Morning Report – credit scores still main impediment to getting a mortgage 1/22/14

Vital Statistics:

Last Change Percent
S&P Futures 1841.6 7.3 0.40%
Eurostoxx Index 3168.0 14.8 0.47%
Oil (WTI) 94.59 0.2 0.23%
LIBOR 0.237 -0.001 -0.21%
US Dollar Index (DXY) 81.3 0.076 0.09%
10 Year Govt Bond Yield 2.84% 0.02%
Current Coupon Ginnie Mae TBA 105.3 0.0
Current Coupon Fannie Mae TBA 104 -0.1
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.39
Markets are flat as the Northeast digs out of a snowstorm. Apparently NYC got hit pretty hard so desks are probably thinly staffed today. Bonds and MBS are down small.
Another day of no economic data, except for mortgage applications, which increased 4.7% last week Purchases dropped 3.6%, while refis climbed 9.9%.
The latest CoreLogic Market Pulse asks where credit is still constrained in the mortgage market. It turns out if you look at the different variables that affect access to credit, low credit scores are the biggest impediment. High LTV loans are actually more prevalent than normal (must be the fact that FHA loans are now a major part of the mortgage market). If you look at the graph below, the red line shows where we are now, the blue line is “normalcy” and the green line is where things got during the go-go days of the bubble.

In the same issue, they say that cash sales made up 37% of total home sales in September. Historically, that number has been closer to 20%. This speaks to the professional investor’s presence in the market, which will undoubtedly wane as prices / interest rates continue to climb. Tomorrow we will get existing home sales. The Street is expecting a 4.93 million annualized pace. That works out to about 3.1 million mortgages. If we get back to our historical levels of cash sales, that would equate to 3.94 million mortgages, or a 27% increase in business, even if existing home sales go nowhere. Given that refis are still 64% of all mortgage applications, that won’t make up for the loss in refi business, but it does soften the blow a little. Of course there is always the potential for FHFA to tweak the HARP eligibility dates, which would boost refi activity.
Mohammed El-Arian resigned from PIMCO, where he was the heir apparent to Bill Gross. Neel Kashkarian (of TARP fame) resigned as well, and plans to run for Governor of California on the Republican ticket. Bill tweets that he is ready for another 40 years. Good for him – it might be that long until we see another bond bull market.
Wells is selling a $39 billion MSR portfolio to Ocwen. Terms were not disclosed.

19 Responses

  1. First (ha)!!

    So, what is now considered a “low credit score”?

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  2. < 680

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  3. Do you know your credit score? I’ve seen mine before but I never actually look for it and don’t really care what it is. Every time people run my credit they come back trying to give me cheap money, so I just assume it’s golden.

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  4. I always look just because I am paranoid about identity theft…

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  5. FYI, I don’t like meetings.

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  6. Kevin!

    Yes; I check mine once a year when I go through my credit reports. Like Brent, I’m paranoid about identity theft, having had it almost happen to me many years ago (they caught the woman before she started really using my ID–long ago before the days of on-line banking she had stolen my purse and was using my bank account to start stashing money in that she was draining from somebody else’s account. We found out about it when I notified the bank that my checkbook was in my purse, and the next time she came through the drive-through teller they nabbed her).

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  7. Brent–thanks!

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  8. FYI, I don’t like meetings.

    And here I thought that, with your personality, you would have reveled in them!

    Like

  9. Worth a read for those who haven’t seen it:

    “Meet the New Kochs: The DeVos Clan’s Plan to Defund the Left
    They beat Big Labor in its own backyard. Next up: your state?

    —By Andy Kroll
    | January/February 2014 Issue”

    http://www.motherjones.com/politics/2014/01/devos-michigan-labor-politics-gop?page=1

    Like

  10. Must be starting to cost people real money.

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  11. Someone’s gonna find a horse head in their bed.

    http://www.cnbc.com/id/101354183

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    • jnc:

      Refusing to defend statutes is the new nullification.

      The notion of a state government petitioning the federal government to overturn its own state law is something that I am sure the Founders never considered possible. It goes some way towards showing how far removed we are from the relationship between states and the federal government envisioned and laid out by the Founders.

      Like

  12. “to overturn its own state law”

    Actually it was a state constitutional amendment. Republicans are making the point that the State AG actually swore an oath to uphold the state constitution as part of his oath of office.

    Like

    • jnc:

      Actually it was a state constitutional amendment.

      Even worse.

      Republicans are making the point that the State AG actually swore an oath to uphold the state constitution as part of his oath of office.

      He should be impeached. Or recalled. This shows the dangers in electing to state office people who have an ideology that has no commitment to (if not outright disdain for) states rights.

      Like

  13. The counter argument will be that it’s in conflict with the US Constitution, as he understands it and therefore that takes precedence as the oath requires upholding both.

    I suspect that this tactic will come back to bite Democrats one day.

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    • jnc:

      The counter argument will be that it’s in conflict with the US Constitution, as he understands it and therefore that takes precedence as the oath requires upholding both.

      I guess that is an argument that is always available to anyone over anything in a state constitution, especially in an environment in which the judicial interpretation of the constitution has become as disconnected from what it actually says as it is today. But on the merits such a counter argument is absurd. No sane, honest reading of either US history or the Constitution itself could conclude that state recognition of SSM is constitutionally mandated.

      I suspect that this tactic will come back to bite Democrats one day.

      I would hope so, but I suspect it is unlikely. I can’t think of many instances in which the Dem’s cynical abuse of process has been turned against them.

      Like

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