Morning Report – Notes from the left wing fever swamp 10/22/14

Stocks are rising in the US as European markets rally. Bonds and MBS are down.

Mortgage applications increased 11.6% last week on the bond market rally. Purchases actually fell 4.8%, while refis rose 23.3%. The contract interest rate on the 30 year fixed dropped from 4.2% to 4.1%. Refis jumped to 65% of all applications.

The MBA is forecasting that mortgage volume will increase 7.4% in 2015. Given most people are thinking that home prices will increase by mid single digits, that is not a lot of unit growth.

Inflation at the consumer level remains muted, with prices rising ,1% month-over-month, and 1.7% on an annualized basis. Again, I simply do not see the Fed raising rates except for a symbolic amount to get off the zero bound until we start seeing 4%+ wage inflation. And that is not yet happening.

The final rules for QRM are out, and there weren’t a lot of surprises. It generally follows the QM framework, and conforming loans will be exempt from the retained risk feature. They also dumped the minimum down payment for language that requires “sound and responsible underwriting.” Not surprising since the government is now looking at 3% down conforming loans.

In case you missed it, here are the prepared remarks from Mel Watt, speaking at the MBA conference. Here are the prepared remarks by HUD secretary Julian Castro. The theme is to increase access to credit, largely by promising the lending industry more safe harbor. However not everybody is thrilled about this – see below.

Did you know the entire mortgage industry got together and decided that they will extort the government by overly restricting credit in order to make more money down the road when regulations ease up? I guess I must be a nobody since I wasn’t invited to the big pow-wow. Maybe Rob Chrisman was. Anyway, this is what passes for analysis nowadays in the left-wing fever swamp. The author thinks that Wall Street is unnecessarily restricting credit and blaming the government in a scheme to supposedly bring back the good old days. How he imagines hundreds of companies in the most fragmented, competitive business on the planet are going to come up with a scheme to voluntarily lose money on a bet that regulations might change in the future is beyond me. However, it is a window into how many in DC view us. What is common sense to practitioners is not necessarily apparent to many of the opinion makers who politicians listen to. While Mel Watt may not believe this nonsense, influential politicians like Elizabeth Warren probably do. Note Bene.

5 Responses

  1. Thomas B Edsall figures it out:

    “Nathaniel Persily, a professor of law at Stanford, is a proponent of strong, well-financed parties. Polarization, he wrote in an email to me, “is a cost of many of these good government reforms. It is almost an intended cost if you think about it.” Why? Persily argues that the purpose of

    ‘good government reforms is often to make politics more about ideas and less about material or private gain. Well, we have ideological parties now, with clear distinctions and a broad gulf between them. There is nothing wrong with that in the abstract. However, a separation of powers system requires compromise between the parties. Transparency, open meetings, bans on earmarks, and weaker party machines make compromise more difficult.’

    In “Strengthening Parties,” a chapter in the forthcoming volume “Solutions to Political Polarization in America,” Persily contends that in the case of campaign finance, “the good good-government reforms that have been tried have, if anything, made things worse.””


  2. We all have our blind spots. But to suggest that the DSCC pulled out of KY in some sort of clever plot is just insane.


  3. No more so than the assumptions that went into that asinine spreadsheet. What’s so funny is in the next post they will argue that conservatives are the ones stuck in an echo chamber.


  4. Yglesias writes another column that makes sense:

    “Publishers would like writers to believe that the pressure they are feeling from Amazon will trickle down and hurt authors as well. But there is a big difference. Even in the brave new world of e-publishing, authors are still making a crucial contribution to the industry by writing the books. Publishers are getting squeezed out because they don’t contribute anything of value.

    When all is said and done, the argument between Amazon and book publishers is over the rather banal question of price. Amazon’s view is that since “printing” an extra copy of an e-book is really cheap, e-books should be really cheap. Publishers’ view is that since “printing” an extra copy of an e-book is really cheap, e-books should offer enormous profit margins to book publishers. If you care about reading or ideas or literature, the choice between these visions is not a difficult one. The publishing incumbents have managed to get some intellectuals sufficiently tangled-up to believe that it is. But ask yourself this — do you regret the invention of the printing press? Of the paperback? Do you think public libraries devalue books and reading? The idea is absurd.”


  5. NoVA, comment of the day on the CDC monitoring procedures announced:

    “It will be interesting to see if this is really enforceable. It had better be.”


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