New Appraisal Rules, New Tax Code Coming?, Mortgage Brokers Still Kicking, Commercial Real Estate Struggling

New Tax Code Coming?
President Obama has announced a task force to review the tax codes. He’s concerned there are too many loopholes and too many people manipulating the system to avoid paying taxes. And that’s just in his administration.

Mortgage Brokers Still Kicking
Many large companies have left the wholesale arena. Although I am traveling this week with my daughter through the South East, I know that in Northern California the wholesale presence is still strong. Top companies still buying loans from brokers include Union Bank, Provident, Wells Fargo, Guild, Countrywide, Flagstar, Sierra Pacific, SunTrust, Citi, and Stearns Lending.

Commercial Real Estate Struggling
Will commercial real estate be the next shoe to drop? Or has it already hit the ground? Those involved in commercial lending (apartment buildings, office space, retail, etc.) are seeing that property values have fallen as our economy has stalled, and the main sources for permanent debt (Wall Street) are gone. One industry veteran told me, “The lenders who remain can be very selective in underwriting and charge spreads that many don’t want to accept. At this point it seems that only through time will enough properties change hand at lower debt levels that will allow for some equilibrium. This will also push values down below what the market would have seen if credit was more available.”

In a related event, S&P completed a loan-by-loan review of commercial mortgages that were included in securities it rated. Standard & Poors determined that the risk of losses on commercial mortgages has sharply increased in recent months. “The economic recession combined with the absence of readily accessible financing in the capital markets has, in our opinion, skewed the credit risks related to the performance of (commercial mortgage-backed securities) sharply to the downside, and in excess of what we expected at origination or in our prior scenario analysis.” Based on the review, S&P projects that securities originated between 2005 and 2007 will perform the worst, with some potential lifetime losses on them rising above 10 percent.

New Appraisal Rules
AmTrust Mortgage reminded their clients that “Fannie Mae, Freddie Mac, the Federal Housing Finance Agency (FHFA) (formerly named OFHEO), and the New York Attorney General announced that they entered into an Agreement on March 3, 2008, adopting the Home Valuation Code of Conduct (HVCC)…As a result, AmTrust Mortgage Banking has established a new appraisal process to be compliant with HVCC. Effective for loans registered on or after 04.19.09, all table-funded transactions must order the appraisal through the new Gemstone Appraisal Process.”

Rates Up After 3 Lower Days
Looking way back to Thursday, rates shot up after three days of improvement as speculation the economy is stabilizing reduced the “flight to safety” appeal of government debt. Ten-year yields rose the most in nearly a week ahead of the $18 billion 10-yr Treasury auction on Thursday, which was on top of the already sold $41 billion. On top of that, the equity markets had a big day after Wells Fargo made a preemptive earnings announcement which ended up helping practically all the financial stocks. It seems at this point that brokers and agents are telling their borrowers that it is a mistake to wait for lower rates.

Economic Preview
Unlike last week, and today, where there was little news to move the markets, the remainder of this week is busy. Tomorrow we have the Producer Price Index (PPI), expected +.2% for March, and Retail Sales for March, expected to be -.1%. On the 15th we’ll see the Consumer Price Index (CPI), which measures the price change for those finished goods which are sold to consumers – it is expected to be +.2%. Also on Wednesday we have the Empire Manufacturing survey, Industrial Production and Capacity Utilization, and the Fed’s Beige Book (which really is beige). The hits keep coming on Thursday with Housing Starts & Building Permits and the Philadelphia Fed survey, along with the usual Jobless Claims. Finally on Friday we have the Michigan Sentiment survey. Ahead of all this the 10-yr is at 2.93% and mortgage prices are worse by about .125.

Daily Humor
For punsters everywhere:

A small boy swallowed some coins and was taken to a hospital. When his grandmother telephoned to ask how he was, a nurse said, “No change yet.”

The man who survived mustard gas and pepper spray is now a seasoned veteran….

In democracy it’s your vote that counts. In feudalism it’s your count that votes….

When cannibals ate a missionary, they got a taste of religion….

Don’t join dangerous cults: Practice safe sects!