What Do Foo Fighters Know Mortgage Rates?
Why can’t automated answering services at mortgage companies be more like the one at Nestle Crunch’s Hotline at 800-295-0051? When asked if you want to continue in English or Spanish, just wait for about 10 seconds, listen to the options and press “4”. Listen to the options again, and then press “7”. (It is worth trying a few times if the line is busy.)
“I know what you’re thinkin’
We were goin’ down.
I can feel the sinkin’
But then I came around.”
What do the Foo Fighters know about mortgage banking? Maybe not much. But bond prices have certainly moved higher (and interest rates lower) since New Years, as has the stock market. According to one trader, the 10-yr note “caught a bid” on speculation that the Fed will leave rates low for an extended period of time. Interestingly, the odds of that happening have been dropping, and now the futures market is pricing in a 79% chance that the Fed will keep rates somewhere between 0% and .25% through April. After hitting 3.91% last Thursday, we’re back down to 3.77% this morning (mortgages prices are better by about .125).
Will Fed Continue MBS Purchases After March 31?
Another story making the rounds is that the Fed may/will continue to buy mortgage-backed securities after its self-imposed March deadline if needed (the release of the FOMC minutes may help shed some light on this). Lately, most of their interest has been 4.75%-5.125% mortgages. Regardless, when you combine continued buying by the Fed, along with some interest shown by banks & servicers, with slowing supply (some mortgage banks are crying for new locks), the laws of supply and demand come into play and the prices go up.
Mortgage Apps Down, Refis Main Source of Business
And “crying for new locks” might just be the case industry-wide, although The MBAA’s weekly index showed that applications filed for mortgages rose .5% last week from the week before. Refinances were down almost 2%, and purchases were up almost 4%. Refinancing still makes up about 75% of all activity – scary.
US Dollar’s Impact On Rates
Why should anyone in mortgage banking care about the value of the dollar? Doesn’t a falling dollar only hurt foreign exporters, foreign holders of US securities (like the Chinese with over $1 trillion), or American tourists? Unfortunately, a falling dollar only benefits American exporters so far – it can hurt in the long run if manufacturing companies can reap rewards without improving products or productivity. And when the dollar rallies back, they will suffer. Interesting, toward the end of 2009, the value of the dollar was inversely related to stocks but in the past, the dollar and stocks usually moved together. (With the global financial crisis the dollar rallied as a safe haven for investors, and stocks plunged.) With regard to interest rates, a falling dollar (or any currency) usually leads to higher inflation and higher interest rates on loans of all types.
New CA Licensing Requirements
During the last 100+ years, the nation often follows what happens in California. Many originators in other states are hoping that this does not happen this time. The Department of Real Estate and CFL, via the SAFE act, will install new licensing requirements this year. Loan originators must have sound credit, despite the recent economic downturn, for example. The law impacts any MLO (“Mortgage Loan Originator”), and, as best as I can tell, requires individuals who are licensed as Real Estate Agents in CA and who are also originating loans as an LO must now meet the new NMLS criteria for LO licensing by obtaining an NMLS account and meeting Federal and State education, exam, fingerprint, credit and background checks. They must also report to the state that besides Real Estate deals that they are also working as LO’s and originating loans by filling out online Form RE 866 (Mortgage Loan Activity Notification).
Mortgage Industry M&A
A story from the National Mortgage News yesterday highlights the “plight” of the mortgage banker. “For the past two years, brokers have taken it on the chin from politicians and regulators, accused of selling loans to consumers who cannot afford them and pocketing excessive fees in the form of yield-spread premium payments.” It appears, according to a quote in the article, that “the only large bank wholesaler that still believes in brokers is Wells Fargo & Co., which also happens to be largest table funder in the nation out of a field of 40 or so firms.” There is some thought that the loan brokers that are left standing today are believed to be the most experienced, motivated and professional. Of course, “a handful of mortgage banking firms are beginning to gobble up well-managed loan brokerage shops, turning these operators into retail arms of their companies” – WJ Bradley, Prospect, and Skyline come to mind.
GMAC Financial Services expects to report a loss of about $5 billion in the fourth quarter, mostly due to $3.8 billion write down from its mortgage unit. So far the taxpayer has provided GMAC with over $16 billion of aid, and the government owns 56% of the company. GMAC’s subsidiary Ally Bank is now allowed to seek brokered deposits, but GMAC has also come to terms with writing down its mortgage portfolio – something other large banks have already done to a large degree. (By classifying its mortgage securities as “held for investment,” GMAC was able to postpone this.) Options for Res Cap include selling it, selling off its bad assets, or keeping Res Cap and putting it into bankruptcy.
Proof that the economy affects us all……..
Two car salesmen were sitting at the bar. One complained to the other, “Boy, business stinks.
If I don’t sell more cars this month, I’m going to lose my a–.”
He noticed a beautiful blonde woman sitting two stools away. Immediately, he apologized for his bad language.
“That’s okay,” the blonde replied, “I can relate. If I don’t sell more a– this month, I’m going to lose my car.”