Fed Buys $10.2b of MBS In First Week. Target Is $500b By June.
Speaking of food, this morning I was pouring the half & half over my Coco Puffs (hey, you only live once) when yet another ad came on the radio about how I could stiff-arm the credit card companies. In the past I would usually run up my credit card, and then refi or do a home equity loan to pay off the balances. Now I can’t do either, so how am I supposed to pay off my credit card bills? Maybe I should listen to the ads on the radio…Banks and households loaded up on debt during the boom years and used the money to buy assets that are now falling in value. They are now working furiously to pare the debt and get rid of the assets. The painful process, known as deleveraging, involves less consumer spending and less lending by banks, two critical engines of growth. It is a big problem.
Economy Loses 524k Jobs
Nonfarm payroll (and I don’t imagine farm payroll is doing that much better…) dropped 524,000 jobs in December, and experts believe that a rapidly deteriorating economy promised more significant losses in the months ahead. More declines in rates? Perhaps, and I would opine probably. December’s job losses brought the total for 2008 to 2.45 million, and the unemployment rate jumped to 7.2% in December from 6.8% in November (it was 5% last April!). The news was roughly as expected, and we find the 10-yr at 2.47% and mortgage prices slightly worse to begin Friday.
GMAC Now Offers Title Services
GMAC stated that, “Due to the recent purchase of LandAmerica Title by Fidelity National, GMAC Bank will again accept title commitments, title insurance policies, and insured closing protection letters with no reinsurance requirements from the following companies: Lawyers Title Insurance Corporation, Commonwealth Land Title Insurance Company, United Capital Title Insurance Company, LandAmerica NJ Title Insurance Company.”
Fed Buys $10b of $500b in First Week
How much mortgage-backed securities has the Federal Reserve been buying? The program, begun this week, has bought $10.2 billion of Fannie Mae, Freddie Mac and Ginnie Mae securities, with the bulk being $3.45 billion of 30-year bonds with 4.5% coupons (which usually includes 4.75%-5.125% mortgages) and $3 billion of 30-year 5%’s (5.25-5.625%) per the New York Fed’s Web site. In other words, they are will on their way to the $500 billion targeted for purchase by the end of June.
Other Mortgage Buyers–PennyMac
And others are buying mortgage debt. The headline read, “FDIC Un-nationalizes Some Debt”, but it turns out that the federal government is going to let Private National Mortgage Acceptance (“Penny Mac”, run by several ex-Countrywide folks, who many say helped get us into this mess in the first place) service a portfolio of loans that had been owned by failed First National Bank of Nevada. The nearly $500 billion in mortgages sold could serve as a model for the government to put nationalized mortgages into efficient private hands, and it gives an indication of how much investors might be willing to pay: 30-50 cents on the dollar. Asset Manager Blackrock has a sizable stake in PennyMac and served as an adviser on the deal.
Daily Humor
Two hats were hanging on a hat rack in the hallway. One hat said to the other, “You stay here. I’ll go on a head.”