Morning Report - bank mortgage rejection rates

Vital Statistics:

	Last	Change	Percent
S&P Futures	1690.7	-1.8	-0.11%
Eurostoxx Index	2918.0	-4.9	-0.17%
Oil (WTI)	103.9	0.7	0.70%
LIBOR	0.248	-0.003	-1.04%
US Dollar Index (DXY)	80.44	-0.120	-0.15%
10 Year Govt Bond Yield	2.64%	-0.01%
Current Coupon Ginnie Mae TBA	105.4	0.0
Current Coupon Fannie Mae TBA	104.5	0.0
RPX Composite Real Estate Index	200.7	-0.2
BankRate 30 Year Fixed Rate Mortgage	4.32

Markets are slightly weaker this morning as durable goods orders came in better than expected, but still weak. Ted Cruz continues to tell bedtime stories. Mortgage applications rose 5% as rates fell.

CFPB Director Richard Cordray spoke to the American Banker Regulatory Symposium yesterday. He lamented that consumers cannot sever ties with certain entities, namely debt collectors and mortgage servicers. They will also use the disparate impact theory when determining whether discrimination is taking place, which unfortunately means that FICO is all that matters, and if the value of the underlying collateral in one area is likely to be more volatile than another, tough cookies, you have to lend to both borrowers at the same rate, assuming all other risk factors are the same. The volatility of the underlying collateral is an important issue that the regulators conveniently ignore because it negates the validity of their argument. The speech is basically a shot at mortgage bankers, payday lenders, servicers, debt collectors and other unsavory financial services folks.

Ever wonder how much banks differ in their loan approval percentages? It turns out that there is a bit of a spread between the big ones and the smaller ones. The biggest banks - Wells, JPM, BOA - have the highest rejection rates, in fact JPM rejects 1/3 of its applications!

So, LOs the next time a borrower says that "Wells or JP Morgan is quoting me X% with so many points, tell them that unless they have a commitment, they are taking a risk going with a big bank. It would be a shame to go all the way through the process, only to get rejected at the last minute. 

Moody's is warning that a government shutdown may slow economic activity and would damage the nation's credit quality. I suspect Ted Cruz knows that we aren't going to shut down the government over obamacare, and this "filibuster" - is his last stand on the issue. Once he sits down, we'll get a continuing resolution and a debt ceiling increase in short order. Certainly the stock market, the bond market, and the US dollar are taking that view. The risk: Democrats demand an end to the sequester and try and stick in tax hikes. I don't think they do that because Republicans will reject that and then a government shutdown becomes a case of "he said, she said" where Democrats take some risk of getting dirty with the Republicans. Here is a list of cuts that can avert a government shutdown.