Morning Report: Regulation increases the cost to originate by 18%

Vital Statistics:

	Last	Change	Percent
S&P Futures	2053.5	2.9	0.08%
Eurostoxx Index	3055.8	-69.6	-2.23%
Oil (WTI)	44.22	-0.5	-1.04%
LIBOR	0.638	0.004	0.63%
US Dollar Index (DXY)	93.18	-0.583	-0.62%
10 Year Govt Bond Yield	1.78%	-0.01%
Current Coupon Ginnie Mae TBA	105.4
Current Coupon Fannie Mae TBA	104.7
BankRate 30 Year Fixed Rate Mortgage	3.63

Markets are flattish this morning on no real news. Bonds and MBS are flat as well

Announced job cuts increased 5.8% in April, according to outplacement firm Challenger, Gray and Christmas. Layoffs are at a 7 year high, driven primarily by pain in the energy sector, but also in retail and computers (Intel accounted for 17k of them). Remember, these are announced job cuts - they often either don't end up materializing or are accomplished by attrition. 

We still aren't seeing evidence of mass layoffs in the initial jobless claims numbers, which are hovering around 40 year lows. Last week, they increased to 274k.

We are starting to see a slowdown in the labor market. The ADP number was a disappointment. The Street is forecasting a 200k print tomorrow.

Consumer comfort fell last week. Increasing gasoline prices aren't helping.

Soaring compliance costs are going to drive M&A activity in the mortgage banking sector.  The average cost to originate a loan has increased by 18% over the past two years to just over $7,000 from just under $6,000 in 2013, according to the MBA. As banks retreat from the sector, non-banks are growing, especially firms like Quicken and Freedom. This is obviously attracting more regulatory scrutiny.

Mortgage credit availability decreased in April, according to the MBA. Lynn Fisher, MBA's Vice President of Research and Economics commented, "Mortgage credit became less available in April as a result of two opposing trends, resulting in a net decrease to the index. Investors continued to roll out Fannie Mae and Freddie Mac's low down payment loan programs, which had a loosening effect on credit availability. However, this was more than offset by tightening among high balance and jumbo loan programs."

The CFPB is proposing a rule to limit mandatory arbitration clauses in financial contracts, which would make it easier for class-action lawsuits. These are in place for 99% of payday lenders, which the CFPB wants to put out of business.