Alarming Retirement Survey Results. How Much Do Mortgage Banks Make?

Retirement Survey Results
Last week’s Wells Fargo retirement survey indicates that many Americans express worry about their retirement prospects: respondents predict they will need a nest egg of $300,000, but have saved just $20,000 of that amount for retirement (figures are medians: the midpoint of responses). The survey found that 72% of middle-class Americans between the ages of 25 and 69 expect to work through their retirement years. Other top findings from the survey are below:

1. 20-somethings are the least confident about investing in the stock market, and are most likely to put their savings in a bank CD rather than invest in stocks.
2. 40-somethings are under the most financial stress of any age group. They are dramatically less likely to have pensions than older workers, and economic strains are most likely to be causing tension in their households. 80% of them expect to work through retirement, vs. 54% of 60-somethings.
3. Those surveyed expressed strong support for reforms that would encourage additional saving. Respondents overwhelmingly (79%) want employers to offer more advice to help manage their retirement plans – guidance that is difficult for employers to provide under current regulations.
4. Only a third (33%) of those surveyed have a detailed written retirement plan.
5. Compared with Americans who are married or partnered, single Americans are more confident in the future of Social Security and expect to spend less on healthcare during retirement.
6. Two thirds (65%) believe they should be saving more and could be if they got more guidance or advice.

How Much Do Mortgage Banks Make?
Figures from the MBA showed that independent mortgage banks and subsidiaries made an average profit of $1,423 on each loan they originated in the third quarter of 2010, up from $917 per loan in the second quarter. “The increase was driven by higher secondary marketing gains that increased from $3,455 per loan in the second quarter 2010 to $4,069 per loan in the third quarter 2010. The secondary marketing gains offset further increases in the cost to originate a loan.”

Fed Meeting Recap
The Federal Open Market Committee met, and left overnight rates unchanged at a range of 0-.25%. We are all learning, however, that there is little correlation between overnight rates and mortgage rates. The actual announcement had some choice, albeit expected, tidbits. “The economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment. Household spending is increasing at a moderate pace, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. The Committee decided today to continue expanding its holdings of securities as announced in November. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month…continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.”

After this was released, once again it seemed that half the e-mails on everyone’s computers were from investors making prices worse due to the bond market selling off – even though there was really nothing new in the language. The yield on the 10-yr Treasury note reached 3.45%, May levels.

Today’s Stats
This morning we have the Consumer Price Index and some Empire State (NY) manufacturing numbers. We’ve already had the MBA’s application index: apps were down for the 3rd week in a row. Falling 2.3% overall, purchases were down 5% while refi’s were only down slightly. The November CPI was +.1%, ex-food & energy +.1%, Empire +10.57 versus a down number last month. Industrial Production and Capacity Utilization come out later on this morning. With next week, and the week after, being a holiday week, and a slug of Treasury supply between Christmas & New Year’s, traders believe that they need to see solid participation from “real money players” to push rates back down. After the CPI we find the 10-yr at 3.43% and MBS prices worse about .125.