Rumors of the big sale at the store (and some advertising in the local paper) were the main reason for the long line that formed in front by 8:30, the store's opening time. A small man pushed his way to the front of the line, only to be pushed back, amid loud curses. On the man's second attempt, he was punched square in the jaw, and knocked around a bit, and then thrown to the end of the line again. As he got up the second time, he said to the person at the end of the line... "That does it! If they hit me one more time, I won't open the store!"

Are big price cuts “artificially” bumping up Retail Sales? Studies have shown that consumers are shopping at second-hand stores in growing numbers, cutting back on luxuries and putting money in the bank – resulting in the highest saving rate in 16 years. We appear to be putting off visits to the doctor, not grooming our pets, choosing store brands over big-name brands and turning to do-it-yourself manicures and pedicures. And we are shedding the things we've accumulated over the years: garage-sale listings on Craigslist shot up 60% in the last year, either because we’re less materialistic or we need the money.

How is the reverse mortgage business doing? It depends who you ask, especially with all the scams in the newspaper and some in the business are worried about investors/lenders exiting – like Senior Lending Network. Rumors have circulated that Ginnie Mae was limiting their HMBS issuances and withdrawing previous authority to certain issuers while not accepting any new ones, especially in the wake of the SLN developments. Demand continues to be strong, however, with $1.6 billion so far this year versus $1.1 billion all of year. Supposedly a Ginnie Mae spokesperson said, “We do not have a limit on the level of HMBS securities we will issue for the year, nor is there a limit on new issuers we will accept.” Wall Street, never shy about making a profit, is also supposedly interested in securitizing HECM product.

Last week I raised the question about investors searching to buy loans off of originators warehouse lines. I had a few responses. One, Titan Capital, is based in Northern California and provides “secondary marketing services to both residential and commercial” operations. They also “source and place performing and non-performing loans”. Check out www.titancapital.com. The second company is located in Southern California: BOM Capital. (Bank of Manhattan.) They have set up a “vertically integrated mortgage platform”, from retail origination all the way to warehouse lending, and also engage in sales and trading along with taking positions in scratched and dented loans. Their phone number is 877-307-2664.

Hopefully these companies have more success than Guaranty Financial is currently having. Reports from MarketWatch say that Guaranty, based in Texas, is nearing its end, with about $1.5 billion in mortgage write downs and a negative net worth at the end of March. The report goes on to say that the FDIC and OTS have been trying to help raise capital, but it is hard to counter the bleeding. Based on assets ($16 billion), they are/were one of the 50 largest publicly traded financial services companies in the US.

There is news today that mortgage servicers are meeting in Washington DC to discuss how it is possible for them to carry out the directives on modifying mortgages that have been advanced by the Obama Administration. They’d better do something, as the delinquency numbers at Fannie and Freddie are frightening. According to a report from Barclay’s, two million loans are already delinquent, and 75,000 per month are falling behind. As it turns out, the agencies have the option of repurchasing the delinquent loans. This is highly doubtful, but nonetheless if they decide to do that, large blocks of mortgages will pre-pay, and any investor will see their mortgage holdings drop. Remember, investors pay a premium hoping to keep the mortgage on their books for some time. But with 5% of all Fannie loans, and 3.6% of Freddie loans, delinquent, it is a real problem. Per the study, defaults are concentrated in rates above 6%, originated in 2006 and 2007 in CA, FL, AZ, and NV, and have/had higher LTV with low FICO’s and higher loan balances. (Don’t look for any private programs for borrowers with a FICO of less than 620 and an LTV higher than 90% in the near future: their delinquency rate is 18%.)

Last week was pretty quiet with regard to economic news, and in fact rates ended the week about where they started. This week, things are a little different – there is a lot going on. We have New Homes Sales today, Consumer Confidence and the Case/Shiller Home Price Index tomorrow, Durable Goods (always a volatile number) and the Beige Book on Wednesday, Jobless Claims on Thursday, and Gross Domestic Product & the Chicago PMI on Friday. And in-between, the Treasury is selling over $100 billion of 2-yr, 5-yr, and 7-yr notes. On the flip side, the Fed has been in buying mortgage-backed securities, roughly $4 billion per day for a year-to-date total of about $682 billion. In addition, banks have been buying MBS’s: nice to see! Unfortunately rates are higher  to start the week.

A woman walked into her ex-husband's house with a chicken under her arm.
She says, "This is the pig I was in love with."
Her ex-husband retorts, "That’s a chicken, not a pig."
The woman responds, "I was talking to the chicken."

Rob

(For archived commentaries, check www.robchrisman.com, or to subscribe/unsubscibe write to rchrisman@robchrisman.com. The commentary is produced every business day, but there always seem to be vague e-mail “issues”, so if you don’t receive it, let me know.)