Agents often wonder about why the pricing on FHA loans
(which are often securitized in Ginnie Mae pools) is different than conforming
conventional loans. Looking at the basic security marketing pricing, Ginnie
Mae securities have a better price than Fannie Mae securities, given the same
coupon. Fannie and Freddie don't guarantee payments on home loans, but the
FHA does. Fannie and Freddie guarantee payment made by servicers on their
securities, similar to GNMA, but they don't guarantee payments on the
underlying collateral. That's why a GNMA historically trades at a better spread
to Treasury securities than FNMA or FHLMC securities: not only are the loan payments
guaranteed by FHA and VA, but the security payments are also guaranteed by
GNMA. Recently, however, this relationship has changed, and continues to
change, based on investors’ interest in new loan limits, investors’
loss forecasts, the ability of HUD to absorb losses, the LTV make-up of pools,
etc. By the time the basic securities market price is passed through to
borrowers and agents, FHA pricing is often worse than conforming pricing!
Jay Leno mentioned that, “Barack Obama took some time
out from campaigning recently to go on a date with his wife. And when Hillary
Clinton heard about that, she said to Bill, “Why can't you do something
like that?” So Bill asked Obama’s wife out on a date.”
(Thanks Tom M.!)
Is Washington Mutual still a force to be reckoned
with in mortgage origination? They just announced plans to slash another 1,200
jobs, or 3% of their workforce, in its home lending unit as well as support
staff in human resources and technology. Two months ago they cut 3,000 jobs,
and this latest round gives WaMu 10% fewer employees than it did at the end of
2006. And note that WaMu’s stock has declined 85% over the last year.
Speaking of declining stock prices, Lehman Brothers has
cut their mortgage holdings by 20% in the second quarter to curb further
damage after losing $2.8 billion. Their stock is down 60% this year. A good
chunk of Lehman’s holdings were/are “AAA-rated” bonds backed
by Alt-A mortgages which are priced at 70 cents on the dollar.
Let me set the record straight: I did not receive a
preferential loan from Countrywide. (Or any loan, for that matter!) Regulators
are investigating allegations that some members of Congress received special
mortgage rates from CW after word has leaked out about other “special
loans”. It is rumored that senators Christopher Dodd and Kent Conrad
(D-N.D.), among others, received lower interest rates on their mortgages
because they were friends with Countrywide CEO Angelo Mozilo. Dodd and
Conrad have denied that they knew they were receiving any preferential
treatment, and Conrad has already agreed to donate the $10,700 in savings from
his lower interest rate.
US Bank’s wholesale group announced their new
3/1 and 5/1 IO qualifying guidelines: a maximum 45% DTI, a qualifying rate using
the fully indexed rate of 1 year LIBOR + margin + 100 bps or the start rate +
100 bps, which ever is higher, and a qualifying payment: their 3/1 uses a
27 year amortization, and their 5/1 uses a 25 year amortization for qualifying
payment.
Chase is eliminating the Non-Agency
Income Express products and Liquid Express reduced documentation programs
available with their Non-Agency amortizing and interest only products.
In terms of news that is directly impacting mortgage rates,
yesterday we had the weekly Jobless Claims showing 381,000 new claims for
benefits were filed last week. This was higher than the 375,000 that was
expected, which might have helped somewhat if May's Leading Economic Indicators
(LEI) hadn’t risen 0.1%, slightly exceeding forecasts. This means that
economic activity is being predicted to rise slightly over the next three to
six months. Generally speaking, however, mortgages have done very well this
week – 30-yr prices are .375 better in price than they were at the end of
last week, in spite of 10-yr yields being very close to where they were. The
market has seemed content with the 10-yr Treasury in the 4.25%-4.10% range, and
if locks continue to slow nation-wide mortgages should continue to outperform.
There is no news today, or really much until June 24th
with the FOMC meeting and a large Treasury auction. That said, the 10-yr
yield is down to 4.14% this morning, and 30-yr prices are better than yesterday
afternoon by roughly .125 in price.
Why females should avoid a girl's night out after they are
married...
The other night I was invited out for a night with the
'girls.' I told my husband that I would be home by midnight, 'I
promise!' Well, the hours passed and the margaritas went down way too
easily. Around 3 a.m., a bit loaded, I headed for home.
Just as I got in the door, the cuckoo clock in the hallway
started up and cuckooed 3 times. Quickly, realizing my husband would
probably wake up, I cuckooed another 9 times. I was really proud of
myself for coming up with such a quick-witted solution, in order to escape a
possible conflict with him. (Even when totally smashed... 3 cuckoos
plus 9 cuckoos totals 12 cuckoos = MIDNIGHT!)
The next morning my husband asked me what time I got in, I told
him, “Midnight”. He didn't seem upset in the least. Whew, I
got away with that one!
Then he said, “We need a new cuckoo clock.”
When I asked him why, he said, “Well, last night our
clock cuckooed three times, and then swore. Cuckooed 4 more times, cleared its
throat, cuckooed another three times, giggled, cuckooed twice more, and then
tripped over the coffee table and swore again.
Rob
