Morning Report: PennyMac earnings

Vital Statistics:

	Last	Change	Percent
S&P Futures	1575.3	1.7	0.11%
Eurostoxx Index	2679.6	16.7	0.63%
Oil (WTI)	89.52	0.3	0.38%
LIBOR	0.276	0.000	0.00%
US Dollar Index (DXY)	82.97	-0.077	-0.09%
10 Year Govt Bond Yield	1.71%	0.01%
Current Coupon Ginnie Mae TBA	105.9	-0.2
Current Coupon Fannie Mae TBA	104.2	0.0
RPX Composite Real Estate Index	191	0.5
BankRate 30 Year Fixed Rate Mortgage	3.47

Markets are flat this morning after a slew of earnings releases. Apple reported a mixed bag last night, with better than expected earnings, but a disappointing Q2 forecast. They are increasing their buyback, which is raising concerns about future growth. Ford reported better than expected earnings as well. We will hear from Ryland and Meritage Homes today. MBA mortgage applications rose .2% last week, while durable goods orders fell. It appears most of the drop in durable goods was defense-related, so you probably shouldn't read too much into it. Bonds and MBS are down small.

New Home Sales rose to 417,000 units in March, which was up 1.5% from February. We are seeing a pickup in activity in the Northeast and the South. The inventory of new homes for sale was 4.4 months, while the median price was 247,000, and the average price was 279,000. Average prices actually dropped on a year-over-year basis, which means luxury building must be decreasing.

Lender Processing Services released their February Mortgage Monitor yesterday, showing delinquencies and foreclosures continue to fall. DQ + FC fell to 10.18% from a peak of 14.82% in Jan 2010. This is still well above normalcy, which is a DQ+FC percent in the 5% range. Mods are starting to pick up havter having declined for 6 consecutive quarters.

PennyMac reported earnings yesterday. Seem to be growing in all 3 business lines: origination, servicing, and distressed MBS.  Some of the highlights:

• PMT reported earnings of .90, better than expectations of .76
• Correspondent loan purchase volume $8.5B, down 15% from Q4
•  Lock volume $8.1B, down 22% from Q4
• MSR portfolio up 36% to $17B UPB
•  Strong demand for reperforming loans
• Correspondent margins decreasing but still above historical norms
• Correspondent will increase as a share of origination market
• Anticipating increase in refi activity as LTVs decrease
• Re-launched prime jumbo program, did over $100M in locks in Q1
• Targeting Q313 for first jumbo private label securitization transaction