Morning Report: Ginnie Mae is increasing scrutiny of non-bank lenders

Posted on January 29, 2019 by Brent Nyitray

Vital Statistics:

 

Last Change
S&P futures 2642 0
Eurostoxx index 357.3 2.93
Oil (WTI) 52.35 0.36
10 year government bond yield 2.73%
30 year fixed rate mortgage 4.62%

 

Stocks are flat as we begin the FOMC meeting. Bonds and MBS are up small.

 

Despite the end of the shutdown, we will have to wait for economic data. Two big reports this week – GDP and personal incomes – have been delayed.

 

Economic activity picked up in December, according to the Chicago Fed National Activity Index. Production-related indicators and employment drove the increase. Note that the CFNAI is a meta-index of a number of announced economic indices, and the government shutdown has decreased the amount of data going into the index. We’ll see the same effect next month as well, so the index won’t be as accurate as it usually is. Regardless, the CFNAI is an amalgamation of previously released data, so it doesn’t move markets.

 

Ex-Fed Head Narayana Kochlerakota thinks the Fed should consider easing at the next meeting. His argument is that the Fed has been falling short in maintaining inflation at its 2% target and that notwithstanding the latest unemployment data we are still not at full employment. He is looking at the percentage of prime age people (age 25-54) who are currently employed. We are just south of 80%, and were closer to 82% during the late 90s. Given that the number of prime age people in the US is roughly 100MM, then we have about 2 million more jobs to create in order to get to back to where we want to be. Interestingly, he not only advocates maintaining the current balance sheet, he thinks it should increase about 4% a year to grow in lockstep with the economy.

 

employment population ratio

 

Guess what has been one of the best performing assets so far this year (almost tripled in under a month). If you guessed the GSEs, you would be correct. The market is betting that shareholders won’t get wiped out when / if housing reform happens this year. Check out this chart of Fannie Mae:

 

fnma chart

 

Ginnie Mae is stepping up oversight of its partners, particularly non-bank lenders, telling some that they must improve some financial metrics before they will be granted more commitment authority, which is the ability to securitize FHA and VA loans. The government is concerned that non-bank lenders have replaced a lot of the traditional banks in servicing government loans. Indeed, they have – nonbanks now service 61% of government loans, up from 34% at the end of 2014. FHA was largely a backwater of the mortgage market pre-crisis, however post crisis, it has picked up the load that subprime left. Servicers for government loans have a lot more liquidity demands than servicers for GSE loans – and in a downturn the advances liability could take out undercapitalized mortgage bankers. VA lenders can face what is called no-bid risk, which can be a disaster for many servicers without a line of credit to cover advances and loan buyouts.

Filed under: Economy, Morning Report |

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21 Responses

  2. jnc4p, on January 29, 2019 at 4:01 pm said:

    Interesting read on the changes in the Financial Services Committee:

    Podcast Special: Alexandria Ocasio-Cortez on Her First Weeks in Washington

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  3. Let the mutherfuker burn!, on January 29, 2019 at 4:56 pm said:

    It’s a fair question.

    I have been curious about their relationship. Up till now I just assumed George Conway needed to be vocal NeverTrumper to remain viable in his job.

    Liked by 1 person

    Reply
    • Kevin S. Willis, on January 30, 2019 at 2:36 pm said:

      Every time I follow a link to Twitter I have to bail ASAP. Social media in general is a cesspool but Twitter is the cesspooliest.

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      • Brent Nyitray, on January 30, 2019 at 2:38 pm said:

        I quit Twitter.. Just too much negativity.

        I am still on FB, but i have muted everyone who talks politics.

        Liked by 1 person

        Reply
        • Kevin S. Willis, on January 30, 2019 at 3:08 pm said:

          Yeah. It’s just awful. I’m “on Facebook” but I never actually check it. My social media is mostly this place and a slack user group that some people who got tired of another comment board (based on entertainment) . . . where there’s very little politics, and if nonsense does come up, I tend to tune out.

          And I say politics but the stuff that goes on on Twitter and FB is almost never actually politics. It’s tribal bloviating that bears almost no relationship to empiric data.

          If I really feel the need to bloviate myself, I’ll just come here. It’s cleaner and less crowded.

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        • Brent Nyitray, on January 30, 2019 at 3:36 pm said:

          I triggered a lot of liberal women on Twitter concerning a Bloomberg article on this very subject.

          I said that Wall Streeters understand the concepts of risk and reward better than anyone, and this is a situation with zero upside and hellacious downside.

          I thought that was a generally innocuous comment, but I triggered the feminist army…

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    • Brent Nyitray, on January 30, 2019 at 2:36 pm said:

      The sense of entitlement is palpable.

      Mentor me! You OWE me!

