Morning Report – The left is balking on housing finance reform 4/8/14

Vital Statistics:


  Last Change Percent
S&P Futures  1838.7 0.6 0.03%
Eurostoxx Index 3162.4 -23.6 -0.74%
Oil (WTI) 101.3 0.9 0.89%
LIBOR 0.227 -0.002 -0.89%
US Dollar Index (DXY) 79.86 -0.377 -0.47%
10 Year Govt Bond Yield 2.71% 0.01%  
Current Coupon Ginnie Mae TBA 105.4 0.0  
Current Coupon Fannie Mae TBA 104.4 0.0  
RPX Composite Real Estate Index 200.7 -0.2  
BankRate 30 Year Fixed Rate Mortgage 4.32    


Stocks are flat after a rough couple of days for stocks. Bonds and MBS are flat
Small Business turned slightly more optimistic in March, according to the NFIB. Expected increases in sales and inventories drove the increase. That said, plans to increase hiring fell. That said, small business did add more workers in March (an average of .18) than they did in February (an average of .11). Half of the respondents hired or tried to hire in the past three months, and 41% reported few or no qualified applications for open positions. Skilled trades are in short supply, and pretty much all of the homebuilders have noted the same thing on their conference calls. We are starting to see salary increases for the most in-demand workers. For the rest of us, any increased compensation is being eaten up by increased benefits expense. 
The National Association of Homebuilders reported that the recovery continues to spread. Nationwide, we are operating at 88% of normal economic and housing activity. Unsurprisingly, the most activity is in the energy patch, with Baton Rouge, Oklahoma City, and Houston topping the list. Encouragingly, stronger employment numbers seem to be driving the increase. 
The latest HUD Housing Scorecard is out, if anyone cares about the Administration or HARP / HAMP.
The left is revolting over the effort to overhaul the GSEs. They want more low-income lending mandates. Of course, if the bill becomes larded with social engineering mandates, Republicans will vote against it. The problem is that the left simply does not believe that affordable lending mandates had anything to do with the housing bubble. Of course if one looks at the severities in CRA areas, it is obvious that it did. How many abandoned houses worth ten grand have $100,000 mortgages on them in places like Detroit, Harrisburg, San Bernardino, etc. That is CRA ground zero. This may be one area where the two viewpoints of what happened from 2000 – 2008 are irreconcilably different. Wall Street Sharpies caused the bubble! Social Engineering caused the bubble! Both viewpoints go to the core of what the different parties believe and no one is going to convince the other of anything. Meanwhile, the taxpayer backstops 90% of all new origination…. Ask who is happiest with the status quo and you’ll be able to see who drives the hardest bargain.

22 Responses

  1. “How many abandoned houses worth ten grand have $100,000 mortgages on them in places like Detroit, Harrisburg, San Bernardino”

    To me, this is just like student loans. The real predator here was government


  2. I am of the view that discrimination in lending is 100% a figment of the left’s imagination. The studies that purport to prove it are bullshit because they only look at FICO scores and nothing else.


  3. Racist predatory lending. It’s a known, known.

    What the hell is wrong with everybody today?


  4. you mean they ignore things like income?


  5. No, what they do is compare rates for equal FICOs / incomes / DTI ratios, and if the borrower in the bad neighborhood gets denied or pays a higher rate than the borrower in the good neighborhood, then that is prima facie evidence of discrimination. obama believes that – the disparate impact theory – no intent to discriminate is required.

    What this misses is that lenders don’t focus solely on FICO scores (the probability of getting paid), they also focus on the downside if they don’t get paid (severity). This is why borrowing rates for manufactured homes are higher than normal detached single family homes.

    Simply put, a house in Toledo Ohio is more likely to become worthless than a house in Madison, WI. So if there are borderline borrowers with the same FICO score, I am more likely to lend to the borrower in Madison and deny the borrower in Toledo. Or I am going to want to charge the borrower in Toledo more. It isn’t discrimination, it is the proper pricing of risk.

    Now, if the government wants to make the argument that poor people should not be penalized for living in a lousy neighborhood, then they should make that argument, not create some trumped-up bullshit accusation of racial discrimination in lending.

    Lending is the most competitive business on the planet. The idea that a bunch of lenders are avoiding perfectly good loans due to racism is ridiculous. Fuck, if that is the case, Jay-Z and Oprah should open a bank. They would clean up making loans that all of these white racist stooges like me are too stupid to make.


  6. “Iit is the proper pricing of risk”

    ah, Also known as discrimination. in Bizarro world.

    but thanks for the explanation.


  7. Stan Greenberg has a new analysis of the mid-term election up with the Democrats strategy of running on women’s issues highlighted.

    What I found interesting was that all of the Republican policies that they polled on commanded a majority of likely voters and all of them but repealing Obamacare commanded a majority of single women, especially the flex time instead of overtime proposal.


  8. I read “shut down” as “shot down”


  9. Best part about private planes is skipping homeland security. The piece does answer some questions about why services such as this haven’t sprung up already and of course it’s because the government bans it.

    Edit: Some friends and I batted around the idea of joining one of those charter services once like MartinAir, but it wasn’t worth it.


    • jnc:

      Best part about private planes is skipping homeland security.

      I did it once. In the heady, pre-recession days of 2007 a friend of mine hired a private plane to fly down to Florida, and invited us to come along. Greatest flying experience of my life. Drive up onto the tarmac, someone valet’s the car, walk onto the plane. No hassles. Fantastic.

      Doubt it’ll ever happen again. He’s back flying commercial.


  10. Worth a read:

    “Finding the Man Who Saved My Family
    He rescued us from a Balkan death camp 20 years ago. I found him in my apartment in Queens.

    By Kenan Trebinčević”


  11. For travel up the NE corridor as far as New York, I’ll actually take the train all things being equal. But I know we are just one bomb away from ruining that too.


    • My daughter does the train from Boston to Stamford, when I can’t pick her up. Seems pretty efficient, but not exactly cheap. I like to drive anywhere that’s within, say, 8 hours. Just have to plan around traffic.


  12. In my first two months as a brand new lawyer, over 20 years ago, I got a call from a partner to go home and pack for a trip. We flew out the next morning on a corporate jet for a corporate investigation that ended up on the front page of the WSJ and had long-term repercussions for a corporation that is still a household name. It changed the entire course of the company, thousands of people, and communities in several states.

    I thought, wow, I hit a home run. This career is going to be glamour and excitement all the way. Hahaha. I’ve flown by private plane exactly once since then, several years ago, and the client made me drive four hours to hop the flight rather than just fly commercial.


    • Speaking of jets, what are we going to do with all that extra water from the melted ice due to jet-induced global warming? Fuel more jets!


    • Very funny.

      In 1972 or ’73 I took flying lessons because I represented a FBO in TX. I hated landing and never got licensed, but that is another story. I still had connections with a NASD broker I worked for in ’64 and got them interested in underwriting the FBO expanding to Sky Harbor in Phoenix. Well, that all went pretty well, the IPO was a success, and my career hit a high point that was never again duplicated.


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