Morning Report – grim Q4 numbers out of the MB 3/27/14A

Vital Statistics:

 

Last Change Percent
S&P Futures 1841.2 -1.4 -0.08%
Eurostoxx Index 3116.2 -14.0 -0.45%
Oil (WTI) 101.2 1.0 0.96%
LIBOR 0.234 0.000 0.11%
US Dollar Index (DXY) 80.12 0.090 0.11%
10 Year Govt Bond Yield 2.70% 0.01%
Current Coupon Ginnie Mae TBA 105.1 -0.1
Current Coupon Fannie Mae TBA 104.2 -0.1
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.33

 

Markets are lower after yesterday’s sell off. Bonds and MBS are down small. Initial Jobless claims came in at 311k, lower than expected.
The final revision to fourth quarter GDP is in – 2.6%. The advance estimate was +3.2%. Personal consumption was up 3.3%, which is a good number. The price index came in at 1.6%, which is still below the target level for the Fed.
Mortgage banking profits hit a low in Q4. Average per-loan profits fell from $743 in Q3 to $150 in Q4, according to the MBA. This is the lowest level since the MBA began tracking this in 2008.  Loan production expenses increased to $6.959 from $6,368 in the quarter. Loan production expenses are an “all-in” number that includes commissions, overhead, etc. Personnel expenses per loan averaged $4,385 in Q4 vs $4,130 in Q3. Average production volume was $367 million in Q4, down from $391 million in Q3. Secondary marketing income increased by 4 bps. Finally, the productivity rate was 2.0 loans per production employee per month, a decline from 2.5 loans in the third quarter. Lower volume + increased compliance costs = lower profits. And this is in Q4, before all the new rules kicked in.
Is the distressed REO-to-rental trade getting played out? According to RealtyTrac, we have reached a state of stasis in the distressed real estate arena, with a dwindling supply of homes, institutional investors beginning to balk at the higher prices, a lack of supply of new construction, and an MIA first time homebuyer. All cash sales were 43% of all U.S. residential sales in February. The historical number is closer to 20%. There is an incredible amount of pent-up demand for the first time homebuyer once the economy recovers. That dip in household formation was due to a lousy economy, not fertility rates 25-30 years ago.

Pending Home Sales dropped .8% month-over-month and 10.2% year-over-year. I’m sure weather played a role in this drop, but it confirms what RealtyTrac is saying above.
Maxine Waters has proposed a bill to wind down the GSEs and replace it with a system that regulates the mortgage industry like a public utility, where a co-op of lenders would issue MBS guaranteed by the government. I wonder if that would also mean that the government would dictate how much a lender is permitted to make on a loan. She would reduce the private sector’s first loss risk to 5% from 10%, and lower the required down payment to 5% (3.5% for first time homebuyers). Naturally, this is a bill the left is going to love because it ensure that “underserved” constituencies continue to be subsidized by other borrowers. This bill has a less than zero chance of ever becoming law, so it is basically just a political marker and nothing more.

 

77 Responses

  1. “Pitfalls of Reverse Mortgages May Pass to Borrower’s Heirs
    By JESSICA SILVER-GREENBERG
    March 26, 2014, 7:57 pm

    The only solace for Isabel Santos as she spends her evenings huddled over stacks of yellowed foreclosure notices is that her parents are not alive to watch their ranch-style house in Pleasant Hill, Calif., slipping away.

    Ms. Santos, 61, along with a growing number of baby boomers, is confronting a bitter inheritance: The same loans that were supposed to help their elderly parents stay in their houses are now pushing their children out. “My dad had nothing when he came here from Cuba and worked so hard to buy this house,” Ms. Santos said, her voice quivering.

    Similar scenes are being played out throughout an aging America, where the children of elderly borrowers are learning that their parents’ reverse mortgages are now threatening their own inheritances. “

    http://dealbook.nytimes.com/2014/03/26/pitfalls-of-reverse-mortgages-may-pass-to-borrowers-heirs/?hp

    That’s the whole point of the reverse mortgage. The children didn’t have to pay for keeping the parents in the house, but that means they don’t get to inherit the equity.

    You don’t get to have it both ways.

    Like

  2. Who among us has not wanted to facilitate gunrunning for a Chinese triad? Senator Lee I salute your living the dream.

    Like

  3. Brent, was the sharp revision down for Q4 GNP expected? Weather related? A harbinger of a downturn, outside of Texas and ND? Seems like more than the usual “correction” to me.

    Like

  4. “You don’t get to have it both ways.”

    That’s the core of most of our problems.

    Like

  5. Sorry, it’s CA Senator Yee who is living the gunrunning Triad stooge dream.

    BTW, this.

