Morning Report

Vital Statistics:

	Last	Change	Percent
S&P Futures	1426.5	2.5	0.18%
Eurostoxx Index	2544.6	2.4	0.09%
Oil (WTI)	90.51	0.5	0.51%
LIBOR	0.316	-0.002	-0.47%
US Dollar Index (DXY)	79.54	-0.083	-0.10%
10 Year Govt Bond Yield	1.81%	0.04%
RPX Composite Real Estate Index	193.9	0.1

Markets are up slightly in spite of weak guidance out of Caterpillar. CAT is forecasting a 5% decline in next year's sales based on the weak global economy. This week is heavy with earnings reports with Dupont, Facebook, 3M, Coca Cola, Conoco, and Amazon.com. On the economic front, we will have the FOMC rate decision tomorrow and the first estimate of 3Q GDP on Thursday.  Bonds are down 25 ticks and MBS are down 6 or 7.

Mark Zandi of Moody's is endorsing the the qualified mortgage rule. This rule should provide lenders some relief from litigation as long as the mortgage was underwritten in accordance with CFPB guidelines. As far as loans outside those guidelines?  They "will remain toxic water for most lenders."

Many market participants are expecting the Fed to announce that treasuries will be included in future QE.  The Fed has already committed to buy $40 billion of MBS a month until unemployment is down and it surprised many observers by not including Treasuries in that statement. This caused MBS to rally way in excess of what the moves in the 10-year would predict.  In some ways, this would offset the buying that would be lost when Operation Twist ends this year.  Bank of America is predicting the Fed will buy $45 - $60 billion of Treasuries in addition to the $40 billion in MBS.

Still, banks are understaffed as the volume of mortgage applications swells, where timelines are being stretched from the typical 45-days to 90. Banks undoubtedly believe that the current volume is being driven by refis, which they view as temporary.  The article goes on to say that mortgage rates to the consumer should be lower, but they do note the increase in guarantee fees.

Ocwen and Walter Investment are teaming up to out-bid Nationstar for Rescap.

The Bipartisan Policy Center is launching a Dodd-Frank initiative, where they try and do a "cost-benefits" analysis to Dodd-Frank. They frame it as a "stability vs growth" issue.