Mortgage Market Headline News
by Tom on October 5, 2007
in Uncategorized
From the New York Times
From: CNNMoney.com Breaking News [mailto:BreakingNews@mail.cnn.com]
Sent: Monday, October 01, 2007 7:28 AM
To: Vanderwell, Thomas
Subject: Citigroup warns that third-quarter earnings will fall 60% on mortgage and loan losses.
– Citigroup warns that third-quarter earnings will fall 60% on mortgage
and loan losses.
From: CNNMoney.com Breaking News [mailto:BreakingNews@mail.cnn.com]
Sent: Monday, October 01, 2007 10:02 AM
To: Vanderwell, Thomas
Subject: ISM manufacturing index a little weaker than expected in September, Dow Jones reports.
– ISM manufacturing index a little weaker than expected in September,
Dow Jones reports.
Log on to http://money.cnn.com/bn for the latest news.
WSJ: UBS Is Expected to Report Loss
From the WSJ: UBS Is Expected to Report Large Loss From Fixed-Income Unit
…UBS … is projecting a third-quarter loss of … ($510 million to $600 million) based on a writedown of 3 billion to 4 billion Swiss francs for fixed-income assets ……Its losses resulted from applying sharply lower market values to asset-backed bonds … Many banks had serious troubles with securities-tied to mortgages when liquidity dried up in the last quarter.
From www.housingwire.com
MBA: 45 Percent of Treasury Securities Held by Foreign Investors
Posted: 01 Oct 2007 02:26 PM CDT
The large and continuing purchases of U.S. securities by foreign investors, primarily Asian investors, have had a powerful and beneficial impact on the U.S. housing market, according to a study released today by the Mortgage Bankers Association. The study found that international demand for US debt had a material effect in lowering overall interest rates and that the Chinese demand for mortgage-related debt lowered US mortgage rates by approximately half of a percentage point.
The study found that almost 45 percent of all U.S. Treasury securities and more than 20 percent of all U.S. Agency securities (bonds and MBS) are currently held by foreign investors.
“It might seem farfetched as a story, let alone as sound economics, but the truth appears to be that U.S. mortgage borrowers have been a primary beneficiary of China’s decision to move a large part of its population from rural agriculture to urban manufacturing through export-driven growth, with the U.S. as a major market. The connection is that the need to maintain a somewhat undervalued Chinese yuan has caused China to make extensive investments in U.S. Treasury and Agency securities, with the likely result that U.S. mortgage rates have been at least 50 basis points lower; indeed a case could be made that U.S. mortgage rates are a full percentage point lower as a result,” said Bardhan and Jaffee.
The study’s authors also note that an undervalued yuan has been one of the policies adopted by the Chinese government to maintain a high level and growth of exports. This policy, they argue, necessarily creates a large trade surplus with the U.S. — which in turn necessarily creates the need to invest the resulting dollar inflows in U.S. dollar or other assets, in order to maintain an overvalued dollar
From www.housingwire.com
WaMu Introduces Tough New Rules for Brokers; Will Require Disclosure of YSP
Posted: 01 Oct 2007 12:44 PM CDT
Washington Mututal today noted that it’s getting tough on brokers in the wholesale channel, unveiling new rules and requirements designed to “help ensure that borrowers fully understand the terms of the loan their brokers are requesting in addition to the total compensation the borrower will pay to the broker for their service.”
WaMu said it will now require brokers to provide evidence that a broker has disclosed key terms of the loan such as loan amount, loan term, whether the interest rate and mortgage payments may change, and whether the borrower’s pricing package carries a prepayment fee.
WaMu also will require brokers to disclose the amount of all compensation the borrower will pay the broker for their services, including broker points, or administrative or processing fees, and whether the broker has requested a yield spread premium — and the bank will attempt to contact borrowers prior to closing to review loan terms with each individual borrower.
Read that again: the second part is the real news here. Industry-changing news, in fact — I’ve heard some rumors recently suggest that banks committed to remaining in the wholesale lending space will adopt similar rules for brokers shortly. Some are allegedly considering going even further, requiring that brokers disclose the amount of YSP in a deal (not just that YSP exists).
From www.blownmortgage.com
Countrywide Continues to Try to Calm Nervous Brokers
Published at October 1, 2007 in Mortgage Musings.
