Morning Report – The regulators throw originators a bone on fair-lending 10/23/13

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Markets are lower on an earnings miss from Caterpillar. Import prices rose .2% month-over-month. Bonds and MBS are up small.
Mortgage Applications fell .6% last week, which is surprising given that rates fell so much later in the week. The refi index actually fell while the Bankrate 30 year fixed rate mortgage fell 5 basis points to 4.23%. The purchase index was up small.
The FHFA Home Price index rose .3% month-over-month in August, which was lower than expected. Prices are up 8.5% year-over-year. The FHFA index only looks at houses with conforming mortgages, so it is a bit of a central tendency index in that it ignores the jumbos and the cash sales (which are usually distressed sales). The FHFA index shows the strongest recovery in home prices of all the indices out there.

Regulators gave originators a bit of breathing room by saying that originators that focus only on QM loans will not have EEOC issues if they choose to go this route. Of course that can easily change if they find that loans are not getting made in certain areas, so I would take that assurance with a grain of salt. Now that the points / fee caps pretty much make sub-$100k loans uneconomic, lets see how the Administration reacts when credit dries up at the lower price points. You think Eric Holder is going to care that CFPB made these loans money-losers? Me neither.
Flagstar Bank reported better than expected earnings this morning, although mortgage origination suffered. Total originations declined 28.9% to $7.7 billion from $10.9 billion in Q2 and $14.5 billion in Q312. Purchase activity was up 17% though. Gain on sale margin fell to 1.14% from 1.47% based on “lower hedge performance.” This is surprising given that the 30 year fixed rate mortgage started the quarter at 4.39% and ended it at 4.33%. Volatility is what kills mortgage pipeline hedging and Q3 was a bit more volatile than Q2, but not by much. Surprising result. They also made no bulk MSR sales in Q3, after having made them in Q2. Given that MSR valuations have been going up, it is surprising they haven’t been ringing the register. Perhaps they are done with their Basel III MSR selling.
One of the unintended consequences of taper-talk has been the slowing of the private label market. Lewis Ranieri’s (of Liar’s Poker fame) Shellpoint Partners pulled a jumbo bond deal after finding it could get better pricing by selling the loans outright. Investors are shunning the bonds because they are afraid that they will be holding long-duration / low yielding assets for a long time.

49 Responses

  1. Or “lack of taper-talk”. . .


  2. Oh, and FIRST!!!

    Heh, McWing.


  3. Such a gentleman. . .


  4. My brother works for a DoD contractor and is at some sort of arms bazaar. He’s flooding my inbox with weapons systems porn.


  5. It cannot be possible to believe this about the website problems.

    Actually, that’s been the problem: Obama didn’t know that. Nor did White House chief of staff Denis McDonough. Nor did Health and Human Services Secretary Kathleen Sebelius, who will be testifying to that fact next week.

    Dude arm haired the Obama hunt and doesn’t have a clue about the impending Trainwreck of his fucked-up pinnacle achievement?

    Cause Juicebox is a real journalist and shit.

    But in general, reporters, myself included, got a wall of denials from White House staff. Worse, the White House actually believed those denials.


    • McWing:

      It cannot be possible to believe this about the website problems.

      Sure it is. If people can believe that passage of a law could provide more people more and better health care coverage for lower cost, they can believe anything. After Obama’s election and the passage of ACA, never again can it be said about anything “It cannot be possible to believe…”


  6. @HotlineJosh: this –> RT @Chris_Moody Dem Rep. Pascrell after Obamacare briefing: If probs persist, he may be open to considering delaying indiv mandate.

    Crazy racist TeaBagger!


  7. McWing, the problems may well be systemic. From Woodward’s book on the 2011 sequester deal:

    “Reid gave Krone a ride back to the Capitol. The majority leader was almost like a father to him.

    “You stood up to him,” Reid said. “He needed to hear it, and nobody was telling him.””

    See also:

    “What did President Obama know (and why didn’t he know more) about the broken website? The $400 million-plus online marketplace fueling his signature legislative achievement is a bust. Its failure threatens to undermine the public’s confidence in Obamacare, which could dampen sign-up rates and undercut the goal of providing affordable health care to 40 million Americans. The site launched despite internal warnings that it was not ready. When did the president realize his site was a joke?

    In “the first couple of days” after the site went live Oct. 1, Health and Human Services Secretary Kathleen Sebelius told CNN.

    “But not before that?” CNN’s Dr. Sanjay Gupta asked.

    “No, sir,” she replied.

    That is either a lie, which would be unforgivable. Or it reveals an unfathomable lack of oversight. For a breakdown of this magnitude to go undetected by Sebelius and her boss, there must be severe gaps in the management systems of the Obama administration that any first-year MBA student could ferret out. Even Democrats are asking, how could they let this happen?”


    • jnc:

      For a breakdown of this magnitude to go undetected by Sebelius and her boss, there must be severe gaps in the management systems of the Obama administration that any first-year MBA student could ferret out.

