Morning Report – Is the REO-to-Rental trade played out? 2/21/14

Vital Statistics:

Last Change Percent
S&P Futures 1838.3 2.1 0.11%
Eurostoxx Index 3122.8 1.3 0.04%
Oil (WTI) 102.4 -0.3 -0.34%
LIBOR 0.235 -0.001 -0.32%
US Dollar Index (DXY) 80.36 0.076 0.09%
10 Year Govt Bond Yield 2.77% 0.02%
Current Coupon Ginnie Mae TBA 105.4 0.0
Current Coupon Fannie Mae TBA 103.9 -0.1
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.35
Markets are up small this morning on no real news. Bond and MBS are down. HP’s earnings beat consensus. Nat Gas continues to move higher based on forecasts of another polar vortex to hit next week. Nat Gas is up 36% over the past two weeks.
Fannie Mae posted a profit for the fourth quarter and will distribute $7.2 billion to Treasury. At this point, Fannie Mae has sent Treasury $121 billion, more than the $116 billion in aid it has received. The stock continues to climb, but emails have shown that the Obama Administration has no intention of letting the common shareholders have anything. So why do the common shareholders still exist? Because as long as the government holds under 80% of the company (they hold 79.9%), Fannie Mae’s debt doesn’t get consolidated on the government’s balance sheet (which incidentally was the reason why LBJ spun out a piece of Fannie Mae in the first place – so that Fannie Debt is not counted as sovereign debt. Of course the Obama Administration will have to deal with court cases from Perry and Fairholme so the Administration’s edict is not necessarily the last word.
The MBA just released fourth quarter delinquency and foreclosure data. The delinquency rate for 1-4 family homes was 6.39% in the fourth quarter, a drop of 2 bps from the 3rd quarter and 70 bps from a year ago. The foreclosure inventory was 2.86%, the lowest since 2008. The remaining inventory is concentrated in the judicial states on NY, NJ, CT, FL, IL.
Investors are beginning to focus more on buying distressed mortgages as a cheap way to secure property as the supply of foreclosed inventory has shriveled up, at least out West. Blackstone is beginning to wind down the amount of additional capital they are putting in the business. As I said yesterday, given that the big price increases are probably in the past and forecasts are predicting a more normal mid-single digit price appreciation pace going forward, the returns in this business today look a lot different than they did two years ago. When the smart early entrants are starting to eye the exit, you know the trade is getting played out.
The government regulators have trained their sights on the non-bank servicers which is evident from the stock prices of Ocwen and Nationstar. Ocwen’s sale of bonds tied to MSRs raised less than expected. New York has placed an indefinite hold on Ocwen’s purchase of a Wells MSR portfolio. The CFPB also gave a tongue-lashing to the industry at a MBA conference. So, while the servicers should have an interest rate wind at their backs, the regulators are dominating the news flow, which has put a damper on valuations.

87 Responses

  1. Dang!

    (You win on style points, too, “Carl”).

    Like

  2. I
    f you mess with the bull…

    Like

  3. As usual, thanks for the analysis and commentary, Brent. I still learn something new from you every day!

    Like

  4. Interesting short piece on why and where insurance exchanges are working (or not).

    So what makes a state health exchange successful? Joel Ario, who helped launch the exchange program for the federal government and now consults for states and others working to implement the health law, says the states doing best are generally the ones doing the least — at least when it comes to their websites.

    “The states that said, ‘This is complicated, we’re going to focus on the most essential issues,’ those were the states that tended to do better,” he says.

    Among places in that category, according to Ario, are not just California, but also Kentucky, New York and Connecticut.

    In contrast, Ario says, many of the states that are now struggling may simply have overreached.

    “Unfortunately states that I once touted as the leaders — Maryland, Oregon, Minnesota,” are among those bringing up the rear, he acknowledges. “This is a complicated undertaking, and so people who tried to do too much in [the first year], I think, had some problems with that.”

