The scene from this movie was obviously a horrible period in history, but this take on it cracks me up every time:
My uncle used to say, “Do not corner something that you know is meaner than you.” Or bigger, for that matter. Speaking of big, the numbers yesterday show that the Fed’s purchases dipped somewhat, as expected. For the week ending on September 30th, the Federal Reserve’s MBS program was a net buyer of $20 billion agency MBS which indicates a $2 billion decline from their prior week’s purchases, entirely consistent with their announcement last week that they will gradually slowdown MBS purchases and also extend their $1.25 Trillion purchase program to into the first quarter of 2010. Anyone nervous about scaling back the Fed’s purchase program should remember that a) they don’t want to de-stabilize the markets, b) historically they are not buyers of MBS’s, c) they are currently buying more MBS’s than are being originated – do they need to buy older production? and d) in spite of the numbers yesterday that showed a decline, mortgage rates still improved nicely.
Treasury Auction Update
There are a few things to note, not the least of which is that the Fed’s MBS purchases continue to be heavily skewed towards conventional loans (Fannie & Freddie) and away from GNMA (FHA & VA) securities, in spite the fact that FHA & VA production has skyrocketed. The Fed is also has bought a large portion of Treasury securities, although there are always more where those came from! In fact, next week the Treasury is selling another $78 billion of 3, 10, and 30 year fixed income securities for anyone wanting to add to their portfolio.
Pending Home Sales & Construction Spending Up, Manufacturing Down
After I sent out the commentary yesterday, we had some decent economic news. Pending Home Sales were up over 6% in August, and are at their highest level since early 2007. (Some explained that this was due to the rush of buying ahead of the tax credit expiring at the end of November, and that buyers are still facing delays due to short sales or HVCC issues.) We also had Construction Spending increase almost 1% in August, which balanced out a revision to the July numbers. (Spending on private residential projects rose 4.7% in August.) And we had the ISM Manufacturing Index drop slightly to 52.6 – still above the magical 50 level that indicates expansion. (Many would say that manufacturers are catching up in taking care of depleted inventories rather than in satisfying new demand…)
Strong Buying for Wall Street Firms
Wall Street firms (all 3 of them) saw very good buying yesterday, in spite of the decent economic news. Whether or not investors pass along the superb MBS pricing to their clients is another issue: 4% securities (which contain 4.25-4.625% 30-yr mortgages) are trading near par (100). Add on some value for servicing, and suddenly these rates are at a point or two premium. In addition, the yield curve is continuing to flatten, impacting ARM rates relative to 30-yr fixed rates. Supposedly Japanese trust banks had been buying Treasuries in the 5-year to 7-year range, but still, there is plenty of supply out there. Some view this as a way of buying “cheap” dollars; others believe that investors are not concerned about inflation while world economies are still weak.
Unemployment Hits 9.8%
Today was the “big daddy” unemployment numbers that always make it into the headlines Saturday morning. Estimates heading into today had job losses pegged at 175-200,000 for September with the Unemployment Rate hitting 9.8%. “Weak but improving” was the term some economist were using for the job market – until this morning. U.S. employers cut 263,000 jobs in September, pushing the unemployment rate to 9.8%. 9.8% is the highest rate since mid-1983 and payrolls had now dropped for 21 consecutive months. After the number stocks are getting hit again, but the yield on the 10-yr is down to 3.13% and mortgage prices are better by .250-.375!
Lender Updates from US Bank and Franklin American
US Bank begins their Freddie Mac Streamline Refi Program today. USB’s Freddie program will go to 105% LTV, with a 620 minimum FICO and all borrowers must have a FICO score. It is available for conforming and high cost county limits in 1-4 units for primary residences and investment properties, 1-unit second homes, condos & PUDs. (Manufactured homes are not allowed). And there is no MI required if there is no MI on the loan being refinanced (even if new LTV is at 105%) – but you should know that this program is not available for existing loans with MI. And, of course, the loan must receive an LP Accept and the existing loan must be current.
Franklin American addressed HUD’s recent Mortgagee Letters announcing significant revisions to FHA program parameters. Starting today any FHA Streamlines & VA IRRRLs going to FAMC will need a minimum FICO of 640. On top of that, FICO price adjustors will be modified for all FHA and VA loans promoting loans with scores above 700. Franklin will also, starting today, require 6 payments (which may or may not be the same as 6 months) with the current lender for this product.
The Cajun Prenuptial Agreement:
Boudreaux done got older and his childen dun put him in the old folks’ home near Breaux Bridge, where he dun met a lovely lady dat were from Texas.
Now Boudreaux being a fine upstanding Catholic, he didn’t want to do nutin dat were aganst his religion, no. So he dun propose marriage.
Now both Boudreaux and Mabel wuz well into their 80s.
Mable went and tole everyone at the Senior Citizens home the good news. Irene, Mabel’s best friend, told her that since she was very wealthy and the person she was about to wed was, well to say the least, not worth a plug nickel, she should insist on a prenuptial agreement.
Mabel was sitting on the porch swing with Boudreaux and she told him she would marry him providing he would sign a prenuptial agreement.
Boudreaux dun told Mabel, “I don’ know what dat is but I’ll sign anything you want, cause I luv you so much.”
Mabel got out her pen and paper and started:
She said: “I want to keep my house down in Texas with all the oil wells.”
He said: “Dat’s fine wit me. I’ll keep my shack on da bayou.”
She said: “I want to keep my Cadillac, BMW and Lexus.”
He said: “Dat’s fine wit me. I’ll keep my pick-em-up truck.”
She said: “I want to keep my yacht that is moored near my summer home in Padre Island.”
He said: “Dat’s fine wit me. I’ll keep my pirogue.”
She said: “I want to keep all my jewelry.”
He said: “Dat’s fine wit me. I’ll keep my stuffed deer head.”
She said: “And I want to have sex 6 times a week.”
He said: “Dat’s fine wit me. Put me down for Fridays.”