OK. So I've been away for a while (rehab, continuing education, re-programminng for new guidelines, etc.), but this is a good one I saw today:
If you ever need a creative "Out of Office" response for your e-mails:
- I am currently out of the office at a job interview and will reply to you if I fail to get the position. Please be prepared for my mood.
- You are receiving this automatic notification because I am out of the office. If I was in, chances are you wouldn't have received anything at all.
- Sorry to have missed you, but I'm at the doctor's having my brain and heart removed so I can be promoted to our management team.
- I will be unable to delete all the emails you send me until I return from vacation. Please be patient, and your mail will be deleted in the order it was received.
- I will be out of the office for the next two weeks for medical reasons. When I return, please refer to me as "Kate" instead of Dave.
Merry Christmas and Happy New Year to all.
Monday, December 14, 2009
Sunday, June 7, 2009
What Now?
NEW YORK (AP) - The Federal Reserve announced a $1.2 trillion plan three months ago designed to push down mortgage rates and breathe life into the housing market.
But this and other big government spending programs are turning out to have the opposite effect. Rates for mortgages and U.S. Treasury debt are now marching higher as nervous bond investors fret about a resurgence of inflation.
That's the Catch-22 threatening to make an awful housing market potentially worse and keep the economy stuck in a funk. Kick-starting the economy requires higher spending, but rising rates mean fewer Americans will be able to refinance their home loans. And some potential buyers will be shut out of the market by higher monthly payments they won't be able to afford.
To understand how this is all connected, you have to think like a bond trader. Inflation is their enemy because it means the purchasing power of the dollars they receive when bonds eventually are paid off will be diminished. The only question is by how much.
Yields on 10-year Treasury notes, a benchmark for home mortgages and other consumers loans, jumped from 2.5 percent in March around the time of the Fed announcement to as high as 3.7 percent in recent days as signs that efforts to stabilize the financial system and economy were starting to pay off. And 30-year mortgage rates jumped more than a quarter-point this week to 5.29 percent, the highest level since December, Freddie Mac reported.
"If the meltdown continues in the bond market, then mortgage yields will soon be at levels that choke off refinancing activity," said economist Ed Yardeni, who runs his own investment firm. "Even worse, they could abort any necessary recovery in home sales and prices."
Yardeni coined the term "bond vigilantes" in 1983 to describe how traders took matters into their own hands when they felt the Fed wasn't doing enough to fight inflation, which was running at an annual rate of more than 3 percent at that time.
So what has set off the vigilantes this spring, at a time when the consumer price index is down at an annual rate of 0.7 percent?
One explanation is that bond investors anticipate a greater supply of government debt being sold to fund federal spending. Investors are also increasingly fearful that the trillions of dollars the government will need to borrow in the coming years to finance the various stimulus programs will lead to a new bout of inflation.
The White House estimates that the government will rack up an unprecedented $1.8 trillion budget deficit this year - more than four times last year's all-time high.
"The bond market is calling the Federal Reserve out," said Mike Larson, a real estate analyst at Weiss Research Inc. in Jupiter, Fla. "Investors are saying that the Fed can't just print money out of thin air to finance a massive deficit."
Fed Chairman Ben Bernanke acknowledged Wednesday in congressional testimony that large budget deficits could threaten financial stability by eventually eroding investor confidence and endangering the economy's prospects for long-term health.
"Even as we take steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance," Bernanke told the House Budget Committee.
That kind of talk is meant to calm bond investors' nerves. It also shows the quandary faced by Bernanke and other federal officials. They need to hold down interest rates through massive government spending at the same time they have to deal with worries over how that spending could damage the economy over the long term.
After Fed policymakers this spring said they would buy billions of dollars of government debt and more than $1 trillion of mortgage securities, 30-year fixed mortgage rates fell to 4.78 percent in April, the lowest since Freddie Mac started surveying rates in 1971.
Sales of new and existing homes began to trend higher. Mortgage refinancings also jumped, allowing borrowers to lock in lower rates. Fee income from this activity helped lift profits at many battered banks and gave consumers more disposable income to spend, which helped lift their confidence about the economy's prospects. All that was good for the nation's businesses.
But now, surging mortgage rates are threatening to undermine all that. Seventy percent of refinancing activity could be knocked out as rates close in on 5.5 percent, according to Mark Hanson, a managing director at the independent research firm Field Check Group of Menlo Park, Calif.
That's because homeowners wouldn't get much of a benefit if a refinancing only reduces monthly payments a tiny bit while they are stuck paying closing costs that typically run about 2 percent of the loan amount. Also, many homeowners who wanted to refinance didn't lock in the super-low rates in April when the refi boom took off. "Half the deals in the pipeline are dead," Hanson said. "People were applying to refinance to improve their situation, but now they are seeing it won't be much improved."