      Too bad they didn’t teach MBA 101 at community organizer school.


  8. McWing: Why “Juicebox”?


  9. For a breakdown of this magnitude to go undetected by Sebelius and her boss, there must be severe gaps in the management systems of the Obama administration that any first-year MBA student could ferret out.

    Or even a 2LT.


  10. “Even Democrats are asking, how could they let this happen?””

    I know why. I know exactly why. Because the Obama administration is staffed with thin-skinned know-it-alls who do not tolerate constructive criticism. They are all academics. Why didn’t they test it? Because the smartest people in the room though it would work. and you don’t question the professor.

    Every decision they make is political in nature. From the admin that said they would judge policy on its merits. They believed their own bullshit. Because they see themselves as better/smarter/faster than everyone else. And they believe this because they beat McCain and Romney. Congrats. You won the big game against the homecoming patsy.

    They brought in Jeff Zients* to fix this clusterfuck. He’ll fix it.

    *used to work for one of his companies

    maybe i’m just mad that I got stuck behind 2 POTUS motorcades this week. 45 mins sitting in the car monday night. 25 mins last night.


  11. The organization takes it’s cue from the top. If President Obama didn’t receive bad news, it’s because he effectively communicated that he didn’t want to hear it.

    Based on Woodward’s reporting, it doesn’t seem to be a one off.


  12. As I noted on PL, between the failure of the stimulus to meet it’s stated objectives and the potential failure of the PPACA, President Obama may well end up setting back the cause of progressive governance if Republicans were better positioned to take advantage of it politically.


  13. Juicebox because of their youth. I picked it up from Mickey Kaus. Klein, Sargent, Yglesias and the freaks, er, “writers” at MMfA and Think Progress.

    If the case is as NoVa describes then this is unfixable.

    Only a Central Planner can ignore The Knowledge Problem.


  14. ” if Republicans were better positioned to take advantage of it politically.”

    so, no.


  15. President Obama may well end up setting back the cause of progressive governance


    Juicebox because of their youth.

    Gotcha. I thought that might be it, but wanted to check.


  16. JNC — if you are interested you can enter your zip code and there might be a yard sign depot


  17. President Obama may well end up setting back the cause of progressive governance if Republicans were better positioned to take advantage of it politically.

    Our company’s plan just got a lot more expensive… I can’t be the only one. Having a lighter paycheck has a very effective way of cutting through all the spin and media bias…


  18. but free preventive care, brent!

    look, you were getting hosed before. I know this, because I’m clearly smarter about your personal financial situation, hopes, goals, fears, booze of choice, and shoe size than you are.


  19. the sad thing is that nobody believed us when we said that this would be the result, and now the spin will be that insurance companies are to blame for passing on this added cost to consumers. And the solution, of course, is more centralized control..


  20. I think she’s got it solved.

    @JimAcostaCNN: HHS: On Thurs “Sebelius will visit Phoenix, where she will tour one of the HHS customer call centers for the Health Insurance Marketplace”

    Thanks 52%! Heckuva job!


  21. Too good to not post:

    “It makes me so gosh darn angry,” Palin explained. “The liberal left in this country has targeted Christian holidays and is trying to secularize them right out of existence.

    “When Jesus celebrated Easter with his disciples there were no Easter bunnies or egg hunts. There were no Easter sales at department stores or parades in the street. Easter was a special time of prayer and Christian activism.

    “Jesus would gather all the townspeople around and would listen to their stories about the meaning of Easter in their lives. Then he would teach them how to love one another, how to protest Roman abortion clinics and how to properly convert homosexuals.

    “You can’t even do things like that these days without getting called out by some wacko left-wing human rights group. Christians had more freedom under Roman rule than we do now in our own country! We need to return Easter back to the way it was when Jesus was alive.”

    h/t yello

    Don’t yell at me until you’ve checked out the source.


  22. This is interesting.

    @MattBevin: Spent time w fellow vets including Pearl Harbor vet & Cong Medal of Honor recipient @Dakota_Meyer @ConcernedVets

    Bevin is primarying Dam Project McConnell and Dakota Meyer is Kentucky’s MOH recipients favorite son.


  23. “: On Thurs “Sebelius will visit Phoenix”

    ha. i’m flying to PHX tomorrow too. wonder if we’ll be on the same flight.


  24. “There were no Easter sales at department stores or parades in the street.”

    That’s just because they couldn’t secure the permits.


  25. That’s just because they couldn’t secure the permits

    Damned liberal government!