    Like

  5. Thanks, Michi!

    Like

  6. You’re welcome, Brent!

    Today’s little internet quiz. Are you left or right brained?

    Like

  7. “Congratulations. You use your brain equally.”

    59% – rules, rationality, logic, etc.
    41% – creativity, intuition, chaos, etc.

    Jeebus, who knew? Must be something wrong with the test. 😉

    Like

  8. I got equal brained as well.

    Like

  9. Holy smokes!

    53% left, 47% right.

    Maybe there’s a reason we’re all here. . .

    Like

  10. 59% creativity, intuition, chaos, etc
    41% rules, rationality, logic, etc.

    Like

  11. So NoVA and Lulu are polar opposites. . .

    Like

  12. The suggestion that I might be more rational than Scott sort of freaks me out.

    Like

    • lms:

      The suggestion that I might be more rational than Scott sort of freaks me out.

      According to the last test we took, you are also more libertarian than me. I am looking forward to the next test that measures how masculine/feminine we are. No doubt you will be more manly than me, too.

      Like

  13. “At this point, Fannie Mae has sent Treasury $121 billion, more than the $116 billion in aid it has received. ”

    I’m sure Mel Watt can help them lose some money.

    Like

  14. that’s why we get along. clearly my creativity and passion counter her cold, ruthless logic.

    WTF?

    Like

  15. WTF?, indeed!

    I’ve just been toying with y’all all this time!

    Nova, we should probably switch avatars!

    Like

  16. 72 / 28 right brained…

    Like

  17. Call me Homer Jay, man.

    Like

  18. NoVA: the new avatar!

    Bwahahahahahahahahahahahahahahahaaaaaaaaaa!!!!!!!!!!

    Like

  19. 72 / 28 right brained…

    You’d think you were an economist or something, Brent!

    Like

  20. Fed publishes meeting transcripts from September 2008

    Almost halfway through it… Fascinating reading…Takeaways so far:

    1) They had no idea of the severity of what was going on
    2) They were still concerned about inflation – Janet Yellen was against cutting the Fed Funds rate.
    3) Janet Yellen has a sense of humor..

    Like

  21. No doubt you will be more manly than me, too.

    Ahem.

    Not that there’s anything wrong with that. . .

    Like

  22. You’d think you were an economist or something, Brent!

    Should have been a musician, I guess. Actually you would be surprised how many people in my business have a creative / artistic side..

    Like

    • Brent:

      Actually you would be surprised how many people in my business have a creative / artistic side..

      Finance is filled with creative minds. It takes a lot of imagination to run a criminal enterprise.

      Like

  23. @ Scott

    No doubt you will be more manly than me, too.

    Yikes…………………low blow and all. But then again, maybe I’ve just been using the wrong bathroom all these 60 odd years. I might actually be stronger than you, that’s pretty manyly I guess!

    Like

    • lms:

      Yikes…………………low blow and all.

      More a reflection of the tests than you, I assure you.

      I might actually be stronger than you, that’s pretty manyly I guess!

      Well, I certainly wouldn’t challenge you to a swimming race, that is for sure, you being a near-olympian and all that.

      Like

  24. It takes a lot of imagination to run a criminal enterprise.

    . . . and not get caught. 🙂

    Like

  25. Scott

    Unfortunately near only counts in horseshoes.

    Like

  26. and curling. I think. i really don’t know.

    Like

  27. My grandma’s saying was “Close only counts in horseshoes and hand grenades.” Not quite sure where she got it from.

    Like

  28. women’s biathlon is where its at

    Like

  29. NoVA, do you have your TV on mute again right now?

    Like

  30. No .. i had a live stream going, but it timed out. don’t get the channel at the office.

    Like

  31. My results are identical to lulu’s. I’m a little skeptical.

    I didn’t know how to answer several of them; on tests like this, I always stare at some of the questions and make an internal case for each answer. The shape preference and “which one is most like” were really unanswerable for me. Liked different shapes for different reasons. So I guess I probably am more left brained. When I am working on complex problems, though, I have found that I have to let them simply percolate for long periods of time, and eventually my brain finds the way through the chaos. Interesting stuff.

