As debt ceiling legislation passes the House and heads to the Senate, the market’s attention turns to the fact that our economy is languishing, and thus rates are moving down. Yesterday the ISM manufacturing index, which is closely monitored for a gauge of manufacturing activity, plunged to 50.9 in July from 55.3 in June – way below expectations. Economists continue to cut their GDP forecasts for 2011 below 2% – stagflation? And this latest nightmare in Washington DC won’t help the consumer, the jobs market, or the housing market.
But it’s a good time for refinancing (assuming borrowers are clean and have equity). Rates drop when bond prices rise, and mortgage bonds (aka MBS) were up about .375 yesterday on heavier-than-normal volumes. 10-year notes rallied 18/32nds and down to a yield of 2.74%. Today we have the debt bill moving to the Senate, but we have also had Personal Income and Outlays for June (+.1% but -.2%, respectively). After the numbers the 10-yr is at 2.70% and MBS prices are better another .250-.375.
Ally (aka GMAC) Earnings
Ally Financial reported a net income of $113 million for the second quarter of 2011, compared to $146 million in the prior quarter and $565 million for the second quarter of 2010. Ally’s mortgage operations (which include ResCap and the mortgage activities of Ally Bank and ResMor Trust) are broken down into several segments. The Origination and Servicing segment reported second quarter 2011 pre-tax income of $47 million, down from 2010’s $249 million, with the drop attributed to lower net servicing income, which was impacted by MSR valuation adjustments, lower production as a result of a smaller overall mortgage market, and compressed margins due to a shift in product mix and lower industry volume. Total mortgage loan production was $12.6 billion, up slightly from the 1st quarter but down from the $13.5 billion in the second quarter of 2010. Ally’s “Legacy Portfolio and Other” segment, which primarily consists of loans originated prior to Jan. 1, 2009, reported a pre-tax loss of $174 million in the second quarter of 2011, compared to a pre-tax loss from continuing operations of $19 million in the corresponding prior year period. The big drop was due to a mortgage repurchase expense of $184 million.
Mortgage Insurance Stats
According to MICA (Mortgage Insurance Companies of America) private mortgage insurers wrote $4.8 billion in new insurance on mortgage loans originated in June, up from $3.92 billion in May. MICA’s members include Genworth, MGIC, PMI, Radian, and RMIC. Insurers under the MICA umbrella had $606.3 billion in primary mortgage insurance in force last month, down from $610.8 billion a month earlier. Insurers who are part of MICA received 28,214 applications for private mortgage insurance in June. Of that group, 24,161 borrowers ended up using private mortgage insurance to refinance or purchase a mortgage. During the same month, the companies also reported 45,573 defaults and 38,753 cures on troubled mortgages.