Personal Spending Up, Indymac Reports Loss, 2008 Rate Update

Whether you think “May Day” signifies International Worker Day, or a cry for help, a celebration of spring, or a day of political unrest, here we are. Four months of 2008 already gone, and what have mortgage rates done since the beginning of January. 30-yr conforming began the year at 6.125%, and yesterday they were 6.25%. Jumbos, up to $1 million, have gone from 7.375% up to 7.625%.

Hispanics now account for about one in four children younger than age 5 (put another way, that is 25% of the US population under the age of five) in the United States, according to US Census Bureau. Do you have Spanish-speaking agents at your branch?

IndyMac Bancorp said its first-quarter loss will decline from the loss it reported in the fourth quarter – a trend it expects to continue – and that its chief financial officer is taking a leave of absence. Its first-quarter loss will be about 50-65% smaller than the prior quarter’s loss of $509.1 million. (That’s good news, right? Not like, “I’m pregnant, but not as pregnant as I thought.”?) The loss is tied to one-time charges for severance and office closings, and Indy said that it expects losses to narrow each quarter through the remainder of the year. They have certainly changed their product mix, moving from originating mostly Alt-A to now 90% of their product fitting government guidelines.

Speaking of Indymac, and originating less risky, more saleable product, they announced that “For primary residence purchase transactions where the borrower will retain his/her current residence as an investment property, rental income from the retained property may not be included in the borrower’s qualifying income. The full principal, interest, taxes and insurance payment for the retained property must be included in the qualifying ratio calculations.”

U.S. Personal Spending rose by 0.4% in March, twice as much as forecast, and Personal Income was +.3%, and despite a cooling economy, according to the Commerce Department. Income was slightly under forecasts for a 0.4 percent rise and after a 0.5 percent February gain. But adjusted for inflation, income stagnated after increasing by 0.3 percent in February. Excluding volatile food and energy prices, the core PCE price index, which is the Federal Reserve’s preferred measure of inflation, rose by 0.2 percent. This compared with forecast for a 0.1 percent rise after a 0.1 percent increase in February. The other news – Jobless Claims – showed a larger-than-expected increase of 35,000 last week, and the number of workers remaining on jobless benefits climbed to a four-year high. The four-week moving average of new claims, a more reliable guide to underlying labor trends because it irons out weekly fluctuations, fell last week to 363,750 from a revised 370,250. After all of that, we find our friend the 10-yr back into the high 3.60’s and mortgage prices better by roughly .250 from yesterday afternoon.