    Like

  32. I don’t like Homer nearly as well, nova.

    Like

    • McWing:

      Why?

      I suspect it is because they view him as essentially a traitor to the cause. Identity, and especially racial, politics is a cornerstone to leftist ideology. Blacks who don’t toe the line, being potential examples for others, are a lot more dangerous to the coalition than any white person, and hence their destruction is much more important.

      Is it racism?

      Of a sort.

      Like

  33. Well, how about we combine them.

    Like

  34. I mean, look at what Toobin writes here,

    Thomas is demeaning the Court. Imagine, for a moment, if all nine Justices behaved as Thomas does on the bench. The public would rightly, and immediately, lose all faith in the Supreme Court.

    That is objectively stupid.

    Like

  35. Is hatred of Clarence Thomas a tribal indicator
    That must be expressed frequently?

    Like

  36. “They are, in fact, the public’s only windows onto the Justices’ thought processes, and they offer the litigants and their lawyers their only chance to look these arbiters in the eye and make their case. ”

    or, i don’t know, the written opinions.

    Like

  37. They’ve never stopped being deranged over Thomas. That statement by Toobin is particularly stupid, but he is a particularly stupid and dishonest little man. Just like Linda Greenhouse, the stupid and dishonest little woman who is the other “mainstream” “journalist” on that beat.

    Like

  38. No shit, Toobin is completely unhinged. What percentage of Americans could even name a member of the Supreme Court let alone Thomas yet ALL would lose faith if no one asked a question?

    Again, how is this tribalism, directed at the black guy not racism?

    Like

  39. Hasn’t he written a book about his life for Christ sake?

    Like

  40. Yes it is liberal racism. It was from the beginning with Thomas. People like Toobin lost their minds when he was nominated. Thomas is not a legitimate member of his own race, since he doesn’t hold the views Toobin approves for him to hold. And Toobin lives in one of the tiniest bubbles of DC/NYC/Ivy/Democrat/Official Media liberalism there is. He is oblivious to everything but what happens at his DC cocktail parties with members of the DNC and Journolists. He spent years screwing Jeff Greenfield’s daughter on the side. That’s just who he is. He speaks and writes for the 11 people who read the New Yorker.

    Like

  41. “Whitaker. Motherfucking. Chambers, on February 21, 2014 at 12:32 pm said:

    Is hatred of Clarence Thomas a tribal indicator
    That must be expressed frequently?”

    Yes. When forced to acknowledge that he’s not an idiot:

    “For better or worse, Thomas has made important contributions to the jurisprudence of the Supreme Court. He has imported once outré conservative ideas, about such issues as gun rights under the Second Amendment and deregulation of political campaigns, into the mainstream. Scalia wrote District of Columbia v. Heller, which restricted gun control, and Kennedy wrote Citizens United v. Federal Election Commission, which undermined decades of campaign-finance law, but Thomas was an intellectual godfather of both decisions. ”

    all that’s left is to attack his demeanor on the bench.

    Like

  42. Toobin is an ignoramus. If he had the capacity to be embarrassed, this would embarrass him.

    http://justicethomas.blogspot.com/2007/09/why-doesnt-thomas-speak-often-at-oral.html

    Like

  43. “I just think that it’s more in my nature to listen rather than to ask a bunch of questions. ”

    Oh my God. There’s an introvert on the bench!

    Like

  44. Why waste your time researching and writing something useful when you can just reel off another Thomas smear?

    Toobin probably had to get ready for a weekend in Aspen or Jackson Hole. Maybe St Barts. Trashing Thomas is quick and easy and pays the same.

    Like

  45. Thanks QB, that was a fascinating link.

    Like

  46. damn, hosers.