This is an open letter from Countrywide to its brokers regarding the recent market situation. This is the third such communication in a series that started here, and continued here. What are you thoughts? Honest, genuine insight in to Countrywide or marketing drivel to placate an important (but problematic) revenue source?
From NBNNews.com
Public Not That Worried About Mortgage Crisis Affecting Own Finances
In a Gallup Panel survey conducted Aug. 23-26, about seven in 10 Americans say they are following the news about the home mortgage-lending industry closely, including 28% who are following it very closely. In the same poll, 45% of Americans say they are following the news about problems with Chinese products very closely. Americans appear to be far more apprehensive about the impact of the subprime mortgage crisis on the national economy than on their own financial situations. Seventy percent of Americans say they are worried that the problems in the home mortgage-lending industry will have a negative impact on the U.S. economy, with 21% of respondents saying they are worried and 49% who are somewhat worried. When considering their own financial situations, about one-third (35%) say they worry about the impact the subprime lending crisis will have on their day-to-day finances — half as many as worry about the effect on the national economy. That is the same level of concern expressed about the impact of the subprime crisis on their ability to borrow money and that renters express about their rent. Americans are slightly more concerned that the crisis could have a negative impact on their investments (42%), with stock investors more likely to express concern (51%). Forty percent of home owners are worried about the impact on their investments (42%), with stock investors more likely to express concern (51%). Forty percent of home owners are worried about the impact on the value of their homes. (www.knowledgeplex.org)
From the NAR: Mortgage Problems Continue to Hamper Pending Home Sales
The Pending Home Sales Index*, a forward-looking indicator, fell 6.5 percent to a reading of 85.5 from an upwardly revised 91.4 in July, based on contracts signed in August. It was 21.5 percent below the August 2006 index of 108.9.
This follows the 12% decline in the index for July.
From MarketWatch: Ford September U.S. sales fall 20.5%
Ford Motor Co. on Tuesday posted a 20.5% drop in September U.S. sales to 189,863 cars and trucks. … The flagship Ford F-Series truck, long the nation’s best-selling vehicle, saw its sales drop 20.8% amid stiffer competition in the segment and a steep downturn in the U.S. housing market.
From Reuters: Congress calls for “mortgage czar”
Lawmakers called on Wednesday for a ‘mortgage czar’ to help cope with an expected wave of foreclosures from the U.S. housing slump but Alan Greenspan said the credit crunch was past the worst. “We are beginning to see the frenzy calm down,” the former chairman of the Federal Reserve told a conference in Lisbon. “Unless we get secondary effects the worst is over.”
Whoa! Hold it right there. Whenever Greenspan says the ‘worst is over’, watch out! Here is a quote from October 9, 2006 (almost exactly one year ago) via Bloomberg: Greenspan Says `Worst’ May Be Past in U.S. Housing
Former Federal Reserve Chairman Alan Greenspan said the “worst may well be over” for the U.S. housing industry that’s suffering its worst downturn in more than a decade.
Subprime: Bailout backlash
Not everyone favors helping troubled homeowners, lenders and investors stung by the subprime crisis.
By Jeanne Sahadi, CNNMoney.com senior writer
October 3 2007: 4:56 PM EDT
NEW YORK (CNNMoney.com) — As the list of proposed remedies to the subprime crisis has grown longer, the chorus against helping troubled borrowers has gotten louder.
On Wednesday the Democrats called on the White House to increase funding and implement proposals for foreclosure prevention.
But judging from the hundreds of reader responses CNNMoney.com has received in recent weeks, “foreclosure prevention” sounds a lot like “bailout” to many Americans, and they don’t like it one bit.
“Let the lumps fall where they may. No bailouts! The greedy banks, local gov’ts, realtors and developers caused it and they deserve this beating.” – posted by John, Richmond, Va.
Countrywide consolidates in Grand Rapids
Updated:
GRAND RAPIDS — The nation’s largest lender is cutting jobs in West Michigan.
Countrywide announced Wednesday it is consolidating its Wholesale Lending Division in Grand Rapids into nearby offices, forcing about 30 people out of work.
Employees tell 24 Hour News 8 they were blindsided when corporate told them their branch would close. They got word of cuts throughout the company a few weeks ago, effects from the mortgage meltdown, but were told their jobs were secure.
They packed up their belongings and moved out of the facility on 28th Street in Cascade Township.
“I got my last check today. I just got married and now I am unemployed, so it’s kind of a big hit,” one employee told us.
We called Countrywide officials to get their take on the situation and got their media line.
“Please note that 10,000 to 12,000 is an expected range of reduction. Based on what’s known today is dependent on many factors that can change. Countrywide’s wholesale lending division is realigning its distributed loan fulfillment operations and will consolidate the Grand Rapids location to nearby offices. This consolidation affects loan fulfillment operations only.”
Officials say loan files will be transferred to other sites, but, “We don’t know who’s taking files now,” Kevin Block of Mortgage Max told 24 Hour News 8. “We don’t know what to say to the borrower. We don’t know if we have to pull the loan. We don’t know anything right now.”
Block says it is disappointing because the employees were great. He says he sent nearly all his business to Coutrywide. The branch, he says, was successful.
“We were in the top 13 percent of our division. That’s out of 113 branches nationwide,” Block said.
Even more reason why employees are puzzled with the announcement of job cuts.
They say corporate told them some positions could be reassigned, but many have roots in West Michigan and don’t like the thought of moving to Detroit or across the country.
From MarketWatch: Citizens Banking Co. takes on Miami Valley deposits
The Citizens Banking Company of Sandusky, Ohio, got federal approval to take over the insured deposits of the failed Miami Valley Bank on Thursday, a U.S. banking regulator announced. The Ohio Superintendent of Financial Institutions’ closure of Miami Valley, which had $86.7 million in total assets and $76 million in total deposits, marks the third FDIC-insured bank to fail this year.
FDIC link is here.
Jobs gains back on track
Jobs report shows September gains in line with forecasts, while earlier job loss wiped away; unemployment rate up to 4.7%.
October 5 2007: 8:40 AM EDT
NEW YORK (CNNMoney.com) — Job growth was back on track in September, according to a government report that showed both a solid gain in Americans with jobs in the month, and revised away the job loss reported a month earlier.
U.S. payrolls showed a net gain of 110,000 workers in the month, according to the Labor Department report. That’s roughly in line with the forecast of a 100,000 gain by economists surveyed by Briefing.com.
The Labor Department also now estimates that August had a gain of 89,000 jobs, a big upward revision from the originally reported 4,000 job loss in August. That earlier reading had shaken the markets and stirred concerns of a recession as it was the first job loss in four years. The July reading was also revised higher.
Still, even with the job gains, the unemployment rate rose to 4.7 percent in September from the 4.6 percent reading in August. That increase was in line with what economists had forecast.
The weak August report had opened the door for the Federal Reserve to cut its benchmark interest rate by a half-percentage point in September, the first cut in four years, as it attempted to stave off an economic slowdown.
Friday’s report could be a key to whether the central bank cuts rates again on Oct. 31, when its next meeting concludes.
WaMu Visits the Confessional
From Bloomberg: Washington Mutual Says Third-Quarter Profit Fell 75%
Washington Mutual Inc., the biggest U.S. savings and loan, said third-quarter net income fell about 75 percent because of “a weakening housing market and disruptions in the secondary market.” Loan loss provisions total about $975 million and losses and writedowns on mortgage loans and securities amount to $410 million, the Seattle-based company said in a statement today.
Added: Merrill Lynch Says Credit Market Conditions to Adversely Impact Third Quarter 2007 Results
Merrill Lync
h & Co., Inc. today announced that challenging credit market conditions will have an adverse impact on its net earnings for the third quarter. The company expects to report a net loss per diluted share … resulting from significant negative mark-to-market adjustments to its positions in two specific asset classes: collateralized debt obligations (CDOs) and sub-prime mortgages; and leveraged finance commitments.
MarketWatch: Job growth rebounds to 110,000 in September
Nonfarm payrolls rose by 110,000 in September, including 73,000 in the private sector, very close to expectations of 113,000 total payrolls. Payroll growth in July and August was revised higher by 118,000, the government said. Instead of falling by 4,000 in August, payrolls rose 89,000 after revisions. The unemployment rate ticked up to 4.7%, the highest in a year. …The annual benchmark revision will lower the level of employment by an estimated 297,000 as of March 2007. … The actual revision occurs in February, but a preliminary estimate is given in October.
