Mortgage Volume For 2010, Treasury’s $46b Profit, TARP Recipient Penalties, HUD’s Lender Watch List

Denver Pot Club Fun Fact
According to news sources in Denver, where the City Council voted to regulate medical marijuana dispensaries, more applications have been received for licenses for selling pot than there are Starbucks coffee shops in the entire state, 390 versus 208. Fun with numbers…

Mortgage Volume Projections for 2010
There seems to be a disconnect between many smaller mortgage companies’ projections for their own volumes and profit margins for 2010, and the industry-wide projections. Every large investor has production projections that range from $1 trillion to about $1.5 trillion for 2010. The MBAA came out yesterday with a projection that residential mortgage originations will drop 40% this year to the lowest level in a decade: $1.28 trillion down from $2.11 trillion in 2009. They expect purchases to rise slightly to $776 billion from $742 billion in 2009 but expect refinances dropping to $502 billion this year from $1.372 trillion last year. Yet many smaller companies are expecting to increase their production.

Mortgage Apps Up Last Week
Maybe they’ll have some help: last week mortgage applications in the U.S. rose 14%, with refinancing up 22% and purchases up .8%. Slightly lower rates last week helped, of course, and apps for refinancing were back up to 71.5% of all applications.

Lenders on HUD’s Watch List
Uh-oh. Let’s hope that you don’t find your company on this list, put out by HUD and consisting of companies that are under investigation for excessive claims. Go to HUD site, click on “Press Room”, “Press Releases” and then “HUD INSPECTOR GENERAL PROBES MORTGAGE COMPANIES WITH SIGNIFICANT CLAIM RATES”.

Treasury Posts $46b Profit
At least our Treasury Department is making some coin. The department had a $46 billion profit last year – heck, I wish that I get my taxes done as quickly as they calculated that! Of course, you couldn’t lose owning Treasury debt, mortgaged-backed and agency securities.

TARP Recipient Penalties
Across the news this morning, besides the tragedy in Haiti, was the Obama Administration’s plan to penalize the banks that received TARP money. The final details of the levy are still being worked out, but the idea has been discussed since last summer as a way of recouping taxpayer bailout money and reducing the deficit. What a nightmare. The levy would hit banks even though the aid is being repaid, and the Treasury making a “healthy profit” on the money paid out from the $700 billion Troubled Asset Relief Program fund.

China Raises Bank Reserve Requirements
China’s central bank raised bank reserve requirements for the first time since 2008, increasing them by 50 basis points on January 18th. So what? Well, it raises concern that if those banks have to increase their reserves, there will be less lending. Therefore one of the key engines for the global economic recovery would be slowed. And if growth slows, perhaps rates will improve, which is what happened.

Treasury Auction Summary This Week
We had a nice rate improvement yesterday, starting Monday night with some banking news out of China, a widening Trade Deficit due to oil prices, a down stock market due to potential corporate weakness, and following through to a decent 3-yr Treasury auction. It was “well bid” at 1.49% and a 2.98 bid/cover, exactly the same as last month, but with mediocre indirect level of 38%. The Treasury’s 10-yr, which last Thursday was above 3.90%, was down at 3.72%, resulting in a “bull flattening” on the yield curve. (Once again, if short term rates are near zero, longer term rates going up or down will obviously steepen or flatten the yield curve.)

It is a new day, however, and we’re looking at $21 billion in 10’s today and $13 billion 30’s tomorrow. Dealers expect that once the 10-yr is sold, the yield curve may flatten further. The auction, and the Fed’s Beige Book this afternoon, is the only real economic news expected to push the markets around a little today. Currently the 10-yr risk free Treasury note is yielding 3.75% and mortgage prices are roughly unchanged from Tuesday afternoon.

Fewer Mortgages For Sale
Wall Street firms report a current slowing supply of mortgages for sale, in spite of apps being up last week. Once again, the laws of supply and demand come into play: with applications, locks, and mortgages for sale slowing, and the Fed, hedge funds, and money managers buying…

Daily Humor
Lots of folks were traveling over the holidays. So, overheard on some airline flights:

“On an Air NZ Flight with a very ‘senior’ flight attendant crew, the Pilot said, ‘Ladies and gentlemen, we’ve reached cruising altitude and will be turning down the cabin lights. This is for your comfort and to enhance the appearance of your flight attendants.’”

“On landing the hostess said, ‘Please be sure to take all your belongings. If you’re going to leave anything, please make sure it’s something we’d like to have.’”

“’In the event of a sudden loss of cabin pressure, masks will descend from the ceiling. Stop screaming, grab the mask, and pull it over your face. If you have a small child traveling with you, secure your mask before assisting with theirs. If you are traveling with more than one small
child, pick your favorite.’”