Morning Report – Good early indications on the Spring Selling Season2/11/15

Stocks are lower worldwide as Greece and Germany continue to posture over future Greek bailouts. The Greek 10 year bond yield is up 33 basis points to 10.58%. Global bonds are up small, and MBS are flat.

Mortgage Applications fell 9% last week as rates backed up 32 basis points. Purchases were down 6.5% while refis were down 10.3%.

Hedge funds that bought distressed mortgage debt in 2008 and 2009 are unwinding their positions as spreads have tightened and real estate prices have risen. Probably next on the agenda is the unwind of the REO-to-Rental trade which has simply not lived up to the hype.

Homebuilder KB Home is doing a $250 million bond issue today. Separately, they announced new orders were up 25% so far this year. Key quote from CEO Jeffrey Metzger: “Based on our expanding community count and the strength of our recent net order results, we are optimistic about the spring selling season. We believe the momentum of these favorable trends, in combination with our solid backlog, support a positive revenue outlook for the remainder of the year, particularly in the third and fourth quarters.”

Lewie Ranieri’s Shellpoint Partners rolled out their non-QM credit repair product in October, and they hope to do their first securitization of these loans this year. They believe the agencies will demand 15% credit enhancement for AAA tranches with high quality non-QM loans, and credit enhancement of 34%-40% for the tougher stuff: 620 FICO, 50 DTI, 80 LTV loans. Shellpoint lends through its New Penn unit. Sounds like we are getting closer to non-QM securitization.

3 Responses

  1. Brent,

    Saw this news and thought of you.

    “Tampa Bay led all major U.S. metro areas in completed foreclosures last year as lenders took back nearly 18,400 homes, houses and condos — 5.3 percent more than in 2013. “


  2. Mike! Good to see you stop by.


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