All this means that even though mortgage rates are still low by historical standards, many of the trends that seem to be pointing to economic recovery in recent months could be undone fast.
But this and other big government spending programs are turning out to have the opposite effect. Rates for mortgages and U.S. Treasury debt are now marching higher as nervous bond investors fret about a resurgence of inflation.
That's the Catch-22 threatening to make an awful housing market potentially worse and keep the economy stuck in a funk. Kick-starting the economy requires higher spending, but rising rates mean fewer Americans will be able to refinance their home loans. And some potential buyers will be shut out of the market by higher monthly payments they won't be able to afford.
To understand how this is all connected, you have to think like a bond trader. Inflation is their enemy because it means the purchasing power of the dollars they receive when bonds eventually are paid off will be diminished. The only question is by how much.
Yields on 10-year Treasury notes, a benchmark for home mortgages and other consumers loans, jumped from 2.5 percent in March around the time of the Fed announcement to as high as 3.7 percent in recent days as signs that efforts to stabilize the financial system and economy were starting to pay off. And 30-year mortgage rates jumped more than a quarter-point this week to 5.29 percent, the highest level since December, Freddie Mac reported.
"If the meltdown continues in the bond market, then mortgage yields will soon be at levels that choke off refinancing activity," said economist Ed Yardeni, who runs his own investment firm. "Even worse, they could abort any necessary recovery in home sales and prices."
Yardeni coined the term "bond vigilantes" in 1983 to describe how traders took matters into their own hands when they felt the Fed wasn't doing enough to fight inflation, which was running at an annual rate of more than 3 percent at that time.
So what has set off the vigilantes this spring, at a time when the consumer price index is down at an annual rate of 0.7 percent?
One explanation is that bond investors anticipate a greater supply of government debt being sold to fund federal spending. Investors are also increasingly fearful that the trillions of dollars the government will need to borrow in the coming years to finance the various stimulus programs will lead to a new bout of inflation.
The White House estimates that the government will rack up an unprecedented $1.8 trillion budget deficit this year - more than four times last year's all-time high.
"The bond market is calling the Federal Reserve out," said Mike Larson, a real estate analyst at Weiss Research Inc. in Jupiter, Fla. "Investors are saying that the Fed can't just print money out of thin air to finance a massive deficit."
Fed Chairman Ben Bernanke acknowledged Wednesday in congressional testimony that large budget deficits could threaten financial stability by eventually eroding investor confidence and endangering the economy's prospects for long-term health.
"Even as we take steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance," Bernanke told the House Budget Committee.
That kind of talk is meant to calm bond investors' nerves. It also shows the quandary faced by Bernanke and other federal officials. They need to hold down interest rates through massive government spending at the same time they have to deal with worries over how that spending could damage the economy over the long term.
After Fed policymakers this spring said they would buy billions of dollars of government debt and more than $1 trillion of mortgage securities, 30-year fixed mortgage rates fell to 4.78 percent in April, the lowest since Freddie Mac started surveying rates in 1971.
Sales of new and existing homes began to trend higher. Mortgage refinancings also jumped, allowing borrowers to lock in lower rates. Fee income from this activity helped lift profits at many battered banks and gave consumers more disposable income to spend, which helped lift their confidence about the economy's prospects. All that was good for the nation's businesses.
But now, surging mortgage rates are threatening to undermine all that. Seventy percent of refinancing activity could be knocked out as rates close in on 5.5 percent, according to Mark Hanson, a managing director at the independent research firm Field Check Group of Menlo Park, Calif.
That's because homeowners wouldn't get much of a benefit if a refinancing only reduces monthly payments a tiny bit while they are stuck paying closing costs that typically run about 2 percent of the loan amount. Also, many homeowners who wanted to refinance didn't lock in the super-low rates in April when the refi boom took off. "Half the deals in the pipeline are dead," Hanson said. "People were applying to refinance to improve their situation, but now they are seeing it won't be much improved."
All this means that even though mortgage rates are still low by historical standards, many of the trends that seem to be pointing to economic recovery in recent months could be undone fast.
Sunday, May 10, 2009
Bank Stress Tests
Personally, when I'm stressed, I take a Valium. But since I have been rather stressed lately and remiss on my blog posts, I thought I could share this clip from last night's SNL...
Monday, February 9, 2009
Vindication! Fannie Gets a Clue.
