Morning Report: FHA prepay speeds rise 11/8/17

Vital Statistics:

Last Change
S&P Futures 2584.3 -2.5
Eurostoxx Index 393.8 -0.9
Oil (WTI) 57.1 -0.2
US dollar index 87.8 -0.1
10 Year Govt Bond Yield 2.31%
Current Coupon Fannie Mae TBA 102.875
Current Coupon Ginnie Mae TBA 103.938
30 Year Fixed Rate Mortgage 3.95

Stocks are flat this morning on no real news. Bonds and MBS are down.

Mortgage applications were flat last week as the purchase index increased 1 percent and the refi index decreased 1%. The average 30 year fixed rate mortgage fell 4 basis points to 4.18%.

The House and Senate continue to work on tax reform. Here is the latest state of play. Biggest difference between the House and Senate is the state and local tax deduction, where the Senate bill excludes all state / local / property taxes, and the House bill which allows some deductions. Lawmakers are still working on a way to prevent companies from taking advantage of lower-tax jurisdictions overseas to shelter income. Accountants and lawyers are still getting their arms around what the proposals actually entail, and as expected it will be complicated. The estate tax will probably survive in some form in the Senate.

Capital One (What’s in your wallet?) is exiting the mortgage origination business. “These businesses are in a structurally disadvantaged position, given the challenging rate environment and marketplace,” Sanjiv Yajnik, president of financial services at Capital One, said in a memo to employees. “These factors do not allow us to be both competitive and profitable for the foreseeable future.”

Mortgage Credit availability decreased slightly in October, especially on the jumbo side of things, according to the MBA. This indicates that lenders are tightening standards a little. The index has been pretty much flat for the past year.

Many FHA borrowers are refinancing into conventional mortgages, which has resulted in higher prepayment speeds than expected for FHA loans. This is low-hanging fruit for loan officers: home prices appreciation has been strong enough for most MSAs that someone who did a 3.5% down FHA loan a few years ago may be eligible for a 20% conventional and no longer have to pay MI. Serious delinquencies fell for FHA loans as well, from 5% to 4.3%.

Problems in fin-tech land? Lending Club down 20% pre-open on lousy guidance.

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