    Like

  6. FWIW, those folks in the reverse mortgage story are doing it wrong.

    you hide assets among the kids well before you think you’ll need long term care, keep the house, and get on Medicaid.

    Like

  7. Mark, the advance estimate is usually off. Not sure what caused it in this case.

    Like

  8. “Whitaker. Motherfucking. Chambers, on March 27, 2014 at 9:59 am said:

    Who among us has not wanted to facilitate gunrunning for a Chinese triad? Senator Lee I salute your living the dream.”

    Sounds like something Chow from the Hangover movies would be doing.

    Yee’s tweets could be considered “talking his book”.

    Like

  9. I think of Fletch talking to the the guy. “God I admire you.”

    http://m.youtube.com/watch?v=14647u543-8

    Yee makes me feel like a giddy school girl.

    Like

  10. From the Hill piece:

    ““Just like Election Day, if you are in line when the polls close, you get to vote,” a terse Julie Bataille, spokeswoman for CMS, told reporters Wednesday.

    “We won’t close the door on those who tried to get covered and were unable to do so through no fault of their own.””

    Or the deadline could be considered like the tax filing deadline for April 15th, where even if you request and get an extension, you still owe the tax, plus interest and penalties retroactive to the deadline.

    Edit: I suspect it takes every ounce of self discipline that the administration has not to just reflexively denounce “greedy insurance companies” as to blame for all the problems.

    Like

  11. So Rand Paul:

    “Rand Paul builds 50-state network, courts mainstream support for presidential bid
    By Robert Costa, Updated: Thursday, March 27”

    http://www.washingtonpost.com/politics/rand-paul-building-national-network-courting-mainstream-support-for-presidential-bid/2014/03/27/568b06de-b50d-11e3-b899-20667de76985_story.html?hpid=z1

    He’s probably good enough to make me vote Republican again if he’s the nominee.

    Like

  12. He is a very good politician. I’ve been impressed at his ability to look like he’s reaching out. Low info voters seem to like that for some reason.

    Like

  13. If we include all this debt — public debt, intragovernmental debt, and unfunded liabilities — we currently owe at least $79 trillion, 500 percent of GDP, and perhaps as much as $127 trillion, 800 percent of GDP.

    Piece a cake. No need to inconvenience oneself. Just print MOAR.

    However, this may underestimate the tax burden required to pay the debt, because a country’s tax base is only a fraction of its GDP. Accordingly, the tax increases required to pay the debt would need to be much larger as a percentage of the current tax base than as a percentage of GDP. For example, the payroll-tax base equals slightly less than one-half of GDP, implying that the 15.3 percent U.S. payroll-tax rate would have to be more than doubled to pay our debt. Similarly, the income-tax base is roughly 36 percent of GDP, meaning that revenue from income taxes would have to more than double, requiring massive rate increases just to pay what we owe.

    Taxes at such levels would almost certainly depress both investment and consumption, substantially slowing economic growth.

    Uh… Oh shit.

    Not to worry though, wine and roses are right around the corner!

    The slow economic growth that the United States has seen coming out of the recession is likely due in part to our high levels of government debt.

    Uh… Oh shit.

    http://m.nationalreview.com/articles/339188/debt-deniers-fantasy-michael-tanner

    Like

  14. “He’s probably good enough to make me vote Republican again if he’s the nominee.”

    but you are a Republican!

    /Dezzie’d

    Like

    • First, thanx for the reply, Brent.

      Second, does anyone think the quotation I put up when the airliner disappeared is now in poor taste and should be deleted? I don’t, but if anyone is offended I will find something else.

      Like

      • Mark:

        Second, does anyone think the quotation I put up when the airliner disappeared is now in poor taste and should be deleted? I don’t, but if anyone is offended I will find something else.

        Cool by me. I don’t easily get offended.

        Like

  15. Why do Progressives love Jim Crow and health insurance companies?

    http://thefederalist.com/2014/03/27/are-you-ready-to-pay-the-hobby-lobby-poll-tax/

    That’s a serious question, BTW.

    Like

  16. I got that from the same dude who said Romney paid no income tax.

    If the source is good enough for the Senate Majority Leader (a rumored pederast)..,

    Like

  17. Nova, heard Cantor pulled the Doc fix. True?

    Like

  18. it passed on a voice vote earlier today. expect the Senate to take it up tomorrow.

