Morning Report - Hey, my rate went up and bonds went nowhere, what gives?

Vital Statistics:

	Last	Change	Percent
S&P Futures	1782.3	2.0	0.11%
Eurostoxx Index	2961.3	-17.4	-0.59%
Oil (WTI)	97.44	0.0	-0.04%
LIBOR	0.244	0.002	0.62%
US Dollar Index (DXY)	80.13	0.059	0.07%
10 Year Govt Bond Yield	2.87%	-0.01%
Current Coupon Ginnie Mae TBA	104.7	0.0
Current Coupon Fannie Mae TBA	103.4	0.1
RPX Composite Real Estate Index	200.7	-0.2
BankRate 30 Year Fixed Rate Mortgage	4.48

Markets are little changed this morning ahead of the start of the FOMC meeting. Consumer Prices were unch'd. 

The GSEs are planning on reducing the upper limits sometime next fall.  They are thinking of dropping the high cost ceiling from 625k to 600k and the overall ceiling from 417k to 400k. They are inviting public comment. Setting new purchase limits "furthers the goal of contracting the market presence of Fannie Mae and Freddie Mac gradually over time, one of the key objectives of FHFA's strategic plan."

Fannnie Mae and Freddie Mac also released their new pricing adjustments today, (Fannie is here, Freddie is here) which increases costs for borrowers in 2014. The first part is a g-fee increase of 10bp. The second is a series of LLPAs to better reflect credit risk. Note the Adverse Charge goes away for all states except CT, FL, NY, and NJ. However, when you include the new LLPAs, conforming loan rates are going up. Mortgage News Daily put out this handy chart showing the new adjustments. Note that these are not the actual adjustments - they are the change in adjustments. Note that higher LTV loans with FICOs over 680 are getting socked.

Toss in the potential effects of QE tapering and conforming loans just got a lot more expensive. LOs get ready for this new pricing regime. 

A total of 791,000 homes returned to positive equity in the third quarter, according to CoreLogic. This leaves a total of 6.4 million homes (or about 13% of all mortgaged homes) with negative equity. This compares to 7.2 million homes (or 14.7%) a year ago. You can see the distribution of negative equity MSAs in the chart below:

The budget deal is looking more and more likely to pass the Senate. That doesn't necessarily mean smooth sailing ahead - Republican lawmakers who are angry about the budget deal are spoiling for a fight over the debt ceiling. CNBC also has a lay of the land. The big strategic question for the GOP remains obamacare - if it continues to flail and have issues, do Republicans go along with a debt ceiling increase for fear of changing the subject, or would they view this as an opportunity to slay the unpopular ACA dragon once and for all?

When people think of Detroit, they often think of the hapless Lions, but also the Packard Plant, which went dormant in 1956 and is ruins remain a testament to urban decay and is a symbol of Rust Belt misery. It just got bought for $405,000. He plans to revitalize Detroit's East Side. Good luck with that...