November 13, 2014

Lots going on so, let’s get started.

Starting this morning we’ve had a decent amount of volatility already, at 7:00 the 10 year was  at 2.18% -4 bps, at 9:30 2.23% +1 bp. Which a’int really plummeting or jumping like last week. September Consumer Price Index was released at 8:30, both the overall and the core were +0.1%, forecasts were the overall 0.0%. Yr/yr CPI inflation +1.7% for the overall and the core. Inflation remains under the 2.0% target the Fed has. The favorite for the Fed in measuring inflation is the personal consumption index that is running at +1.6%. The data didn’t have much impact on equity markets; at 9:30 the DJIA opened +13, NASDAQ +5, S&P +2 after the strong improvements yesterday. There is no other data or economic reports today, which may keep market activity quiet and muted.

Earlier this morning the MBA weekly mortgage applications jumped last week. Mortgage applications increased 11.6% from one week earlier, mostly all of it re-finances that increased 23%. The purchase index actually fell 5.0%. So the headline is good, but purchase activity slowing will be something to watch over the coming weeks and months. Interestingly, I’ve gotten several calls about adjustable-rate mortgages and their share of activity increased to 9.4% of total applications, the highest level since June 2008.

Some light at the end of the tunnel for the mortgage industry MAYBE; Folks like Jamie Dimon are taking a stand that mortgage lending standards have kept housing from growing as it should. He said most forms of credit have loosened since the financial crisis except mortgages. “Mortgage credit is too tight.” Fannie and Freddie were forced to adopt rules that are so stringent many very good credits have been worked over by a combination of a fine tooth comb and a lead pipe. The agencies were also forced by the regulations to enforce rules on buy-backs from lenders selling to the agencies. Unless a borrower put 20% down the lender has to agree to buy the loan back if it ever is delinquent—no matter how long. Who would make such a loan? Not many. burma Now the FHFA is re-writing the requirements to make it more palatable for banks to make lower down-payment loans—even 3% down may be acceptable now to the agencies. The new rules are still in the making but perhaps Washington is getting it.