TEAM EMPOWERMENT MORTGAGE CHATTER: Apr. 30, 2009: FOMC announcement; stocks continue to improve in spite of poor earnings; rates slide higher

“While one person hesitates because he feels inferior, another is busy making mistakes and becoming superior. “ Henry C. Link

Wells Fargo’s hiring. Or maybe the correct verb tense is “hired”. According to their CFO Wells recently hired about 5,000 people to handle the increased workload in their mortgage operation. The bank added people across the country in the past couple of months to process record mortgage applications.

StoneWater Mortgage came out with their DU Refi Plus program. “Mortgage insurance requirement waived if previous loan scenario LTV was less than or equal to 80%, but due to declining property values, new loan scenario LTV now exceeds 80%…Provide up to 105% LTV for loan scenarios that previously did not require mortgage insurance. Loan scenarios with existing mortgage insurance policies are not eligible for the DU Refi Plus through StoneWater Mortgage…a minimum 620 credit score for all DU Refi Plus loan scenarios.”

The FOMC’s announcement yesterday was not overly surprising. “The economy has continued to contract, though the pace of contraction appears to be somewhat slower. Household spending has shown signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Weak sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories, fixed investment, and staffing. Although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time…expects that inflation will remain subdued…some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.” They left the overnight rate unchanged, and to provide support to mortgage lending and housing markets they will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn.

One trader said that, “It feels like we are in the middle of a 6-12 month window where it will be unclear if the economy & stocks have bottomed. The economy needs to digest all the stimulus, financials need time to heal their balance sheet, earn their way out of this mess. I’m much less negative than I was even 3 months ago, but I strongly believe there are many more interesting chapters to write.” Nicely summed up – stocks certainly continue to do well, in spite of some very poor earnings releases. That’s not what they taught us in business school!

We also have supply issues continuing to weigh down on bond prices, raising yields. Next week the Treasury will sell $35 billion of 3-yr, $22 billion of 10-yr, and $14 billion of 30-yr bonds. Today’s Jobless Claims number showed that the number of U.S. workers filing new claims for jobless aid unexpectedly declined by 14,000 last week, to 631,000, although “continued claims” hit a record high. In addition, more news today showed that Personal Consumption (consumer spending) fell in March after two months of straight increases. It was down 0.2% after a revised 0.4 percent increase in February. Personal Income slipped 0.3 percent after declining by an unrevised 0.2 percent in February – it has declined in five of the last six months. But here is some good news: the savings rate climbed to 4.2 percent in March from 4 percent the previous month. After this, the 10-yr has shot up to 3.12%, and mortgage prices and the 5-yr note are worse by about .125.

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