    Like

  19. from trade press:

    Following the House floor debate on H.R. 4302, House Republican leaders called for a recess and huddled for nearly an hour in House Speaker John Boehner’s (R-Ohio) office, strategizing on how to proceed. Major medical groups, including the American Medical Association, objected to the one-year patch that would take the place of a permanent fix for Medicare’s problematic physician payment system. When House leaders emerged from Boehner’s office shortly after noon, they quickly called for a voice vote on the bill and it was declared passed. The voice vote avoided a roll call, which could have revealed that the measure hadn’t gathered the two-thirds vote needed to pass.

    Like

  20. ” I don’t, but if anyone is offended I will find something else.”

    This really isn’t the sort of crowd that easily takes offense, Mark.

    Like

  21. NoVA, any individual member can call for the yeas & nays after a voice vote, right?

    So the conservative members had to effectively acquiesce by silence?

    Like

  22. i think shrink is mad at me.

    Like

  23. shrink is mad at almost everyone, and hates most people.

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  24. yes. there can be a call for that after a voice vote.

    edit — but you have to have sufficient support.

    Like

  25. “novahockey, on March 27, 2014 at 2:12 pm said:

    i think shrink is mad at me.”

    Actually no, he’s agreeing with you. It’s hard to tell the difference sometimes.

    His new description of me is “libertarian nihilist”, which I kind of like, because I’ve given up on collective solutions to public problems. I’ll happily concede that.

    Like

  26. hmm. i was interpreting it as a very passive aggressive “you are the problem.”

    Like

  27. “His new description of me is “libertarian nihilist””

    That must be exhausting

    Like

  28. The proof continues to roll out that the whole crusade against saturated fat, meat, butter, etc., was a sham.

    http://www.nytimes.com/2014/03/26/opinion/bittman-butter-is-back.html?partner=rss&emc=rss&_r=3

    The public was steered toward massive carb overloading–particularly processed grain, the absolute worst and a real cause of cardiovascular disease–based on scientific nonsense.

    It was all scientific rubbish. But we are supposed to let the same complex of “experts” in academia, industry, and government micromanage our health and diets.

    Like

  29. “His new description of me is “libertarian nihilist””

    You must have risen in his estimation. He used to agree with Cao that all libertarians are “slavers” at heart.

    Like

  30. “particularly processed grain”

    that stuff will kill you.

    unless it’s beer or whiskey. it’s nothing but meat, vegetables, and fermented and or distilled beverages for me.

    Like

  31. I wonder how much of the increase in obesity and diabetes is due to people eating too much processed grains.

    Like

  32. I lost 15 pounds in a month but cutting it and doing crossfit 3x a week. sleep better, feel better,
    i’ve since put booze back into the diet.

    Like

  33. Scott,

    Agree. Predictable and inevitable.

    Like

  34. I hate to be contrarian but it’s calories in calories out.

    Like

  35. I wonder how much of the increase in obesity and diabetes is due to people eating too much processed grains

    Virtually all of it, imo. I suppose there needs to be some allowance for sheer overdosing on french fries, candy bars, and milk shakes. But it is the grain-based diet that drives diets in that direction. I creates the phenomenon of people perpetually on a glycemic roller coaster while chronically malnourished. Fat but starving to death. Processed grain (wheat and oats the worst), not bacon, has been killing people.

    A former partner of mine once said, look, it’s simple. What do they feed cattle to fatten them up? Truth.

    I all but eliminated grain, with exceptions now and then for a little corn salsa or the like. But wheat is out, and my health is transformed. Every time I see someone I haven’t seen in a few years, they want to know how I did it. It happened again Tuesday evening. A friend in his mid-30s I had not seen in five years or so said he hardly recognized me and wanted to know my secret. Shakeology + a roughly paleo+dairy diet + old-school fitness a la Mark Rippetoe (thanks to Glenn Reynolds). I’m really just at the beginning. My family watched me look at donuts, cake, bread, etc. all week while on vacation without eating them.

    Edit: I should add something important. It was getting the diet in better shape that allowed me even to have the energy to start exercising again. It was a difficult experience, because I was very active and athletic when I was young.

    Like

  36. I hate to be contrarian but it’s calories in calories out.

    I hate for you to be wrong, TMW, but this is. In simple terms, sure, you have to burn more calories than you take in. But the glycemic spike from wheat and oats, plus other effects like its addictive opiate effect, play major roles. People who eat a lot of these grains have a very hard time avoiding calorie surplus, because they crave more.

    Like

  37. i think shrink is mad at me.

    Don’t feel bad. He gave me “Sisters of Mercy” as a bedtime lullaby a couple of nights ago.

    Like

  38. “a roughly paleo”

    that’s me. I call it 100% paleo, 80% of of time.

