Is Census Bureau Cooking Books On Jobs Count?, Survey Shows Which Lenders Are Most Profitable

Survey: Which Lenders Are Most Profitable
With all of the talk in the past two years about owning a bank or not owning a bank, it is interesting to keep in mind some recent findings of the semi-annual MBA/STRATMOR Peer Group Survey. The study divided mid-level retail mortgage originators into two groups, one owned by banks and the other independent mortgage bankers. Most every mortgage bank had a grand year in 2009, but the study found that bank-owned lenders were the top earners by a rather large margin due to lower expense levels and higher net interest spreads. The next profitable group, earning a margin 20% less than their bank-owned brethren, was net branch lenders. This group actually saw higher revenues, but had the highest expense levels. Standard branch independents came in third, about 20% less in profits than net branch lenders.

The MBA/STRATMOR study raises some interesting questions, fine for me to raise but far above my pay-grade to answer. Can the bank-owned lenders sustain their cost advantage in 2010 with lower industry volumes? Is some of this cost advantage due to the bank exemption from state and LO licensing requirements, and if so will it continue under consumer protection legislation? Do these results validate the net branch business model in comparison to the corporate branch model? And, if the mortgage industry ever has a “normal” year, will standard branch lenders fare relatively better or worse?

Anyone interested in learning more about the study can visit the MBA/STRATMOR website.

Treasuries Highest In 2 Weeks
What difference does it make that after the commentary went out yesterday, the market saw Factory Orders come out at +1.2%, lower than expected? Or that the ISM Non-Manufacturing Index was steady at 55.5 for May – still expansionary. Yesterday the decent news pushed the 10-year note’s yield to its highest level in two weeks, and mortgage selling really picked up yesterday, especially while the Treasury market was rallying. Traders estimate about $1.5 billion of new production came through their phone lines, but buyers were waiting and mortgage prices did well relative to Treasury prices. Not that this impacts current-coupon originators, but 5.5%-6.5% MBS’s hit record high prices of 107, 108, and 109! Where’s the prepay risk?

Is Census Cooking Books On Job Count?
Everyone seemed to think that Nonfarm Payrolls were going to increase significantly. Census hiring, a big wild card in this government-sponsored era, has fallen way below the bureau’s original estimate of 700-800,000 jobs, and is probably less than 200,000. But even the Census Bureau numbers have been called into question lately. The New York Post reports that although this hiring has been decent over the last few months, the Labor Department

“doesn’t check the Census hiring figure or whether the jobs are actually new or recycled. It considers a new job to have been created if someone is hired to work at least one hour a month. One hour! A month! So, if a worker is terminated after only one hour and another is hired in her place, then a second new job can apparently be reported.”

Poor Jobs Report
Non-Farm Payrolls were up 431,000, but the private sector was up only 41,000. In fact, the census workers accounted for 411,000. Although there were March and April revisions, this is a weak number, and stock market numbers plunged on the news. The unemployment rate fell to 9.7% from 9.9% – certain to make the headlines tomorrow. Hourly Earnings were up 0.3%. A jobless recovery anyone? The 10-yr. is down to 3.24% after being above 3.40% yesterday and 30-yr mortgage prices are better by around .5. Yesterday not only did rates go up, but the stock market fell as well. What a difference a day makes, as today we are seeing stocks tumble after a weak jobs number, but fixed-income prices improve nicely. You can read all the flowery language you want, but it boils down to a poor job market continuing to show that our economy is sluggish, leading to a lower stock market and continued lower rates.

Daily Humor
(As always, the joke does not necessarily reflect the view of the author.)

A woman, married three times, walked into a bridal shop one day and told the sales clerk that she was looking for a wedding gown for her fourth wedding.

“Of course, madam,” replied the sales clerk, “exactly what type and color are you looking for?”
The bride to be said: “A long frilly white dress with a veil.”

The sales clerk hesitated a bit, then said, “Please don’t take this the wrong way, but gowns of that nature are considered more appropriate for brides who are being married the first time – for
those who are a bit more innocent, if you know what I mean. Perhaps ivory or sky blue would be nice?”

“Well,” replied the customer, a little peeved at the clerk’s directness, “I can assure you that a white gown would be quite appropriate. Believe it or not, despite all my marriages, I remain as
innocent as a first time bride. You see, my first husband was so excited about our wedding; he died as we were checking into our hotel. My second husband and I got into such a terrible fight in the limo on our way to our honeymoon that we had that wedding annulled immediately and
never spoke to each other again.”

“What about your third husband?” asked the sales clerk.

“That one was a Democrat,” said the woman, “and every night for four years, he just sat on the edge of the bed and told me how good it was going to be, but nothing ever happened.”