Morning Report: Credit risk is at post-crisis lows 3/21/17

Posted on March 21, 2017 by Brent Nyitray

Vital Statistics:

	Last	Change
S&P Futures	2373.8	3.5
Eurostoxx Index	378.3	0.6
Oil (WTI)	48.4	0.2
US dollar index	90.2
10 Year Govt Bond Yield	2.49%
Current Coupon Fannie Mae TBA	101.703
Current Coupon Ginnie Mae TBA	102.98
30 Year Fixed Rate Mortgage	4.22

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

We have no economic data this morning, but will have a lot of Fed-speak during the day.

CoreLogic took a look at credit risk of mortgages going back to 2001 and came up with an index to describe the credit risk of a typical mortgage, using things like credit scores, LTVs, and DTI ratios. Credit risk is now re-approaching the lows of 2011-2012. This is somewhat interesting as you would expect lenders to loosen standards as rates rise – basically using a larger credit box to offset some of the volume lost from refis. So far (this data is through December) we don’t have evidence of lenders doing that. Even the Ellie Mae data had a de minimus change in FICOs.

Speaking of increasing the credit box, we are seeing signs of life from the private label securitization market, which has largely been dormant since 2006. Angel Oak did a $148MM deal securitized by non-QM mortgages that got a AAA rating from Fitch. The new deals are much different than the past deals in that they documented, have large downpayments, and are much more overcollateralized than they were in the past. Part of the problem in bringing them back has simply been interest rates. Banks have been unable to structure anything that provides a high enough rate of return to interest the traditional MBS investor. As rates rise, that problem should go away. We are a long way from the no-no loans of 2005 – the typical loan is either a high quality jumbos or non-QM loans for the self-employed.

Filed under: Economy, Morning Report |

17 Responses

Brent Nyitray, on March 21, 2017 at 11:44 am said:

Only the left is permitted to use the Nazi reference.

http://www.mediaite.com/online/the-anne-frank-center-wants-an-apology-from-tim-allen-for-comparing-hollywood-to-1930s-germany/

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novahockey, on March 21, 2017 at 11:59 am said:

See hotair for a story on Feinstein and gorsuch. Poor staff works infuriates me.

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- ScottC, on March 21, 2017 at 12:09 pm said:
  
  This one:
  
  http://hotair.com/archives/2017/03/21/gorsuch-to-feinstein-here-are-a-a-lot-of-little-guy-rulings-you-seem-to-have-overlooked/
  
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- jnc4p, on March 21, 2017 at 12:10 pm said:
  
  Don’t assume it’s poor staff work vs ideological blindness.
  
  But I think Gorsuch prepped well too. No better retort than:
  
  “Oh, I’ll name a bunch them right now.”
  
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  - ScottC, on March 21, 2017 at 12:59 pm said:
    
    jnc:
    
    Don’t assume it’s poor staff work vs ideological blindness.
    
    That is what I was thinking. The whole idea that whether or not a participant in a suit is a “little guy” should weigh as a factor in court decisions is an ideological corruption of the justice system.
    
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    - jnc4p, on March 21, 2017 at 2:13 pm said:
      
      I was thinking that even if Feinstein’s staff had done the work and briefed her, she may have still felt compelled to stick to the talking points to help present a unified attack on Gorsuch.
      
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- novahockey, on March 21, 2017 at 3:17 pm said:
  
  Maybe. I think you find another line off attack.
  
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Let the mutherfuker burn!, on March 21, 2017 at 1:35 pm said:

These comments are fantastic!

http://www.dailykos.com/story/2017/03/21/1645688/-Day-2-of-the-Gorsuch-confirmation-hearings

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- Brent Nyitray, on March 21, 2017 at 2:09 pm said:
  
  “Only question necessary:
  
  Why are you here seat-thief ?”
  
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jnc4p, on March 21, 2017 at 3:46 pm said:

Worth noting

“Britain and U.S. ban most electronic devices in cabins on flights from several Muslim-majority countries”

https://www.washingtonpost.com/local/trafficandcommuting/us-unveils-new-restrictions-on-travelers-from-eight-muslim-majority-countries/2017/03/21/d4efd080-0dcb-11e7-9d5a-a83e627dc120_story.html

https://thepointsguy.com/2017/03/faq-electronics-ban/

https://thepointsguy.com/2017/03/uk-cabin-electronics-ban/

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- Let the mutherfuker burn!, on March 21, 2017 at 4:12 pm said:
  
  Waiting for the Democratic Freakout.
  
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Let the mutherfuker burn!, on March 21, 2017 at 9:18 pm said:

Stupefying.

Susan Rice: False statements from the W.H. pose "real and potentially profound dangers to U.S. national security."https://t.co/hTJKv65ZF7

— Kyle Griffin (@kylegriffin1) March 22, 2017

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- ScottC, on March 22, 2017 at 5:18 am said:
  
  Rice’s shamelessness is…dare I say it…almost Trumpian.
  
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  - jnc4p, on March 22, 2017 at 9:10 am said:
    
    That’s good.
    
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ScottC, on March 22, 2017 at 7:49 am said:

Heh.

http://thefederalist.com/2017/03/22/happens-originalist-textualist-evolutionist-walk-courtroom/

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Let the mutherfuker burn!, on March 22, 2017 at 8:45 am said:

I loved The Gong Show as a kid.

http://variety.com/2017/tv/news/chuck-barris-dead-dies-gong-show-host-1202013790/

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Let the mutherfuker burn!, on March 22, 2017 at 10:30 am said:

Could be bad. Shooting st UK Parliment.

http://news.sky.com/story/gunshots-outside-parliament-8211-several-injured-10810680

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