Morning Report - Home prices are within 6% of peak levels, according to FHFA.

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	Last	Change	Percent
S&P Futures	1939.1	14.0	0.73%
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LIBOR	0.231	-0.002	-0.65%
US Dollar Index (DXY)	85.81	0.068	0.08%
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Current Coupon Ginnie Mae TBA	104.8	0.0
Current Coupon Fannie Mae TBA	103.6	-0.2
BankRate 30 Year Fixed Rate Mortgage	3.94

Markets are higher as earnings come in decent and we get some positive economic surprises this morning.

In economic data, the Chicago Fed National Activity Index rebounded strongly to +.47 from -.25. Initial Jobless Claims rose to 283k, which is still an incredibly strong number. September's initial jobless claims were the lowest since 2000. The Bloomberg Consumer Comfort index rose to 37.7 from 36.2, but is still below 50, which is "normalcy" and shows why Democrats are looking at losing the Senate this fall in spite of stronger economic data. Finally, the index of leading economic indicators rose to +0.8% from flat in August. So overall, strong data, but the consumer remains unhappy. 

The FHFA Home Price Index rose .5% in August and is up 4.8% year-over-year. The index is within 5.8% of its August 2007 peak. Remember the FHFA index only looks at homes with conforming mortgages, so it ignores the very high end and distressed sales which are usually cash. As a result, it is more of a central tendency index than either Case Shiller or CoreLogic. It has still been a case of two markets, however with the West Coast and Mountain states outperforming the East Coast and Midwest by a large margin:

Ocwen cannot get out of its own way. The stock is down 68% over the past year. NY AG Eric Schneiderman announced that he found evidence of backdating of letters sent to borrowers. Wall Street BFF Elizabeth Warren is piling on, prodding the GAO to look at nonbank servicers. Note that this could affect MSR valuations, which would pressure on nonbank lenders in general by reducing the fair value of MSRs on their balance sheets and also depressing SRP schedules. 

Why have the regulators have changed their opinion on risk retention rule?. Because the full housing recovery has taken longer than expected. Tight credit is holding back the recovery, and they are correct. Unfortunately for Mel Watt, just saying "everybody back in the pool" won't be enough. Banks are run by the business discouragement units (aka compliance) these days, and consider regulatory risk, not credit risk as the thing to be most mindful of. Note that the article speculates that FHA might be lowering the fees it charges (Mel Watt's first act was to freeze Ed DeMarco's planned FHA fee hike) in addition to lowering the downpayment on conforming loans. So, even if conforming loans go to 3%, FHA loans might still be competitive.