Why You Shouldn’t Give Out Your Social Security Number On The Radio
Does the name “Todd Davis” ring a bell? He is the CEO of a company called LifeLock, and he made the news a while back by broadcasting his Social Security Number in radio ads to show confidence that his identity couldn’t be stolen. Phoenix New Times reported that, based on police reports, Davis appeared to be the victim of identity theft at least 13 times, which was 12 more times than previously known. LifeLock’s current ad slogan is “Real Protection. Real Peace of Mind.” But folks apparently rose to the challenge of using his identity! The article is a little sensationalized, but the moral of the story seems to be what I tell my kids: Don’t give out your social security number on the radio.
Reinventing Ratings Agencies
Lookout Moody’s, S&P, and Fitch – there’s a new kid on the street. Jules Kroll, founder of Kroll and current principal of K2 Global Partners, plans to launch Kroll Bond Rating this summer. The man credited with modernizing the intelligence and security sectors will target mortgage-backed securities (MBS). For those playing at home, there has been 1 (one) non-agency MBS issued in 2010. His plan is that instead of relying on the issuer-paid model for running the rating agency, a consortium of institutional investors will own 30% to 40% of the company and before investing in a product will require a Kroll bond rating. Institutional investors would include public pension funds, corporate pension funds, endowments and universities, with each owning a small segment of the company. Issuers such as Redwood Trust will have to pay for the rating up front, with the actual rating based more on due diligence and auditing rather than basic assumptions used in the past by existing rating agencies.
European Debt Crisis Explained With Humor
This is the best explanation of the European debt crisis that I have heard, and with English humor – the English version of Bob and Ray. So if you can spare 2-3 minutes and have sound to hear how broke countries are supposed to pay other broke countries back for loans, check this out.
Implementing Euro Bailout
U.S. Treasury Secretary Timothy Geithner said that financial markets want to see euro zone countries put into action their $1 trillion standby package designed to stabilize the euro – talk is fine, but let’s see some action.
Status of Financial Reform Bill
Sometimes Congress acts quickly, sometimes not. The House passed its version of the Financial Reform Bill 6 months ago. The Senate passed its version recently. But now what? The House and Senate bills must be reconciled. Representative Barney Frank, a fierce critic of Wall Street and close ally of the Obama administration, will head a House-Senate committee to hammer out a final bill on financial regulation reform. Alongside him will be Senator Christopher Dodd, author of the Senate bill. Senator Blanche Lincoln will be on the committee. House Speaker Nancy Pelosi has the responsibility for naming the members of the panel from the House. She may wait until the second week in June to do that, after the June 8th election. Most analysts expect a bill to be passed prior to the July 4th recess. Standard & Poor’s Ratings Services does not expect its passage in and of itself to have an immediate impact on the ratings of larger banks such as Bank of America, Citigroup, Chase, etc.
Mortgage Loan Officer Compensation Regulations
Tuesday I mentioned possible lawsuits if the law sets limits on total compensation. I was wisely corrected by a few folks that the bill may set “how” or “structure” loan officers can be paid, not total limits on commissions. So compensation could be based on the percent of a loan amount, not to the loan type or interest rate, as a percent of profit. A few pointed out that when fees are limited, in this case possibly to 3%, work on loans that fall into that category will obviously cease.
Momentum on Selling Distressed Loans
According to a panel discussion at the MBA conference, banks have picked up steam in attempting to sell distressed U.S. home loans. Lenders have sought bids on about $10 billion of troubled mortgages in recent months, more than in all of 2008 and 2009, and probably disposed of about $3 billion of those. Banks are stepping up their sales in order to reduce their levels of nonperforming loans and to clean up their balance sheets so they can be in the running to acquire failed competitors with assistance from the FDIC.
