Morning Report: Mortgage Credit increases 2/8/17

Vital Statistics:

Last Change
S&P Futures 2285.3 -0.3
Eurostoxx Index 363.7 0.9
Oil (WTI) 51.8 -0.4
US dollar index 90.7 -0.1
10 Year Govt Bond Yield 2.36%
Current Coupon Fannie Mae TBA 102.1
Current Coupon Ginnie Mae TBA 103.2
30 Year Fixed Rate Mortgage 4.13

Stocks are flat this morning while bonds and MBS are up.

Mortgage applications rose 2.3% last week as purchases rose 2% and refis rose 2%. Refi activity slipped to 48% of total applications, the lowest since June 2009.

Jeb Hensarling, the Chairman of the US Financial Services Committee says that reforming Dodd-Frank is a “this year priority.” Congressional Republicans are planning to introduce legislation that will give banks relief from certain Dodd-Frank provisions if they increase their capital. He also called the CFPB a “rogue agency” and called for the President to fire CFPB Director Richard Cordray.

Given the structure of the CFPB, firing Cordray is going to be difficult, however there supposedly is a way. The DC Circuit ruled that the structure of the CFPB was unconstitutional, and that the Director could be fired at will by the President. However, Cordray can stay until the appeals process plays out. Here is the way out: President Trump orders Cordray to drop the appeal, which he has the right to do, since the CFPB must coordinate with the DOJ, and they need the Attorney General’s approval to go to the Supreme Court. So, Trump orders Cordray to drop the appeal, and the court ruling stands. If Cordray refuses then Trump can fire him for insubordination.

In expectation of an easier regulatory environment, we are seeing startup banks after a long dormant period post-crisis. Eight banks filed applications with the FDIC in 2016. This is a far cry from the salad days when you would see 250-300 applications, but it is a step in the right direction towards increasing credit.

Speaking of credit, the MBA Mortgage Credit Availability Index rose in January. The conventional, conforming, government and jumbo indices all rose, although jumbo was really what drove the increase. Since the index was benchmarked at 100 in early 2012 (probably the bottom of the housing market) the increase since then looks pretty dramatic. However, when you compare it to the longer term chart (that includes the bubble years) you can see how much things have changed.

Long-term MCAI chart: Credit probably overshot in the immediate aftermath of the bubble (and credit is probably still too tight), however we are nowhere near returning to the days when ads for “pick a pay” mortgages dominated the Super Bowl.

Will rising rates kill home price appreciation? Probably not, since inventory is so tight. At a minimum, borrowers are looking to get ahead of any increase in mortgage rates, so this could be a lagged effect. Ultimately, mortgage rates will be determined by the 10 year bond, which is influenced by the Fed Funds rate, but doesn’t move in lockstep. In fact, the correlation between the two is quite low: around .12 since 1990. Until we start seeing wage inflation, the yield curve will probably flatten as the fed hikes.

33 Responses

    • This has always been true. This isn’t new. When you look back at any protest movements (even those that ostensibly succeeded), you will see that any that used disruptive tactics saw their public support go down thereby.

      Same goes with disruptive tactics used to quell protests. When you bring out the dogs and the firehoses against non-violent protestors, you elevate the protestors. When protestors obstruct traffic pointlessly or break and burn stuff, the diminish themselves. Even if a small minority does it.

      I think quality of protest matters, as well (in the context of the time). Presently, police shooting unarmed black men seems like it’s a legitimate problem, it involves the coercive power of the state, lack of due process, racism, yada yada. That seems like a high-quality thing to protest.

      Recent protests involving not liking who won an election, objecting to .00001% of the population being inconvenienced by temporary travel restrictions, not liking who gets nominated to a cabinet or appointed to the National Security Talking Club . . . these are low-quality protests. Protesting imagined things, or a gay conservative who might make mean, politically incorrect jokes, getting to talk to a small audience . . . low-quality protests. You cannot possibly hope to increase support for your point of view, or accomplish change, protesting results you don’t like and you’re own paranoid fantasies (or hyperbolic narratives of real, more boring things).


