Rates Much Better After Good Treasury Auction, Reverse Mortgage Update, Where To Go For ARM Rates & Indices
Before school ended, I noticed that one of my daughter’s homework assignments (in “Romance Languages”) was not turned in. When I asked her what happened to it, she replied, “Canis meus id comedit.” (“My dog ate it.”) Click the link for more handy Latin phrases (like “I never received that buy-back request!”).
Old School Mortgage Rules
When things are slow in the mortgage banking world, I dig out my old mortgage banking texts. Why aren’t we in the “first trust deed banking” business instead of the mortgage banking business? Did you know that “in the old days” the borrower deeded his property outright, as security, to the lender, who thereafter was its legal owner? The owner could take back the property if the borrower defaulted. The borrower kept the right to be given back his property if they fully satisfied the terms. In some states this system is still used, except that until a default occurs the borrower retains possession of the property. In many states a mortgage is not an actual transfer of title, but only creates a lien, under which in case of default the lender may proceed to collect from the property. Under this system the mortgage is actually personal property and not a transfer of title and therefore it may be passed by assignment, and upon the lender’s death goes, not to his heirs as if real property, but to his executors or administrators. Since it is only a lien, there may be a first, second, third or as many mortgages on the property as its owner can procure, each being subject or subordinate to all prior mortgages.
Rates Much Better
How about those great rates? Gosh – you mean the economy is not doing as well as analysts thought a month ago? For an interesting side note, consumers appear to be saving money: personal income is up slightly, personal consumption is down. What are folks doing with their money? Keeping it in the bank. And what are the banks doing with the cash? Uh, how about investing it in safe Treasury securities?
Successful Treasury Auction
Not only did the 3-yr auction go well on Tuesday, but yesterday’s $19 billion 10-yr auction exceeded all expectations. The “bid to cover” ratio, which is a measure of demand, was 3.28, basically meaning that for every note purchased there were over 3 bids. And the “indirect” bid, typically from foreign entities and non-primary dealers, was 44%: a very high level. After the auction the yield, which was at 3.42% prior to the sale, dropped to a low of 3.29%, representing a 1 point rally? (Remember that the recent high yield on the 10-yr was in early June at 4.01 %.) Mortgages tagged along for the ride. Today is Thursday, which means Jobless Claims. And the 30-yr auction. The yield on the 10-yr is at 3.38% and mortgage prices are slightly worse than yesterday afternoon, but better than yesterday morning.
Mortgage Fraud Headlines
Mortgage fraud continues to make the headlines. Apparently there is not much else going on in mortgage banking – or at least that is what the public may think. The latest mortgage fraud story heralds from the NY area.
Where To Go For ARM Rates & Indices
Occasionally I am asked about good places for charts and graphs, especially for ARM rates. I will typically direct the person to this site.
CitiMortgage, which, as I have mentioned, is rolling along again, reminds me that “as a result of Citi’s correspondent reengineering program”, they have not “cut off” a single lender during their hiatus nor given deadlines to fund out pipelines. My apologies if my comments yesterday were confusing.
Freddie Mac came out with their requirements for higher-priced mortgage loans (HPMLs). HPML’s, in case you’ve lost track of all the abbreviations out there like I have, are mortgages secured by primary residences that (for first-lien mortgages) have an annual percentage rate (APR) that is at least 1.5 percentage points higher than the average prime offer rate (APOR) for a comparable transaction. After 10/1 (although look for investors to put this in place sooner, of course) Freddie deems the following products as eligible for purchase as HPMLs: fixed-rate mortgages, 7/1 or 10/1 ARMs, or 7/6-month or 10/6-month ARMs, and 7-year Balloon/reset mortgages. Freddie Mac will not purchase HPMLs that are prepayment penalty mortgages, streamlined refinance mortgages, Freddie Mac Relief Refinance Mortgages, ARMs with an Initial Period or Interest Only Period less than seven years, or 5-year Balloon/reset Mortgages.
Reverse Mortgage Update
Reverse mortgages are in the news quite a bit. World Alliance Financial, which operates Senior Lending Network but is owned by KBC Group, has stopped taking applications. Their statement read, in part, “To be clear, this decision will have no impact on our current borrowers, holders of GNMA securities that we’ve issued and our partners in the Senior Lending Network. We will continue to service outstanding loans, as well as fulfill all of our other obligations. Our core infrastructure will remain fully intact while we seek other opportunities.” KBC Group has received government to the tune of $41.5 billion in financing and guarantees. Tax money at work!
Daily Humor
A woman was sitting at a bar enjoying an after-work cocktail with her girlfriends when an exceptionally tall, handsome, extremely sexy, middle-aged man entered. He was so striking that the woman could not take her eyes off him.
The young-at-heart man noticed her overly attentive stare and walked directly toward her. (As men will.) Before she could offer her apologies for staring so rudely, he leaned over and whispered to her, “I’ll do anything, absolutely anything, that you want me to do, no matter how kinky, for $20.00…on one condition.”
Flabbergasted, the woman asked what the condition was.
The man replied, “You have to tell me what you want me to do in just three words.”
The woman considered his proposition for a moment, and then slowly removed a $20 bill from her purse, which she pressed into the man’s hand along with her address. She looked deeply into his eyes, and slowly and meaningfully said, “Clean my house.”