Will Banks Lend or Just Buy Each Other?, Conforming Limit Update, Median Home Prices

Banks continue to seem hesitant about lending money to each other. (“Hesitant” might be an understatement.) That is a real problem, since Congress has appropriated $250 billion to do so, but they are either buying Treasury securities or buying other banks. Late last week, for example, PNC purchased National City. This does not bode well for Nat City employees, as they are very similar institutions, geographically and product-wise, so Cleveland is bracing for yet another set of lay-offs.

Speaking of banks, the Treasury unveiled a $7.7 billion investment in PNC Financial, and over the weekend put money into Capital One Financial. They will receive $3.55 billion from the government. Also receiving money from the US government are Huntington Bancshares, KeyCorp, Northern Trust, and SunTrust.

Conforming Loan Limits & Expiration Dates
A few weeks ago Freddie Mac announced permanent new “Super conforming” Agency loan limits. Now loan amounts greater than $417,000 are set at 115% of Area Median Housing with a maximum of $625,500, so apparently at this point there will continue to be two programs for conforming loans. I, for one, don’t understand the logic of this, but I am sure that brighter minds have it all mapped out. Supposedly there are fewer “High Cost” counties, although I do not have a list.

Franklin American proclaimed that beginning with “loans locked November 1, 2008 (they lock on Saturday’s?) both refinance and purchase transactions will be limited to a maximum LTV/CLTV of 70% for Florida condominiums and attached housing properties.”

Existing Home Sales 1 Year High, Median Price Down to $191,600
The news from Friday consisted of Existing Home Sales rising 5.5% to a 1-year high – but that was attributed to falling prices. The median home price was $191,600 in September, down 9.0% from $210,500 one year ago. That $191,600 median price across the nation is the lowest since April 2004. Over the weekend stocks tumbled around the world, helping rates. The Nikkei was off more than 6%, and major European indices fell 4-6%. Looking into this week, we have the usual amount of economic news, but the highlight may be the Fed meeting later this week, and the market is fully discounting a 50 bps rate cut from 1.50 to 1.00%. So far this morning the Treasury bond markets seem to be doing well, with the 10-yr at 3.66%. But in more signs of de-coupling, mortgage-backed securities are anemic, with prices worse by .250 as spreads widen.

Daily Humor
During a visit to the mental asylum, a visitor (a mortgage broker) asked the Director, “How do you determine whether or not a patient should be institutionalized?”
“Well,” said the Director, “we fill up a bathtub, then we offer a teaspoon, a teacup and a bucket to the patient and ask him or her to empty the bathtub.”
“Oh, I understand,” said the broker. “A normal person would use the bucket because it’s bigger than the spoon or the teacup.”
“No.” said the Director. “A normal person would pull the plug. Do you want a bed near the window?”