THE BASIS POINT

Rates Near 2010 Lows, Consumer Inflation Tame (CHARTS), Purchase Loan Applications Down 27%

 

Ongoing Bond Rally Brings Rates Near 2010 Lows
Investors buying fixed income securities have taken over the markets like a cold sweeping through a kindergarten. Does it really matter that we have yet another release of some Fed minutes, this time from the meeting less than a month ago? A release from the economics team at Comerica Bank sums things up nicely, in case someone asks you during Happy Hour tonight about the economy.

“Economic reports show with increasing clarity that a sustainable expansion is taking hold in the United States.”

But Comerica’s economists don’t see any Fed tightening, impacting overnight rates, until early 2011 due to the turmoil in Europe. Here in the US, in spite of some encouraging numbers,

“economic conditions don’t yet create a strong case for an early change in Fed monetary policy” and the Fed will “do what it can to help European authorities to calm their financial markets.”

Treasury 10-year note yields hit 3.34%, are the lowest they’ve been all year, the euro is at a 4-yr low versus the dollar, and the stock market is heading down.

Mortgage lenders are scrambling to hold onto locks that they took only a week ago, and everyone who predicted rates were heading higher are justifying why they were wrong. (“Who could have predicted these European issues?”) Germany said it will ban naked short sales of European government debt and 10 financial companies – and if German officials are nervous, that is not a good thing. The Fed raising interest rates wwould intensify the downward pressure on the euro, potentially destabilizing already fragile market sentiment.

Purchase Mortgage Apps Down 27%
The Mortgage Bankers Association of America released its weekly applications survey. Talk about volatility in the numbers! The number of mortgage applications in the U.S. dropped last week by 1.5% in the week ended May 14. Purchase apps fell 27%, but the refinancing measure rose 15%. Speaking of volumes, Navy Federal Credit Union, the largest credit union based on mortgage origination, funded only about $850 million in residential loans during the first quarter, a 60% decline from the same period a year ago.

Consumer Inflation Tame (Notes Below For Our Auto-Charts)
This morning we have already had the Consumer Price Index. But really, does a few tenths one way or another make a difference given the troubles in Europe? In March the number was +.1%, with a year-over-year reading of +2.3%. This morning’s CPI, expected to be up slightly, actually dropped by .1%. Are we going to experience deflation? It is a lagging economic indicator, but still, it will give the press something to talk about. Given the huge rally yesterday, it is not surprising that the market, regardless of no signs of inflation, is giving back a little. Currently the 10-yr is at 3.38% and mortgage prices are maybe .125% worse.

You can automatically create charts and download historical CPI data by scrolling to our data section on the right side of the site, or visiting our Data page. And you can see all stats on our Economic Calendar page, and click each release title for the definition of what each stat means.

Mortgage Industry Insider Comments
The comments yesterday about the general state of mortgage bankers and brokers drew some responses. One reader wrote:

“What actual data exists to show the percentage of brokers and bankers were any more dishonest than accountants, carpenters, mechanics, appraisers, bond traders, or whatever the reader does for a living. Brokers, by their nature, are small businesses operating in the communities they serve. It is unlikely they will treat someone unfairly that they will see in the supermarket the next day, when their reputation in the community is everything to their survival.”

Additional comments were:

“To blame brokers, mortgage bankers, real estate agents, or appraisers for the bubble and subsequent bust is naive – no one can provide data that supports the hypothesis that appraisers across the nation all colluded, for example, or all became dishonest at the same time leading to the over appreciation of every market in the nation – which is the justification for HVCC.”

“Brokers keep the banks honest by shopping them in attempts to secure the best rate for the consumer. If broker compensation is limited, there will be little financial incentive for brokers to spend the time and resources necessary to process a loan and find the best rate and product for the consumer. It’s like trying to reduce health care costs by mandating doctors only charge $100 per operation, and attracting skilled doctors into the profession.”

“Originators working for brokers that were unable to pass the originator licensing test (only required of brokerage employees) will go to work for banks, where there is freedom from originator training, licensing, HVCC (for banks with ‘appraisal desks’, for all practical purposes), freedom from income limits and even income disclosure.”

Another wrote:

“I’ve been doing 20-Hour SAFE ACT classroom training for the MBAA. One of the points I make to brokers and bankers is that once they have their Federal MLO license, they will have earned a very impressive credential attesting to their competence and training. The stringent licensing, screening, training and testing requirements will make entry into the industry much more difficult in the future and will deter many of the marginal players who have tainted the reputation of industry. MLOs with mortgage brokers and mortgage bankers will have an edge over their bank/depository counterparts because bank based MLOs are not tested and trained to the same extent. I am seeing bank MLO’s working to obtain a personal license so they will be free to move to the mortgage broker or mortgage banker side as opportunities arise.”

Daily Humor
On their wedding night the young bride approached her new husband and asked for $20.00 for their first lovemaking encounter. In his highly aroused state, her request was readily agreed to.

This scenario was repeated each time they made love, for more than 30 years, with him thinking that it was a cute way for her to afford new clothes and other incidentals that she needed.

Arriving home around noon one day, she was surprised to find her husband in a very drunken state. During the next few minutes, he explained that his employer was going through a process of corporate downsizing, and he had been let go. It was unlikely that, at the age of 59, he’d be able to find another position that paid anywhere near what he’d been earning, and therefore, they were financially ruined.

Calmly, his wife handed him a bank book which showed more than thirty years of steady deposits and interest totaling nearly$1 million. Then she showed him certificates of deposits issued by the bank which were worth over $2 million, and informed him that they were one of the largest depositors in the bank.

She explained that for the more than three decades she had ‘charged’ him for sex, these holdings had multiplied and these were the results of her savings and investments.

Faced with the evidence of cash and investments worth over $3 million, her husband was so astounded he could barely speak, but finally found his voice and blurted out, “If I’d had any idea you were doing, I would have given you all my business!”

That’s when she shot him.

You know, sometimes, men just don’t know when to keep their mouths shut.

 

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Comments [ 3 ]
  1. “Economic reports show with increasing clarity that a sustainable expansion is taking hold in the United States.” but what does that MEAN? and for whom? I just read the Dodd neutered the derivatives regulations out of the Wall Street bill and the GOP is using stalling tactics. sorry, but WTF?

  2. First, reg reform is theatrics. Markets will engineer their way around regs even if they were good regs (which these proposals are not), so any chatter about what's getting watered down or not doesn't matter much in the end. Regarding economic recovery, key indicators like GDP and jobs give good inputs into growth, but sustainability is still in question. U.S. state and local governments still look to be a big risk factor. More on reg reform later this week.

  3. Dodd recanted via Twitter no less. I'd say that counts as theatrics! and what is the “product” in our GDP? do we even make anything anymore? makes me think of Lloyd Dobler. maybe he became a derivatives trader:

    “I don't want to sell anything, buy anything, or process anything as a career. I don't want to sell anything bought or processed, or buy anything sold or processed, or process anything sold, bought, or processed, or repair anything sold, bought, or processed. You know, as a career, I don't want to do that.”

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