    Like

  39. Yes, second the recommendation of Wheat Belly and the blog. I read it a while back and had my eyes opened. It was after I had eliminated wheat and grain just based on experience.

    I never had paid much attention to paleo but had mildly laughed when I saw the idea. Now, I don’t particularly care about the “evolutionary” theory behind it, I just know my experience validates it. I do fine with dairy, though, too.

    Like

  40. Or, people overeat

    Yes, but some dietary habits encourage that. And some foods have other biochemical effects. Eating a standard American diet, I weighed 30-40 pounds more and couldn’t stop gaining. I couldn’t control my cravings and hunger. Now it’s pretty much a breeze. I’m off the carb crackpipe.

    Like

  41. One easy solution is no unopposed carbs. For every serving of carbs offset it with a serving of protein.

    Like

  42. And keep total caloric intake below 2000
    And below 1500 to lose weight. Unless you compensate with exercise.

    Like

  43. One easy solution is no unopposed carbs. For every serving of carbs offset it with a serving of protein.

    I certainly agree with that. Without consciously thinking about it, I probably never have carbs alone now, unless you count a few potato chips once-in-a-while. Or a candy bar. I cut myself a little slack.

    Like

  44. Without really intending to, I’ve cut 90% of carbs out of my diet–it’s mainly just snacks now. Protein and vegetables, with pasta maybe once every two to three weeks. Much to my surprise I’ve lost 20 pounds in the last year and am back down to my graduated-from-high-school weight.

    You can have my salty pretzels when you pry them from my cold dead hands, though!

    Like

  45. When I just eat carbs my face gets a little flushed and feels warm (and looks red,) it’s weird really. But like Michi I just don’t really eat bread or pasta (not worth the calorie expenditure) our weakness is sweet potatos, either fries (baked) or baked sweet potato. We eat a TON of vegetables and some fresh fruit.

    I can tell when I eat out or eat processed food as I’ll gain a pound or two from the slat and water.

    Like

  46. I don’t avoid carbs, I just deprive them of my essence.

    Like

  47. Kinsley gaffe

    Like

  48. I don’t avoid carbs, I just deprive them of my essence.

    I’m totally stealing that line!

    Like

  49. Personally, I think most of us should do what works for us and keeps us healthy and at a normal weight. I spent about six months a little over a year ago trying to gain weight and the only thing that really worked was whole grains, legumes, nuts and extra protein. Then this summer I had to do a little bulk because I was exercising too much and burning too many calories and did the same. I mainly use non or low fat dairy (greek yogurt and 2% cottage cheese), fish and some rice protein (shakes) to increase my protein. Since I don’t eat any pasta other than soba (buckwheat) and very little bread, I mainly eat brown rice as my grains. Other than that it’s all fruits and veggies with a little chocolate thrown in because I’m not a complete idiot.

    But I do think calories in VS calories out is the main thing for losing weight, or gaining, whatever the case may be. There are always a lot of fad (paleo) diet plans out there but I think a well balanced diet is the most important thing.

    McWing, we eat lots of sweet potatoes here as well. Love them with just a little cinnamon on them and the occasional dab of real butter!

    Like

  50. The butter really does compliment the sweet potato, no doubt about it.

    Like

  51. Hi McWing!

    Like

  52. I thought these were interesting reflections from a lot of different people and some very wise words in here for all of us, but especially you youngsters, which is everyone but Mark and I, hahaha.

    http://markmanson.net/10-life-lessons-excel-30s

    Like

  53. Thanks for that link, lms. I’m going to send it to my son and save it for my daughter.

    I find 8 interesting, and when I read it I remembered that I had seen the author’s list of lessons from his 20s. 8 is one of those things that I think is true but maybe only half the truth. I am not sure it is possible to understand how this one is true until you are older, if that makes sense. It is very subtle. Perhaps the difference between inner and outer life? It reminds of the remark I made a while ago that as your kids mature they realize you were right about everything while you realize you had no idea what you were talking about. Both somehow can be true.

    I like that the column has the quotation from Jobs. His commencement speech was priceless, really the best.

    Edit: to be less eliptical, I think many people do know very well what they are doing, in certain ways, sometimes even in their 20s, at the same time that in other ways they are just braving it out, faking it until they make it. Something like that. There are people building businesses or setting a course for a long-term career.

    Like

  54. Interesting how many people are one way or another shunning grain carbs. Pretzels are tough one, especially the dark-chocolate pretzel slices from Costco. Pasta is tough for a lot of people, too, but I laid the law down for myself on pasta and pizza. Never thought I would give up pizza.

    Like

  55. Sweet potatoes: if you are ever in NYC near Bobby Flay’s Bar Americain, get the sweet potato casserole side. It is the best thing ever.