  26. No, but i did see this:

    David Burge ‏@iowahawkblog 6h
    The Barack Obama Website For Kids Who Can’t Buy Insurance Good And Want To Have To Buy Insurance Too


  27. and:

    David Burge ‏@iowahawkblog 1h
    G.L.I.T.C.H. – Global Libertarian Intrigue To Crush Healthcare #bwahahaha


  28. NOVA – already got one from a meet & greet.


  29. It will be interesting to see if the administration can get away with this while simultaneously stonewalling the actual oversight committees


    • JNC, the Felix Salmon article makes sense and I hope it is true. Buffett said last night on Charlie Rose something to the effect that Dimon is an excellent financial mind and that if he took that deal without an indemnification agreement from the govt and if he is agreeing to this then his calculation is probably correct for JPM. but he offered the caveat that when the regulators come around, unless they are pushing you to the wall, you go along to get along.

      I am broadly paraphrasing because it was past my bedtime.


      Leaving on trip tomorrow and will be scarce around here. Personally I hope the Admin fixes, by TG, but I am not optimistic. I hope to read y’all’s comments and posts on my Iphone but probably won’t participate unless I get a long stretch at a computer.


  30. nice. he’s having a meeting with Gary Johnson up my way, but i’m out of town. I’d have gone otherwise.

    Meet & Greet with Robert Sarvis and Governor Gary Johnson Arlington
    When: Oct 26 6:00pm – 8:00pm
    Where: Iota, 2832 Wilson Blvd., Arlington


  31. he’s on fire today:

    David Burge ‏@iowahawkblog
    TechSurge: the teen taskforce who wage a relentless battle against G.L.I.T.C.H. using a potent arsenal of supermemes and press releases


  32. Lol!

    @BenHowe: Shorter @JoanWalsh: “Unless an old white guy tells me different, the black guy is lying.” #StandWithDurbin


  33. Another good piece by Ezra:

    “EK: Let’s go back to the 834s for a minute. This sounds like it should be an easy problem to solve. The 834 standard is widely used. It’s not particularly complicated. What’s going wrong?

    BL: I don’t know. This process is decades old. Every union and every self-insured employer who contracts with an insurance company uses it. It’s like a 74 Ford pick-up truck. There’s nothing complicated about it. People in the industry are shaking their heads over the errors they’re getting. They’ve been using this process for many years. No one has ever seen these kinds of errors before. No one has any idea where they’re coming from.”


  34. @JohnEkdahl: This dangerous rhetoric by some Democrats about delaying settled law is borderline seditious.


  35. @TheH2: Old and Busted Obama: You didn’t build that.

    New Hotness Obama: I didn’t build this.


  36. NoVA and jnc: The Cooch’s problem is that he isn’t conservative enough.

    Virginia attorney general and gubernatorial candidate Ken Cuccinelli is a longtime conservative culture warrior, but according to one Virginia-based Tea Party leader, the reason that he is trailing in the polls behind his Democratic rival is because his hard-right record simply isn’t conservative enough.

    Larry Nordvig, Executive Director of the Richmond Tea Party, told Breitbart News last month that “conservatives are highly concerned about Obamacare, immigration, and moral decline, and are looking for reassurance and leadership in those areas. Attorney General Cuccinelli has not taken a hard stand on those issues. The net effect is that he’s not exciting his base, which dampens campaign volunteer activism.”

    But for Nordvig when he spoke with Breitbart in September, “re-engaging his base” was “even more critical for Attorney General Cuccinelli.”

    “Cuccinelli is not going to win the money race,” Nordvig said. “That means he will stand, or fall, based on grassroots support. He has got to start reassuring conservatives that he will fight for their deepest-held beliefs. Oh, and it wouldn’t hurt to court the Tea Party a little more,” Nordvig added. “We’re the major component of the grassroots support he needs to win.”



  37. George Will gives Robert Sarvis a long tongue-bath. He is clearly the more sensible rational conservative candidate in the race. Why can’t he break 10%?


    • jnc:

      Thought I posted this yesterday, but apparently I never hit post. On your Salmon link, he makes an interesting point. However, if we are to look at the settlement from his perspective, ie not as a fine for wrongdoing but as an out-of-court settlement for liabilities that JPM took on when it tookover Bear and WaMu, then the episode can’t really be pointed to as evidence of JPM’s character as a “criminal enterprise”, nor does it make sense to demand a trial and an admission of criminal wrong-doing. Also, on this:

      The best way of looking at this JPM settlement, then, is not as a massive $13 billion fine for wrongdoing. Rather, you should think of it as an upsized out-of-court settlement between JP Morgan and the various private companies which bought mortgage bonds from JPM, WaMu, and Bear.

      If that is true, then why is nearly a third of the settlement going to “homeowners”?

      Those companies were mostly Fannie and Freddie, which means that they’re now owned by the government, and so of course lots of other government baggage is being brought in at the same time. But what we’re not seeing is overreach by the SEC, by the Justice Department, by Treasury, or by any other government agency.

      How is “lots of other government baggage” being “of course” piled on not an example of overreach?


    • yello:

      Why can’t he break 10%?

      Because we live in a 2-party system, and he isn’t representing either of them.


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