Morning Report - Mel Watt speaks at Brookings

Vital Statistics:

	Last	Change	Percent
S&P Futures	1890.7	-3.6	-0.19%
Eurostoxx Index	3203.4	-8.4	-0.26%
Oil (WTI)	102	0.3	0.30%
LIBOR	0.225	0.002	0.67%
US Dollar Index (DXY)	80.02	-0.119	-0.15%
10 Year Govt Bond Yield	2.57%	-0.03%
Current Coupon Ginnie Mae TBA	106.4	0.0
Current Coupon Fannie Mae TBA	105.2	0.1
BankRate 30 Year Fixed Rate Mortgage	4.36

Stocks are lower this morning on no real news. Bonds are up and the 10 year yield is back at the bottom of its range. LOs, if you have customers that were waiting for better rates, wake them up and tell them that if the range holds, today is about as good as it is going to get.

Mel Watt spoke at Brookings yesterday and the left has to be unhappy because they didn't get the big things they wanted - principal mods on Fannie / Freddie loans nor did they get an extension of HARP eligibility dates. The highlights were (in no particular order):

• No principal mods on Fan / Fred loans
• Housing finance reform is a Congressional responsibility, not a FHFA one
• No extension to HARP eligibility dates
• Will provide some reps and warranties relief - 2 DQs in 36 months ok
• Not lowering conforming loan limits
• Will try and find a "cure" option for buybacks
• Some sort of new neighborhood stabilization pilot program, details unclear
• FHFA is worried about tight credit overlays
• New securitization platform, will allow private label
• Expect to see FNMA / Gold spread narrow as they will fall under one security
• Will continue to shrink Fannie and Fred's balance sheet to $250B each by 2018

Punch line: For all the sturm and drang, Mel Watt isn't dramatically different than Ed DeMarco. The left has to be seething.

Mortgage Applications rose 3.6% last week. Purchases fell .1% while refis rose 6.8%. Refis are back up over 50% of the volume. Mortgage rates fell 4 bps last week.

Inflation picked up a little at the wholesale level, increasing from .5% to .6%, although ex food and energy it was down a little. Not enough to move the markets as inflation is still below the Fed's target. 

FHA is trying to increase access to credit, and they are launching a new program which will offer a 50 basis point reduction in up-front mortgage insurance premium and a 10 basis point reduction in the annual premium for first-time homebuyers who complete the program.