Profile of A New Jumbo Mortgage Player
Who is buying jumbo loans out there? Not the pseudo-jumbo loans, between $417,000 and $729,750, but higher loans. An informal poll shows Union Bank, GMAC, Chase, US Bank, BB&T, Fifth Third, and Everbank (who will go up to $1.5 million under its 5-yr ARM program). The larger investors, such as BofA and Wells, have rates in the 7’s for jumbo product, not viewed as entirely competitive. Luxury Mortgage is a new player in this space on the wholesale level, as possibly a replacement for the Thornburg of old. With loan amounts up to $4 million, including 2nd homes, with a 700 minimum FICO. Interesting. You can go to Luxury’s website for more.
Treasury Auction & New Home Sales Summary
On Wednesday stocks staged a comeback, but rates slid higher – continuing today. Day 2 of the auction saw $40 billion in 5-yr notes going off at the usual 1PM time slot. The 2-yr was relatively sloppy on Tuesday, hitting an all-time low for 2-yr yields, and yesterday’s 5-yr was little better with a bid-to-cover of 2.71 – the recent average.
We found out that New Home Sales shot up 15% to a 2-yr high, although the median price dropped 9.5% from the same month in 2009 and is the lowest it’s been since late 2003. Given that most of the action was in the low end price-wise, the jump in home sales was attributed to first time buyers and the tax credit. Take your pick: either home buying remains solid, despite the tax credit going away, due to low interest rates and good entry house prices, or home buying drops, leading to lower prices. As of April, the inventory of new homes for sale was the lowest in quite some time, although existing home inventory is not seeing the same improvement.
Mortgage Bond Market Report
Mortgage prices and rates did have a little help from servicing companies which were apparently in the market buying 4.5% securities, so mortgage prices did better than Treasury rates. The 30-yr current coupon (trader talk for the MBS nearest par, or a price of 100) is the Fannie or Freddie 4.0%, which again touched 4.06% – about 80 basis points above the 10-yr Treasury. Speaking of which, the 10-yr note eased back above 3.20%. For those playing along at home, Fannie 6.5’s (with 6.75-7.125% mortgages) are trading at 108 – I am surprised that they all haven’t refinanced (if they can)! Traders are reporting a slight pick-up in MBS volume, but no one is expecting a refi wave – it is too hard to close deals!
Jobless Claims, GDP Figures
Initial Claims came in down 14,000 to 460,000 with roughly 4.61 million in continuing claims. The 4-week moving average crept higher. First quarter GDP came in at 3.0% with few signs of inflation. But this is somewhat old news, and pales in comparison to news like the Chinese saying that they will not be selling Euro-debt and the rally that this caused in pre-opening stocks. We also have the Chicago Purchasing Manager’s Survey. The yield on the 7-yr is at 2.73% ($31 billion of which will be sold today), the 10-yr is up to 3.28%, and 30-yr mortgage prices are worse by about .125. And tomorrow is an early close in the bond markets and many lock desks around the nation.
A father put his 3 year old daughter to bed, told her a story and listened to her prayers which ended by saying: “God bless Mommy, God bless Daddy, God bless Grandma and good-bye Grandpa.”
The father asked, ‘Why did you say ‘good-bye Grandpa’?’
The little girl said, “I don’t know daddy, it just seemed like the thing to do.”
The next day grandpa died. The father thought it was a strange coincidence.
A few months later the father put the girl to bed and listened to her prayers which went like this: “God bless Mommy, God Bless Daddy and good-bye Grandma.”
The next day the grandmother died.
“Holy smokes”, thought the father, “this kid is in contact with the other side.”
Several weeks later when the girl was going to bed the dad heard her say, “God bless Mommy and good-bye Daddy.”
He practically went into shock. He couldn’t sleep all night and got up at the crack of dawn to go to his office. He was nervous as a cat all day, had lunch and watched the clock. He figured if he could get by until midnight he would be okay. He felt safe in the office, so instead of going home at the end of the day he stayed there, drinking coffee, looking at his watch and jumping at every sound. Finally, midnight arrived; he breathed a sigh of relief and went home.
When he got home his wife said, “I’ve never seen you work so late. What’s the matter?”
He said “I don’t want to talk about it – I’ve just spent the worst day of my life.”
She said, “You think you had a bad day, you’ll never believe what happened to me. This morning my golf pro dropped dead in the middle of my lesson!”