THE BASIS POINT

FDIC Seizes 69th Bank of 2009, Bond Rally To End Last Week, Economic Preview: ISM, Jobs, Factory Orders

I heard an esteemed commentator talking about the government paying private parties to carry out certain tasks. She was asking, “Is it really indicative of where we are as a society that someone can receive a credit of $4,500 for a car, but a servicer will only receive $1,000 to modify a mortgage?” This is obviously a complicated question, but it does raise some questions. I am waiting for them to offer a “clunker rebate” for my old television, and why not electric toothbrushes?

FDIC Seizes 69th Bank of 2009
With all this talk about the end of the recession, it is easy to lose sight of the number of bank failures this year. Friday afternoon another five banks were shut down, so now the total is 69 for all of 2009 with 5 more months to go. The shut-downs have cost the FDIC, and us, over $15 billion this year, compared to about $18 billion for all of 2008. Gone are First State Bank of Altus, Oklahoma (folded into Herring Bank Texas), Integrity Bank of Florida (taken over by Stonegate Bank), Peoples Community Bank of Ohio (taken over by First Financial Bank), First Bank Americano (New Jersey, taken over by Crown Bank), and in Illinois Mutual Bank was taken over by United Central Bank.

Lender Updates
I am in no way an expert on the Canadian mortgage market, or even the one here in the US for that matter, other than I now know that Wells Fargo offered residential mortgages and home equity loans in that country. That came to an end, as Wells’ Canadian unit stopped accepting applications for the loans last week (through its HomePlan broker network). Wells Fargo, who has a 20% market share here in the US, said, “In response to recent analysis of our operations and the current market environment, at this time, we made the decision to stop originating consumer real-estate loans products in Canada.” Wells apparently does about $5 billion a year up there, as opposed to about $400-500 billion a year here in the US.

GMAC, who is coming out with their HomePath product today, also is making their “proprietary decisioning engine, Engenious” available for Jumbo products including Jumbo Fixed Rate, 3/1, 5/1, 7/1, 10/1, LIBOR ARM, 3/6, 5/6, 7/6, 10/6 LIBOR ARM, 3/6, 5/6, 7/6, 10/6 Interest Only LIBOR ARM, 3/1, 5/1, 7/1, 10/1 LIBOR ARM and Fixed Rate Interest Only, and Texas Equity Jumbo Cash Out.

Bond Rally To End Last Week
We had a nice rally in the bond market at the end of last week. Although it is difficult to put one’s finger on why, possible reasons include a weak GDP number, some relief that the auctions were over with (and none this week), etc. The dollar has been sliding, and oil is back on the march higher, but it didn’t seem to hurt interest rates. This seems to have turned around a little here this morning, after stock markets rallied overseas and there is some profit taking (selling) in our bond market. Even HSBC and Barclays posted a first half profit. Investor news has been light as the end of summer is nearing.

Economic Preview: ISM, Jobs, Factory Orders
What’s ahead of us for economic news this week? It will be relatively busy: today we have Construction Spending and the ISM Index number, tomorrow we have Personal Income and Consumption, Wednesday we’ll see Factory Orders and the ISM Services number, Thursday our buddy Jobless Claims, and then on Friday we have all of the Unemployment data. So once again, given the rally late last week it is not surprising to find the mortgage prices giving a little back today: mortgage security prices are worse by about .250 versus Friday afternoon, and the yield on the 10-yr is 3.58%.

Daily Humor
A female New York City trader is mandated by Corporate to attend a “bonding” retreat at a Colorado dude ranch. At dinner she notices one of the cowhands has on very large boots.
She asks “Is it true what they say about the size of a cowboys boot indicate… well…you know?”
He answers “Well little filly, why don’t you just come up to the bunkhouse tonight and find out for yourself!”
She does and in the morning she gets up and hands him a hundred dollar bill.
He says with a smile, “I’ve never been paid for my services before.”
She says ‘ That’s not for your services…it to buy better fitting boots.”

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