    • That’s a good article. Surprising to see it in WaPo. Not so surprising to read the comments:

      Sorry Julian, we are going to take down Trump whatever it costs, and we are in this with most of the free world. Trump is a monster, and if left alone, will destroy the Republic.

      Cognitive dissonance. They do not read what he’s saying, just what they want to read. Another comment goes to my theory about the quality of the protests:

      So why the fight in the courts about the visa and Green Card bans?

      Remember the Vietnam War protests? The Civil Rights protests? Did they fail?

      Proof, again, that the only good Republican is a dead Republican:

      No sound Princeton man would compare our so-called “President” Trump to Reagan. Take your inane drivel to the Wall St Journal or Faux News, where such myopic rhetoric is the order of the day. You, sir, have no place here.

      I don’t disagree, but Reagan was despised by the left and was always just about to destroy the planet by starting WWIII.

      Protests didn’t hurt Reagan but John Hinckley sure did!
      Maybe we could arrange showings of Taxi Driver around the country.

      Advocating for assassination, always evidence of the soundness of your political philosophy.

      This exchange is great. They’ve learned nothing from all the polls that gave HRC a 90%+ change of victory.

      2/8/2017 11:53 PM CST

      The protests are having no impact on Trump, but they’re turning off many Americans who don’t like Trump but don’t see him as evil either. After several weeks of this, protesters are starting to be viewed as pouty chilrdren. People start to see it as whining rather than being constructive. The occasional huge rally like the women’s rally is okay. But not the monthly or weekly protests going on now.

      2:05 AM CST

      Never mind the fact that polling doesn’t bear out your assertion at all: Trump crossed the 50% disapprove barrier faster than any other president on record–and by a considerable margin: it happened in only 8 days. His administration looks both dishonest and–far worse–incompetent, and thus far have shown no sign of being able to rally themselves.

      Fortunately for them, liberals can see the future and know exactly what Trump is going to do. I’m sure this person predicted a Trump victory.

      The comparison between Reagan and Trump is shocking. Reagan’s popularity fell in his 1st term to due his and the Fed’s policy to tame inflation by drastically raising interest rates. This led to the worst recession since the 1930’s. Once rectified the economy grew, and Reagan swamped his opponent in the next election. Reagan and Trump and their policies are polar opposites.

      So, what happened to the smart people in November?

      Trump is a stupid person. He has plenty of stupid people supporting him. His behavior is self destructive and many normal people will eventually tire of his adolescent antics.

      And, of course, Trump is King George and today’s protestors are the equivalent of our Founding Fathers:

      Citizens have two powerful tools available to them: boycott and strike. Both forms of civil disobedience helped bring about a fairer and more equitable society.

      It all started with a boycott against English-made goods in the Thirteen Colonies.

      It worked.


  1. Interesting read.

    “The American Climbing the Ranks of ISIS

    John Georgelas was a military brat, a drug enthusiast, a precocious underachiever born in Texas. Now he is a prominent figure within the Islamic State. Here’s the story of his long and troubling journey.

    Graeme Wood
    March 2017 Issue”


  2. Nice summary:

    “6 Fake News Stories Reporters Have Run Since Trump Won
    Journalists, media types, reporters, you have two choices: you can fix these problems, or you can watch your profession go down in flames.

    By Daniel Payne
    February 6, 2017”


    • Only the left thinks the media is unbiased. Any more, if some one disagrees with a story, they attack the source.

      That said, I think the real bias in the news lies in which facts are reported and which ones are ignored. Does the NYT “lie?” Probably not. Do they ignore stories that don’t fit their narrative? All the time. In fact, it is inevitable. Not everything can be printed.

      As news consumption gets even more segmented, people from different ideological perspectives aren’t even talking about the same news stories any more. Kellyanne’s Bowling Green thing was apparently a huge deal to the left wing press, but I only knew about it from some facebook posts. Similarly Maxine Water’s gaffe about Korea is something only right-wingers are talking about. Heck, people now think making a snarky comment about the source of an article is the same as refuting what it says. The damage to the profession has already been done.