    Like

  56. qb: My biggest pretzel weakness is soft pretzels laden with salt (luckily my BP is not sodium-sensitive) and dunked in a judicious amount of mustard. Luckily you usually have to go to a sporting event of find a street vendor to have a good one, so they’re few and far between.

    There’s a local brand of pretzel rods here that are to die for. . .

    Like

  57. QB

    Both somehow can be true

    I understand that completely!

    On carbs and diet (as in what we eat, not weight control), my healthiest combination is about 40% carbs, 30% protein and 30% fat. In the fat category I try to eat healthy fats from nuts, avocado, salmon, healthy oils etc and stay away from animal and dairy fat as much as possible, although I love cheese, I only eat it in small quantities. When I need to gain a little I load up on extra carbs, nuts, avocado and beans…………………………toot, toot!

    Although I’m not really training for competitive swimming any longer I’m having trouble getting out of training mode because I love it so much. My trainer’s trying to talk me into doing a little mini triathlon now………………….LOL…………..no dice!

    Like

  58. soft pretzels laden with salt …

    just pair it with a wurst of your choice and you’re good to go. and a hefe or a dunkel. .

    Like

  59. I’ll also add. last year (2012-2013) i played in about 40 rec hockey games and had 0 goals. stunk up the ice. went mostly paleo and started lifted seriously. 20 goal scorer in the 2013-2014 season.

    Like

  60. QB – you might be interested in https://www.jovialfoods.com/products/einkorn-flour.html

    it’s a heritage wheat. if you google einkorn wheat you can read about it. jovial is the brand that i buy. they make pasta too. i just doesn’t leave you with the weighted-down feeling. but i use it sparingly too.

    it’s basically “unprocessed” or something along those lines.

    Like

  61. That was an interesting list, Lulu, thanks! My biggest problem has always been #2; I’ve always been the accommodating one (much as I know some around here will find that hard to believe). I finally, about three years ago, started putting my foot down and it has made the world of difference. I dropped some people that were treating me poorly, others got offended and stormed off saying I was being too demanding, but a couple said “wow–you’re right! We have been treating you like shit.” and we’ve become good friends again. Good list.

    Like

  62. Good for you NOVA. Didn’t you also say you lost a few pounds? A healthier and trimmer NoVA is tearing up the ice! I think paleo works, I just don’t know if it’s going to be sustainable for people long term.

    When I first became obsessed with my diet (not losing weight but what I was eating) as a teenager, I started out doing Macrobiotics, it was the big fad then, but after about 7 or 8 years life got in the way and I couldn’t keep it going. What I did was hang onto what I learned and incorporated that into a more sustainable menu of foods. But that’s just what has worked for me. I’ve only really been sick once (and it wasn’t really my fault) and don’t take any prescriptions and have the heart and lungs of someone much younger. That’s why I said I think people should find what works for them and pretty much stick with it for life.

    Like

  63. re wheat: the biggest problem is the wheat grown here in the US; we’ve modified it to be drought resistant, bug resistant, pesticide resistant, flood resistant, alien-life-forms-from-Mars resistant to the point that no wonder out bodies don’t know what to do with it! I have a friend who decided that her gastrointestinal problems were gluten, so she’s gone gluten-free and feels great–but even just one bite of bread will give her cramps that can leave her doubled over.

    She’s a former flight attendant, and one of her old colleagues who didn’t know that she’d gone gluten-free came back on Air France and brought her a baguette from France as a gift. She was using it to make sandwiches for her kids and decided to risk a bite. . . because who can resist French bread from France? Three slices later she was sure that she was going to be in bed for the next day–but nary a problem.

    It isn’t gluten per se, it’s the gluten from modern American wheat that’s the problem.

    Like

  64. Yep. i dropped about 15 pounds. went from a 34 to a 32 waist . I also had a “come-to-jesus” talk with my goalie. asked him “what is wrong with my game” i got a book long email back! basically, i broke my collarbone and was playing fat and timid on my return. now i get to the net and the dirty areas to make plays again.

    michi — i think mrs. nova has the same thing with the modern vs. old school gluten.

    Like

  65. Michi, I bet your friend has celiac disease. Pretty commonly diagnosed in Europe but not so much here. My wife had exactly the same symptoms and once
    She gave up (most) gluten she felt fine. For some reason, sour dough bread does not cause problems.

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  66. Troll–

    Nope, not celiac; that was her first thought, also, but it’s not (nor Crohn’s, either). Probably just vast intolerance to something in American wheat. She can also eat pasta as long as it’s imported from Italy.

    Like

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