Stricter Appraisal Guides From FNMA, Income Down Savings Up, 1-Mo T-Bill Yields Negative

One-Month T-Bill Yields Negative Again
I called up the US Treasury yesterday to ask them how much they’d pay me to loan them money (e.g., buy a Treasury security) for a month. They replied, “Not only will we not pay you any interest, but you’ll pay us interest to loan us your money!” A novel thought – like paying for a storage unit for your junk – but it occurred yesterday where the interest rate on 1-month T-bills was negative. (It also happened back in December, as investors put their money into the most easily-traded securities to help their balance sheets at the end of the quarter. I guess that if I had a balance sheet that needed bolstering, I’d do the same. Banks prefer to carry securities on their balance sheets instead of cash at the end of the quarter, driving up the demand for bills, thus driving up the price, driving down the rate.)

What Are Borrowers Saying About Their Loans?
What are the borrowers who are still making their payments saying out there? “A promissory note means that I am promising to repay the loan – it doesn’t mean I get to walk on the loan if the property value declines. Since the lender does not share the upside appreciation of an investment property, why should lender be stuck with the downside? I, as a borrower, accept both sides of the risk/reward equation: I get the upside AND the downside. My feeling is that many borrowers, especially for single family homes, believe that they are entitled to a 4%, no down payment, $1,000,000 loan. And somehow, if they can’t get that, that means there is a crisis requiring taxpayer subsidy.”

US Bank Rolls Out $729k Loans. But Not Really
US Bank’s wholesale division sent this note to their brokers: “The American Recovery and Reinvestment Act of 2009 (ARRA), provided for the FNMA/FHLMC high cost county loan limits to be returned to the “higher of” the 2008 or 2009 loan limits. In most Cases the 2008 limits will be the higher limits but there are several counties (located in California, North Carolina & Virginia) where the 2009 limits were actually higher than 2008 limits. On a county by county basis you may be able to originate loan amounts up to the $729,750 limits of 2008. Effective immediately, for program #3626/3627 FHLMC Super Conforming Jumbo, U.S. Bank Home Mortgage Wholesale Division will accept loans at the revised loan limits. You may verify specific high cost counties at the new ARRA limits by checking this site.”

Stricter Appraisal Guidelines
Fannie Mae has implemented the mandatory use of the Market Conditions Addendum to the Appraisal Report (Form 1004MC) which is intended to provide a clear and accurate understanding of the market trends prevalent in the subject neighborhood. The form provides the appraiser with a structured format to report the data and to more easily identify current market trends and conditions. The appraiser’s conclusions will be reported in the “Neighborhood” section of the appraisal report. Appraisers should be made aware of this taking affect April 1.

Income Down, Savings Up
This morning we’ve seen the February Personal Income & Outlays report which measures consumers’ ability to spend. As you would expect, if a consumer’s income is rising, they are more likely to make additional purchases. Normally this would be viewed as inflationary, and bad for rates, but at this point, the markets would like to see a pick up in that measure. Forecasts called for a -0.1% drop in income and a +0.3% increase in spending. Income actually dropped -.2%, after January’s +.2% increase, and spending was +.2% after being +1.0% in January. The “savings rate”, which many watch, was +4.2% in February, indicating that households were still remaining frugal. The second report comes from the University of Michigan, and is merely a revision to the March consumer sentiment index from 2 weeks ago. It is expected to be about unchanged. The 10-yr is back down to 2.71%, and anyone who didn’t improve their mortgage prices yesterday afternoon will do so this morning.

Daily Humor
A lady inserted an ad in the classifieds: “Husband Wanted.”
Next day she received a hundred letters.
They all said the same thing: “You can have mine.”