THE BASIS POINT

Trailer Loans Discontinued, Did TARP Work?, Obama Scrapping Home Ownership?

There are lots of trailer trash jokes out there, and more at the bottom of this post (You know you’re trailer trash when “You have your local taxidermist on speed dial”, “You think ‘The Nutcracker’ is something you do off the high dive”, and “Your grandmother has ‘ammo’ on her Christmas list”, for example). Manufactured housing has always been one of those fringe areas of lending, and now even more so. US Bank Home Mortgage announced that, given their goal to “originate and service quality loans that surpass the overall Industry performance…USBHM will discontinue Manufactured Housing as an eligible property for all of our Government Programs.” This includes, obviously, fixed rate, ARM, temporary buy down, and VA products. In addition to that, USBHM will discontinue offering cash out refinance options on conventional manufactured housing.

Georgia, like many other states, has its fair share of manufactured housing. According to the Atlanta Journal-Constitution, “Federal and state regulators have put as many as one-third of Georgia’s 300 banks under intensified monitoring and recovery plans, mostly strict enforcement orders a step or two short of seizure, according to banking experts. A majority of these 90 to 100 banks, these experts say, are operating under “cease and desist” orders that require them to complete tough turnaround plans within strict deadlines.” Georgia already leads the nation in total bank failures, having had 21 in the last year. The story states that most of the enforcement actions are not publicly disclosed, so a firm number of affected banks can’t be determined: the state regulators don’t disclose their cease-and-desist orders whereas Federal regulators, who do disclose their actions.

Did TARP Work?
How is giving the money to banks working out? Many argue “not so well”. The injections have made the banks richer and less likely to become go bankrupt, but it doesn’t force them to lend money out. Heck, they may want to use the money to cover the bad loans they either already have on their books or may have in the future. Government directives go to Fannie and Freddie, who in turn offer to buy the loans. Then, of course, it is up to the investors to decide whether or not to offer the program.

Obama Scrapping Home Ownership?
Renting isn’t so bad, right? In an interesting quote from Rep. Barney Frank, chairman of the House Financial Services Committee, he said, “I’ve always said the American dream should be a home – not homeownership.” Supposedly the current administration is doing away with George W. Bush’s “ownership society’’ and instead plans to pump $4.25 billion of economic stimulus money into creating tens of thousands of federally subsidized rental units in American cities. In other words, the government will get behind the construction of low-rise rental apartment buildings and town houses, as well as the purchase of foreclosed homes that can be refurbished and rented to low- and moderate-income families at affordable rates. Apparently the Obama White House has acknowledged that not everyone can or should own a home.

FDIC Update On Colonial Failure
According to a spokesman from the FDIC, BB&T has acquired all of the mortgage warehouse assets from the failed Colonial Bank, except for those associated with Taylor, Bean & Whitaker. BB&T does indeed have its own small warehouse facility, and they are currently evaluating Colonial’s warehouse business. In its statement on the Colonial acquisition, BB&T said it did not acquire any assets relating to TBW, primarily mortgage loans and are currently involved in litigation.

Seasoned Loan Values
Sometimes companies wonder why a seasoned loan (one that has been on their books for a while, perhaps as much as a few years) would be worth less than a loan that has recently funded. After all, they wonder, hasn’t the borrower been making their payments with no issues? Well, from an investor’s point of view, two things tend to push the price of servicing down. First, if the original lender sells loans, why wasn’t the loan sold in the past? Second, and probably more importantly, how much longer is this loan going to be on the books?

Treasury Auction Announcements, Jobless Claims
Unfortunately yesterday, as the stock market improved, the bond market worsened. (This is not always the case, by the way.) Today we’ll get the announcement of 2 year, 5 year and 7 year notes, all of which will be auctioned in the middle of next week. Jobless Claims already came out this morning: claims unexpectedly rose last week by 15,000 to a seasonally adjusted 576,000 in the week ended Aug. 15. The number of people collecting long-term unemployment benefits edged up 2,000 to 6.24 million in the week ended Aug. 8 (that’s a lot of people “on the dole”!), but the four-week moving average declined 2,500 to 6.27 million. For weekly claims, the four-week moving average for new claims climbed 4,250 to 570,000 last week.

Later today the Philly Fed Survey is released. (I think that it is only a rumor that, with Michael Vick coming to play there, Philadelphia’s new City Song is, “Don’t Let Your Dog Out! Woof, Woof”.) In other news, oil prices have moved up again, and Asian stock markets improved. Tomorrow the only news out is Existing Home Sales. With all of that in mind, the 10-yr’s current yield is 3.46%, and both the 5-yr Treasury and mortgages are roughly unchanged.

Daily Humor
You know you’re trailer trash if…
You consider your license plate personalized because your father made it.

You wonder how service stations keep their rest-rooms so clean.
You come back from the dump with more than you took.
You keep a can of Raid on the kitchen table.
Your wife can climb a tree faster than your cat.
You’ve been involved in a custody fight over a hunting dog.
You know how many bales of hay your car will hold.
Your house doesn’t have curtains, but your truck does.
You can spit without opening your mouth.
Your lifetime goal is to own a fireworks stand.
You have a complete set of salad bowls and they all say “Cool Whip” on the side.
A tornado hits your neighborhood and does $100,000 worth of improvements.