Vital Statistics:
|
Last
|
Change
|
Percent
|
|
|
S&P Futures
|
1676.5
|
-12.9
|
-0.76%
|
|
Eurostoxx Index
|
2920.1
|
-12.9
|
-0.44%
|
|
Oil (WTI)
|
102.1
|
0.0
|
0.05%
|
|
LIBOR
|
0.244
|
-0.002
|
-0.61%
|
|
US Dollar Index (DXY)
|
80.12
|
-0.017
|
-0.02%
|
|
10 Year Govt Bond Yield
|
2.61%
|
-0.04%
|
|
|
Current Coupon Ginnie Mae TBA
|
105.4
|
-0.1
|
|
|
Current Coupon Fannie Mae TBA
|
104.9
|
0.1
|
|
|
RPX Composite Real Estate Index
|
200.7
|
-0.2
|
|
|
BankRate 30 Year Fixed Rate Mortgage
|
4.32
|
Markets are
weaker after the ECB maintained interest rates at current levels and the ADP
jobs report came in disappointing. Mortgage Applications fell .4% last week.
Bonds and MBS are higher.
Bonds are
rallying (interest rates are falling) on the shutdown. What gives? The shutdown
means that the Fed is on hold for QE tapering. Certainly an October move is off
the table, and perhaps December is as well. Then we get Janet Yellen, who is an
even bigger dove than The Bernank. Maybe, just maybe, we can squeeze in one
last refi wave if rates drop below 2.5% on the 10 year.
If the shutdown
remains in place, you just got Friday's all-important jobs report with the ADP
number. The economy created 166k jobs last month, while the Street was
expecting 180k. The August number was revised downward from 176k to 159k. As we
have seen, the financial industry is laying off mortgage origination staff as
the refi boom dries up.
The Washington
Post gives you the state
of play with the shutdown.
Punch Line: there are no high level negotiations happening at the moment. Both
sides absolutely despise each other and neither one trusts the other further
than they can throw them. Republicans are playing a strategy similar to the
sequester. Democrats believed that once people started feeling the effects of
the sequester (think business travelers and flight delays) that the pressure
would bring everyone to the table. That didn't happen. Instead, Congress passed
a bill requiring the FAA to move funds to keep the air traffic controllers on
the job. That took the pressure off and the sequester stayed, much to the
chagrin of Democrats. Republicans are planning to submit separate continuing
resolutions to fund the most popular government activities and daring the
Democrats to vote against them. In other words, this could take some time to
play out.
Rob Chrisman has
a decent analysis of the shutdown and its effects on the mortgage business. Here is
another. The highlights
·
Lenders needing an executed
IRS Form 4506-T only need to have it signed by the borrower not processed by
IRS prior to closing. However, the actual 4506-T information must be obtained.
·
USDA loans will be on hold as
the Department of Agriculture is closed.
·
VA will remain open.
·
We should also see delays in
FHA processing.
·
Fully approved FHA and VA
loans will be able to close, but there will be delays in insuring
·
FHA case numbers will be
obtainable if processed automatically. Manual processes will not.
·
FEMA flood insurance will not
be obtainable
Once we climb
continuing resolution mountain, we have to deal with the debt ceiling. Nobody
thinks we will miss a principal or interest payment on the debt, but it could
potentially affect the economy if the government stops paying some bills. One
potential issue is the repo market, which could hit a bump if T-bills become
classified as "defaulted securities." Defaulted securities are
unacceptable as collateral for repo transactions (a repo is just a secured loan
and is a huge way banks and companies handle cash management). This could start
to affect the financial markets and restrict credit.
Brent Nyitray, CFA
Dellacamera Capital Management
National Asset Direct
iServe Residential Lending
1010 Washington St, 6th floor
Stamford CT 06901
T: 203-817-3614
C: 917-841-4938
AIM bnyitray
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