Putin’s Russian Mortgage Stimulus
Any weapons race with Russia doesn’t receive the publicity it did 30 years ago. But whatever you call someone who originates loans in Russia (brokers?) received some good news last week, when Russia’s Prime Minister Vladimir Putin announced that the government will help to lower the mortgage rates investing more than $8.3 billion. The government will provide this money to the banks thus substantially subsidizing the current mortgage rates, which are currently at 14-15% in Russia. Putin set a target rate at 11% with a maximum down payment of 20%.
Is Jumbo Mortgage Comeback for Real?
Do folks here in the US and in the mortgage business have any good news to cheer about, besides rates not being 11%? Some are dealing with the changes in FHA lending and the effect on condominiums. The markets, and interest rates, are facing the end of the Treasury’s purchases of mortgage backed securities and the end of the first time homebuyer tax credit ($8000). The economy does not appear to be rebounding enough to generate much home buying interest, the unemployment rate is hovering around 10%, and foreclosure filings not yet abating.
It could very well be that the jumbo market, like a dormant volcano, is about ready to rumble back to life. In addition to jumbo security prices rallying, there have been several newspaper articles on the subject, and there are rumors that Wells Fargo plans to roll something out in a few business channels possibly as soon as the end of this month. In Los Angeles and Orange counties, Wells Fargo Home Mortgage (retail) already lowered their down payment from 25% to 20%. But, as one would expect and hope, borrowers must provide evidence of high income, have sizable bank accounts as a cushion against the unforeseen and occupy the houses themselves. We don’t really want more problems in the jumbo market by going too far back the credit curve, do we? Do we?
Economic Stat Summary, Fed Vice Chair Donald Kohn Retiring
Yesterday we learned that in January Personal Income increased .1% but that Personal Spending Increased by .5%. So much for that savings rate, which hits its lowest level since 2008. In addition, the ISM Manufacturing Index for February fell slightly from January’s levels, and Construction Spending dropped .6% as expected. The decline in construction spending was led by a fall in private nonresidential construction spending, which more than offset a moderate increase in residential construction. Lastly for news yesterday, Fed Vice Chairman Donald Kohn said that he will leave the Federal Reserve at the end of his four-year term as vice chairman after 40 years at the central bank. Although the announcement was somewhat early, it was not altogether unexpected and many believe that he will be a huge loss to the institution at time when credible, independent thinkers are required to get the Fed through a very difficult political period ahead.
Through all of that we had the usual Fed buying, and higher coupons (which are mostly older, 6% and higher, mortgages) doing somewhat better than lower coupons. With a slight break in the scheduled news today, the rate markets are pretty quiet and close to unchanged from yesterday, although the stock markets appear poised to continue rallying.
A young Texan grew up wanting to be a law man. He grew up big, 6′ 2”, and strong as a longhorn and fast as a mustang. He could shoot a bottle cap tossed in the air at 40 paces. When he finally became of age he applied to where he had only dreamed of working: the West Texas Sherriff’s Department.
After a big mess of tests and interviews the Chief Deputy finally called him into his office for the young man’s last interview.
The Chief Deputy says, “You’re a big strong kid and you can really shoot. So far your qualifications all look good. But we have what you call an ‘attitude suitability test’ that you must take before you can be accepted. We just don’t let anyone carry our badge son.”
Then, sliding a service pistol and a box of ammo across the desk, the Chief says, “Take this pistol and go out and shoot six illegal aliens, six ACLU lawyers, six Democrat senators, six meth dealers, six Muslim extremists, and a rabbit.”
“Why the rabbit?”
“Great attitude,” says the Chief Deputy. “When can you start?”