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Markets are up small after a mixed bag of economic data. Bonds and MBS are up.
The second revision to 4Q GDP came in at 2.4%, lower than the 2.5% consensus, a big revision downward from the advance 3.2% estimate. Consumption came in lower than expected as well. Given that the big Q3 number (+4.1%) was driven largely by inventory build, and consumption hasn’t really materialized, some of the weakness we have seen in the numbers lately can be attributed to this “borrowed” growth. Of course weather is another factor.
In other economic data, the Chicago Purchasing Managers Index came in at 59.6, which was better than expected. Readings over 50 indicate growth. University of Michigan consumer confidence rose to 81.6 from 81.2 last month (better than expected).
Pending home sales were flat in January
, according to NAR. Blame low inventory / high prices in the West and lousy weather in the East. Existing home sales are expected to be weak in the first quarter, while limited inventory is expected to drive price appreciation. While the builders have been able to raise prices at will, they seem to be at the point where buyers are balking, which means they will need to rely on volume to drive the top line. This will help solve the inventory problem.
Foreclosures were down 19% year-over-year and 11.8% month over month, according to CoreLogic
. The foreclosure inventory has fallen by a third but we still have a ways to go. For every completed foreclosure, there are 954 mortgaged homes in non-judicial states and 896 mortgaged homes in judicial states. A normal ratio would be one for every 2000. The time to complete a foreclosure increased to 943 days
, according to Black Knight Financial Services (formerly knows as Lender Processing Services).
The CFPB is aggressively going after servicers. Walter Investment (WAC) disclosed during their earnings report that the FTC and the CFPB has sought authority to bring enforcement action. For what, the company doesn’t know. Ocwen (OCN) really couldn’t comment on their call regarding the NYS action. Finally, Nationstar (NSM) is up small on no volume after reporting earnings. The CFPB has the non-bank servicers in the crosshairs and their stocks have been hit accordingly. That said, MSR valuations continue to increase. How many people bought the servicers as a way to hedge interest rate risk and ended up getting the view of the underlying assets correct, but missing the regulatory onslaught?
Speaking of the CFPB, another industry that they hate, hate, hate are payday lenders and check cashing places, which charge what they claim to be “usurious” rates. Yes, if a loan is only going to last a week, any fees are going to make the implied interest rate look huge. Given that QM has effectively shut many people out of the mortgage market and payday lenders will probably go away, it is ironic that the government will end up forcing people to go to the neighborhood loan shark all in the name of consumer protection.
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