Marc's Mortgage Matter's

Progressive Auto Insurance has recently created an in-car system to monitor the driving habits of its customers. In a similar vein (pun intended), a small credit union in Oklahoma is testing a new system whereby it implants a silicon chip in the necks of its borrowers. Credit information, address changes, marital status, etc., are all updated via a central telecommunications transmission. "It worked real well with the SPCA tracking family pets, so we decided to roll it out to our debtors," announced Chester Gohder, who runs retail lending for the institution. "We can refi these guys with a wave of our wands - process the paperwork and draw docs before the customer leaves the premises. Just the other day I was at Brownie's Burgers, and I lowered the cook's rate by .5% before she could get the fries on the table." It is rumored that Bank of America will soon be implanting chips into everyone in its servicing portfolio. Teams of expensive attorneys have been brought in by each side in the matter.

 

The New York Lottery was last week up to $319 million, and here’s a better idea: Rather than giving one person the full $319 million, why not give $1.0 million each to 319 people? It would create more public happiness and probably be better for the economy.

And before you laugh at the concept of happiness as a byproduct of lotteries, you might want to read the latest issue of The Atlantic. “The Fortunate Ones” is about an ongoing study of the ultra-rich, and their anxieties and fears.
Just one quote: “Most of us occasionally spoil ourselves with outbursts of deliberate and perhaps excessive consumption: A fancy spa treatment, dinner at an expensive restaurant, a shopping spree. In the case of the very wealthy, such forms of consumption can become so commonplace as to lose all psychological benefit. Constant luxury is, in a sense, no luxury at all.” Interesting concept, isn’t it? And while we’re at it, why does the lottery winner guy look so dour?

A pretty simple question, but one that has important implications: "Do rates tend to go up both on inflation and fears of inflation?" Remember that the real interest rate includes both inflation and the nominal rate of interest. In the case of a loan, it is this real interest that the lender receives as income. If the lender is receiving 3.5% percent from a loan and inflation is at 3.5% percent, then the real rate of interest is zero because nominal interest and inflation are equal.

But what is more important, the actual inflation rate, or what people perceive is the actual inflation rate? The predominant view at the Federal Reserve remains that the underlying rate of inflation is not on the verge of a dangerous acceleration, but mounting public concern about inflation has increased markedly, and yes, this can cause rates to creep higher in a preemptive fashion. The Fed is more attuned to high unemployment (although it is not the Fed's responsibility to increase jobs), a depressed housing market, relatively sluggish economic growth and downside risks to the expansion. Many are quick to point out that conducting monetary policy when the economy is sluggish is difficult. But when inflation, or fears of inflation, begins to pick up is very difficult - the futures market believes that the odds of the Fed leaving overnight rates near 0% through August are higher than 90%. One can look for continued Fed pronouncements that the risk of inflation is low... until it is not.

Here’s an interesting chart showing the movement between private mortgage insurance and FHA insurance. FHA was only 3% of the market as recently as 2006, and it has jumped 8-fold in the following five years. Rapid growth of any sort is always worrisome.

When you read about politicians filing their net worth statements, doesn’t it bug you that they don’t have to list the exact numbers? Asset values go into categories such as ”worth from $100,000 to $2 million”, so you never really know what they have. You’d never let a borrower get away with that. How come the politicians can?

In Prison for Taking a Liar Loan – By JOE NOCERA – (’Liar loan’ liar goes to prison)

 http://mortgagenewsclips.us1.list-manage.com/track/click?u=ccf914f5dc0465e9a4233b205&id=32b2a7727c&e=e311432cd5

Are you paying $400-500 a month for Viagra? Worry not, the patent runs out next year, so you can expect the price to fall dramatically. But buy the pills, not the stock. That $1.9 billion in revenue from Viagra will probably shrink by 90% once it becomes a generic.

Seeing as Cialis doesn’t have a spokesman, why not onetime Congressman Dick Swett?

While foreclosure is a national problem, it has not been evenly distributed across the country. Four states (AZ, CA, FL, and NV) have suffered the highest foreclosure rate and account for 42% of the foreclosure inventory today. If one adds in the next tier, adding Illinois, New York, and New Jersey, that represents 60% of all foreclosures.

When you see photos like this, don’t you think “One of these days I definitely want to spend a week in Bora Bora “? And those resorts with bungalows out over the lagoon: Wouldn’t it be kind of hard to sleep soundly knowing that even a small tsunami and you’re toast?

Interest rates are low, Spring weather is almost here, and the baseball season has finally started. What more could you want?

The economy is starting to show some additional signs of an expanding recovery, and one more resilient to external shocks. That said, many challenges to overcome still remain before we get to a "full recovery", and if consumer moods are any indication, rising gasoline prices are starting to create some considerable headwinds.

There are at least two facets of the economy still missing from the recovery. Of the two, the housing market is a much more intractable problem, since its solution depends upon the settling of a whole host of market-related issues, but at the same time is also dependent upon substantial and continual gains in job growth, which seems finally to be gaining some traction.

Mortgage rates are pushed higher by improving growth and especially improving inflation. A still-soft job market and weak housing markets act as a counterbalance to that upward pressure, while the events overseas do add degree of uncertainty to the outlook. As the glass begins to seem more likely to be half full than empty, the likelihood is that interest rates will tend to be somewhat higher on balance than lower. A stock market finding its footing is one expression of that as money moved more confidently into risk and away from safety.
Concerned about risk, the Federal Reserve and other regulators released for comment and feedback a paper to address financial risk. Ultimately this will include a definition of a Qualified Residential Mortgage, expected to be quite a risk-free item indeed, requiring borrowers to have a deep equity position, great credit while weighed against 1990s-level qualification ratios, among other risk-controlling features. Eventually, the QRM will be the only loan which can be bundled into securities with no loss reserves ("skin in the game") held back by the issuer or originator. In theory, a narrow definition will expand the number of borrowers who fall outside the boundaries, and that audience should be large enough as to attract a response from lenders eager to lend money.

However, it is by no means clear at this moment whether a more robust market for non-QRM mortgages will form, or if the market will go the other way, originating only (or mostly) QRM-level mortgages, sharply limiting the availability of credit to only the best possible borrowers. Commentary from the public and interested parties is open until June, if you have an opinion.

Mortgage rates have firmed up a little bit over the past couple of weeks, as the economic spring continues to warm we might see a little more of that. At the moment, though underlying interest rates have leveled off, so we probably won't see much movement if any next week. Oil passing $108/bbl does seem likely to presage an economic slowing at some point, though.

A duck walks into a post office and asks the postal clerk, "Got any 4.5% 30-yr mortgages?"
The clerk replies, "No, this is a post office; loans aren't done here."
The duck walks out, but this brief dialogue is repeated daily for several weeks. Finally, the clerk snaps: "If you ask for a loan one more time, I'll nail your beak to the ceiling!"
The next day the duck asks, "Got any nails?"
The clerk is fuming. "NO!"
The duck pauses. "Got any 4.5% 30-yr mortgages?"