The other day my 14-yr old daughter told me that she had decided to become a vegetarian. I told her, “Well, that’s too bad. I guess that you’ll miss eating Animal Crackers in your lunch.” She is still puzzling over that one.
The verb “to mull”: to study or ruminate; ponder. Several American banks, including Goldman Sachs and Wells Fargo, are “mulling” the return of bailout funds they received because of the growing number of strings the federal government is attaching to the money. And it is already happening: the Signature Bank of New York informed the Treasury Department the bank will give back $120 million it received from the government, due to executive pay caps. Bailout funds include caveats about executive compensation, the postponement of evictions, modification of mortgages for troubled home loan borrowers, reduction of dividends, cancellation of employee training and morale-building events, and the withdrawal of job offers to foreign workers.
Lock A Rate, Stick With It
What does a “loan lock” mean? One top agent sent out a note to her staff. “I think as a consumer, or even a loan officer, when we lock a loan, we feel like we are simply “securing” or “holding” that rate for a client. That is only part of it. Once a lock is made, at that moment, the investor is expecting delivery of that loan at the interest rate as part of their portfolio. (In essence, the loan might not be closed, but it is already sold.) If you can’t deliver, or don’t close on time, or you are just simply “trying” to secure a “deal” based on rate, then the investor is going to call your lender and ask, “Where is my loan? Where is my money?” Then your lender might try to “replace” that loan with another loan, or just say to the investor, “Sorry.” You are not just simply holding for you and your client an “Insurance Policy” to try to get that rate, if by some chance you get the loan, you are, in fact, impacting the investors who are trying to make money on those sold loans. It may be hard to miss that “single day” rates are awesome…but, if you are not in Contract, and you don’t have an Appraisal…and you don’t have a true file you can close in 30 days…then DON’T LOCK…UNTIL YOU DO! LOCK when you KNOW you are going to close it. Lock AFTER you have an approval. Don’t lock at multiple Banks. A lock is a promise to deliver!”
RealtyTrac’s Latest On Foreclosures
RealtyTrac, who tracks foreclosures and hasn’t seemed to put forth good news for a few years, released its report for February. Default notices, auction sale notices and bank repossessions went above 290,000, an increase of 6% from the previous month and an increase of nearly 30% from February 2008. The top states were Nevada (1 in 70 in foreclosure), Arizona (1 in 147), and California (1 out of 165). Rounding out RealtyTrac’s Top 10 were Florida, Idaho, Michigan, Illinois, Georgia, Oregon and Ohio, but on average 1 in every 440 U.S. housing units received a foreclosure filing in February. In spite of many investors putting foreclosures on a temporary halt, according to their spokesman there were some exceptions. For example, a 45-day voluntary moratorium in Florida expired at the end of January, and foreclosure activity there was up 14% from the previous month. In New York foreclosure proceedings delayed by a new law for an extra 90 days appear to have hit the system in February, when the state’s foreclosure activity increased 23% from the previous month.
Credit-ratings agency Fitch Ratings placed the ratings of mortgage insurer MGIC Investment Corp. and its operating subsidiaries on a “negative watch”.
A downgrade to junk status could further hinder the insurer’s ability to generate new business, and the downgrade occurred after MGIC said it said it would defer interest payments on $390 million in junior subordinated debt. The deferral is further indication of the increasing financial pressure on the company and the entire MI industry. For “good news”, Fitch noted that MGIC has enough liquidity to meet immediate financing needs. (If it is any consolation, Fitch also downgraded Berkshire Hathaway Inc.’s AAA issuer default rating and senior unsecured debt ratings by one notch, saying “a top rating isn’t appropriate for financial-oriented holding companies in the current volatile market”.)
Stocks Up, Rates Down!
How about those markets so far this week! Yesterday’s 30-yr bond auction was viewed by many to be one of the best (i.e., have the highest demand) auctions in recent memory. Stocks and bond prices both improved (leading to lower rates). In addition, and this directly helps mortgage rates, the Thursday release of the Fed MBS purchases showed that they purchased $61 billion gross, $27 billion net, in the preceding 5 days, suggesting that not only are they buying new low coupon origination but also loans that have been on investor’s books for a while. Given that they are basically the only buyer, it is nice to see. We have already seen the Trade Balance figures (The U.S. trade deficit shrank 9.7% in January to its smallest since October 2002, as both imports and exports fell for the sixth straight month) and in a while we’ll see the University of Michigan consumer confidence report (it is expected to fall from last month to near its all-time low in 1980). The 10-year yield is back up to 2.95% and mortgage prices are worse between .125-.250 based on the improving stock markets.
An Irish priest is driving down to New York and gets stopped for speeding. The state trooper smells alcohol on the priest’s breath and then sees an empty wine bottle on the floor of the car.
He says, “Sir, have you been drinking?”
“Just water,” says the priest.
The trooper says, “Then why do I smell wine?”
The priest looks at the bottle and says, “Good Lord! He’s done it again!”