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    • Kevin S. Willis, on January 30, 2019 at 2:46 pm said:

      companies and the men that lead them have been forced—largely for the first time—to be held accountable for the way they behave

      Really? For the first time? In 2018? Seriously?

      Maybe in Hollywood and east coast entertainment industries. Sexual harassment suits have been a thing since like 1977 in the rest of the country.

      Also, leaves out an important addendum–folks are getting held accountable for the way they behave, but also just the way one or a handful of people claim they have behaved. Which makes self-segregation a very smart corporate and professional strategy for men. Who may want to make a career out of what they are doing and not take unnecessary risks.

      disclosed that rather than attempt substantive institutional change, their method of reducing the risk of sexual misconduct was “simply minimizing contact between female employees and senior male executives”

      Why is that strategy not considered substantive institutional change? And what strategy is better. It does two things: protects guys against false, mistaken, or exploitive claims of harassment, and keeps harassers from harassing. Win/win.

      has had to explicitly tell men in management that it is illegal to deliberately avoid their female subordinates

      Is this true and if so, how do you provide it?

      Broadcasting a reluctance to be alone with female co-workers indicates that you either find women to be fundamentally untrustworthy or unreliable narrators of their own lives.

      Some are. How do you identify them ahead of time? They aren’t going to put that one their resume.

      Sheesh.

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      • Let the mutherfuker burn!, on January 30, 2019 at 2:57 pm said:

        Some are. How do you identify them ahead of time? They aren’t going to put that one their resume.

        Ditto for harassing dudes. Do you think a company wants to hire Harvey Weinstein level pervs?

        Jesus, women are stupid.

        Liked by 1 person

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        • Kevin S. Willis, on January 30, 2019 at 3:01 pm said:

          I don’t think you should judge women by journalists. Or all journalists by Slate writers, but even then, I think if you said “journalists are stupid” you’d be way closer to the mark.

          There are plenty of women that have more sense than the writer of that piece. I think the percentage of journalists that have more sense (despite their industry being full of offenders, more so that the offices of Proctor and Gamble, I would wager) is probably much, much smaller.

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    • Let the mutherfuker burn!, on January 30, 2019 at 2:49 pm said:

      It’s like a dude can’t even talk about tight pussy without offending some dumb broad. If they want to talk about big dicks or whatever, it’s fine with me.

      Liked by 1 person

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    • Kevin S. Willis, on January 30, 2019 at 2:58 pm said:

      Also, why are all these ladies so desperate for one-on-one mentoring with dudes? The thing being avoided is being alone. I don’t think men generally, and certainly any practical ones, are avoiding conferences with women or group meetings. What they have to (and should) avoid are get togethers without any other witnesses.

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    • Kevin S. Willis, on January 30, 2019 at 3:12 pm said:

      You know, I my wife makes up stories and exaggerates. All the time. She sometimes wants to start fights with people who are trying to help us for reasons that are completely in her head. She frequently believes her revisionist history, and it’s relatively harmless. I guess.

      But human beings are capable of doing all sorts of things, and it would be very easy for misunderstandings or misinterpretations to become harassment and then a firing offense or a lawsuit. Without other witnesses or documentary evidence, whose to say, and who will be believed?

      And, Christ, for a lot of these guys it’s too late. They’ve been interacting with women one-on-one for years, and if it’s a big enough thing or if it’s a big enough guy, they can get nailed for something someone remembers having happened 30 years ago. Or more. So . . .

      Gender segregation. It’s not just a good idea, it’s the BEST idea!

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    • novahockey, on January 30, 2019 at 3:19 pm said:

      “Never mind that an inability to notice that you’re making a colleague uncomfortable requires a stunning lack of both empathy and just plain observational skills. ”

      It’s like she’s totally unware of how men function.

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  5. Kevin S. Willis, on January 30, 2019 at 2:54 pm said:

    That men would rather cordon themselves off from the women in their workplace than do to the work of examining why they cannot distinguish between predatory behavior and mentoring

    One is guaranteed to work–segregation–and one is not. One is safer than the other, in addition to being easier. One offers no rewards but significant potential downside for the guys, while the other offers little potential downside for the guys and accomplishes the ultimate goal of reducing sexual harassment.

    or as harpies who lie about harassment for revenge.

    Because anybody whose ever had a female relative or been in a romantic relationship with a woman knows that never happens.

    I’m with the dudes. They are making the best decision.

    Also, I notice that’s there’s very little reference to the bad actors who actually kicked off the present #MeToo movement. Or their clear examples of super-creepy harassment. What, they don’t even want to mention Matt Lauer had a button under his desk to lock women in the room with him remotely? No, all their scorn is saved for the regular hoipoloi who aren’t doing that, but just want to avoid trouble. Those are the real bad actors. Not the Matt Lauers with their creepy rape room buttons.

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Be kind, show respect, and all will be right with the world.