You may have read my earlier posting about the failed logic of Fannie Mae's restriction on investor-ownership of more than four financed properties. (Read Fuel, But No Fire November 28, 2008) In a statement released today, they agreed with me, and have relaxed those restrictions. Here is an excerpt:
Fannie Mae is committed to providing financing opportunities for high-credit quality, bona fide investors. Experienced investors play a key role in the housing recovery and Fannie Mae’s continued support for investor borrowers is consistent with its mission to provide stability, liquidity, and affordability to the nation’s housing system.
Fannie Mae is updating the policy that pertains to multiple mortgages to the same borrower. ... Fannie Mae is modifying this policy to allow investor and second home borrowers to own five to ten financed properties if they meet certain eligibility and underwriting and delivery requirements as outlined in this Announcement.For the complete announcement click here.
Tuesday, January 27, 2009
Real Estate Trends
Well, this refi "boom" is not like the last one. Why is it that only 30% of applications are leading to actual refinances? Two reasons: lack of equity and insufficient credit. I'll do a separate entry on this later in the week. But for now.... It's a good thing it is Tuesday, because it is time for my weekly industry post.
Click here to read the Real Estate Report - January 27, 2009.
Click here to read the Real Estate Report - January 27, 2009.
Saturday, January 24, 2009
Where Have I Been? Read This...
Needless to say to many, but the past few weeks have been crazy. Some would call it a refi boom, and I guess that would be a generous depiction considering how hard it is to actually get a mortgage these days. Here is a great article from the Times that sums it up:
Costs and Tighter Rules Thwart Refinancings
By TARA SIEGEL BERNARD
Published: January 24, 2009
Interest rates are falling, but many potential borrowers may not qualify for the best rates.
Costs and Tighter Rules Thwart Refinancings
By TARA SIEGEL BERNARD
Published: January 24, 2009
Interest rates are falling, but many potential borrowers may not qualify for the best rates.
Monday, December 8, 2008
Mortgage Fraud Raised to an Art
Here is a great story I came across this morning. Since i am busy with this week's refi boom, I've just reprinted it here:
Orson Benn, once a vice president at the nation’s largest subprime lender, spent three years during the height of the housing boom tutoring Florida mortgage brokers in the art of fraud.
From his office in New York, he taught them how to doctor credit reports, coached them to inflate income on loan applications, and helped them invent phantom jobs for borrowers.
While prosecutors looked at roughly $100 million in loans written by Benn and a cadre of co-workers, that represents just a portion of the loans they approved during his aggressive expansion into Florida.
The Miami Herald found that Benn’s network approved more than $550 million in home loans from Tampa to West Palm Beach to Miami, according to an analysis of court records. In Miami-Dade County alone, Benn’s office approved more than $349 million in loans on 1,913 homes — more than one in three have since fallen into foreclosure, the analysis shows.
Valdes brokered at least 100 of those loans worth $22 million — nearly all based on false and misleading financial information, the newspaper found
How did they doctor loan apps? Simple mortgage broker fraud: “non-existent employers, grossly inflated salaries and sudden, drastic increases in the borrower’s net worth.”
There apparently was an art to falsifying the documentation, and Benn taught his brokers precisely how, falsifying income and employment data:
He taught one of those brokers, Scott Almeida, a convicted cocaine trafficker, to prepare phony income statements and doctor credit reports. A few months later, Almeida introduced Benn to Tampa brokers David Tuggle and Eric Steinhauser. After Benn taught them to prepare phony documents, they began to write millions of dollars in loans.
Orson Benn, once a vice president at the nation’s largest subprime lender, spent three years during the height of the housing boom tutoring Florida mortgage brokers in the art of fraud.
From his office in New York, he taught them how to doctor credit reports, coached them to inflate income on loan applications, and helped them invent phantom jobs for borrowers.
While prosecutors looked at roughly $100 million in loans written by Benn and a cadre of co-workers, that represents just a portion of the loans they approved during his aggressive expansion into Florida.
The Miami Herald found that Benn’s network approved more than $550 million in home loans from Tampa to West Palm Beach to Miami, according to an analysis of court records. In Miami-Dade County alone, Benn’s office approved more than $349 million in loans on 1,913 homes — more than one in three have since fallen into foreclosure, the analysis shows.
Valdes brokered at least 100 of those loans worth $22 million — nearly all based on false and misleading financial information, the newspaper found
How did they doctor loan apps? Simple mortgage broker fraud: “non-existent employers, grossly inflated salaries and sudden, drastic increases in the borrower’s net worth.”
There apparently was an art to falsifying the documentation, and Benn taught his brokers precisely how, falsifying income and employment data:
He taught one of those brokers, Scott Almeida, a convicted cocaine trafficker, to prepare phony income statements and doctor credit reports. A few months later, Almeida introduced Benn to Tampa brokers David Tuggle and Eric Steinhauser. After Benn taught them to prepare phony documents, they began to write millions of dollars in loans.
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