“If at first you don’t succeed, do it the way your mother told you to.”
~ Author Unknown
Mother’s Day, Sunday 10 May 2009
What is the deal with these interest rates? Or perhaps the better question might be, is anyone surprised that with the economy showing signs of life, and the tremendous amount of supply hitting the market, rates have moved higher? And this is even with the Fed buying securities. Yesterday mortgage investors worsened prices, and prior to the unemployment data this morning the new 10-yr was sitting at 3.35%, the highest level since before Thanksgiving. Gold is well above $900 an ounce, and oil is above $57 per barrel.
Things appear to be improving slightly in the jobs market. The unemployment numbers came out, and employers cut a “smaller-than-expected” 539,000 jobs in April, the smallest amount since October. The Unemployment Rate, however, which tends to grab headlines, shot up to 8.9% as expected, the highest since September 1983. The March number was revised from a drop of 663k to show a decline of 699,000, and February was revised from a drop of 651k to 681,000. For the April number, experts were expecting a drop of about 600k. All sectors lost jobs except for the government and education & health services areas. After the numbers we find mortgage prices worse by .125-.250 yet the 10-yr is back down to 3.28%.
The House of Representatives approved a measure that would force mortgage lenders to retain a 5% stake in home loans they make, securitize and then sell to investors. (I imagine that this does not include brokers or small bankers, but I don’t know.) In addition, mortgage brokers would face tighter oversight and lenders would have to prove that homeowners are well-served when they refinance a home loan under the rule. The legislation would also help renters fight eviction when their landlords default on their mortgages. Remember, however, that there is no equivalent Senate legislation, but this certainly shows where some in Congress feel mortgage lending is heading.
With investors moving into the $729, 750 loan space, it takes some of the pressure off of agents who have specialized in high balance loans. The jumbo market, however, as best as I can tell is showing no signs of coming back soon. Hopefully I am wrong. Agents and brokers are seeing their best high net worth and self employed clients search for loans in local or community-based banks, who in turn are being very selective about to whom they lend. But as most know, any small bank is going to come up against lending limits based on their capital and deposits. I suspect that with client deposits on the decrease bank lending limits have decreased as well. Certainly, on the TPO side of the business, there is no viable active secondary market, which of course in reflected in the “dogmeat” pricing.