Morning Report - I guess we are all colluding now

Vital Statistics:

	Last	Change	Percent
S&P Futures	1938.1	0.1	0.01%
Eurostoxx Index	3000.4	9.0	0.30%
Oil (WTI)	82.98	0.5	0.59%
LIBOR	0.232	0.001	0.32%
US Dollar Index (DXY)	85.7	0.399	0.47%
10 Year Govt Bond Yield	2.24%	0.02%
Current Coupon Ginnie Mae TBA	104.5	-0.3
Current Coupon Fannie Mae TBA	103.7	0.0
BankRate 30 Year Fixed Rate Mortgage	3.94

Stocks are rising in the US as European markets rally. Bonds and MBS are down.

Mortgage applications increased 11.6% last week on the bond market rally. Purchases actually fell 4.8%, while refis rose 23.3%. The contract interest rate on the 30 year fixed dropped from 4.2% to 4.1%. Refis jumped to 65% of all applications. 

The MBA is forecasting that mortgage volume will increase 7.4% in 2015. Given most people are thinking that home prices will increase by mid single digits, that is not a lot of unit growth. 

Inflation at the consumer level remains muted, with prices rising ,1% month-over-month, and 1.7% on an annualized basis. Again, I simply do not see the Fed raising rates except for a symbolic amount to get off the zero bound until we start seeing 4%+ wage inflation. And that is not yet happening. 

The final rules for QRM are out, and there weren't a lot of surprises. It generally follows the QM framework, and conforming loans will be exempt from the retained risk feature. They also dumped the minimum down payment for language that requires "sound and responsible underwriting." Not surprising since the government is now looking at 3% down conforming loans. 

In case you missed it, here are the prepared remarks from Mel Watt, speaking at the MBA conference. Here are the prepared remarks by HUD secretary Julian Castro. The theme is to increase access to credit, largely by promising the lending industry more safe harbor. However not everybody is thrilled about this - see below. 

Did you know the entire mortgage industry got together and decided that they will extort the government by overly restricting credit in order to make more money down the road when regulations ease up? I guess I must be a nobody since I wasn't invited to the big pow-wow. Maybe Rob Chrisman was. Anyway, this is what passes for analysis nowadays in the left-wing fever swamp. The author thinks that Wall Street is unnecessarily restricting credit and blaming the government in a scheme to supposedly bring back the good old days. How he imagines hundreds of companies in the most fragmented, competitive business on the planet are going to come up with a scheme to voluntarily lose money on a bet that regulations might change in the future is beyond me. However, it is a window into how many in DC view us. What is common sense to practitioners is not necessarily apparent to many of the opinion makers who politicians listen to. While Mel Watt may not believe this nonsense, influential politicians like Elizabeth Warren probably do. Note Bene.