| Last | Change | Percent | |
| S&P Futures | 1625.8 | -2.9 | -0.18% |
| Eurostoxx Index | 2768.2 | -16.5 | -0.59% |
| Oil (WTI) | 95.83 | -0.8 | -0.82% |
| LIBOR | 0.275 | 0.000 | 0.00% |
| US Dollar Index (DXY) | 82 | 0.103 | 0.13% |
| 10 Year Govt Bond Yield | 1.79% | 0.02% | |
| Current Coupon Ginnie Mae TBA | 105.9 | 0.2 | |
| Current Coupon Fannie Mae TBA | 104.1 | 0.1 | |
| RPX Composite Real Estate Index | 195 | 0.3 | |
| BankRate 30 Year Fixed Rate Mortgage | 3.54 |
Markets are slightly weaker this morning. Initial Jobless Claims came in at 323,000, better than expected. Bonds and MBS are up small.
I was surprised by the magnitude of last Friday's reaction to the jobs report and the persistence. The jobs report was good, but not great. I do not see anything in the report to prompt the Fed to end QE early. Perhaps the strength in the equity market is causing people to rotate out of stocks and into bonds. If you believe in technicals, you might be looking for the 10 year yield to do a 50% retracement, hit 1.85% and then bounce back.
Tonight is the Fannie / Fred MBS roll as we go from May to June. MBS prices will look like they just fell tomorrow morning, but it is just the roll.
Freddie Mac reported $4.6 billion in earnings in the first quarter, its second-largest in history. They required no Treasury draw and paid $5.8 billion to the government in Q1. So far, they have paid $29.6 billion. This is after Fannie Mae reported $7.6 billion in Q4. One almost certainty is that G-fees are going up. The government wants to "crowd in" private capital and price credit risk more in line with private mortgage insurers. The game for originators going forward may well be to stick with qualified mortgage (QM) loans and compete with the government on the guarantee fee. The other sense I got from the conference is that QM is not enough of a safe harbor to really encourage lending outside of the QM box. Which means that anyone with dinged credit is more or less stuck in the FHA box.
The sense I got from the MBA Secondary Conference is that despite the Obama Administration's white paper that claims they would like to replace Fannie and Fred with some private entity, they are slow-walking reform. Certainly Mel Watt was not nominated to preside over the orderly dissolution of the GSEs. After the Administration changed the terms of the deal, the GSEs now just distribute all of their profits to the government, which has created a slush fund for general government purposes. And $13 billion a quarter isn't chump change. I think at the end of the day, Fan and Fred are going nowhere and will stay on as quasi-nationalized entities until they are fully re-capitalized and then they will be sold.
The big questions regarding Mel Watt as the new FHFA Chairman concern principal mods and an extension of the HARP window (HARP 3.0). As of now, HARP eligibility does not extend to anything originated or refinanced after May 31, 2009. There is talk that the window might be extended to allow people who took out conforming loans in 2009 and 2010 to be HARP eligible. Also, there is talk of allowing people to "re-HARP." Anyway we could see another refi boom if Watt is confirmed. Regarding the principal mods, CBO gave FHFA the ammunition to permit mods. If Watt is rejected, expect Mark Zandi to be the next guy nominated and he fully supports principal mods.
60-day delinquencies dropped to 4.56% according to Transunion, which is the fastest drop since they started keeping records in 1992. This decrease was higher than expected.
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