    Like

  47. Thanks for that link QB. Note also that Toobin contradicts his own earlier writing:

    “These tempests obscure a larger truth about Thomas: that this year has also been, for him, a moment of triumph. In several of the most important areas of constitutional law, Thomas has emerged as an intellectual leader of the Supreme Court. Since the arrival of Chief Justice John G. Roberts, Jr., in 2005, and Justice Samuel A. Alito, Jr., in 2006, the Court has moved to the right when it comes to the free-speech rights of corporations, the rights of gun owners, and, potentially, the powers of the federal government; in each of these areas, the majority has followed where Thomas has been leading for a decade or more. Rarely has a Supreme Court Justice enjoyed such broad or significant vindication.

    The conventional view of Thomas takes his lack of participation at oral argument as a kind of metaphor. The silent Justice is said to be an intellectual nonentity, a cipher for his similarly conservative colleague, Antonin Scalia. But those who follow the Court closely find this stereotype wrong in every particular. Thomas has long been a favorite of conservatives, but they admire the Justice for how he gives voice to their cause, not just because he votes their way. “Of the nine Justices presently on the Court, he is the one whose opinions I enjoy reading the most,” Steve Calabresi, a professor at the Northwestern University School of Law and a co-founder of the Federalist Society, said. “They are very scholarly, with lots of historical sources, and his views are the most principled, even among the conservatives. He has staked out some bold positions, and then the Court has set out and moved in his direction.”

    Thomas’s intellect and his influence have also been recognized by those who generally disagree with his views. According to Akhil Reed Amar, a professor at Yale Law School, Thomas’s career resembles that of Hugo Black, the former Alabama senator who served from 1937 to 1971 and is today universally regarded as a major figure in the Court’s history. “Both were Southerners who came to the Court young and with very little judicial experience,” Amar said. (Thomas is from Georgia.) “Early in their careers, they were often in dissent, sometimes by themselves, but they were content to go their own way. But once Earl Warren became Chief Justice the Court started to come to Black. It’s the same with Thomas and the Roberts Court. Thomas’s views are now being followed by a majority of the Court in case after case.””

    http://www.newyorker.com/reporting/2011/08/29/110829fa_fact_toobin?currentPage=all

    Edit: see also:

    http://www.the-american-interest.com/wrm/2011/08/28/new-blue-nightmare-clarence-thomas-and-the-amendment-of-doom/

    &

    http://www.outsidethebeltway.com/the-triumph-of-clarence-thomas/

    Like

  48. More embarrassment for Toobin.

    http://www.politifact.com/georgia/statements/2012/apr/16/clarence-thomas/clarence-thomas-gives-supreme-court-history-lesson/

    They publish these “eight years silent” stories every so often. It is all ridiculous. Calabresi is correct: Thomas has been an intellectual heavyweight and very independent. He does express my own views more consistently than any other justice.

    If you have ever been involved in any kind of panel discussion, argument, or debate like the Supreme Court, you also understand the dynamics Thomas describes. More vocal people tend to dominate. Quieter people who are more focused on and content to process what they are hearing come out looking even more reticent than they are, just because the vocal people vie for speaking time.

    The whole thing is silly. They hate Thomas because he isn’t authentically black. He committed the cardinal sin of being a race traitor to liberalism.

    Like

  49. damn, hosers.

    Argh! I’m stuck in an airport and couldn’t watch. I guess I won’t watch a replay.

    Like

  50. Another immigration post from Hack Sargent. This one ought to do it.

    Like

    • NY State Senator proposes that parents be forced to take “parenting classes” if they want their kids to move from 6th to 7th grade. (Yes, it’s a Democrat.)

      There really is no limit to the authoritarian nature of the left. Never again should anyone mockingly say “There ought to be a law”. Today’s hyperbole is tomorrow’s Democratic policy.

