Q: What’d the
0 (zero) say to the 8?
A: “Nice
Belt.”
Speaking of belts,
and their tightening, a survey says that
“48% of all millionaires say the outlook for the economy is gloomy. The
other 52% are no longer millionaires.” Will Rogers defined a recession as “when
your neighbor is out of work, and a depression is when you’re out of
work”. Jokes aside, Economists define a recession as two quarters of
negative GDP growth, whereas a depression is 3 years of it and/or a decline in
real GDP of 10% or more. We’ve had a 6.7% decline so far in the 2nd
half of 2008, so great interest will be placed on this quarter’s
numbers. Tell that to builder Toll Brothers, the largest U.S. builder of
luxury homes, who just reported their 6th consecutive quarterly loss. The
NAR is predicting that sales of newly built properties probably will fall to
their lowest level in 46 years of data.
Guarantee Bank has left
many small and mid-size mortgage banks with one less warehouse option. In a
phone call to clients, they are exiting the business, although many companies
that use Guarantee have several months to find new lines from warehouse firms
like First Tennessee or Comerica.
Following other
banks like BofA, Chase, Citi, and PNC, U.S. Bancorp (the 8th largest bank in
the US)
cut its dividend 88 percent. Prior to
2008, U.S.
Bancorp had announced dividend increases in 36 straight years.
Last week lock
desks around the nation noticed that locks fell. The MBAA reported
that mortgage applications for the week ending Feb 27th fell for the second
week in a row by 12.6%, with refinancing applications down over 15% and
purchases down almost 6%. This follows the previous week’s number showing
a drop of over 15%. Are homeowners and potential homeowners waiting for lower
rates? Perhaps, but the slowdown is giving Ops staffs a chance to catch up
on processing, underwriting, drawing docs, funding, and warehouse lines,
although management teams are hoping that lower applications are not here to
stay. If so, it will not bode well for April numbers. The industry is
already seeing mortgage companies reduce their profit margins slightly, or in
some cases reducing margins but raising fees. Talk of upfront lock fees is
increasing, and many brokers are charging borrowers for appraisals at the start
of processing.
According to Sheila
Blair, chairman, the FDIC is investigating more than four-thousand cases of
alleged mortgage fraud worth more than $7 billion. Unfortunately the FDIC
only has 56 employees*. Blair also expects an increasing number of civil suits
against mortgage brokers and others who allegedly defrauded lenders. *OK, I
made that up. In fact, the FDIC is actively hiring new staff: http://www.npr.org/templates/story/story.php?storyId=101097890&ft=1&f=1001
CitiMortgage
Correspondent announced new MI FICO and LTV criteria, effective 3/9. Many
investors are already at these levels already, and some may be considering
raising the bar further. “To obtain Mortgage Insurance for Loans with LTV
> 80%, regardless of documentation process, the following criteria is
generally now required by the MI companies: A credit score of 660 or greater
for Full Amortization Loans for a primary residence &second home under a
purchase or rate/term refinance, a credit score of 680 or greater for
Interest-Only Loans, a credit score of 720 or greater for Cash-out Refinance
Loans, a credit score of 700 or greater for Agency Jumbo Loans, and, in Florida, if the property
is located in a declining market as designated by the MI companies, the
property must be a detached 1-unit property.
Ok, so what is
going on today in the market? Rates are higher, prices lower, primarily
attributed to stable stock markets rather than anything else. This could
balance out yesterday’s rate improvements. It appears that most
lenders are locking 30-yr loans between 4.75% and 5.25%, with the Fed
continuing to buy securities that hold those rates. The ADP Employer Services
said U.S.
private employers cut 697,000 jobs in February, and although the correlation is
always questionable, it has caused the market to wonder about Friday’s
unemployment data. That does it for the day on scheduled news, although we will
see the Fed’s Beige Book out in several hours along with the expectation
that the Treasury will announce $60 billion in new issue debt tomorrow. The
yield on the 10-yr Treasury, also of questionable correlation to mortgage rates
recently, is currently 3.02% and mortgages are a shade worse than yesterday
afternoon.
My wife sat down on
the couch next to me as I was flipping channels.
She asked,
“What's on TV?”
I said,
“Dust.”
And then the fight
started...
Rob
(For archived
commentaries, check www.robchrisman.com, or to subscribe
write to rchrisman@robchrisman.com)
