Morning Report - What a Republican Senate means for housing reform

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	Last	Change	Percent
S&P Futures	2017.7	12.2	0.61%
Eurostoxx Index	3082.7	48.4	1.60%
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LIBOR	0.232	0.000	0.11%
US Dollar Index (DXY)	87.4	0.412	0.47%
10 Year Govt Bond Yield	2.36%	0.03%
Current Coupon Ginnie Mae TBA	104.3	-0.1
Current Coupon Fannie Mae TBA	103.3	0.0
BankRate 30 Year Fixed Rate Mortgage	4.04

Stocks are up in NY on the Republican win and a decline in gold. Bonds and MBS are down.

MBA mortgage applications fell 2.6% last week. Purchases rose 2.6% while refis fell 5.5%

The ADP Employment Change is predicting 230k jobs were created in October. The Street is forecasting Friday's number will come in at 232k. 

Republicans won convincingly last night, taking the Senate and building on gains in the House and at the State level. If you are a political junkie, here is a great backgrounder on how it happened. While it is premature to think about potential legislative initiatives, it is a good bet that financial regulation will be addressed at least in some form. Also, Republicans will have a much bigger hand in GSE reform and the infrastructure for the housing market going forward. At the margin, this means less subsidies, or in other words, higher priced MI and maybe slightly higher rates. 

Democrats had been hoping that voters would also slap down Republican governors that they think went too far. This primarily means WI governor Scott Walker, who has survived in spite of unions throwing the kitchen sink at him, and KS governor Sam Brownback who cut taxes and services and lived to tell about it. Walker's 2016 stock is rising.. Democrats made a big deal of putting these GOP policies on the ballot and they survived. The only bright spot for the left was seeing a few minimum wage increases get approved by voters.

Here is left wing economist Dean Baker's take on GSE reform. He is afraid the government will be backstopping subprime mortgages, which I do not think is on the table. Also, he misunderstands the government is moving from an insurer role to a re-insurer role, with private capital taking the first 10% of losses. At any rate, I think he either does not understand or is misrepresenting what housing reform will do. And Dean Baker is a respected economist from the left, although he is an economist / ideologue in the mold of Paul Krugman. My point is that there will be a lot of partisan posturing and a lot of ideological collisions as the housing reform sausage gets made. The WH is most concerned with access to credit for underserved populations and probably imagines that its "disparate impact" theory on lending discrimination can take the place of hard quotas and targets.

Speaking of mortgage credit, it declined in August, according to the MBA Mortgage Credit Availability Index. However the decline was driven by the removal of special loan programs which only pertain to REO sales.