U.S. Loses 63k Jobs, Citi Trims Mortgage Unit, Carlyle Defaults
According to the the conforming loan limit press release from the Office of Federal Housing Enterprise Oversight (OFHEO), the new loan limits will be in effect from July 1, 2007 (to allow for refinances) until December 31, 2008.
Fannie announces a new set of pricing changes to delivery fees, effective June 1.
Citigroup announced that it is scaling back its mortgage business to free up capital. CitiMortgage’s plan is to cut back the number of loans on its books, which currently totals $200 billion, by about 20% ($45 billion) over the next year and afterwards will focus its underwriting on loans that can be sold on to other investors. The reduction, fortunately, will take place mainly by not replacing loans when they mature or are paid off. Citigroup said it will combine some middle office and support services and will cut some $ 200 million a year in costs, Citigroup said. There will be job cuts, but the bank wouldn’t say how many.
Anyone believing that the economy is not retracting must be in the minority after this morning’s job numbers. Non-farm Payroll, expected unchanged, was -63k for February, along with January and December numbers being revised downward by a total of 47k! Although the Unemployment Rate came in at 4.8% and Hourly Earnings were +.3%, the numbers pointed to continued weakness in the employment area. (The drop in the unemployment rate compared to the drop in non-farm payroll indicates that a large number of unemployed aren’t even looking for work any longer!) And although the government added jobs, the private sector lost over 100k in jobs.
In an interesting move, 15 minutes prior to the 5:30AM PST numbers the Fed came in and made a move to increase liquidity: “a series of 28-day term repurchase agreements, increase the March TAF auctions to $50 billion each, and to continue to address the heightened liquidity pressure”. The 10-yr has improved to 3.56% and mortgage prices are better by roughly .250-.50 in price.
We have also seen a slew of Fed officials speaking around the world (Brazil, France, etc.), but their impact on the markets has been slight. US mortgage foreclosures increased to an all-time high and the Carlyle Mortgage-Bond Fund received a default notice after missing margin calls. It’s no surprise that treasury prices rallied on the news while US stocks dipped down to 18-month lows. New foreclosures jumped to 0.83 percent of all home loans in the fourth quarter from 0.54 percent a year earlier. Late payments rose to a 23-year high, and the government is urging lenders to avert foreclosures by modifying mortgage terms amid the worst housing slump in a quarter century. The share of all home loans with payments more than 30 days late, both prime and fixed-rate loans, rose to a seasonally adjusted 5.82 percent, the highest since 1985, a bankers’ group reported.
Why did I put my entire 401K into Thornburg stock a few weeks ago? Thornburg stock dropped by 51% to $1.65/share yesterday, versus $12/share last week, and has fallen 82% this year.