      Like

  51. Has he offered up what he’s willing to exchange for a path to citizenship?

    Like

  52. OT: Good piece on why Windows 8 is failing.

    http://winsupersite.com/windows-8/what-heck-happening-windows

    Like

    • jnc:

      OT: Good piece on why Windows 8 is failing.

      I bought my daughter a laptop with Windows 8 when it first came out. Since then I have had to buy 3 more laptops, and each one has been a Mac. Never again for windows.

      Like

  53. Has he offered up what he’s willing to exchange for a path to citizenship?

    He was re-elected. That means whatever he wants is the will of the people. You’ll get nothing and like it, bagger..

    Like

  54. I don’t know how many (if any) of you guys this will apply to, but I found this list of former crushes and thought of you. Happy Friday!

    Like

  55. Never again for windows.

    Only as long as I can stick with Windows 7 (or skip over 8 at some point). But by the same token, I’ll never, ever go with Mac. . . which means Linux/Android for me!

    Like

  56. You are a couple of decades off with most of those, Michi. Don’t even know who some are.

    Like

  57. I am an equal-opportunity hater. I hate both Windows and Mac.

    Like

    • qb:

      I am an equal-opportunity hater. I hate both Windows and Mac.

      At home I use my ipad almost exclusively. The Mac laptops were all for the females in the house, who seem to love them. The youngest is stuck with the windows 8 hand-me-down.

      Like

  58. You are a couple of decades off with most of those, Michi.

    I thought I might be. . .

    Like

  59. Since Mac transitioned to Intel processors, it’s a pretty good choice. BootCamp allows you to run Windows XP or Windows 7 on it natively which is nice.

    Like

    • There is a good deal of dedicated legal software that does not run on the Mac or on Linux but only on Windows. Thus I use Windows and Linux. I have used the Mac OSX and liked it but I like Linux better.

      I think W 8.1 customized to run the W 7 desktop on a computer is faster then W 7. Quite a bit faster and uses less resources. So while I would not compare it favorably to the OSX or to Linux I do think W 8.1 is better than W 7.

      Like

  60. I use parallels if i need to run a windows based program on my mac, which is pretty rare.

    Like

  61. Essentially all science writing is done in Windows. The easiest way to upload a ms to a journal is Word, the easiest way to submit a poster to a meeting is PowerPoint, data is essentially always in Excel.

    Until journals and meeting organizers change that (and equipment manufacturers change their equipment control and data output from robots away from Office software) things aren’t going to change.

    Like

  62. There is no substitute for Excel…

    Like

  63. “72 / 28 right brained…
    You’d think you were an economist or something, Brent!”

    FYI, The wife weighed in this result and doesn’t believe it for 1 second…

    Like

  64. FYI, The wife weighed in this result and doesn’t believe it for 1 second…

    Heh!

    Like

  65. That question about being lost? The answer with using your phone, whirling around to orient yourself, walking 50 m in the wrong direction before turning around and heading in the right one?

    Done that more times than I can count since I’ve moved here.

    Like

    • Mich:

      Done that more times than I can count since I’ve moved here.

      Well, you are a woman…

      I don’t know if I have asked this here before, but on a car GPS system, who here sets it so that the direction of the car moves as you turn (ie north always up regardless of which direction car is moving) and who here sets it so that the map moves as you turn (ie car always pointed up regardless which direction the car is moving)? I have long had a theory that this tendency is a male/female thing. Not at all sure how “transgendered” people fit the theory.

      Like

  66. I don’t *use* GPS. I sniff the wind and taste the dirt to get where I’m going.

    Like

    • McWing:

      I don’t *use* GPS. I sniff the wind and taste the dirt to get where I’m going.

      Clearly you are more manly than I.

      Like

  67. BTW, I do not believe Europe will respond in any tangible way to a split Ukraine.

    Like

  68. I’m gonna post an open thread.

    Like

Be kind, show respect, and all will be right with the world.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: