Market Color: SI hopes everyone enjoyed their Thanksgiving Holiday with family and friends. So after the long Holiday break, we have Tiger Woods potentially in the doghouse after his car crash, Dubai World asking for a six month suspensions of loan payments and for 75 years we have been subjected to watching the Detroit Lions football team play on Thanksgiving day and for most part lose. Barry Sanders can you come out of retirement? It is still uncertain what significance the Dubai issue will have in the market, but it has rippled throughout the world markets. Traders are trying to determine whether this is an isolated event, or if this is the beginning to credit turmoil in the emerging markets. One buried story but is significant to our rates is when the FED will begin to drain the money from the economic swamp. The Federal Reserve of New York has been testing some measures using reverse repurchase agreements which is one tool to remove money from the system. Right now, the futures market is pricing in an 86% chance that the Fed keeps rates somewhere between 0% and .25% through March 16th, 2010. Currently, the Ten Year yield is at 3.24% (3.21% on Friday). 30 year fixed rates are holding from the Friday close at the same level and have moved to the plus side for the Ginny 4% coupon.
Market News: When will the MBS market return to be a free market? The housing market is no longer plunging due to Federal Reserve intervention, but continued weakness in the economy is likely to lead the central bank to extend its program of purchasing mortgage-backed securities beyond the March 30th deadline. SI believes this is predicated on the strength and pace of economic recovery early in the first quarter and whether concrete proposals have been advanced on what to do with Fannie and Freddie. Unemployment is still high, foreclosures continue to rise, and the Mortgage Bankers Association reports that a record 9.6 percent of borrowers were delinquent on their loan in the third quarter.
Meanwhile the covers are being pulled back on the Federal Reserve since Congress has started an investigation on what the Federal Reserve really does. And predictably, the Federal Reserve Chairman wrote on November 29th that the economy will suffer if the proposals to reign in the Federal Reserve are enacted. He argued that investors must believe the Fed is immune from political pressure in order to push interest rates to near zero without raising fears of inflation, but a House proposal seeking to subject the central bank to broader audit scrutiny would make Congress appear to have an influence on monetary policy decisions. The op-ed preceded this week’s Senate Banking Committee hearing that will debate whether Bernanke should serve a second term as well as proposals to revamp financial regulation. This will be great financial soap opera to watch unfold when these hearings begin.
How would you like the White House looking over your shoulder about the pace of loan modifications or whomever the appointed czar happens to be. It seems the Treasury Department announced today to appoint people to look after the number of completed loan modifications. And if you are not doing so well in this effort, your company will be subjected to negative publicity because you have not moved fast enough as the Treasury department will publish a list of servicers that are lagging. Guess that is one list a company would not like to find themselves on or not. Is that a potential blacklist? And since the majority of loan modifications are not remaining current as well, it presents a catch 22 situation for the large mortgage servicers. Here is the link to the article on Yahoo.
Filed under: Uncategorized | Leave a comment »
Freedom Mortgage Funding Blog 