rates, and stable home values - quite a wish list. READ MORE
Last week lock desks were busy, much to the relief of those in the biz, and applications jumped to a five-month peak. Purchase apps were up over 7%, and refi apps were up over 21%, leading to an overall application index number of +7.7%. Refinances accounted for almost 75% of the apps. MND SAYS THE JUMP IS A FACTOR OF REDUCED CLOSING COSTS
Stocks did very well yesterday, which of course grab the headlines in spite of bond trading volume being much greater than stock volume. Mortgage prices, and rates, continue to do well relative to Treasury securities. Mortgages are seeing twice as much interest, given that they are a dollar-denominated asset, and supply is much less than demand. Yesterday, for example, MBS trading was once again below normal. But all rates edged higher. Mortgages finished the day worse by about .250 for current coupons on rates sheets around the nation. Blame it on the equity markets.
Today we have already had the Producer Price Index. Here are the results: MAY PPI -0.3% vs. concensus estimates of -0.5% vs. April -0.1%. Year over year the PPI is +5.3%, excluding food and energy, PPI is up +1.3 % vs. last May. We also had May Building Permits at 8:30. They declined 5.9% and Housing Starts fell 10%. This was worse than expected. Some would say, "Why build new houses when there are so many old ones on the market?" Housing continues to be a weak point in the economy, in addition to the employment picture, despite a huge amount of help from the government. Housing Starts were expected to be down quite a bit (but a 19-year low?), and may signal a trend which some believe will last several months. Mortgage applications for purchases are now down 49 percent from their April peak and the rate of delinquencies and foreclosures continue to rise. Consequently, housing starts should pull back in the second and third quarters, but begin to pick up some momentum later in the year. We also had Capacity Utilization (74.7%) and Industrial Production (+1.2%). After all this news the 10-yr is at 3.28% and current coupon mortgage prices are better by about .150.
An old prospector shuffled into the town of El Indio, Texas, leading an old tired mule. The old man headed straight for the only saloon in town, to clear his parched throat. He walked up to the saloon and tied his old mule to the hitch rail.
As he stood there, brushing some of the dust from his face and clothes, a young gunslinger stepped out of the saloon with a gun in one hand and a bottle of whiskey in the other.
The young gunslinger looked at the old man and laughed, saying, "Hey old man, have you ever danced?"
The old man looked up at the gunslinger and said, "No, I never did dance... never really wanted to."
A crowd had gathered as the gunslinger grinned and said, "Well, you old fool, you're gonna' dance now," and started shooting at the old man's feet.
The old prospector, not wanting to get a toe blown off, started hopping around like a flea on a hot skillet. Everybody was laughing, fit to be tied.
When his last bullet had been fired, the young gunslinger, still laughing, holstered his gun and turned around to go back into the saloon. The old man turned to his pack mule, pulled out a double-barreled shotgun, and cocked both hammers. The loud clicks carried clearly through the desert air.
The crowd stopped laughing immediately. The young gunslinger heard the sounds too, and he turned around very slowly. The silence was almost deafening. The crowd watched as the young gunman stared at the old timer and the large gaping holes of those twin barrels.
The barrels of the shotgun never wavered in the old man's hands, as he quietly said, "Son, have you ever kissed a mule's rump?"
The gunslinger swallowed hard and said, "No sir, but...I've always wanted to."