Fraudster Uses A Kid’s Social Security Number To Get Mortgage, ADP Jobs Numbers Signal Weakness

Man Using Child’s Social Security Number Hit For Fraud
A man in Houston, TX just pled guilty in a mortgage fraud scheme. So these days, just what does using a child’s Social Security number to secure funds for mortgages and committing wire fraud get you? The sentencing of 39-year-old Adrian Levale Cole isn’t until September, but he faces 20 years in prison for his 2003-2006 handiwork.

Mortgage Apps Hit 8 Month High
Mortgage applications hit an eight-month high according to the MBA numbers. Apps were up almost 9%, with purchases down about 3% (to 1997 levels) but refi’s were up 13% to where they were a year ago. Refi’s accounted for almost 77% of applications.

Housing Recovery Mixed
How is housing holding up out there? It is a mixed bag. U.S. existing home sales unexpectedly fell last month and purchases of new houses tumbled to a record low. Until last week applications for mortgage refinancing are off almost 57% from last year’s peak reached in January, in spite of 30-yr mortgage rates being in the mid-high 4% range. But yesterday’s S&P/Case-Shiller HPI for April increased 4.6% from a year ago for the 10-City Composite and +3.8% for the 20-City. Sure, it was helped by the expiration of the tax credit, but it was good to see.

Mortgages and Treasuries Rally…Again
Yesterday the 10-yr Treasury note was up almost .625 in price – and current coupon mortgage-backed securities were better by .125, at most, and many lenders improved whole loan prices by less than that. Liquidity with lower mortgage rates (near 4%) can only get better, right? Wall Street MBS traders are still very hesitant about doing any buying or selling of Fannie/Freddie 3.5’s (containing 3.75-4.125% mortgages), with one trader saying, “If you were to sell one you probably won’t even be able to roll it, much less buy it back later if the loans don’t deliver.” So any originators looking for 30-yr rates below par are going to have to wait a bit longer.

Yesterday the 2-year yield did, however, hit an all-time low, and the 10-year note yield hit 2.956% before closing at 2.97%. Mortgages lagged, apparently due to investors saying, “Hmmm… maybe there IS a chance that recent production can refi…” Not that 10-yr yields and mortgage rates are directly linked, but many think that if the 10-yr yield drops below 2.80%, it will spur another set of refi’s for borrowers who can qualify and who own properties with equity. Selling increased from mortgage bankers and investors, which didn’t help mortgage rates relative to Treasuries.

Jobs Report Preview
This Friday we will have our “first Friday of the month” unemployment data. Is it as good an indicator as, say, income tax receipts? If unemployment creeps higher, does it matter if the remaining employed are paying more in taxes? Many believe that the income trend is more important than the hiring trend, because the particular source of the income is less relevant than the fact that it is actually being generated. In fact, some analysts are seeing an expanding economy due to acceleration in household employment income. But the uptrend in tax receipts has faltered over the past month after peaking at the end of May, pointing, as other indicators have, to a potential renewed slowdown in the economy.

ADP Jobs Numbers Signal Weakness
This morning on the last day of the first half of 2010, we saw the ADP numbers, related to, but of questionable correlation to, Friday’s unemployment data. (ADP does not include government workers – a big chunk.) ADP was up only 13,000 – not a good sign for the economy. Later we will have the Chicago Purchasing Manager’s Survey and some ISM numbers. Tomorrow we have Initial Jobless Claims and Construction Spending. But Friday we have traders & hedging company’s nightmare: unemployment data ahead of a holiday weekend. (Not only are many folks on vacation, but those that aren’t will want to be leaving early Friday.) Ahead of that the 10-yr yield is currently at 2.96% and mortgage prices are slightly better.

Daily Humor
A hooded robber burst into a Round Rock, Texas bank and forced the tellers to load a sack full of cash. On his way out the door a brave Texas customer grabbed the hood and pulled it off revealing the robber’s face.

The robber shot the customer without a moment’s hesitation.

He then looked around the bank and noticed one of the tellers looking straight at him. The robber instantly shot him also.

Everyone else, by now very scared, looked intently down at the floor in silence.

The robber yelled, “Well, did anyone else see my face?”

There are a few moments of utter silence, in which everyone was plainly afraid to speak.

Then one old man tentatively raised his hand and said “My wife got a good look at you.”

(Speaking of the Great State of Texas, a reader wrote, “We have two seasons in Texas: summer and hell. Well, summer’s over.”)