      The left’s fantasy of everyone in the US getting their news from another Walter Cronkite who is the universally trusted arbiter of what is true and false is just that – a fantasy.


      • The left’s fantasy of everyone in the US getting their news from another Walter Cronkite who is the universally trusted arbiter of what is true and false is just that – a fantasy.

        That a lot of people lament this is absolutely fascinating.


        • The left pines for the days when they had sole possession of the megaphone..


        • Brent:

          The left pines for the days when they had sole possession of the megaphone..

          They can console themselves knowing that they still have sole possession of education.


      • The MSM is bad about fact checking things they already assume must be true. While not technically lying, it’s also not doing their ostensible job. Dan Rather’s story on Dubya and his National Guard service being a prime example. The story would have been obviously full of red flags, for anyone who wasn’t desperate to believe it already. It’s not necessarily lying to want bad information to be true, but it’s also not reportage.

        Then there’s WaPo and CNN, whose information is sometimes basically #fakenews, which they then give an imprimatur of vetting and source-checking it doesn’t actually receive, and whose use of adjectives in news stories are more opinion than fact-clarifying . . . again, not lying, but so close to intentionally deceptive that it might as well be.

        Fox does the same thing, simply caters to a different audience.

        But my general response to reports of Trump’s low approval ratings is to point out that the press’s approval ratings are much lower, and on a downward trend. There is a reason for this, and it’s not because “they are just too honest”. Should we impeach the press?


        • Drawing attention to Trump’s low approval numbers is really aimed at House and Senate R’s.


        • Eh, good luck with that. House and senate politicians always have abysmally low approval ratings. And they know he remains popular with the base, which is who they need to turn out if they want to get re-elected. His approval ratings with the Republican base, and the independents who voted for him, are still positive.


    • McWing:

      The new boogeyman.

      Interesting. Although the author’s assumptions are surely wrong when he says:

      There’s clearly a media gap here, too: Democrats know about Bannon far more than Republicans because they consume different media.

      I highly doubt Democrats actually know more about Bannon than Republicans do. More likely they are just saturated with negative references to him, and they blindly take these unsubstantiated accusations at face value. As we have seen, every time I press someone (and not just here) to justify their slanderous claims about him, I get no substantive response. Dems don’t have knowledge about Bannon that Republicans don’t have. They have fantasies about him that R’s don’t have.


      • “I highly doubt Democrats actually know more about Bannon than Republicans do.”

        They may be somewhat more aware of his role in Biosphere II. Otherwise, no.

        The majority of stuff I see on Bannon from the left is completely unsourced. Same sort of thing is happening with Milo. I feel there is an implicit and perhaps unconscious assumption that they can just make up stuff and share it in very public ways, as Trump does, and that it will work for them the way it has for Trump. Maybe, but I’m dubious.


  3. This will change some minds:

    What a beautiful cocktail of victim bragging and virtue signalling…


  4. Heh


  5. Good read about the merits of the policy itself in achieving it’s goals, rather than going on about the rights of immigrants and refugees.

    “The Coldhearted Folly of Trump’s Proposed Immigration Order

    The countries likely affected are not those whose nationals have actually perpetrated the most ghastly attacks on Western targets.

    Graeme Wood
    Jan 27, 2017”


  6. Funny this hasn’t made it into the Sessions debate:

    Liked by 1 person

  7. EW is an example of a candidate who could not poll 39% nationally against a live person, and she is McConnell’s wet dream of a D nominee. His slap at her so called violation of Senate Rule 19 has elevated her to heroine status with the D left as nothing else could have.

    The more I think about it, the more I am sure McConnell played the Ds like a drum.


  8. @jnc4p:

    After you asked the question on PL last night, I looked it up. The nearest Lee’s Chicken for me is Richmond–yet another reason to get down there one of these days!

    Liked by 1 person

  9. “Radical hatred”


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