Morning Report: ADP and GDP numbers come in strong 8/30/17

Vital Statistics:

Last Change
S&P Futures 2448.5 1.5
Eurostoxx Index 368.4 -3.8
Oil (WTI) 46.3 -0.1
US dollar index 85.5 -0.1
10 Year Govt Bond Yield 2.15%
Current Coupon Fannie Mae TBA 103.33
Current Coupon Ginnie Mae TBA 104.21
30 Year Fixed Rate Mortgage 3.84

Stocks are higher this morning on some strong economic data. Bonds and MBS are down.

The economy added 237,000 jobs in August, according to the ADP jobs report. The Street is looking for 180,000 jobs in this Friday’s jobs report. In a reversal of recent trends, large businesses are starting to add workers.

Second quarter GDP was revised upward to 3% from 2.6% as consumer spending increased 3.3%. The GDP price index was unchanged at 1%, which gives the Fed the leeway to maintain an easy monetary policy.

Mortgage Applications decreased 2.3% last week as purchases fell 3% and refis fell 2%. The 30 year conforming rate fell by a basis point to 4.11%.

Corporate profits fell in Q2 from 11.5% to 8.1%.

The FHFA is changing some of the limits for reverse mortgages, after it found that the program amounts to a 7.7 billion a year loss for the government. The borrowing caps will fall, such that a 62 year old would be able to only access 41% of the equity in their property, down from 52%. An 82 year old would only be able to access 51%, down from 60%. Reverse Mortgages are a way for seniors to tap an illiquid asset (their home equity) and turn it into a liquid asset (cash) while still living in their home. They are a great deal for the senior, however they are a money-loser for the taxpayer.

CoreLogic takes a look at which housing markets are most at risk for a downturn, using its Market Health indicator. This looks at home price appreciation relative to income growth and rental inflation. 8 of the top 10 riskiest markets are in Florida. Note that the highest risk areas are the ones that fell the furthest when the bubble burst. The low risk ones are the areas that didn’t really experience the huge peaks and valleys.

Wells Fargo is being sued over lock extension fees. The suit claims that they charged extension fees when the bank was the reason the lock was blown.

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