THE BASIS POINT

Jobless Claims Highest Since 1991, Not All Bad Changes For ING Loans, Mortgage Apps Up

Thank you Judy S.: I don’t know if Adolph Hitler ever discussed Ron Paul, granite countertops, or AIG, but this is one clever video.

Downey Savings In Trouble
Rumors, and facts, are suggesting that Downey Savings is on the ropes.

More Mortgage Application Disclosures Coming
What will loan agents be doing in a year? How about RESPA training? The industry was wrong about HUD taking RESPA reform back to the drawing board. HUD has amended RESPA, effective January 2010. The “highlights” include a three page GFE, and lender fees on the GFE must match (exactly) the fees on the HUD I; the interest rate must be stated on the GFE with the date the rate is good through; the lock period associated with the interest rate must be stated; the origination fee and discount on the HUD must be the same as on the GFE; it will no longer be acceptable to take a loan application before the consumer selects a program, and all the information must be available within three days.

ING Loan Changes
Here is some clarification on ING’s latest changes. Scott Gray, who runs broker lending for ING, wrote to me and said, “We put out our announcement about lowering LTV’s a week ahead of time so our brokers can get the loans in their pipelines, slated for ING Mortgage, submitted before we make the change. Second, to put rumors to rest, we are actually reducing LTV’s by 5% from a maximum of 80% to 75% on fully amortized loans and from 75% to 70% on IO loans. However, in California, we are actually expanding our loan menu, bringing back second homes and loans to $3 million.” Thank you Scott.

Treasury Alters TARP Plan
In what some call “changing horses in midstream”, or “acting like a trader rather than an economist”, ex-Goldman Sachs Treasury Secretary Henry Paulson said the Treasury has put a plan to purchase illiquid mortgage-related assets on hold. Now the Treasury Department is considering requiring that firms seeking future government money raise private capital in order to qualify for public assistance. It won’t impact what has already been done with injecting money into banks. On the news yesterday, the stock market quickly sold off on worries that the $700 billion plan may not help the economy. Rates were helped, somewhat, since the $700 billion plan may not help the economy. You get the idea. In fact, rates are good, but so far this year the S&P 500 broad stock market index is -42%.

Mortgage Applications Up, Jobless Claims Up
Here is some good news, aside from rates generally being low. US Mortgage Applications increased 11.9% last week, bouncing off an 8-year low. Purchases were +9% and refinancing applications were +16.1%. Forget the Trade numbers this morning. (U.S. imports fell by 5.6% in September and exports suffered their steepest drop since September 2001, narrowing the monthly trade deficit slightly more than expected.) The Labor Department’s weekly Jobless Claims number showed workers filing new claims for jobless benefits rose last week to 516,000, the highest level since the weeks following the Sept. 11, 2001 attacks, when they were 517,000. The four-week moving average, which smoothes out weekly variations, was 491,000, the largest since March 1991. We still have the Treasury’s auction of $10 billion of 30-yr bonds later today. With all of this, the 10-yr is back up to 3.72%, and 30-yr mortgage prices are worse by about .250 in price.

Daily Humor
Forrest Gump Explains Mortgage Backed Securities

Mortgage Backed Securities are like boxes of chocolates. Criminals on Wall Street stole a few chocolates from the boxes and replaced them with turds. Their criminal buddies at Standard & Poor rated these boxes AAA Investment Grade chocolates. These boxes were then sold all over the world to investors. Eventually somebody bites into a turd and discovers the crime. Suddenly nobody trusts American chocolates anymore worldwide.
Hank Paulson now wants the American taxpayers to buy up and hold all these boxes of turd-infested chocolates for $700 billion dollars until the market for turds returns to normal. Meanwhile, Hank’s buddies, the Wall Street criminals who stole all the good chocolates, are not being investigated, arrested, or indicted.
Mama always said, “Sniff the chocolates first, Forrest, sniff the chocolates first.”